• A Deal May Be Near
    Posted by on December 31st, 2012 at 11:09 am

    The final day of trading is underway. The seemingly unending Fiscal Cliff drama continues. Honestly, I’m a bit dizzy from the constant news. The latest is that both sides are very close to reaching a deal. On the major points, the Democrats have agreed to raise the tax threshold to $450,000. The GOP is holding out for $550,000. The Democrats want to raise dividend taxes to 20% on households making over $250,000.

    Despite the positive news on Fiscal Cliff negotiations, the market is up rather modestly. Joe Weisenthal of Business Insider notes that the market is actually doing quite well when compared to some of the worse points of the futures market this weekend. The Senate has just reconvened to discuss the Fiscal Cliff.

    The S&P 500 is currently up five points to 1,407.

  • Morning News: December 31, 2012
    Posted by on December 31st, 2012 at 7:17 am

    Merkel Calls for German Patience as Euro Crisis ‘Far From Over’

    China Manufacturing Pickup Shows Rebound Gains Traction

    Diving Currency Adds to Egypt’s Woes

    Egypt To Resume IMF Loan Talks As Reserves Dwindle

    Hollande’s 75% Millionaire Tax Rejected in French Court

    On the Fiscal Cliff, Republicans Are Blowing a Great Deal

    Congress Dysfunction as Deadline Arrives Poses 2013 Risks

    Big Depositors Seek a New Safety Net

    Crude Futures Set for Annual Drop in New York

    Farm-State Lawmakers Back Plan to Avoid ‘Dairy Cliff’ Price Jump

    Tribune Co. Emerges From Bankruptcy

    Duff & Phelps to Be Sold for $665.5 Million

    U.S. Clears DNA Firm’s Acquisition by Chinese

    Jeff Carter: Going Over The Cliff – What’s The Bill?

    Howard Lindzon: Is Apple Pulling a Braveheart…and Why I Hate ‘Cheap’

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  • Places that Visit Crossing Wall Street
    Posted by on December 28th, 2012 at 9:10 pm

    Here’s a ranking of countries that send the most visitors to our humble blog:

    The United States
    Canada
    The United Kingdom
    Australia
    Singapore
    Germany
    Spain
    India
    France
    The Netherlands
    Mexico
    Belgium
    Denmark
    Switzerland
    Hong Kong
    Japan
    Israel
    Brazil
    Bermuda
    Italy
    China
    Sweden
    Malaysia
    Greece
    New Zealand
    Ireland
    The United Arab Emirates
    Colombia
    South Africa
    Taiwan
    The Philippines
    Finland
    Republic Of Korea
    Poland
    Thailand
    Argentina
    Austria
    Norway
    Portugal
    Viet Nam
    Egypt
    Indonesia
    Chile
    Turkey
    Slovenia
    Romania
    Czech Republic
    Estonia
    Hungary

    Here are the top cities:

    New York, NY, USA
    Toronto, Canada
    Chicago, IL, USA
    Washington, DC, USA
    Houston, TX, USA
    Los Angeles, CA, USA
    San Francisco, CA, USA
    Boston, MA, USA
    London, The United Kingdom
    Singapore, Singapore
    Dallas, TX, USA
    Austin, TX, USA
    Brooklyn, NY, USA
    Seattle, WA, USA
    Pittsburgh, PA, USA
    San Diego, CA, USA
    Denver, CO, USA
    Montreal, Canada
    Phoenix, AZ, USA
    Atlanta, GA, USA
    San Jose, CA, USA
    Charlotte, NC, USA
    Portland, OR, USA
    Santa Clara, CA, USA
    Minneapolis, MN, USA
    Philadelphia, PA, USA
    Alexandria, VA, USA
    Saint Louis, MO, USA
    Jersey City, NJ, USA
    Cincinnati, OH, USA
    Ottawa, Canada
    Albany, NY, USA
    Oakland, CA, USA
    Mexico, Mexico
    Madison, WI, USA
    Irvine, CA, USA
    Fort Lauderdale, FL, USA
    Tucson, AZ, USA
    Hamilton, Bermuda
    Central District, Hong Kong
    Milwaukee, WI, USA
    Santa Barbara, CA, USA
    Beaverton, OR, USA
    Wilmington, NC, USA
    Cleveland, OH, USA
    Saint Paul, MN, USA
    Vancouver, Canada
    Baltimore, MD, USA
    Columbus, OH, USA

    We had 16 visitors from Liechtenstein this year (so far). Let’s aim for 20 in 2013!

