• June ISM = 55.3
    Posted by on July 5th, 2011 at 9:46 am

    On Friday, the ISM Index for June came in at 55.3. This is an important report because the number for May came in at a surprisingly weak 53.5. Until then, the numbers had been running around 60.

    Unlike a lot of economic reports, I like to follow the ISM because it has a pretty good track record of telling us if we’re in a recession or not. Historically, whenever the ISM is below 45, the odds that the economy is receding are very high.

  • Morning News: July 5, 2011
    Posted by on July 5th, 2011 at 7:47 am

    Eurozone Banks to Meet on Greek Debt

    Europe Faces Tough Road on Effort to Ease Greek Debt

    Chinese Local Debt Understated by $540 Billion: Moody’s

    Osaka Securities Exchange Jumps on Report of Takeover Bid by Tokyo Bourse

    Argentina Hopes for a Big Payoff in Its Shale Oil Field Discovery

    EU Sees Delays in Derivatives, Short-selling Rules

    European Retail Sales Declined 1.1% in May

    Gold Climbs as Risk Aversion Picks Up

    Oil Halts Two-Day Drop in London; Barclays Raises 2012 Brent, WTI Forecast

    Treasuries Triple Global Returns as Dealers Predict Decline

    An Agency Builder, but Not Yet Its Leader

    Energy Transfer Raises Southern Union Bid to $5.1 Billion

    GM China Sales Hit All-Time Record In 1H At 1.27 Mln Units

    Microsoft to Partner With China’s Leading Search Engine

    Jeff Miller: Weighing the Week Ahead: From One Crisis to Another

    Josh Brown: Four Pebbles in the Recovery’s Shoe

    Be sure to follow me on Twitter.

  • RIP: Archduke Otto von Habsburg
    Posted by on July 4th, 2011 at 5:21 pm

    Archduke Otto von Habsburg has passed away at the age of 98. Talk about a person from another time! To him, the events of World War I were personal.

    His father was Emperor Franz Josef’s great-nephew. When Archduke Franz Ferdinand was shot in 1914, Otto’s father became next in line. Then the war started and Franz Josef died in 1916 after 68 years on the throne. That made Otto’s father the new top dog, Emperor Charles I.

    After the war, Charles gave up the Emperor biz but never technically abdicated. He died in 1922 and from that day until earlier today, Otto has been the pretender to the Austrian crown.

    Within that neatly closed circle lay all the major political dramas of the 20th century, most of which he witnessed and some of which he influenced. He was centre stage for one of them — the unequal struggle against Hitler for the survival of his Austrian homeland, which he tried to conduct as an exiled Pretender in the 1930s. Not for nothing did the Führer call the triumphant march-in of March 12 1938 “Operation Otto”.

    All that seemed unimaginable to the world in which young Otto, as he was known, started life during the deceptively tranquil Indian summer of the 650-year-old Habsburg monarchy. He was born third in line to the throne on November 12, 1912 in the small Vienna palace of Hetzendorf and christened with a string of names demonstrating that the blood of all the Roman Catholic royal families of Europe flowed in his veins: Franz Josef Otto Robert Maria Anton Karl Max Heinrich Sixtus Xavier Felix Renatus Ludwig Gaetan Pius Ignatius.

    His father, the Archduke Karl, was a great-nephew of the ruling Emperor Franz Josef, and was then serving as an infantry major-commander at the regimental barracks in the capital. His mother was the former Princess Zita of Bourbon-Parma, and their marriage the year before had been that rare event in a dynasty plagued with so many matrimonial mishaps and misalliances — a happy union of two people perfectly matched in attractiveness, temperament and lineage. Their firstborn was to follow the prescription almost to the letter in his own marriage 38 years later.

    At the time of his birth, the 11-nation monarchy still seemed safe, if somewhat wobbly, and his own time at its helm still fairly distant. One Viennese newspaper hailed the newborn prince as the future monarch who “according to the human calculations, will be called upon to steer the future of Europe in the last quarter of the 20th century”.

    The assassination at Sarajevo on June 28, 1914 of the heir apparent, Archduke Franz Ferdinand, alongside his morganatic wife, put a brusque end to all such calculations. Indeed, the First World War which broke out six weeks later was to spell the doom of Europe’s continental empires, that of the Habsburgs included.

    Half way through the war, in the early hours of November 22, 1916, the old emperor Franz Josef, who had ruled for a record-breaking 68 years, died at last.

