• RIP: Q3
    Posted by on September 30th, 2010 at 11:05 am

    Today is the final day of the third quarter. Maybe it’s just me, but it seems like the third quarter has been going on since 1974.

    The good news is that the government revised the GDP growth number higher for the second quarter to 1.7% from 1.6%. As I said before, don’t be too impressed since this is for a time period that began six months ago and ended three months ago. When the original report came out in July, it said that GDP had grown by 2.4%.

    Overall, GDP continues to be dragged down by a widening trade deficit between the United States and foreign exporters, said Mark Vitner, senior economist with Wells Fargo.

    But the report did contain a small sign of hope for the recovery, he said: spending by both consumers and businesses was up significantly from the prior quarter, and investments in new equipment and software alone were up nearly 25%.

    “When you look into the details of the report, consumer spending and business investment actually ticked up,” Vitner said. “They’re not off the charts, but they are posting very solid gains. So in some ways the economy looks a bit firmer.”

    The Dow is now up for the year. Of the previous 68 years when the Dow was up after three quarters, it continued to rise 71% of the time and ended the year in the black 94% of those years.

    Our Buy List is having another market-beating day. I’m very happy to see that NICK has been as high as $9.60 per share today. The stock is up about four-fold from its low point two years ago.

  • Morning News: September 30, 2010
    Posted by on September 30th, 2010 at 7:32 am

    China Says U.S. Yuan Legislation Will Hurt World Economy

    European Stocks Fall on Irish Banking Woes

    AIG to Sell Japan Life Units to U.S. Pru for $4.2 billion

    Nearly One in Four Second-Quarter Home Sales a Foreclosure

    Thursday Look Ahead: Stocks Set to Close Out Best Quarter in a Year and Best September in 70 Years

    BofA Quant: 21 Dividend Growth Stocks We Like

    Did Peter Thiel Make The Single Best Investment In History?

    Metal Plaque Commemorating the Opening of the Canary Wharf Offices by Gordon Brown on 5th April 2004

    Guy on CNBC Says Farmers Are Driving Porsches in Peoria

    Going Beyond the Statistics: A Look at the $PHYS Premium

  • Former Swiss Finance Minister Speaks to Parliament on Spiced Meat Imports.
    Posted by on September 30th, 2010 at 12:21 am

    Geithner really ought to try this.

  • 68 S&P 500 Stocks Yield More than the Average Corporate Bond
    Posted by on September 29th, 2010 at 11:30 pm

    I really miss the Old Normal. Sigh.

    More than $600 billion have gone into bond funds since the end of 2008, according to the Investment Company Institute, a Washington-based trade group. That’s even as 68 stocks in the Standard & Poor’s 500 Index paid dividends exceeding the average corporate bond yield of 3.8 percent as of Aug. 31, more than at any time in at least 15 years, data compiled by Bloomberg and Charlotte, North Carolina-based Bank of America Corp. show.

    This means that there can be free money for a company to issue bonds and use the proceeds to buy back its stock.

  • The Death of Prop Trading?
    Posted by on September 29th, 2010 at 10:46 pm

    Wall Street screamed and whined and successfully fought to keep prop trading, but they’re not doing it so much anymore. Michael Lewis wonders why. He examines a few reasons: Wall Street has gotten religion (um, no), prop trading isn’t profitable (possibly), they’re still doing it (yes, just with a new name), none of the above or a combination of the others.

    And yet news of the death of the Wall Street prop trader has been greeted with hardly a peep. And I wonder: is this the nature of our new financial order? Big decisions, in which the public has a clear interest, being made outside public view, with little public discussion or understanding.

    If so, it isn’t a future at all. It’s just the past, repeating itself.

  • Tomorrow Marks the Low Point of the Presidential Election Cycle
    Posted by on September 29th, 2010 at 1:15 pm

    Tomorrow, September 30th of a mid-term year, is a big day. This marks the market’s historic low point during the Presidential Election Cycle. Historically, September 30th of the mid-term year is the best time to buy stocks.