  • CWS Market Review – December 28, 2012
    Posted by on December 28th, 2012 at 8:44 am

    “Never buy at the bottom, and always sell too soon.” – Jesse Livermore

    The stock market seems to be limping towards the finish line. Thursday was the fourth-straight down day for the S&P 500. We’ve nearly given back one month’s worth of gains in the last four days. This was the worst four-day Christmas stretch in at least 60 years. Still, the market has had a good year, and the indexes are well above where they were six weeks ago.

    There was some excitement late in the day on Thursday as stocks spiked after the news that House Speaker John Boehner is going to convene a Sunday session of the House of Representatives. In one hour, the U.S. equity markets gained $150 billion in market value. This appears to be one final attempt to resolve the dreaded Fiscal Cliff before the end of the year. I’ll have more to say on that in a bit (here’s a sneak preview: ignore the hype).

    In this week’s CWS Market Review, we’ll take a closer look at what’s impacting the market right now. There’s a lot going on just below Wall Street’s radar. For example, the Japanese stock market is exciting for the first time in more than two decades. Implied volatility is also slowly creeping higher. I’ll also have more to say on the 2013 Buy List, which will go into effect on Wednesday. But first, let’s look at all the hot air about the Fiscal Cliff.

    Don’t Buy the Fiscal Cliff Hype

    I haven’t said much about the vastly over-hyped Fiscal Cliff story because I thought this was a distraction for investors. I still believe that today. The American people have just gone through a long election campaign, and I don’t believe they have much patience for a drawn-out battle over taxes.

    I haven’t addressed this phony issue in detail because I think it’s much ado about nothing. Or rather, it’s a great deal of bluster and posturing about nothing. The latest ruckus merely means that we might to have to wait until January for a compromise. Big deal.

    Let’s be clear about the facts—there’s no point of no return. None at all. It’s really more of a fiscal slope than a cliff. Waiting a few days into January isn’t going to push us into a recession, a fact which ought to put to rest the silly notion of a Fiscal Cliff. And I won’t even go into those absurd countdown clocks on CNBC. I suspect that Fiscal Cliff worries are harming consumer confidence somewhat, but that’s about it. Ideally, I wish we had a better-functioning political system that avoided such theatrics, but unfortunately we don’t.

    As I mentioned before, the latest news is that House Speaker John Boehner will convene the House of Representatives for a special session this Sunday. Just that announcement caused the S&P 500 to leap 15 points in a single hour late Thursday. That should tell you that the market wants this nonsense resolved. I should caution investors to expect, before this mess ends, one or two days with sharp drop-offs (but no more than 2%) as the political players try to sway the markets to their side. We all know how the market loves to be the drama queen.

    Events have gotten so bizarre that the markets actually rallied when Senator Scott Brown posted on his Facebook account that the White House was proposing a last-minute offer. The markets then dropped after journalist John Harwood tweeted that the White House was denying Brown’s Facebook post. Our political system has been reduced to communicating via tweets and Facebook? This is just too silly to comprehend. I’m hardly an expert on political matters, but I think President Obama will ultimately be able to get most of what he wants. There’s too much to lose if this drama drags on.

    All Eyes Are Focused on the December Jobs Report

    The economic news continues to be—not so horrible. This week, we learned that new home sales rose 4.4% in November. That’s the fastest rate in two-and-a-half years, and new homes sales are up 15.3% over the last 12 months. On Wednesday, the Case-Shiller Index indicated that home values are up 4.3% from last year.

    On the jobs front, initial unemployment claims continue to drop. The latest report showed 350,000. Since there tends to be a lot of “noise” in this report, economists prefer to focus on the four-week average. Well, that just hit a five-year low. This also means that the effects of Hurricane Sandy have probably passed.