    An era, as well as a reign, was over, but the succession was smooth. Otto’s father automatically became the new emperor, and he, aged four, the new Crown Prince. His first ceremonial appearance came on November 30, 1916 when he walked, a tiny figure in a white fur-trimmed tunic, between his parents behind the hearse of the late ruler at the great funeral procession in the capital.

    A month later he was greeted with wild enthusiasm by the monarchy’s Magyar subjects when his father was crowned in Budapest as the new King of Hungary. The official photograph shows the young boy, dressed in ermine and velvet with a great white feather in his cap, sitting between his parents in their ornate coronation robes.

    He always retained vague memories of those events, but these became much sharper when, two years later, the monarchy collapsed under the combined pressure of domestic upheaval and defeat on the battlefield.

    The beginning of November 1918 saw him and his siblings stranded in a royal shooting lodge near Budapest, where an armed revolution had broken out. They were rescued by one of their Bourbon uncles, Prince René, who smuggled them across the border to rejoin their parents in the Schonbrunn Palace of Vienna. Otto had a child’s eye view of the collapse of the monarchy, abandoned by the aristocracy it had created.

    On November 11, 1918 the Emperor Karl, though not formally abdicating, “renounced participation in the affairs of state”. That same night they fled the deserted palace, heading at first for Eckartsau, their privately owned shooting lodge 40 miles north-east of the capital.

    The winter there passed fairly calmly, but by the spring their tiny self-styled “court” was under threat from Left-wing agitators. (Austria had promptly declared itself a Republic after their flight from Vienna.)

    Their rescuer now was not a family member but a British Army officer — Lieutenant-Colonel Edward Strutt, dispatched on the personal authority of King George V with orders to escort the beleaguered Austrian emperor and his family to safety. This Strutt accomplished in some style, reassembling their royal train for the journey into Switzerland on March 25 1919. Otto never forgot the experience. Whenever he heard in later life complaints about British indifference to the Habsburgs’ fate he would reply: “Yes, but there was always Strutt.”

    The two and a half years of their Swiss exile were marked by the two attempts of the ex-Emperor to regain his Hungarian crown. Both were blocked in Budapest by Miklos Horthy, who had now ensconced himself in power as Regent. After the ignominious failure of the second restoration bid the family were exiled by the allied powers to Madeira, where Karl died, a broken man, on April 1 1922. That same day the nine-year-old Otto heard himself addressed as “Your Majesty” by the tiny household-in-exile. To the end of his days he remembered the shock it gave him: “Now it was my turn.”

    Under the protection of their kinsman, King Alfonso XIII of Spain, the family moved to Lequeitio on the Spanish Basque coast. Otto remembered the seven years they spent there as their most tranquil time of exile. They were also, for him, the most hardworking. Under the strict supervision of his mother he took, under various tutors, the Matura (roughly, English A-levels) in both German and Hungarian. His further education was also the motive for their next move — to the gloomy castle of Hams at Steenokkerzeel, in Belgium, so that Otto could take his degree at the nearby university of Louvain. It was at Hams that Otto reached his 18th birthday and was duly declared, in a family ceremony with few outside guests, “in his own right sovereign and head of the house”.

    However ghostly that title appeared, it was enough to impress the Austrian-born Adolf Hitler, who was manoeuvring to seize power in Germany. When in the winter of 1931-32 the young Pretender spent a few months studying in Berlin Hitler twice suggested a meeting.

    The first invitation came from Prince August Wilhelm of Prussia, the dim-witted Nazi son of the exiled Kaiser, and the second via Goering himself. Otto refused both times on the spurious excuse that he had not come to Berlin to discuss politics (in fact, he was doing nothing but). Hitler was incensed by the snub and it touched off a six-year battle between the two men for the fate of their Austrian homeland.

    The climax was reached in February and March of 1938 when a Nazi takeover in Vienna seemed imminent, prompting a short-lived show of defiance from the Austrian Chancellor Kurt Schuschnigg — a monarchist at heart but without the strength of his convictions. His vacillation prompted a remarkably courageous offer from the young Pretender to return from exile to take over the reins of government in order to repel Hitler. Schuschnigg dithered but eventually rejected the idea — perhaps just as well for Otto, who was already high on the Gestapo’s wanted list.

