• Today’s Fed Minutes
    Posted by on January 4th, 2011 at 3:52 pm

    The Federal Reserve released the minutes today from its December meeting. This was the first chance they had to evaluate how well QE2 was working.

    What I find fascinating about the Fed’s internal debate is how radically different it is from what we’re often told the Fed is thinking or doing. Instead of being the “root of all evil,” the Fed is actually worth listening to.

    David Berman notes:

    In the policy makers’ view, higher yields aren’t the result of a failed program, called quantitative easing. They are the result of an improving economy, in part at least. They explain:

    “In the weeks following the November meeting, yields on nominal Treasury securities increased significantly, as investors reportedly revised down their estimates of the ultimate size of the FOMC’s new asset-purchase program. Incoming economic data that were viewed, on balance, as favorable to the outlook and news of a tentative agreement between the Administration and some members of the Congress regarding a package of fiscal measures also reportedly contributed to the backup in yields.”

    I stand by what I wrote just before the November QE2 announcement:

    Investors need to understand that QE2 will have a major influence on their investments. The most important aspect is that quantitative easing will help fuel a demand for riskier assets.

    More specifically, quantitative easing will aid a shift toward growth stocks at the expense of bonds and value stocks. QE2 won’t affect the direction of the stock market, though that will remain strong, as much as it will alter the market’s internal leadership.

    Be careful of some of the commentary you see about the Federal Reserve. Some people just plain hate the Fed and are therefore blind to whatever the Fed does.

  • Motorola Splits in Two
    Posted by on January 4th, 2011 at 3:43 pm

    Nearly three years ago, Motorola announced plans to split itself in two. At the time, I said that instead of being one lousy company, Motorola would now be two lousy companies. That was a bit harsh.

    The split was delayed and delayed and pushed back. Today it finally came. Motorola is no more.

    One lesson for investors is to pay attention to when companies have spin-offs. Quite often, the less prominent company is a good buy.

    The two companies that Motorola has now become are Motorola Mobility (MMI) and Motorola Solutions (MSI). First, what’s the over/under on how long these guys keep “Motorola” in their name? Twelve months?

    The one to steer clear of is Motorola Mobility. I firmly expect these guys to be crushed to dust. Motorola Solutions, however, might be a compelling buy. They do the “everything else” part of Motorola’s business which is things like barcode scanners and two-way radios. I’m not recommending MSI just yet, but I certainly want to keep an eye on it. A lot of these businesses are slowing growth but are in well-protected industries.

    Just to give you an idea, in the last quarter, MSI had revenue of $1.9 billion while MMI had revenue of $2.9 billion. Despite having $1 billion less in sales, MSI had operating income of $321 million to MMI’s $3 million.

  • Ford’s Sales Rise 15% Last Year
    Posted by on January 4th, 2011 at 12:47 pm

    More good news for Ford (F). The company just reported that its sales rose 15% in 2010.

    The company sold 1.9 million cars and trucks and grabbed market share from rivals including General Motors and Toyota. Ford says 2010 was the second year in a row it gained U.S. market share, its first back-to-back increase since 1993.

    The Ford F-150 pickup was the best-selling vehicle in the U.S. last year. The company also saw strong sales of its Fusion midsize sedan and Edge, which has the roominess of an SUV but handles like a car. Sales of Ford’s luxury Lincoln brand rose only 4 percent for the year.

    Without the Volvo brand, which Ford sold last fall, Ford’s sales climbed 19 percent for the year.

    Wall Street now expects Ford to make $2.08 per share this year. The stock is currently at $17. The Q4 earnings report should come out at the end of the month.

  • Retail Sales Rise
    Posted by on January 4th, 2011 at 11:13 am

    The end-of-the-world continues to be delayed:

    Sales at U.S. retailers rose 3.6 percent last week from a year earlier, as some shoppers returned to stores to take advantage of post-Christmas discounts, dodging a snowstorm that assailed the East Coast.

    Sales for the week ended Jan. 1 rose 0.4 percent from the previous week, according to a chain-store sales index released today by New York-based International Council of Shopping Centers and Goldman Sachs Group Inc. That compared with a 1 percent gain a week earlier.

