Morning News: June 7, 2013
Posted by Eddy Elfenbein on June 7th, 2013 at 7:03 am

Europe Continues Wrestling With Online Privacy Rules

German Industrial Production Increases Most in a Year

Japan Public Pension Cuts Government Bond Weighting, Lifts Stocks

Hiring Seen Pointing To Economy In Need Of Fed’s Help

Feeling Like Gatsby? Net Worth Hits Another Record

Is an FHA Loan Still a Good Idea?

Is Big Data Turning Government Into ‘Big Brother’?

In Drive To Simplify, Facebook Will Ditch Half Its Ad Formats

Wal-Mart Board Seen at Risk of Losing Independent Voices

Apple to Yahoo Deny Providing Direct Access to Spy Agency

McDonald’s Testing New Late-Night Value Menu

Dimon, Other Wall St. Titans Make Time for Ma Ahead of Alibaba IPO

Forest Braces For Third Bout With Icahn

Cullen Roche: The One Chart That Bodes Very Poorly For Job Growth

Stone Street: Quick Observations on JOSB, GPS

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The S&P 500 Nears Its 50-DMA
Posted by Eddy Elfenbein on June 6th, 2013 at 12:10 pm

The S&P 500 has moved very close to its 50-day moving average. The 50-DMA is currently at 1,604.

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

Euro Rises to Four-Week High Before ECB Decision; Pound Advances

London Should Hand Libor Supervision to EU, Says Brussels

IMF Says Greece May Need Faster Debt Relief, Cites Own Mistakes

Yen Strengthens as Fed Easing Debate Intensifies; Aussie Slides

Financial Fears Gain Credence as Unrest Shakes Turkey

Fed Grants Foreign Banks Leeway in Dodd-Frank Swap Pushout Rule

SEC Unites Opponents on Money Fund Rule With Floating-Share Plan

How Rising Mortgage Rates Could Affect the Housing Recovery

ADP Report Shows 135,000 New Private-Sector Jobs

Entitlement Changes to Put Seniors at Financial Risk

Yahoo Not Done Acquiring

PepsiCo in Talks to Buy SodaStream for $2 Billion

Microsoft And The FBI Are Teaming Up To Take Down A Global Cyber Crime Ring

Jeff Miller: The Most Expensive Investment Research is Free

Joshua Brown: Defending 15,000

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Biggest Selloff of the Year
Posted by Eddy Elfenbein on June 5th, 2013 at 12:23 pm

See that little spot of trouble in mid-April?

The recent drop just surpassed that as our biggest drop of the year. Measuring from the intra-day high to intra-day low, the S&P 500 lost 3.84% between April 12 and April 18.

On May 22, the S&P 500 reached a high of 1,687.18. So to have a larger drop than the one in April, the S&P 500 had to break below 1,622.41. We hovered just above that mark earlier this week. The Monday intra-day low was 1,622.72 and on Tuesday it was 1,623.62.

Today, however, is a different story. So far, the S&P 500 has been as low as 1,612.29. This is the the biggest drop of the year.

The Graham Number
Posted by Eddy Elfenbein on June 5th, 2013 at 11:25 am

Ever heard of the Graham Number? This was a formula developed by Ben Graham, the father of securities analysis, to determine the fair value for a stock.

The Graham Number is:

The square root of [earnings-per-share * book-value-per-share * 22.5]

(Take note that earnings-per-share divided by book-value-per-share is our good friend return on equity.)

Let’s run an example: Nicholas Financial ($NICK) earned $1.63 per share in the four quarters ending March 31, 2013. The book value per share is $10.46.

So…if we multiply $1.63 * $10.46 * $22.5, that gives us $383.62.

The square root of $383.62 gives us $19.59. So by the Graham Number, NICK is going for a hefty 25% discount to its fair value.

Q1 Productivity Revised Down to 0.5%
Posted by Eddy Elfenbein on June 5th, 2013 at 10:38 am

The productivity report for Q4 was terrible. Fortunately, productivity improved in Q1. The government’s initial report said that productivity rose by 0.7% for the first three months of the year. Today that was revised down to 0.5% growth.

Higher Rates Are Good for Wells Fargo
Posted by Eddy Elfenbein on June 5th, 2013 at 10:01 am

Not everything about higher rates is bad. The CFO of Wells Fargo ($WFC) said that higher rates will actually help them:

Wells Fargo, the biggest U.S. home lender, is well-positioned for rising interest rates because the firm will benefit from higher returns, said Chief Financial Officer Timothy Sloan.

“The current backup in rates we think is attractive and will allow us to invest,” Sloan, 53, said today at a New York investor conference in response to a question about rising Treasury note yields. One drawback is that “it makes some consumers who were thinking about refinancing their mortgage probably think twice.”

Managing through a rise in interest rates is the biggest challenge facing bankers today, Sloan’s boss, Chief Executive Officer John Stumpf, said last week. While the San Francisco-based firm erred by prematurely keeping money on the sidelines in anticipation of rising rates, the shift may finally be coming, he said.

Analysts and investors have expressed concern that banks will be stuck with loans and other assets that will lose value because they were created when rates were near record lows.

“We’re very well-poised for an increase in interest rates,” Sloan said. “If rates go up, we can operate successfully.”

ADP Misses By 30,000, Look for Lower Open
Posted by Eddy Elfenbein on June 5th, 2013 at 9:29 am

The great Tuesday winnings streak finally came to an end yesterday. Note that it was only a winning streak for the Dow, not for the S&P 500. Despite how much news the winning streak got, it’s really not important for investors.

What is important for us is to see the fundamentals of the market improve which means corporate earnings. This Friday will be the big jobs report. Each month’s jobs report is by far the biggest economic report. On the Wednesday before each jobs report, ADP, which is a private payroll firm, releases its estimate. This morning, ADP said that the economy created 135,000 jobs in May which was less than what economists were expecting. The consensus was for a gain of 165,000. The stock market looks to pull back in early trading today.

I was impressed to see that Ford ($F) reported 45% sales growth in China. This is good news, but Ford is still way behind its rivals in China.

Morning News: June 5, 2013
Posted by Eddy Elfenbein on June 5th, 2013 at 7:15 am

Eurozone Recovery Signs Few And Far Between

Japanese Shares Suffer Another Setback After Speech By Prime Minister Abe

Euro Endorsement Key to Igniting Delayed Latvian Debt Rally

China Hits Back at EU With Wine Probe

Dow’s Record Tuesday Streak Comes to an End

Jefferson County, Creditors Reach Deal to End Bankruptcy

Apple Faces Limited Ban As U.S. Trade Panel Backs Samsung On Patents

IBM Buying Cloud Computing Company SoftLayer

Wilson Sonsini Advises Salesforce on ExactTarget Takeover

Supermarkets Beware: Amazon is Coming

Uncertain Outlook for Tesco Shares After Sales Fall Around the World

Bill Gates Gets in on ‘Nerd Facebook’

Warren Buffett Lunch Bids Quickly Top Apple CEO Cook’s Coffee

John Hempton: Short Selling and Misrepresenting the Truth – Infitalis Edition

Jeff Carter: 7 Things Kitchen Nightmares Can Teach a Business

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Gundlach on Interest Rates
Posted by Eddy Elfenbein on June 4th, 2013 at 4:44 pm