    He had moved close to the top of that list by the time, two years after the Anschluss, that German armies swept into France and Belgium. The exiled Habsburgs got away from Hams only a few hours before Goering’s bombers attacked the castle, and then they joined the vast stream of refugees heading south. They eventually reached Lisbon, where they were still being hounded by the Gestapo. President Roosevelt (whom Otto had met in Washington just before the fall of France) then honoured his offer of “hospitality in an emergency” and they were all flown by Clipper seaplane to the United States.

    As Otto von Habsburg later admitted, he wasted far too much energy during those wartime years in America on the faction-fighting among Austrian refugee groups instead of concentrating on the broader political picture. But, thanks largely to his personal ties with the President, he was able to repair the image of Austria so tarnished by its supine surrender to Hitler in the Anschluss. And, in the last months of the war, he worked closely with the White House in the vain attempt to lure Horthyite Hungary over to the Allied side.

    Churchill, whom he met at the Quebec Conference, warmly supported the vision of a post-war conservative federation in Central Europe. Stalin put paid to those visions, however, and it was to a Communist-controlled Danube Basin that Otto returned in the spring of 1945.

    He made a brief foray into Western Austria but was expelled by the reborn Austrian Republic, which had reaffirmed the anti-Habsburg legislation of 1919. He then faced a personal crisis — without a valid passport, a home or any regular income. He solved the last problem by embarking on a career as a journalist and public lecturer. This was exhausting but highly remunerative and, within five years, he had paid off all his wartime debts and was enjoying a comfortable income.

    He could now think of finding a home and founding a family. The ideal partner appeared by chance in 1950, when he visited a refugee centre near Munich. Working there as a nurse was Princess Regina of Sachsen-Meiningen, herself a refugee whose father, Duke George III, had died in a Soviet concentration camp. The ideally-matched couple were married a year later and settled in a comfortable villa at Pocking, near Lake Starnberg in Bavaria. Their first five children were all girls, and it was not until 1961 that the birth of Karl Thomas, the first of two sons, assured the line of direct succession.

    This prompted Otto to renounce his own dynastic claims and pursue what had long fascinated him, a full-time career in politics. He acquired dual German-Austrian nationality, and in 1979 was elected to the European Parliament as Christian Democrat member for North Bavaria. There he stayed for the next 20 years, becoming the highly regarded Father of the House and its only member to have been born before the First World War.

    He proved an accomplished debater with a fluent command of seven European languages. Though he spoke on a variety of topics, his abiding theme was the need to bridge the East-West division of the continent and ultimately to bring all the nations of the old monarchy within the new European Union. He continued to work successfully at this even after his retirement, using the pan-European movement as his principal platform. He had been the president ever since the death of its founder, Count Coudenhove-Kalergi, in 1972.

    On October 3, 2004, Pope John Paul II beatified Otto’s father, Emperor Karl. It was an important event in Otto von Habsburg’s life, and one that perhaps softened the blow that had occurred five years earlier.

    He had hoped that his son Karl would carry on the Habsburg name in the European Parliament, but in 1999 the young archduke — who had been sitting alongside his famous father as a Right-wing member for Western Austria — was dropped by his party after a controversy over the financing of his campaign funds. A subsequent attempt to launch Karl on to the Austrian domestic political scene proved a dire, if gallant, failure.

    Otto von Habsburg’s wife, the Archduchess Regina, died in February 2010.

  • Morning News: July 4, 2011
    Posted by on July 4th, 2011 at 7:39 am

    EU Rescue Effort May Prompt S&P Default Rating on Greece

    Hedge Funds Seeking Gains in Greek Crisis

    Greece’s Bailout Faces German Court Scrutiny

    Bank of Japan Report Signals Recovery

    Carrefour Approves Brazil Merger Amid Casino Battle

    Spanish Registered Unemployment Falls as Tourist Industry Grows

    Peabody, China, Russia Teams Chosen in Mongolia Mine Bid

    Gold Gains on Buying After Drop to Lowest Price in Six Weeks, Lower Dollar

    Carmakers and White House Haggling Over Mileage Rules

    Nestlé in Acquisition Talks With China’s Biggest Confectioner

    McDonald’s UAE in Venture to Make Biodiesel From Cooking Oil

    VW Takes Majority Stake in Truckmaker MAN

    James Altucher: July 4th is a Scam

    Brian Shannon: Stock Trading Ideas for 7/5/11

    Be sure to follow me on Twitter.

  • Summertime – Billie Holiday
    Posted by on July 1st, 2011 at 3:39 pm

    The S&P 500 closed at 1,339.67 today. This is only the eighth time in market history that the index has risen more than 0.75% for five-straight days.

