Gold Is Down to $1,218 Per Ounce
Posted by Eddy Elfenbein on December 2nd, 2013 at 3:16 pm

Now that the books have closed on November, we can see that it was the third-straight monthly gain for the S&P 500. The streak may continue. Historically, December has been the second-best month for stocks. The S&P 500 ended last week with its eighth-straight weekly gain. That’s the longest such streak in nearly ten years. This year also looks to be the best year for stocks since 1998. After five years, the stock market has gained an astounding $14 trillion in value.

According to a recent survey from Bloomberg, revenue growth is expected to increase to 4.1% next year which is double this year’s growth rate. Profits are expected to rise by 10%, which means that margins are expected to continue to expand.

But the interesting move today is in gold, which is now at its lowest level since July. Gold is down to $1,218 per ounce. The metal will almost certainly have its first losing year since 2000.

The price of oil has also been under pressure. According to the latest numbers, the U.S. is meeting 86% of its energy needs which is the most in over a quarter of a century. If this keeps up, we’ll soon be the largest oil producer in the world.

Cognizant to Hire 10,000 U.S. Workers
Posted by Eddy Elfenbein on December 2nd, 2013 at 1:29 pm

Big news from Cognizant Technology Solutions ($CTSH):

Cognizant Technology Solutions Corp., one of the largest providers of outsourcing services, plans to hire about 10,000 U.S. workers, potentially soothing concerns that the industry is harming the domestic job market.

The move, which President Gordon Coburn is scheduled to announce at a speech in Texas today, will increase the company’s 29,000-employee domestic workforce by about a third over the next three years. The new positions will be full-time jobs in science, technology, engineering and math — or STEM — fields.

A legislative battle over immigration reform has put a spotlight on outsourcing providers and their effect on U.S. technology jobs. Companies such as Cognizant and Infosys Ltd. (INFO) often rely on work visas to bring in consultants from overseas, rather than hiring local workers to do the job. In October, Infosys agreed to pay a record fine to the federal government after a probe into its use of visas.

For Cognizant, an improved U.S. economy is making it more feasible to hire full-time workers in the country, Coburn said in an interview. The company has raised its forecast for profit and sales twice this year.

“The stabilization of the economy in the U.S. has given our clients more comfort in innovation and investing in growing their own top line,” Coburn said. “There is clearly long-term demand for skilled technology professionals here in the U.S. We are working hard to identify the talent to meet our clients’ needs.”

The S&P 500 Vs. the CPI
Posted by Eddy Elfenbein on December 2nd, 2013 at 12:34 pm

Here’s a look at the S&P 500 versus the CPI. I’ve scaled the graph so the lines meet at the market’s peak in 2000.

You can see that even after this historic rally, prices still haven’t kept pace with inflation. Sorry bears, ain’t no bubble. Now 2000, that was a bubble.

The S&P 500 needs to get near 2,100 to reach a new inflation-adjusted high.

“Buffett’s returns appear to be neither luck nor magic”
Posted by Eddy Elfenbein on December 2nd, 2013 at 12:07 pm

Via Counterparties comes this academic paper:

Buffett’s Alpha
Andrea Frazzini, David Kabiller, Lasse H. Pedersen

NBER Working Paper No. 19681
Issued in November 2013
NBER Program(s): AP

Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors.

In other words, exactly what Buffett says he been doing for 50 years, works.

November ISM = 57.3
Posted by Eddy Elfenbein on December 2nd, 2013 at 10:12 am

Today’s ISM came in at 57.3. That’s the highest number since April 2011. Any reading above 50 means the manufacturing sector is expanding. Below 50 indicates a contraction.

This was the best ISM report since April 2011. The ISM has topped 50 for 50 of the last 52 months.

We’re Back!
Posted by Eddy Elfenbein on December 2nd, 2013 at 9:35 am

We’re back! I hope everyone had an enjoyable long weekend. This will be a busy week for economic news. The ISM report comes out later today. On Thursday, the government will update the third-quarter GDP report. Then on Friday, the November jobs report comes out. Last week’s initial claims report was the fifth-lowest in the last six years.

Trading was very slow last week, but the stock market managed to climb higher. At one point on Friday, the S&P 500 got to 1,813.55 which is an all-time high. However, the market dropped shortly before the early close. Last Monday, the Nasdaq Composite closed above 4,000 for the first time in 13 years.

