Morning News: January 7, 2014
Posted by Eddy Elfenbein on January 7th, 2014 at 7:01 am

Eurozone Inflation Dips Further Below Target

German Unemployment Falls Unexpectedly in December

Yellen Wins Confirmation as Fed Chief

Men’s Wearhouse Takes Higher Jos. A. Bank Bid to Investors

Samsung Pays Out $1 Billion in Bonuses to Mark Chairman Lee Kun-Hee’s 20 Years

Captive Goodyear Bosses Holed Up at French Site

JPMorgan Chase Nears a $2 Billion Deal in a Case Tied to Madoff

Sirius Deserves Richer Offer from Liberty Media

General Electric Goes Shopping, Thermo Fisher Gets “Attractive Price”

Intel Says Its Processors Are Now ‘Conflict-Free’

Twitter Downgraded, Again: ‘Success Is Far From Guaranteed’

Berkshire Stakes Name on Realty Business Buffett Barely Noticed

No Barbarians at the Gate; Instead, a Force for Change

John Hempton: Xero and the Precious Petals of New Zealand Funds Managment

Jeff Carter: SEC to Kill Crowdfunding If They Can

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Yellen Is Confirmed
Posted by Eddy Elfenbein on January 6th, 2014 at 7:35 pm

Janet Yellen was confirmed today as the next Chairman of the Federal Reserve. The vote was 56 to 26. A number of senators didn’t vote because of the weather.

Ms. Yellen was confirmed 56 to 26, with many senators kept away from the Capitol due to inclement weather. Nearly one dozen Republicans — including Kelly Ayotte of New Hampshire, Saxby Chambliss of Georgia and Tom Coburn of Oklahoma — crossed the aisle in support of Ms. Yellen. Ms. Yellen will be the first Democratic nominee to run the Fed since President Jimmy Carter named Paul Volcker as chairman in 1979.

Still, it is the thinnest margin of Senate approval for a Fed chairman in the central bank’s history. Mr. Bernanke was confirmed for a second term as chairman with 70 yes votes and 30 no votes in 2010.

Is Low Vol Closet Value Investing?
Posted by Eddy Elfenbein on January 6th, 2014 at 11:57 am

One of the popular investing anomalies in recent years is the case of low-volatility stocks. It turns out that stocks that don’t move around a lot have actually performed better than the overall market. This runs counter to a lot of financial theory which holds that investors “pay” for better returns by taking on more risk, which means higher volatility. The theory sounds great and intuitively makes sense. The problem is that real world results haven’t been very cooperative.

I don’t deny results. The numbers for low vol are impressive. What I don’t get is how low vol is different from simple value investing. The two strategies may be plowing the same field. A value stock is likely to have a higher dividend yield, therefore it’s likely to have less volatility. Is low vol a reflection of value, or vice versa? I really don’t know.

Low vol strategies have not worked very well over the past several months. The chart below shows how similar low vol and value are.

The blue line is the Utility Sector ETF ($XLU) divided by the S&P 500. The red/black line is a Low Vol ETF ($SPLV) divided by the S&P 500. The base of the two lines are different because the nominal prices are different, but the important point is the nooks and crannies of each line. They seem to match up very well.

Eric Falkenstein, who is the leading proponent of low vol investing, insists that it’s not the same as value. Perhaps there’s some subtle difference, but for most practical purposes, low vol and value appear to be the same.

December Non-Manufacturing ISM = 53
Posted by Eddy Elfenbein on January 6th, 2014 at 11:37 am

The stock market is down again today. This could be the first time since 2005 that the S&P 500 has started the year with three straight losses. Am I worried? Not at all.

Medtronic ($MDT) is leading our Buy List today. The shares are currently up over 1.2%. Their CEO is due to speak at a healthcare conference today.

Some downgrades today are hurting a few Buy List stocks.

eBay ($EBAY), for example, is getting hit this morning for a 3% loss. The shares were downgraded at Morgan Stanley from Overweight to Equal Weight. The earnings report will come out in two weeks.

AFLAC ($AFL) is also down today. Credit Suisse downgraded AFL from Neutral from Outperform. But they raised their price target from $66 to $67 per share.

A number of analysts on Wall Street have been raising their forecasts for Q4 GDP growth. We won’t get the report until the end of the month. While I don’t place a great deal of faith in forecasts from the analyst community, it does reflect a growing sense of optimism from investors.

The ISM reported that its non-manufacturing index fell to 53 in December. The consensus on Wall Street was for 54.7.