    That’s what I call a good week. Let’s have Billie Holiday get our weekend started right.

  • Performance of S&P 500 Sectors
    Posted by on July 1st, 2011 at 2:57 pm

    Sector Market Cap Level 1-Day MTD QTD YTD
    S&P 500 12,021,157.79 1,320.64 1.01% -1.83% -0.39% 5.01%
    Energy 1,523,789.93 559.46 1.51% -1.93% -5.07% 10.40%
    Materials 440,501.89 245.93 1.34% -0.45% -1.37% 2.64%
    Industrials 1,353,230.38 321.86 1.68% -0.82% -1.21% 6.89%
    Cons Disc 1,280,351.18 317.89 0.92% -0.32% 3.08% 7.56%
    Cons Staples 1,279,408.11 322.66 0.89% -2.85% 4.47% 6.29%
    Health Care 1,407,818.96 410.93 0.34% -1.31% 7.29% 12.65%
    Financials 1,819,164.40 206.87 0.38% -2.92% -6.27% -3.68%
    Info Tech 2,138,517.78 410.91 1.44% -2.64% -1.61% 1.57%
    Telecom Svc 371,707.14 134.34 0.83% -1.47% 0.82% 4.35%
    Utilities 406,668.03 170.03 0.37% -0.48% 5.01% 6.71%

  • CWS Market Review – July 1, 2011
    Posted by on July 1st, 2011 at 6:45 am

    The first half of 2011 is now on the books and our Buy List had a very good showing. For the first six months of this year, our Buy List gained 7.27% which is a nice lead over the S&P 500 which gained 5.01% (or 5.0094%, to be precise).

    (As a side note, let me add that I’m pretty impressed at how well the 200-day moving average served as a lower bound for the S&P 500. We had two bounces and a rally. The S&P 500 just closed above 1,320 for the first time in a month. Technical analysis may have little academic respect, but it’s oddly important because everyone else thinks everyone thinks it’s important.)

    When we include dividends, our Buy List gained 8.13% compared with 6.02% for the S&P 500. Bear in mind that we did this without making one single change to our Buy List for the entire year. Absolutely zero trading.

    Frankly, one of the smart moves we made is that our Buy List has a good weighting of healthcare stocks, and healthcare was the top-performing sector for the second quarter. It’s also the best-performing sector for the year so far. If our Buy List keeps delivering, 2011 will be the fifth-straight year that our set-and-forget Buy List has beaten the market. Once again, sloth and patience are an investor’s best friends.

    Also, being well-diversified helped us out. Seventeen of the Buy List’s twenty stocks are up for the year while only Ford (F), AFLAC ($AFL) and JPMorgan Chase ($JPM) are in the red. Our top-performing stock for the year is Jos. A. Banks ($JOSB), which I never would have expected. JOSB is up 24.03% for the year, and that includes the stock’s big 13.3% one-day plunge from a month ago. Fortunately, the shares have recovered a little bit and they closed above $50 for the first time since the last earnings report.

    For those of you keeping score, JOSB dropped over $11 after missing earnings by one penny per share. That’s 1,100 pennies lost due to a one-penny-per-share miss. I thought this was a dramatic over-reaction and the market apparently agrees. Now that JOSB has hit my $50 buy price, I’m raising it this week to $53 per share. JOSB is a good buy.

    In last week’s issue, I highlighted Bed Bath & Beyond’s ($BBBY) great earnings report and higher guidance. The shares have rallied impressively ever since. Not only did BBBY take out its 52-week high from April, but the stock also broke $58 per share which was my new buy price from last week. The stock has managed to become our second-best performer for the year, up 18.76%. For now, I’m going to hold off raising the buy price. BBBY continues to be a very strong buy up to $58 per share.

    The other stock I highlighted last week was Oracle ($ORCL). I feel vindicated because I said that it released a very good earnings report although the market dumped the shares in the very short term. During the after-hours session from last Thursday, Oracle got as low as $30. The shares have so far closed higher every day this week, and on Thursday ORCL came very close to breaking the $33 barrier. Thank you, patience and sloth! Oracle continues to be a very good buy up to $34.

    I’ve also been impressed with how some of our quieter stocks have performed. Abbott Labs ($ABT), for example, is up nearly 10% for the year and that doesn’t include its very generous dividend (now yielding 3.65%). Wright Express ($WXS) is up over 10% in the last nine trading sessions. Johnson & Johnson ($JNJ) is inches away from a new 52-week high.