I’ve often noted that the current rally is the most-hated rally in Wall Street’s history. Perhaps a little overstatement. Still, I suspect that a major reason isn’t that the bears haven’t seen drops, but it’s that they have. Consider that during the current rally which began in March 2009, we’ve seen separate drops of 5.6%, 5.8%, 6.4%, 7.1%, 7.7%, 8.1%, 9.9%, 16.0% and 19.4%. Every single one led to a new high. All of them.

What’s also interesting is the breadth of this market. The top 10 point contributors in the S&P 500 have accounted for 18% of this year’s gain. In 1999, that number was 65%. The tech bubble was created by a very small number of stocks. That’s not what’s happening now. Since World War II, the S&P 500 has gained 20% or more 18 times. The following year’s gain has averaged 10%.

Morning News: December 2, 2013
Posted by Eddy Elfenbein on December 2nd, 2013 at 7:16 am

Bali Talks to Decide Fate of WTO

Global Factory Growth Picks Up But Europe DIverging

Flagship UK Scheme Boosts Bank Lending, Aiding Recovery

Greece Just Hit a Major Milestone In Its Economic Recovery

Markets Dip After China Lifts Ban on New Stock Listings

Bull Market Shows No Sign of Death With Yellen Support

Akamai Buying Prolexic For About $370 Million

Gloomy Numbers For Holiday Shopping’s Big Weekend

Amazon Testing Drones for Same-Day Package Delivery, Bezos Says

Quiet Boss at Citigroup Setting Tone For Wall Street

Hilton Seeks as Much as $2.4 Billion in Biggest Hotel IPO

Three Tax-Savvy Ways to Donate Appreciated Stock

Cullen Roche: Suddenly People Are Realizing That QE Might Be Deflationary

Jeff Carter: The Holiday Wind Down-How To Find a Job or Keep Momentum

Jeff Miller: A Deeper Look at Those Skeptical Charts on Forward Earnings Estimates

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Morning News: November 29, 2013
Posted by Eddy Elfenbein on November 29th, 2013 at 10:34 am

UK’s Falkland Islands Eye Oil Exploration And Argentina Is Fuming

Eurozone Unemployment Falls For First Time Since 2011

Euro Inflation Rate Rises More Than Forecast to 0.9%

Traders Ignore S&P Decision to Cut Netherlands Credit Rating

Upgrade Lifts Spanish Shares

Japan Price Gauge Rises Most Since ’98 in Boost to Abe

Key Bangladesh Garments Factory Destroyed in Blaze

Obamacare’s Secret Success

Shoppers Gobble Up Thursday Deals

ADM’s $2 Billion GrainCorp Offer Rejected by Australia’s Hockey

Hertz Fix in Dollar Thrifty Deal Fails as Insider Warned

A Growth Spurt for Middle Eastern Carriers, Led by Emirates

Black Friday For Owner After $8 Million in Bitcoin Lost to Landfill

Joshua Brown: My Favorite Chart on Earth, Updated

Cullen Roche: Mark Freeman – Finding Income Without Taking Undue Risk

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Happy Thanksgiving
Posted by Eddy Elfenbein on November 28th, 2013 at 8:16 am

Morning News: November 28, 2013
Posted by Eddy Elfenbein on November 28th, 2013 at 6:59 am

Euro-Area Economic Confidence Rises More Than Forecast

German Jobs Miracle ‘Could Be Running Out of Steam’

Carney Acts on U.K. Housing Boom Danger With Lending Restraint

Philippine Growth Slows in Third Quarter

‘Cryptocurrency’ on the Rise: Bitcoin Tops $1K

Why Not Black Wednesday Instead?

AMR, US Airways Merger Clears Final Hurdle

Burberry Appeals China Leather Goods Trademark Restriction

KKR to Invest $200 Million in India Pharma Group Gland

Men’s Wearhouse Eyes Jos. A. Bank; Investors Win

Thomas Cook Posts First Profit Since 2010 as Cost Cuts Deliver

Trader Messages Scrutinized as UBS Bans Chats Among Firms

Analyst Says SAC Trader Sought ‘Edgy’ Information

Joshua Brown: Two-Word Investment Outlooks

Credit Writedowns: The U.S. Retail Outlook Remains Weak

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