• Morning News: December 31, 2010
    Posted by on December 31st, 2010 at 8:19 am

    Stock Indexes Headed Lower on Last Day of Year

    Oil Heads For Highest Annual Close Since 2007

    Dollar Weakens for Third Day as Emerging Markets Gain; Cotton, Copper Soar

    Tax Breaks May Boost Paychecks by $40 Per Week

    Sugar Rebounds in New York on Shortage Outlook; London Ends 2010 Up 9.5%

    Estonia Joins Euro Club Riven by Crisis, Others Wary

    Rousseff Is No Lula as Brazil Stocks Slump Before Inauguration

    Kenyan Stocks, sub-Sahara’s Second-Best, Gain a First Year in 4 on Economy

    Skype Could Be Designated Illegal in China

    U.S. Unveils Plan to Sell Stake in Ally, Once GMAC

    Borders Delays Payments to Vendors

    New Interview with John Maynard Keynes

  • The Plunge In Volatility
    Posted by on December 30th, 2010 at 4:36 pm

    It’s hard to show the market’s plunging volatility, but here’s a good chart. This is the S&P 500 since the beginning of November. While the market has gone up, notice the trend in the difference between the daily high and low (the top of each bar and its bottom).

  • Ever Wonder What It’s Like to Fly Your Own Drone Over New York City?
    Posted by on December 30th, 2010 at 2:37 pm

    Wonder no more:

  • One Day Left
    Posted by on December 30th, 2010 at 1:56 pm

    Unfortunately, the 2010 Buy List is limping to the finish line. We’re still ahead of the market, but our lead has closed some over the last few weeks.

    The problem is that the Buy List is fairly light on cyclical stocks so we didn’t catch the biggest part of the recent updraft. We don’t have any energy stocks and that area has done especially well.

    Since November 5, the S&P 500 is up 2.77% while the Buy List is up just 0.28%. Honestly it’s not that bad, but it takes some luster off what’s been a very good year.

    Still, through yesterday’s close the Buy List is up 14.86% to the S&P 500’s 12.97%. That doesn’t include dividends. I’ll have the complete numbers this weekend, but dividends will add about 2% to the S&P 500 and about 1.65% for our Buy List.

  • Business Activity in U.S. Grows at Fastest Pace in Two Decades
    Posted by on December 30th, 2010 at 1:43 pm

    More good economic news:

    Businesses in the U.S. expanded in December at the fastest pace in two decades, adding to evidence the world’s largest economy is accelerating heading into 2011.

    The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 68.6 this month, exceeding the most optimistic forecast of economists surveyed by Bloomberg News and the highest level since July 1988. Figures greater than 50 signal expansion.

    Gains in business investment on new equipment and growing exports to emerging economies will keep factories churning out goods in the coming year, contributing to the recovery. Reports showing consumer spending is also picking up mean retailers will need to restock shelves, giving manufacturing a further lift.

    “The economy is gathering momentum,” John Silvia, chief economist at Wells Fargo Securities Inc. in Charlotte, North Carolina, said in an interview on Bloomberg Television. “New orders will follow the better business confidence that is showing up. Once the American consumer starts kicking in, we will see stronger orders data.”

    The median forecast of 49 economists surveyed by Bloomberg News projected the gauge would fall to 61. Estimates ranged from 59 to 63.7.

    I’m starting to think that the Q4 GDP growth number is going to come in very strong, possibly 5% or more.

  • Jobless Claims at Two-Year Low
    Posted by on December 30th, 2010 at 11:08 am

    More good news for the economy: the number of Americans who filed for their first week of jobless claims fell below 400,000 for the first time in over two years.

    For the week that ended on December 25, 388,000 thousand Americans filed first-time claims. That’s down by 34,000 from the week before. This is very good news, but I’m not ready celebrate just yet. We’ll get more information with next Friday’s employment report.

    While the economy has definitely pulled out of recession, the growth hasn’t filtered down much to the employment sector. For businesses to continue to see improvement in profits, sales need to start growing and that means more jobs. Today’s news is good, but we need to see a lot more of this.

  • Morning News: December 30, 2010
    Posted by on December 30th, 2010 at 7:52 am

    World Stocks Eye Two-year High

    M&A Bankers Forecast India Deal Volumes to Surpass Record 2010

    Chinese PMI Drops But Shanghai Composite Keeps Rolling

    Pope Benedict Binds Vatican to European Money-Laundering Laws

    Natural Gas Boom Coming—But So Are Major Obstacles

    Three Hedge Funds Got Inside Data From Consultant, U.S. Says

    U.S. Snowstorm Cost Retailers $1 Billion

    Groupon Draws New Investors and Works on an I.P.O.

    GE Leads $3 Trillion in Company Bond Sales as Yields Fall

    PAA Natural Gas Storage to Buy Mississippi Facility for $750 Million

    Paul Kedrosky: Scientists are Now Cornucopian Economists?

    Howard Lindzon: My 2011 Predictions…

  • Motricity Under $20
    Posted by on December 29th, 2010 at 2:18 pm

    I’ve wanted to post more this week, but honestly, nothing is happening. This market is about as dull as it can be.

