Another Good Quarter for Dividends
Posted by Eddy Elfenbein on January 6th, 2016 at 8:26 am

The fourth quarter was another strong quarter for dividends. Last quarter, dividend payouts rose by 8.38%. This was the 23rd quarter in a row of dividend growth.

For the year, dividends rose by 10.00%. This was the fifth year in a row of double-digit dividend growth. Since 2010, dividends are up by 90.89% compared with an increase of 62.52% for the S&P 500. That means that despite all the bubble talk, the market’s dividend yield has been increasing. If this has been a bull market, then it’s been one for dividends.

For 2015, the S&P 500 paid out $43.39 in dividends. That’s the index-adjusted number (every one point in the S&P 500 is worth about $8.75 billion). Going by the closing price at the end of the year, the S&P 500 has a dividend yield of 2.12%, based on trailing dividends.

I would never say that the dividend is the best or only valuation measure you should use, but it’s a decent one. What’s interesting is that, except for the worst of the financial crisis, the market has tracked a 2% dividend reasonably closely for over 10 years. This should be another good year for dividends but I’m expecting dividend growth of 5% to 8%.

In the chart below, the S&P 500 is the blue line and it follows the left scale. The dividends are in red and they follow the right scale. Notice how much smoother dividends are. The two lines are scaled at a ratio of 50-to-1. That means whenever the lines cross, the market’s yield is exactly 2%.

Morning News: January 6, 2016
Posted by Eddy Elfenbein on January 6th, 2016 at 7:00 am

Dragon Tail Risk for World Economy on Higher Fear of China Slump

Eurozone Growth Accelerated at End of 2015

Pressure Grows on Saudi Arabia to Ditch Dollar Peg

Oil Prices Fall to 11-Year Low

Bernie Sanders Attacks Hillary Clinton Over Regulating Wall Street

Pickups and S.U.V.s Lead Way to a Record Year for Automakers

China Asks Microsoft to Explain ‘Major Problems’ in Probe Data

‘Brain-Training’ App Lumosity Will Pay $2 Million for Deceptive Advertising

Ford’s December And The Optimism Going Into 2016

Toyota Hires Artificial Intelligence Gurus For Self-Driving Cars

Wall Street to Get Graded on How Much Spoofing It’s Facilitating

Bank Options Turn Bearish as Favorite 2015 Trades Keep Unwinding

Valeant to Appoint Interim CEO as Pearson Remains Hospitalized

Cullen Roche: Why Hedge Funds Are Sucking Wind

Joshua Brown: The Riskalyze Report: Advisors Get Back to Basics

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Ford’s Sales Miss Expectations
Posted by Eddy Elfenbein on January 5th, 2016 at 9:20 pm

Today was a rough day for shares of Ford Motor (F). The automaker got as low as $13.51 today before closing at $13.72. The catalyst for the selling was a December sales report that missed expectations.

Ford Motor Co.’s U.S. sales rose 8.4% in December, compared to a year earlier, and 5.3% for the year.

In what’s likely to be a record year U.S. auto sales, the automaker sold 2.61 million vehicles, marking its best performance in nine years.

But December’s increase trailed Edmunds.com analyst expectations of 11% growth.

The Ford brand rose 8.2% in December and 5.3% for the year, and the Lincoln luxury brand rose 12.1% in December and 7.1% for the year.

Like the rest of the industry, Ford reported a sharp shift from cars into crossovers, sport-utility vehicles and pickup trucks.

Sales of the company’s crossovers and SUVs rose 13.6% in December and 7.8% for the year, while truck sales rose 13% in December and 8.7% for the year.

But car sales slumped 4.2% in December and 0.9% for the year.

Ford will report Q4 earnings later this month. Wall Street expects earnings of 47 cents per share which is compared with 26 cents per share in Q4 of 2014.

The High Quality ETF
Posted by Eddy Elfenbein on January 5th, 2016 at 3:19 pm

I often talk about the importance of investing in high quality stocks. There actually is an S&P 500 High Quality ETF (SPHQ). The ETF has done very well the last few years.

Here’s something interesting about high quality stocks as an asset class. Check out the relative strength of SPHQ (meaning, dividing its price by the S&P 500) during the last year.