    The holidays can generate up to 40 percent of annual revenue for some retailers. While a Dec. 26 blizzard covered parts of the U.S. Northeast in more than a foot of snow, retailers including Urban Outfitters Inc., Gap Inc. and Columbus, Ohio-based Express Inc. lured shoppers with unique clothing later in the week, said Richard Jaffe, an analyst at Stifel Nicolaus & Co. in New York.

  • S&P 500 Monthly Dividend Yield
    Posted by on January 4th, 2011 at 9:55 am

    Here’s a chart you don’t see often. It’s the monthly dividend yield of the S&P 500. The problem with the normal yield chart is that it’s usually based on the trailing 12 months.

    The trailing one-month shows an obvious pattern. The first month of the quarter (January, April, July, October) usually has the lowest yield. The middle month (February, May, August, November) has the highest yield. The final month’s yield is usually slightly above the first month’s.

    I think it’s interesting that the yield jumped when the market plunged. Since then, however, it’s fallen back roughly to where it had been before the crisis.

  • Morning News: January 4, 2011
    Posted by on January 4th, 2011 at 7:26 am

    Stock Index Futures Inch Up

    Too-Big-to-Fail Banks Face New Limits Under EU Plan

    European Central Bank Weekly Bond Buys Slow to 164 Million Euros

    U.S. Consumer Bankruptcies Rose 9% in 2010 to 1.5 Million, Institute Says

    Inflation Jumps in Europe

    Buffett Locks In Rates on New Bonds Amid Rising Yields

    How Dope Smokers with the Munchies at 2AM Almost Destroyed the Number Three Wholesale Grocery Distributor in Australia

    New Year’s Resolution: Buy U.S. Stocks

    Facebook Deal Offers Freedom From Scrutiny

    Bank of America Deal on Loan-Repurchase Demands Sets `Template’ for Banks

    Motorola’s Jha Seeks to Defy History After Phone-Unit Spinoff

    Masters of the Universe Got They Swagger Back in 2010

  • We’re Already Ahead of the Market
    Posted by on January 3rd, 2011 at 4:49 pm

    That’s one trading day down this year—just 252 more to go.

    I’m happy to say that we had a very good day and that the Buy List is already ahead of the S&P 500. The Buy List gained 1.39% today to the S&P 500’s 1.13%. The old Buy List was only up 1.08% so our new stocks certainly helped.

    I’m also pleased to see new 52-week highs from companies like Wright Express (WXS), Moog (MOG-A), Leucadia National (LUK) and Becton, Dickinson (BDX). AFLAC (AFL) crept up to a new two-month high.

    We obviously shouldn’t read too much into one day, but let’s hope this is a preview of good things to come in 2011.

  • Treasuries Down. Cyclicals Up. Lather. Rinse. Repeat.
    Posted by on January 3rd, 2011 at 1:33 pm

    It’s still all about cyclicals. Treasuries are down and economically-sensitive stocks are up.

    It was just one month ago that we celebrated the Morgan Stanley Cylical Index (^CYC) busting through 1,000. Today, it’s been as high as 1,070.

    The CYC is on track to outperform the S&P 500 for the 32nd time in the last 43 sessions. If the Dow had performed as well as the CYC since the March 2009 low, it would be closing in on 25,000 today.

  • 1% Per Week for Eight Years
    Posted by on January 3rd, 2011 at 12:48 pm

    Apple (AAPL) reached a new all-time high today of $330.20 per share.

    On April 21, 2003, Apple was going for $6.57 per share (adjusted for a split).

    This means the stock is up 50.26-fold in exactly 402 weeks. That works out to an average weekly gain of 0.979%.

    In other words, Apple has gained an average of 1% per week for nearly eight years.

  • The Ever-Collapsing Dollar
    Posted by on January 3rd, 2011 at 11:56 am

    On Google, “collapse of the dollar” currently returns over 1.5 million items. Funny, for something that’s about to happen — or I should say, always has been about to happen — it hasn’t happened yet.

    If a person only followed market commentary but not prices, would they have any clue that the dollar rose last year?