    I’ve had my eye on Motricity (MOTR) which is an interesting stock. It’s a bit too speculative to put on the Buy List, but it’s recently fallen under $20 per share. I think that’s a good price for more aggressive investors.

    The company IPO’d in June at $10. Actually, the IPO was severely cut back. The company originally wanted a much larger offering. Still, the stock struck a chord on Wall Street and by November it was over $30 per share. Now it’s back below $20. Wall Street currently expects earnings next year of 80 cents per share.

  • Reminder: The 2011 Buy List
    Posted by on December 29th, 2010 at 1:02 pm

    With half a week to go in 2010, here again is the 2011 Buy List. The new list will take effect starting on Monday:

    Abbott Laboratories (ABT)
    AFLAC (AFL)
    Becton, Dickinson & Co. (BDX)
    Bed Bath & Beyond (BBBY)
    Deluxe Corp. (DLX)
    Fiserv (FISV)
    Ford Motor Company (F)
    Gilead Sciences (GILD)
    Johnson & Johnson (JNJ)
    Jos. A Bank Clothiers (JOSB)
    JPMorgan Chase (JPM)
    Leucadia National (LUK)
    Medtronic (MDT)
    Moog (MOG-A)
    Nicholas Financial (NICK)
    Oracle (ORCL)
    Reynolds American (RAI)
    Stryker (SYK)
    Sysco (SYY)
    Wright Express (WXS)

  • Keeping Tabs on Economic Bets
    Posted by on December 29th, 2010 at 9:48 am

    Thirty years ago, Julian Simon and Paul Erlich made a famous bet on the direction of commodity prices. Erlich was one of those “gloom and doom” writers who said that we’re living in an age of scarcity.

    Simon asked Erlich to choose any five commodities and averred that the prices would decrease over the next decade. Erlich avowed that they would increase. Erlich chose copper, chromium, nickel, tin, and tungsten. All five went down and in 1990, Erlich paid up.

    Now John Tierney and Matthew R. Simmons have just settled a five-year-old $5,000 bet over whether or not oil would average $200 in 2010.

    The bet was occasioned by a cover article in August 2005 in The New York Times Magazine titled “The Breaking Point.” It featured predictions of soaring oil prices from Mr. Simmons, who was a member of the Council on Foreign Relations, the head of a Houston investment bank specializing in the energy industry, and the author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”

    I called Mr. Simmons to discuss a bet. To his credit — and unlike some other Malthusians — he was eager to back his predictions with cash. He expected the price of oil, then about $65 a barrel, to more than triple in the next five years, even after adjusting for inflation. He offered to bet $5,000 that the average price of oil over the course of 2010 would be at least $200 a barrel in 2005 dollars.

    I took him up on it, not because I knew much about Saudi oil production or the other “peak oil” arguments that global production was headed downward. I was just following a rule learned from a mentor and a friend, the economist Julian L. Simon.

    As the leader of the Cornucopians, the optimists who believed there would always be abundant supplies of energy and other resources, Julian figured that betting was the best way to make his argument. Optimism, he found, didn’t make for cover stories and front-page headlines.

    So how did oil prices do? At first, things were going in Mr. Simmons’ direction. Oil hit $145 per barrel by 2008. Then the recession came and oil dropped to $50. For 2010, oil has averaged $80. Adjusted for inflation that’s about $71 per barrel which isn’t too far from the $65 when the bet was made in 2005.

    It’s true that the real price of oil is slightly higher now than it was in 2005, and it’s always possible that oil prices will spike again in the future. But the overall energy situation today looks a lot like a Cornucopian feast, as my colleagues Matt Wald and Cliff Krauss have recently reported. Giant new oil fields have been discovered off the coasts of Africa and Brazil. The new oil sands projects in Canada now supply more oil to the United States than Saudi Arabia does. Oil production in the United States increased last year, and the Department of Energy projects further increases over the next two decades.

    The really good news is the discovery of vast quantities of natural gas. It’s now selling for less than half of what it was five years ago. There’s so much available that the Energy Department is predicting low prices for gas and electricity for the next quarter-century. Lobbyists for wind farms, once again, have been telling Washington that the “sustainable energy” industry can’t sustain itself without further subsidies.

    As gas replaces dirtier fossil fuels, the rise in greenhouse gas emissions will be tempered, according to the Department of Energy. It projects that no new coal power plants will be built, and that the level of carbon dioxide emissions in the United States will remain below the rate of 2005 for the next 15 years even if no new restrictions are imposed.

    Maybe something unexpected will change these happy trends, but for now I’d say that Julian Simon’s advice remains as good as ever. You can always make news with doomsday predictions, but you can usually make money betting against them.

    In April 2008, Prieur du Plessis and Barry Ritholtz highlighted a $1 million bet from Jim Sinclair that gold would hit $1,650 per ounce by the second week of January 2011.

    I don’t know if anyone took him up on his offer. There are only a few days left and unless gold stages a big rally, it looks like Sinclair will have lost.