Morning News: January 6, 2014
Posted by Eddy Elfenbein on January 6th, 2014 at 7:16 am

Euro Zone – Reasons to Be Wary in 2014

China to Allow Up to Five Privately Funded Banks in Trial Reform

Spain’s Telefonica Denies Readying Joint Bid for TIM Brasil

Swiss National Bank Takes Hefty Gold Hit

Gold Climbs to Near 3-week High as Equities Dip; China Demand Robust

Bond Tab for Biggest Economies Seen at $7.43 Trillion in ’14

Service Sector Growth Slowed in December, PMI Survey Says

Selling Social Media Clicks Becomes Big Business

Pot Prices Double as Colorado Retailers Roll Out Green Carpet

JPMorgan Nears $2 billion settlement in a case tied to Madoff

Ford Revs Up in China, Roars Past Toyota and Honda

$1 Billion as Milestone and Omen

Men’s Wearhouse Launches Hostile Bid for Jos. A. Bank

Joshua Brown: The Only Thing We Have To Fear…

Jeff Miller: Weighing the Week Aheard: Will “Good News” Be Good For Markets?

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Dividends Rose 12% in 2013
Posted by Eddy Elfenbein on January 3rd, 2014 at 11:39 am

The fourth-quarter was another strong quarter for dividends. The S&P 500 paid out $9.52 per share in dividends (that’s an index-adjusted number). That’s an increase of 6.58% over last year’s fourth quarter. But remember that Q4 2012 saw a 22.77% surge in dividend payments to take advantage of the change in tax laws.

Dividends have now risen for 15 quarters in a row. We don’t have the final earnings numbers in yet, but dividends most likely paid out just under one third of corporate profits.

For the full year, dividends rose by 11.99%. While that’s below the 29.60% rally for the S&P 500, it’s not absurdly behind it either. In fact, dividends have actually outpaced the S&P 500 over the last three years. From the end of 2010 to the end of 2013, the S&P 500 rose 46.97% while dividends paid rose 53.95%.

Here’s a look at the S&P 500 (blue line, left scale) along with trailing four-quarter dividends (red line, right scale). The two lines are scaled at a ratio of 50-to-1. In other words, whenever the lines cross, the market’s dividend yield is exactly 2%. We also get a glimpse of how much everyone panicked in 2008 and 2009.

Ford’s December Sales Miss Expectations
Posted by Eddy Elfenbein on January 3rd, 2014 at 11:07 am

Ford Motor (F) wrapped up an excellent year for vehicle sales in 2013. Their sales for December, however, came in below expectations.

For the year, Ford sales rose by 11% to hit a six-year high. The company sold 2.5 million vehicles last year. The big winner was their F-Series pickups which rose 18%. Overall, their sales for December rose 2% to 218,058. December tends to be a big month for sales of luxury cars.

Ford is currently down one penny per share to $15.43.

Morning News: January 3, 2014
Posted by Eddy Elfenbein on January 3rd, 2014 at 6:49 am

Euro Zone Private Loans Contraction Accelerates in November

Spanish Jobless Claims Fall Sharply in December

U.K. House Prices Cap Best Year Since 2006 as Mortgages Surge

India Leader Singh to Step Down After Vote as Gandhi Rises

From Ore to Nuggets, With Peril

For New Fed Chair Yellen, Headaches May Be Only Starting

Jobless Claims in U.S. Fall to Lowest Level in a Month

Labor Department Panel Calls for Ending Lockup for Jobs Data

Marchionne’s Fiat-Chrysler Coup the Beginning, Not The End

FireEye Buys Cyber Forensics Firm Mandiant for About $1 Billion

Macy’s, Martha Stewart Living Settle Dispute

Original Cheerios Are Now GMO-Free

Here’s The First Job Ad We’ve Seen For A Bitcoin Trader At A Hedge Fund

Jeff Carter: Do We Need to Save Silicon Valley?

Cullen Roche: The Biggest Risk in 2014: Recency Bias

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The S&P By Sectors in 2013
Posted by Eddy Elfenbein on January 2nd, 2014 at 11:23 am

Here’s a look at how the different S&P 500 sectors performed last year. The big winner was Consumer Discretionary followed closely by Healthcare.

Industrials and Financials also did well. A little over a year ago, I tweeted, “I suspect an investor could buy the $XLF, then play video games for 12 months and easily beat most money managers in 2013.” That turned out to be right.

The lagging sectors were the safe havens — utilities and telecom. As I’ve said, this was the Fear Bubble deflating itself.

The Dow’s Average Year
Posted by Eddy Elfenbein on January 2nd, 2014 at 10:40 am

With the end of the year, I updated a few of my data files. One of these sets is the complete history of the Dow Jones going back to May 1896 (more than 32,000 trading days).

Here’s a good one. This is what the average year looks like for the Dow.

Interestingly, the second-best day of the year historically has been January 2nd. The best day is October 20th (thanks to following the big crash from October 19th). The Dow has gained an average of 0.37% on the 73 January 2nds the market has traded since 1897.