Energy Resumes Downtrend
Posted by Eddy Elfenbein on July 9th, 2015 at 11:48 am

Energy stocks badly lagged the market during the second half of last year. That seemed to have ended this year, but it didn’t last. Energy stocks have again started to lag the market.

Check out this chart of the relative strength of the Energy Sector ETF (XLE):

Morning News: July 9, 2015
Posted by Eddy Elfenbein on July 9th, 2015 at 7:15 am

EU’s Tusk Latest to Urge Some Greek Debt Help

Proof That Merkel Is Europe’s Economic Bully

Deal or No Deal, Greece Faces a Difficult Aftermath

Irrational Exuberance Triggers Chaos as China Watchdog Sidelined

Trans-Pacific Partnership’s Potential Impact Weighed in Asia and U.S.

Oil Rout Seen Ending as Demand Trumps China’s Market Crash

The Stock Market Bell Rings, Computers Fail, Wall Street Cringes

IBM Announces Computer Chips More Powerful Than Any In Existence

PepsiCo Profit, Revenue Beat Estimates as Higher Pricing Pays Off

Walgreens Beats Earnings Estimates and Appoints Pessina CEO

Albertsons Grocery Chain Makes Plans For Initial Public Offering

Alfa Oil Dream Falters as $1.7 Billion Pacific Bid Withdrawn

With Options Dwindling, BP Seized a Chance to Settle Oil Spill Case

Howard Lindzon: The China Panic

Roger Nusbaum: The Futility of Retirement Calculators

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No Reason to Panic
Posted by Eddy Elfenbein on July 8th, 2015 at 2:57 pm

The NYSE has said that they want to open at 3:10 pm. We’re about there.

The key for investors is that there’s no reason to panic. This only impacts trading on the NYSE. When you place a buy order, it automatically goes to the lowest price it can find. The computers have lots of exchanges to choose from. The closure of the NYSE has little to no impact on today’s market.

Stock Returns and Inflation Expectations
Posted by Eddy Elfenbein on July 8th, 2015 at 2:35 pm

I wanted to see how well the stock market has performed at different points of the 10-year breakeven inflation rate. I took the Wilshire 5000 Total Return index and saw how it performed against the 10-year breakeven.

The results are interesting.

Since 2003, the Wilshire 5000 has gained 14.54% when the 10-year breakeven is 2.36% or less.

When it’s 2.37% or more, the Wilshire has an annualized loss of 0.21%.

Since 2003, the 10-year breakeven inflation rate has been 2.36% or less about two-thirds of the time. It’s currently at 1.87%. It’s been below 2.36% continuously since April 30, 2013.

NYSE Halts All Trading
Posted by Eddy Elfenbein on July 8th, 2015 at 11:50 am

The New York Stock Exchange has halted all trading. I don’t know the details but it appears to be a technical issue. Trading stopped at 11:32 am.

Update: Trading is still closed on the NYSE. Remember that NYSE-listed securities still trade on other exchanges. The NYSE said it is an internal issue, not an outside cyber attack.

Morning News: July 8, 2015
Posted by Eddy Elfenbein on July 8th, 2015 at 7:11 am

Greece Faces Euro Exit Unless Demands Accepted by Sunday

Tsipras Pleads For Fair Deal For Greece in EU Parliament

China Stocks Plunge as State Support Fails to Revive Confidence

Market’s Dive Could Delay Economic Reforms in China

OECD Indicators Point to Growth Slowdown in Major Economies

Nissan Says Takata Air Bag Inflator Caused Fire in Japan Crash

Major Job Cuts Expected at Microsoft

Why Amazon Should Fear Alibaba

Didi Kuaidi Raises $2 Billion in Fresh Funding

Disney Wins City Tax Deal in Exchange for $1 Billion Park Pledge

Hostess CEO Says No Plan For Twinkie IPO

Barclays’s McFarlane Ousts CEO, Criticizes Cumbersome Bank

Corzine, Other Ex-MF Global Officials Settle Suit for $64.5 Million

Cullen Roche: Never Invest in Something You Cannot Understand

Credit Writedowns: More on Greek Tax Anticipation Note IOUs

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Below 2,050
Posted by Eddy Elfenbein on July 7th, 2015 at 10:47 am

For the first time since April 1, the S&P 500 is below 2,050.