    Now that the second quarter is behind us, earnings season will start soon. The upcoming earnings season has a very good shot of being an all-time record for the S&P 500. The previous record was set during the second quarter of 2007. Despite the fact that corporate profits are returning to the same level of four years ago, the S&P 500 is down over 12% over that same time. Furthermore, interest rates are much lower so you would expect earnings multiples to be higher, not lower.

    Speaking of which, perhaps the most important event of the past few days has been the mass exodus out of the bond market. To be precise, this isn’t a new move in the market. Instead, it’s a sign that the dramatic reaction to the problems in Greece is slowly unwinding. What happened is that nervous investors crowded into trades like the Swiss franc and mid-term U.S. Treasuries. Investors also shied away from many financial stocks, and both AFL and JPM were causalities. Now that the worst fears are passing, these trades are fading as well. AFL, for example, just popped over $46. Most surprisingly, the euro is actually higher (!!) which I thought might never happen again.

    Over the last four days, the yield on the three-year Treasury jumped by 24 basis points. The five- and seven-year notes increased by 36 and 37 basis points, respectively. That’s a very big move for such a short period of time. Some folks think this is due to the completion of the Fed’s QE2 policy. I doubt that. We all knew QE2 would end some day, plus the Fed will still be a big buyer of Treasuries.

    What’s really going on is that investors are now more willing to take on more risk. The big beneficiary is the U.S. stock market. The four-day rally has added more than 4% to the S&P 500, and the index just closed at its highest level in nearly a month. This was our best four-day move in nine months. On top of that, this is a seasonally strong time of the year for the stock market.

    Lately, Wall Street has had a tough time getting a good read on the economy. What happened is that a lot of economists had been overly optimistic with their economic projections. As a result, they lowered their forecasts. But now, the numbers keep topping those lowered projections. It’s a combination of over-reaction and reading long-term trends into only a few points of data.

    The upcoming ISM report, which comes out Friday morning, and next Friday’s employment report will tell us a lot about where the economy is headed. If these numbers are strong, I think the third quarter will be a very good one for stocks and our Buy List.

    Be sure to keep visiting the blog for daily updates. The stock market will be closed on Monday for July 4th. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

  • Morning News: July 1, 2011
    Posted by on July 1st, 2011 at 6:15 am

    Greece to Receive Up to $124 Billion in New Aid

    Greek Bonds Turn Into World Beaters as Default Concern Ebbs

    Global Manufacturing Slows, Posing Rates Dilemma

    Western Funds Are Said to Have Managed Libyan Money Poorly

    Macau’s Gaming Revenue Soars

    Opec Meeting Reveals Further Degeneration Of The MENA Region

    Geithner Exit Would Force Obama to Rebuild Team

    Gold Falls as Greek Lawmakers Back Austerity Plan, Easing Risk of Default

    Corn Price Plunges as US Acreage Rises

    Antitrust Regulator Makes Twitter Inquiries

    Apple and Microsoft Beat Google for Nortel Patents

    Boeing Labor Dispute Is Making New Factory a Political Football

    Lockheed Promises Electric-Grid Security

    UBS Thwarts Deutsche by Hiring Weber as Next Chairman

    Joshua Brown: A Humble Request

    Todd Sullivan: Ford Sees 2nd Half Sales Increases

    Be sure to follow me on Twitter.

  • Fun With Numbers
    Posted by on June 30th, 2011 at 8:31 pm

    I was always amused by the fact that the Nasdaq closed out 2003 at 2003.37.

    Even though a market is made of millions of investors making countless decisions, these numerological events keep cropping up. Or it’s coincidence. A very eerie coincidence.

    The S&P 500 finished the first half of the year today at 1320.64. That works out to a year-to-date gain of exactly 63 points. Percentage-wise, that works out to 5.0093%.

    Hey, if you slip enough coins these things happen, right?

  • McCormick & Brown Forman
    Posted by on June 30th, 2011 at 10:15 am

    I’ve been telling investors to be wary of cyclical stocks. Here are two consumer stocks that have performed very well in recent years — McCormick & Co. ($MKC) and Brown Forman ($BF-B). The latter makes Jack Daniels which may be as counter-cyclical as you can get.

    McCormick just reported Q2 earnings of 55 cents per share which was a penny better than consensus. However, the company lowered its full-year forecast to a range of $2.74 to $2.79 per share. The Street was at $2.83 per share.