    We’ll learn a lot more about the jobs market next Friday, when the Labor Department releases the December jobs report. Remember that the Fed has specifically said that it expects rates to remain low until the unemployment rate hits 6.5%. We’re currently at 7.7%.

    Wall Street currently forecasts that real GDP growth for Q4 will be pretty anemic. Goldman Sachs recently lowered their forecast to just 1% growth. But much of this is a short-term concern because it’s due to firms working off their inventories. In layman’s terms, companies aren’t building a lot of new stuff. Instead, they’re letting their customers buy what’s left on their shelves. This is probably due to the uncertainty coming from Washington. But at some point, companies will want to restock their shelves, so they’ll get back to building again.

    We’re only a few weeks from the start of earnings season. Wall Street currently expects earnings of $25.33 for the S&P 500 (the earnings number adjusted to the index). As recently as six months ago, analysts were expecting $28. Despite the slashed estimates, the current forecast would be an increase of 6.74% over last year’s fourth quarter. It would also be the highest growth rate in three quarters and perhaps the first evidence that not only are earnings growing, but the rate of growth is increasing. For all of 2013, Wall Street’s consensus is for earnings of $112. 82. That means the S&P 500 is currently going for just over 12.5 times forward earnings. That’s not a bad deal.

    The Yen’s Impact on AFLAC

    In the last six weeks, the Japan Nikkei has soared nearly 20%. It’s been two decades since investors were excited about Japan. Put it this way: the index is still 73% below its all-time high from 23 years ago. That’s about the time that The Simpsons premiered in the United States. The game changer for Japan is that the new Prime Minister, Shinzo Abe, wants to force the Japanese Fed to be more aggressive in fighting deflation.

    The effect of this is that the Japanese yen has lost ground against the U.S. dollar, and it will probably continue to do so. I wanted to alert investors that a weaker yen takes a bite out of AFLAC’s ($AFL) earnings since the company does most of its business there. It breaks down something like this: Every additional yen in the yen/dollar exchange rate costs AFLAC about five cents per share in annualized operating earnings. In other words, the weaker yen hurts AFLAC, but it’s not a back-breaker. I like AFLAC a lot, and it’s done well for us in 2012. I’m looking forward to another good year in 2013. AFLAC is an excellent buy up to $57 per share.

    The 2013 Crossing Wall Street Buy List

    With just two trading days left, our 2012 Buy List is up 14.02% for the year, while the S&P 500 is up 12.76%. Including dividends, we’re up 16.47%, while the S&P 500 is up 15.33%.

    Once again, here are the 20 stocks for our 2013 Buy List:

    AFLAC ($AFL)
    Bed Bath & Beyond ($BBBY)
    CA Technologies ($CA)
    Cognizant Technology Solutions ($CTSH)
    CR Bard ($BCR)
    DirecTV ($DTV)
    FactSet Research Systems ($FDS)
    Fiserv ($FISV)
    Ford ($F)
    Harris Corporation ($HRS)
    JPMorgan Chase ($JPM)
    Medtronic ($MDT)
    Microsoft ($MSFT)
    Moog ($MOG-A)
    Nicholas Financial ($NICK)
    Oracle ($ORCL)
    Ross Stores ($ROST)
    Stryker ($SYK)
    Wells Fargo ($WFC)
    WEX Inc. ($WXS)

    Please note that I had the incorrect ticker symbol for WEX Inc. in last week’s email. The correct ticker symbol is WXS.

    I want to address a few points that people have asked since I announced the Buy List changes last week. For those of you who have followed for a while, the Buy List changes weren’t a big surprise, and I supposed that’s how it should be. A few of you even guessed my changes correctly ahead of time. Still, some of you were surprised that Bed Bath & Beyond ($BBBY) is on the list. I know BBBY disappointed us with their lower guidance, but I’m willing to give them the benefit of the doubt. They’ve weathered worse storms.

    Some of you were surprised to see Microsoft ($MSFT) on the Buy List. This is where I should explain that oftentimes good investments look a bit banged up on the outside. After all, that’s why the price is so good. I agree with Microsoft’s critics, but at $27 and with a 3.4% dividend, the stock is worth owning.

