The Buy List YTD
Posted by Eddy Elfenbein on June 11th, 2013 at 11:29 am

We’re nearing the half-way point and our Buy List (the red line) has finally pulled ahead of the S&P 500, but it’s still very close. Through yesterday’s close, our Buy List is up 16.16% to the S&P 500’s 15.19%. That doesn’t include dividends.

10-Year TIPs Yield Is Finally Positive
Posted by Eddy Elfenbein on June 11th, 2013 at 10:40 am

The yield on the 10-year TIPs has finally broken into positive territory. After all, lending your money to Uncle Sam for ten years ought to pay you something.

Look how sharply the line has bent up, especially since late April. On April 26, the 10-year TIPs yielded -0.68%.

Tuesday Has Lost Its Mojo
Posted by Eddy Elfenbein on June 11th, 2013 at 10:26 am

Tuesday is losing its magic! The U.S. market is down again today. The Bernanke of Japan, Haruhiko Kuroda, said they don’t need anymore stimulus. I have no idea if that’s right but it’s put a damper on our market. The VIX is up to 16.66 which is still pretty low.

The Commerce Department said that wholesale inventories rose 0.2% last month. This is important because restocking of shelves won’t be a major factor in the Q2 GDP report. The first estimate will be out in late July.

Gold is slipping again. The metal seems to have stabilized after its big April plunge. Gold is now around $1,373 per ounce and will soon test recent lows. Gold traders, however, have become very bullish.

This week is still pretty much a snoozer.

Morning News: June 11, 2013
Posted by Eddy Elfenbein on June 11th, 2013 at 6:59 am

BOJ Gov Kuroda: Not Necessary For BOJ To Extend Fixed-Rate Fund Supplying Ops For Now

France, Germany Oppose EU’s Single Sky Reform Plans – Minister

UN Climate Goals Possible With Efficiency Measures, IEA Says

U.S. Crop Growth Seen Excellent While Plantings Stay Slow

Lawsuit Challenges Takeover of Fannie Mae, Freddie Mac

Regulators Turn Up Heat Over Bank Fees

Citigroup Facing $7 Billion Currency Hit on Dollar, Peabody Says

SoftBank Raises Sprint Offer, Wins Key Shareholder Support

McDonald’s Global Comparable Sales Rise 2.6% In May

Lululemon Stock Squeezed 15% On CEO’s Decision To Step Down

Rare Protest Vote From Wal-Mart Shareholders

Dole CEO Offers $12 Per Share To Buy Rest Of Company

The Hunt is On For Edward Snowden

Cullen Roche: Negative Earnings Guidance Weakest Since Q1 2001

Jeff Carter: Where Are the StartUps?

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Preview of the Fed’s Next Meeting
Posted by Eddy Elfenbein on June 10th, 2013 at 10:13 am

The stock market opened up a little bit higher today but is now down a little bit. Looking across the sectors in the U.S. market, frankly, there doesn’t appear to be much movement at all. But the Japanese Nikkei had a very impressive move today as it jumped nearly 5%. Of course, the volatility there has been very high.

The Federal Reserve meets again next week, and this looks to be an important meeting. The central bank will be discussing the beginning of the end of its bond buying program. Up till now, I’ve been in the camp saying the Fed won’t make any moves before the end of the year. I’m less sure of that today.

On Friday, Jon Hilsenrath of the Wall Street Journal, who is widely understood to be Bernanke’s go-to media conduit, wrote:

Federal Reserve officials are likely to signal at their June policy meeting that they’re on track to begin pulling back their $85-billion-a-month bond-buying program later this year, as long as the economy doesn’t disappoint.

I’m going to assume that’s Bernanke speaking. Note that he didn’t say they “will pull back,” but “they’re on track to begin pulling back.” Of course, I can say that I’m “on track” for a lot of things. It doesn’t mean that’s about to happen. Still, the Fed wouldn’t be floating this in the media if they didn’t think it was important. This is a big deal.

We also have to remember that the Federal Open Market Committee is just that—a committee. Bernanke is the head of it but a majority can oppose him. It’s happened before.

We’ve come to an interesting point in the market where the economic events that are normally the big boys, like the jobs report or a Fed statement, are no longer top dog. Instead, the releasing of the Fed’s minutes is perhaps the most important event. The Fed releases the minutes of each meeting three weeks after they’re held. That means the all-important minutes from this meeting will be out around July 10th. Everyone will want to know what is said. I should add that the Fed’s minutes are a study in indefinite pronouns. Many said this. A few said that. Some added that. It’s almost like it’s written in code.

Also, the minutes release will be probably be just ahead of Bernanke’s Humphrey Hawkins testimony before Congress. He does that twice a year, once in the dead of winter and again in the middle of summer. This is where he spells out the details of monetary policy.