The index has also given up its 200-day moving average.

The S&P 500 has had a pretty good run of staying above its 200-DMA. There was a brief stretch of six days last October when the index drifted below its 200-DMA (thanks to Ebola). Before that, the last time the S&P 500 closed below its 200-DMA was November 16, 2012.

How to Game the Market
Posted by Eddy Elfenbein on July 7th, 2015 at 8:30 am

From Bloomberg:

It’s an easy way to game the stock market, and getting easier by the day.

With some deft maneuvers, hedge funds and Wall Street trading desks are reaping hundreds of millions at the expense of index mutual funds, the investments of choice for a growing number of ordinary Americans.

The tactic, in some ways, resembles illegal front-running – – but in this case, it’s perfectly fine. The traders are simply buying stocks before they’re added to the indexes that, by definition, index funds must track.

As the popularity of index investing soars to new heights, the emergence of index front-running is raising fundamental questions about so-called passive investment strategies, as well as how indexes are compiled and the role the funds themselves play in elevating costs. By one estimate, it gouges owners of funds tracking the Standard & Poor’s 500 Index to the tune of $4.3 billion a year, a sum that can double or even triple the cost of such investments.

“Portfolio managers are aware of it, but some of them will say ‘My clients demand an index fund, and I’m going to give it to them come hell or high water,’” Michael Rawson, an analyst at Morningstar Inc., said from Chicago. “Yes, you matched the index return, but the investor is now worse off. You don’t hear about that as much.”

“Fixed Income is Always a Good Foundation for a Portfolio”
Posted by Eddy Elfenbein on July 7th, 2015 at 7:52 am

From Simon Constable at the Wall Street Journal:

Given the expected rise in interest rates, does your portfolio still need a healthy allocation of bonds? Probably yes, according to the experts.

Many agree that the security and diversification bonds offer shouldn’t be spurned just because the direction of rates could be changing. But, depending on the investor, now may be a good time to adjust the size of that allocation and its contents, with regard to lengths of maturities and levels of risk.

“Fixed income is always a good foundation for a portfolio,” says Eddy Elfenbein, Washington, D.C., author of the Crossing Wall Street blog and newsletter. “Security and safety.… Each month and quarter there is a regular check from the coupons.”

Mr. Elfenbein says he generally suggests a 30% allocation in bonds once investors hit 40, and an increasing allocation as the years progress. Younger investors may want to be in stocks only, he says, because they will be able to weather more market swings.

Morning News: July 7, 2015
Posted by Eddy Elfenbein on July 7th, 2015 at 7:12 am

The Latest: Greece’s New Finance Minister Arrives for Talks

Summit Offers Chance to Get Back to Negotiations on Greece Bailout

European Commission and France Move to Keep Greece in Eurozone

UK May industrial Output Jumps On Oil Boost, But Manufacturing Weak

Scant Relief From Beijing for Bruised Investors

Oil Approaches Bear Market

White House Solar Plan Aims at Low- and Middle-Income People

Why Samsung’s Profits Fell For The 7th Consecutive Quarter

TerraForm to Acquire Wind Farms for $2 Billion

Sealed HSBC Report Shows U.S. Managers Battling Cleanup Squad

For Start-Ups, How Many Angels Is Too Many?

Rich Russians Are Begging Elon Musk to Sell Them Teslas

Reddit CEO Apologizes After Outrage Over Employee Dismissal

Jeff Carter: Grexit Feels Like a Pro Draft

Joshua Brown: Chart o’ the Day: Why the Market Feels Worse Than It Is

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