    Two of our new stocks, Cognizant Technology Solutions ($CTSH) and FactSet Research Systems ($FDS), are former members of the Buy List. At $73, I admit that CTSH is rather pricey, but I’m not a pure value investor. There are occasions where we need to pay for strong growth, and I think this is one.

    With the addition of Wells Fargo ($WFC), we now have two large banks on the Buy List (the other being JPM). Of course, if I hadn’t deleted Hudson City, we were going to get shares of M&T Bank anyway. The Buy List is slightly tilted toward financials, but I don’t believe unreasonably so. Based on next year’s earnings estimate, the financial sector is valued 10% less than the market as a whole. There are some bargains in this sector. In fact, I doubt many active investors will be able to beat the Financial Sector ETF ($XLF) next year.

    I’ll have my Buy Below prices for the five new stocks in next week’s CWS Market Review. Until then, you can consider all five to be very good buys at their current prices. I’m also raising my Buy Below prices on Ford ($F) to $15, on Moog ($MOG-A) to $43, and on Harris ($HRS) to $53. On Thursday, Ford touched an eight-month high. Six weeks ago, I highlighted Moog as an outstanding buy, and the shares have rallied 18% since then.

    That’s all for now. The market will be closed on Tuesday for New Year’s Day. I’ll crunch the numbers and post the complete year-end Buy List stats then. Remember, the 2013 Buy List will take effect at the open on Wednesday. We’ll also get the big jobs report on Friday. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

  • Morning News: December 28, 2012
    Posted by on December 28th, 2012 at 6:39 am

    Goldman Sachs Buying Japan’s Exporters on Abe Policy Bets

    Car Factories Offer Hope for Spanish Industry and Workers

    Obama Eyes $108 Billion Annual Asia Prize Vying With China Trade

    France’s Colonial Hangover: Apologizing Abroad, Ignoring Injustice at Home

    Wheat Rebounds as Demand May Rise After Decline; Soybeans Gain

    Cliff Talks Down to the Wire

    Stalemate in Washington Is Eroding Confidence of Consumers

    Port Strike Hinges on Costly Royalty

    Blackstone’s SeaWorld Files for Initial Share Sale in U.S.

    Porsche Jumps on New York Court Dismisal of VW Stake Case

    Hewlett-Packard Reports Justice Department Fraud Probe At Autonomy

    Instantly Yours, for a Fee

    In a Weak Market for Mergers and Acquisitions, Signs of Strength

    Jeff Miller: Fiscal Cliff Notes: Interpreting the deadline news

    The Epicurean Dealmaker: TED’s Greatest Hits of 2012

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  • Morning News: December 27, 2012
    Posted by on December 27th, 2012 at 7:07 am

    Italian Bonds Seen Weathering Political Confusion

    South Korea Lowers Its Growth Forecast

    Nikkei 225 Rises to Pre-Earthquake Level on Yen Weakness

    Japan Retail Investors Pour $2.3 Billion Into Fund Investing In N. America

    Signs of Changes Taking Hold in Electronics Factories in China

    U.S. Family of Mao’s General Assimilates, Votes for Obama

    Senators to Return With 5 Days Left and No Clear Fiscal Path

    Geithner Warns Lawmakers Debt Standoff Risks U.S. Default

    Wheat Rebounds From Five-Month Low as Drop Seen Luring Buyers

    Toyota Agrees To Settle U.S. Litigation for Over $1 Billion

    Starbucks’ $40,000 Cup Campaign for Bipartisanship

    Appeals Court Backs Wells Fargo On Method Of Assessing Fees

    Rajaratnam Agrees To Pay $1.5 Million Disgorgement In SEC Case

    Joshua Brown: Amazon Vs. Google in 2013

    Cullen Roche: Read of the Day: 3 Reasons 2013 Could Surprise on the Upside

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  • Just Three Trading Days Left….
    Posted by on December 26th, 2012 at 6:39 pm

    With three trading days left in 2012, our Buy List is up 14.32% for the year while the S&P 500 has gained 12.90%.

    Including dividends, our Buy List is up 16.77% while the S&P 500 is up 15.45%.