The key driver of what the Fed will do is the Fed’s own forecast of what will happen. Hilsenrath notes that the Fed has been consistently over-optimistic in what I’ll generously call “the recovery.” The problem is that fiscal policy has been holding back the economy. At least, that’s Bernanke’s view. The Fed believes that the economy will ramp up later this year. The stock market believes earnings will, too. There’s a lot riding on this second-half recovery. If it indeed comes, a lot of problems will be taken care of.

Hilsenrath had another article on Friday saying that the Fed really doesn’t like Wall Street’s latest buzzword: tapering.

The hangup for Fed officials is the word “tapering” suggests a slow, steady and predictable reduction from the current level of $85 billion a month at a succession of Fed meetings, say to $65 billion per month, then to $45 billion and so on. And that’s not necessarily what Fed officials envision.

Because Fed officials are uncertain about the economic outlook and the pros and cons of their own program, they might reduce their bond purchases once and then do nothing for a while. Or they might cut their bond buying once and then later increase it if the economy falters. Or they might indeed reduce their purchases in a series of steps if warranted by economic developments — but they don’t want the markets to think that’s a set plan. It is, as Fed officials like to say, “data dependent.”

This strikes me as a bit pedantic. With interest rates, Fed policy almost always follows a trend. It stands to reason that bond buying will be similar. I think it would be a mistake for the Fed to start tapering (or whatever you call it) before the end of the year. Inflation is hardly a threat and the jobs market is sluggish at best. Unfortunately, I don’t think they’ll take this advice.

Morning News: June 10, 2013
Posted by Eddy Elfenbein on June 10th, 2013 at 6:46 am

Hearing Pits German Monetary Heavyweights Against Each Other

On the IMF’s Big Fat Greek Woulda-Shoulda-Coulda

Japan’s Economy Builds Momentum, Gives Abe’s Policies A Boost

Japan’s Nikkei Surges on Revised Growth Figures

Rupee Falls to Record Lows

AirAsia X, Nok Air to Raise Funds in IPO Amid Boom in Travel

U.S. Expansion Poised for Longevity

Middling Jobs Numbers Signal a Long Path to Healthy Payrolls

AstraZeneca Buys U.S. Lung Drug Firm Pearl For Up To $1.15 Billion

Battery Maker Exide Technologies Files For Bankruptcy

Inside Amazon’s Plan to Sell You Groceries

Disruptions: Celebrities’ Product Plugs on Social Media Draw Scrutiny

New Report Details Just How Apple Will Change The Look Of The iPhone’s Software

Joshua Brown: “modest encroachments on privacy”

Jeff Miller: Weighing the Week Ahead: Is This a Tipping Point?

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Buffett & Gates on Success
Posted by Eddy Elfenbein on June 8th, 2013 at 7:51 pm

Jose de la Vega’s Investing Rules
Posted by Eddy Elfenbein on June 7th, 2013 at 1:57 pm

In this week’s CWS Market Review, I used a quote from Jose de la Vega. Though he’s not well-known today, in 1688 he wrote the first important book on investing, Confusion of Confusions. In it, he outlined four basic rules on investing.

The first rule in speculation is: Never advise anyone to buy or sell shares. Where guessing correctly is a form of witchcraft, counsel cannot be put on airs.

The second rule: Accept both your profits and regrets. It is best to seize what comes to hand when it comes, and not expect that your good fortune and the favorable circumstances will last.

The third rule: Profit in the share market is goblin treasure: at one moment, it is carbuncles, the next it is coal; one moment diamonds, and the next pebbles. Sometimes, they are the tears that Aurora leaves on the sweet morning’s grass, at other times, they are just tears.

The fourth rule: He who wishes to become rich from this game must have both money and patience.

CA Technologies Breaks Out
Posted by Eddy Elfenbein on June 7th, 2013 at 12:00 pm

CA Technologies ($CA), one of our quieter stocks, is breaking out today:

The stock cracked $28 yesterday and suddenly ran as high as $29.83 today.

May NFP = +175K, Unemployment Rate = 7.6%
Posted by Eddy Elfenbein on June 7th, 2013 at 10:47 am

This morning’s jobs report showed that the U.S. economy created 175,000 jobs last month. The figure for March was revised higher by 4,000 while April was revised down by 12,000.

Despite signs of optimism from consumers, other indicators of the health of the job market have been mixed. Average weekly hours and average hourly earnings, for example, have shown little improvement in recent months, according to the Labor Department.

Job gains in May were concentrated in service sectors like professional and business services, retail, and food services and drinking places. That last category has added 337,000 jobs over the past year.

The federal government, on the other hand, lost 14,000 jobs in May, presumably a result of the across-the-board spending cuts, known as the sequester, implemented by Congress in March.

The only thing remotely interesting about this report is how close it is to the established trend. Over the last 32 months, NFP has averaged a gain of 178,000. The standard deviation has been just 67,000. In other words, we’re locked in a trend.

Officially, the unemployment rate rose from 7.5% in April to 7.6% for May. If you work out the decimals, it rose from 7.510% to 7.555%.

This is a pretty dull report. Still, the stock market is very pleased. So far, the S&P 500 is up about 1% to 1,640.