Notice how it spiked last August when the market got scared and there were all those ETF issues. In other words, the SPHQ is also a fear trade. When people get scared, they run all at once towards quality.

Jim Cramer Talks with CEO of ADS
Posted by Eddy Elfenbein on January 5th, 2016 at 10:41 am

This is from May but it tells you a lot about Alliance Data Systems.

Morning News: January 5, 2016
Posted by Eddy Elfenbein on January 5th, 2016 at 6:48 am

Euro-Area Inflation Stuck Close to Zero May Pressure ECB

China Battles to Shore Up World’s Priciest Stock Market

Stocks Hold Steady After Starting Year With a Sell-Off

Puerto Rico Defaults on Debt Payments

The $289 Billion Wipeout That Blindsided U.S. Bulls

Dalian Wanda of China May Buy Majority Stake in Legendary Entertainment

Gene-Editing Drugmaker Backed by Google, Gates Files for IPO

Ex-Soros’s Bessent Raises $4.5 Billion for New Hedge Fund Firm

G.M. Chief Mary Barra Is Named Chairwoman, Affirming Her Leadership

GM Invests $500 Million in Lyft, Sets Out Self-Driving Car Partnership

Ford Will Expand Self-Driving Test Car Fleet to 30

Volkswagen Faces Billions in Fines as U.S. Sues For Environmental Violations

2016 Outlook: Can Berkshire Snap Its Losing Streak?

Jeff Carter: Tax Exempt Investing

Roger Nusbaum: A Wild Ride to Nowhere

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Worst Start of the Year in 84 Years
Posted by Eddy Elfenbein on January 4th, 2016 at 2:02 pm

Today was a terrible start for the market. The S&P 500 dropped below 2,000 and at its low was down 2.65% on the day. The Dow was down more than 460 points although both indexes have recovered some lost ground.

This could be the largest opening day decline since 1932. Markets all over the world have been rattled by the decline in China. Trading in China was shut down after the market fell by 7%. Some economic indicators there continued to be lousy.

Poor ISM for December
Posted by Eddy Elfenbein on January 4th, 2016 at 10:58 am

The December ISM report came out today and it wasn’t a good one. The Index fell to 48.2 for December. That’s the lowest reading since June 2009.

This was also the second-straight month in which manufacturing fell. Any ISM below 50 indicates that the manufacturing sector is getting smaller.

While today’s report is bad news, it’s not dire just yet. For one, the report only covers the manufacturing sector of the economy. Also, recessions have generally correlated with ISMs below 46 or so. During the stretch from 1995 to 1998, there were several weak ISMs even though the broader economy was doing well.

Since 1948, the ISM has been between 45.0 and 49.9 a total of 137 times. Only 25 have been during recessions. That’s 18.2%.

Morning News: January 4, 2016
Posted by Eddy Elfenbein on January 4th, 2016 at 6:44 am

Biggest Economies Face $7 Trillion Debt Refinancing Tab in 2016

China’s Two-Speed Economy Stays Intact as Factories Slump, Services Gain

Singapore’s Economy Expands More Than Estimated

Stocks Slump Across Europe and Asia Following Shanghai’s 7% Crash

Fed’s Fischer Supports Higher Rates If Markets Overheat

Solar Energy Is The Future. You Can’t Stop It.

Nokia, Alcatel-Lucent Set to Put Merger to Work

Ferrari Makes Stand-Alone Debut on Milan Stock Exchange

Uber’s No-Holds-Barred Expansion Strategy Fizzles in Germany

Samsung Warns of a Challenging 2016 as Competition Escalates

Takata Emails Show Brash Exchanges About Data Tampering

The Ghosts of Baha Mar: How a $3.5 Billion Paradise Went Bust

Cullen Roche: Shorting The Big Short

Jeff Miller: Will There Be A January Effect?

Howard Lindzon: My Mission Continues in 2016

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Amazing Stat
Posted by Eddy Elfenbein on January 2nd, 2016 at 6:10 pm

With the end of the year, I was updating some of my data files, and I came across this stat. Over the last 20 years, the Dow gained 253.49% on Monday and Tuesday combined. But it lost 3.67% on Wednesday, Thursday and Friday.

That’s extraordinary.