    The Buy List’s gain from dividends has been 2.15% which is just a little bit below the 2.26% for the S&P 500.

    One more stat: If this matters to you, the “beta” for the Buy List for this year has been 1.045. Historically, it’s been around 0.955.

    For the last seven years combined, we’re outpacing the S&P 500 by a margin of 61% to 32%. I’ll have a complete rundown once trading is done for the year.

  • The Slumping Yen and AFLAC
    Posted by on December 26th, 2012 at 12:08 pm

    I wanted to add a quick work about AFLAC ($AFL) and the falling yen. Since AFLAC does most of its business in Japan, the company’s profits are impacted by the yen/dollar exchange rate. Lately, the dollar has been crushing the yen.

    Basically, the stronger the yen is, the better it is for AFLAC. Conversely, a weak yen is bad for AFLAC. I should add that I don’t see AFLAC as a yen play. I prefer to look at their “currency neutral” results. But the fact is that the weaker yen will take a bite out of earnings.

    Very roughly, every one yen above 80 yen to the dollar knocks five cents per share off of AFLAC’s annual earnings. The WSJ quotes Morgan Stanley’s Ron Leven who says the exchange rate will hit 90 in the first half of 2013.

  • Stocks Are Down On Boxing Day
    Posted by on December 26th, 2012 at 11:29 am

    I hope everyone had a nice Christmas. The stock market is open again after a closed day yesterday and a half day on Monday.

    So far, stocks are down today but it’s not too bad. The S&P 500 is hovering right about 1,420. This could be the third down day in a row. Bear in mind that we had a six-day winning streak earlier in the month.

    Ford Motor ($F) had a great day on Monday as the stock soared above $12 for the first time since April. I’m happy to see that Ford continues to hold on to those gains today.

    We had more good news from the housing market. The Case-Schiller Index reported that home values rose 4.3% in the 12-month period ending in October. That’s the biggest year-over-year gain since May 2010. It was also above what economists had been expecting.

    The price increase accelerated from a 3 percent advance in the 12 months ended September. The Case-Shiller index is based on a three-month average, which means the October data were influenced by transactions in August and September.

    Residential homebuilding has contributed 0.3 percentage point to gross domestic product on average in the first three quarters of 2012, according to Commerce Department data. The last time it added to growth for an entire year was in 2005, when it boosted the economy by 0.36 point.

    Home prices adjusted for seasonal variations rose 0.7 percent in October from the prior month, with 17 of 20 cities showing gains, according to today’s report. Las Vegas showed the biggest gain with a 2.4 percent advance, followed by San Diego with a 1.7 percent increase.

    What’s the impact for investors of recovering housing? I tried to address that recently when The Atlantic asked me to contribute to a round-up of favorite charts of 2012. Here’s my entry:

    This shows the Retail ETF (XRT) beating the S&P 500 this year, while the Homebuilders ETF (XHB) has absolutely creamed it. The move in the homies is much more dramatic since it’s coming off a lower base. That’s been the story this year: recovering housing slowing lifting consumers. In June, Walmart finally took out its high after 12.5 years

  • Morning News: December 26, 2012
    Posted by on December 26th, 2012 at 7:09 am

    Abe Chosen As Japan’s Next Prime Minister

    China Beige Book Signals Limits on Rebound as Loan Demand Slips

    Refi Program Expansion Eyed

    Budget Talks Cloud Outlook

    U.S. Holiday Sales Advanced a Marginal 0.7%, SpendingPulse Says

    ‘Dairy Cliff’: Milk Prices May Double In New Year

    Toyota Poised To Reclaim World’s Biggest Carmaker Title

    VW Races With GM for 2013 China Crown as Toyota Struggles

    Russia’s Desire for Cars Grows, and Foreign Makers Take Notice

    Asiacell Seeks $1.3 Billion in Top Mideast IPO Since 2008

    Grounded Kingfisher Lacks Funding Plan -India Minister

    ICE Chief Challenges Stock Views of Trading

    The Triumphs and Failures of Deal Makers in 2012

    Roger Nusbaum: Christmas With Taleb!

    Phil Pearlman: Zeroing In On The Profound Aspect of Social Networks

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