    A few years ago, I crunched the entire history of the Dow from 1896 to 2007. Here’s what I found:

    Historically, the Dow has gained an average of 24.1% from September 30 of the mid-term election year to September 6 of the pre-election year. This means that nearly two-thirds of the Dow’s four-year gain (24.1% of 36.7%) comes in less than one-quarter of the time. That’s a pretty stunning stat.

    After September 6 of the pre-election year, the Dow has historically pulled back 5.2% to May 29 of the election year. After that, it puts on a nice 23.2% climb to August 3 of the post-election year. Then trouble starts. After August 3, the Dow then pulls back 5.6% and we’re back at our starting point, September 30th of the mid-term election year.

    By the way, if you take out some of the unpleasantness from 1929 or 1987, it doesn’t really alter the trend of the long-term chart terribly much.

  • Tomorrow’s GDP Report Isn’t Important
    Posted by on September 29th, 2010 at 11:54 am

    This going to be an interesting week for folks in the finance/econ stat biz. For one, Wall Street is about to close out its best September since 1939. Personally, I can do without the starting of major world wars.

    I’m happy to say that the Buy List is also wrapping up a great month. Through yesterday’s close, we’re up nearly 13% for September and we hit our highest close in four-and-a-half months.

    Tomorrow, the final GDP report comes out for the second quarter. This usually gets more attention than it deserves. The report will cover a period that began six months ago and ended three months later. The stock market usually focuses slightly forward, perhaps three to eight months ahead.

    On Friday, we’ll get the ISM index for September. Here’s the odd thing: There’s a decent correlation between ISM level and GDP growth so we might get a glimpse at Q3 growth. The correlation is around 40% which is far from perfect but it’s worth paying attention to.

    The past few quarters, however, have been a bit off-key. GDP growth has decelerated, meaning it’s still growing but the rate of growth has dropped over the last two quarters. That’s been one of the main drivers of the “Double Dip” thesis. I think the economy was impacted by problems in Europe much harder than people expected. The ISM has been fairly steady in the mid- to upper-50s. Normally, that signals growth of around 4%.

    If the economy has been growing that quickly, then we would now see some evidence in the jobs market. Unfortunately, that evidence has been sorely lacking. While there’s been some growth in jobs, it’s nowhere close to the kind of growth we normally see coming out of a recession. During the 1990’s, the economy regularly created huge amounts of jobs each month. We’ll get a look at the jobs market next Friday when the Labor Department releases its jobs report for September.

    Soon after that, earnings season will start. On October 7, Alcoa (AA) will be the first major company to report earnings. According to estimates, this earnings season will show a slight sequential decline from last quarter (meaning, Q3 earnings will be below Q2 earnings). I think estimates are just a bit too low, so that may mean there won’t be a sequential decline, but it’s hard to say right now.

  • Morning News: September 29, 2010
    Posted by on September 29th, 2010 at 7:25 am

    Savers Told to Stop Moaning and Start Spending

    After Recalls of Drugs, a Congressional Spotlight on J.& J.’s Chief

    BP to Create New Safety Division in Wake of Spill

    Stock Futures Point to Lower Open on Wall Street

    European Economic Confidence Unexpectedly Improves

    Barrick Says Gold Could “Easily” Exceed $1,500/oz

    Asian Shares End Mostly Higher; Tankan Survey Lifts Tokyo

    Food is the New Pharma: Nestlé Aims to Enter the Functional Foods Market

    Sometimes It’s Just a Black Duck

  • Costco Hits New 52-Week High
    Posted by on September 28th, 2010 at 12:49 pm

    Hats off to Costco (COST). The stock just broke out to a fresh 52-week high this morning.

    I think the stock has its pre-crash high of $75.23 (from May 14, 2008) in its sights, although it’s not easy to decipher what inanimate objects are thinking.

    There’s always a weird period when investing in Costco. They reported Q3 earnings on May 27, but the Q4 report won’t come out until mid-October. That’s 4-1/2 months without knowing how the business is doing.

    The last earnings report was in line with forecasts; the one before that missed by two cents and the one before that was in line. This tells me that the Street is seeing COST as a value play, not an emerging growth story.

  • US Economic and Equity Outlook from Goldman Sachs
    Posted by on September 28th, 2010 at 11:43 am

    GS Sep 10 Econ Update

    (Via: ZeroHedge).