Discretionaries Take the Lead
Posted by Eddy Elfenbein on November 28th, 2012 at 10:03 pm

Here’s a breakdown of how the S&P 500 sector groups did during the recent down leg from October 17th to the post-election low on November 15th, and then on the recent rally since November 15th.

What’s interesting to note is that Consumer Discretionaries were down the least, and then up the most. Utilities came very close to being down the most and up the least.

JoS. A. Bank Earns 47 Cents Per Share
Posted by Eddy Elfenbein on November 28th, 2012 at 8:11 am

For its fiscal Q3, JoS. A. Bank Clothiers ($JOSB) reported earnings of 47 cents per share. That’s nine cents per share below Wall Street’s forecast. I expect the stock to have a rough day today.

JOSB’s top-line growth was pretty decent. Total sales rose by 11.1% and comparable store sales rose by 4.8%.

So what went wrong? Joe Bank’s profit margins got squeezed and the company also blamed Hurricane Sandy:

“We are pleased that we were able to deliver comparable store sales growth and Direct Marketing segment sales growth during the third quarter of fiscal year 2012. However, we are disappointed that our net income declined versus the same period a year ago. We had a decline in our operating income margin due to additional markdowns and promotional activity which were needed to drive these sales. Also, Hurricane Sandy, which hit along the East Coast where the majority of our largest volume regions are located, negatively impacted third quarter sales, particularly when we ran a big promotion right at the end of the quarter,” stated R. Neal Black, President and CEO of JoS. A. Bank Clothiers, Inc. “The hurricane, along with the distractions of the national election, continued to have a negative impact in the first weeks of November. In November, for the start of the fourth quarter, comparable store sales were down. With the critical month of December still ahead of us, and continued pressure on margins, we remain cautious for the outcome of the fourth quarter,” continued Mr. Black.

Warren Buffett on Jon Stewart
Posted by Eddy Elfenbein on November 28th, 2012 at 8:10 am

An Easy Explanation of the Fiscal Cliff
Posted by Eddy Elfenbein on November 28th, 2012 at 8:08 am

From Donald Marron of the Urban-Brookings Tax Policy Center.

China Drops to a 46-Month Low
Posted by Eddy Elfenbein on November 28th, 2012 at 6:58 am

The Chinese stock market has been doing terribly lately. Earlier this week, the Shanghai Composite dropped below 2,000 for the first time since early 2009. The Chinese market has actually been doing worse than Greece this year. That’s just sad.

In April 2011, the index was over 3,000. That’s a loss of one-third in a little over a year-and-a-half. Going back to October 2007, the Shanghai Composite was over 6,000. More than five years later, the index is off by more than two-thirds.

Harry Reid Spooked the Market
Posted by Eddy Elfenbein on November 28th, 2012 at 6:40 am

The stock market got spooked late yesterday when Senate Majority Leader Harry Reid said that little progress had been made on budget talks. Still, most political people in Washington say they’re optimistic that a deal will be reached before we reach the dreaded fiscal cliff. My take is that there’s simply too much to lose in not reaching a deal. Somehow something will happen at some point. You heard it here first.

The bad news from our markets spilled over into Europe as stocks dropped modestly over there. Interestingly, Italian bonds have been soaring lately. In fact, soccer players have been profiting. The two-year yield in Italy is at its lowest point in more than two years. The 10-year yield is down to 4.674%. Four months ago, it was yielding 6.6%. Clearly, the crisis that consumed investors this past summer has faded away.

Costco ($COST) became the latest company to announce a big special dividend. The company is going to pay out $7 per share. That’s a yield of 7.25% based on yesterday’s close. All the cash-rich stocks are looking to dish out money to shareholders before the end of the year when tax rates are expected to rise. So far, 103 companies have announced special dividends. Other companies, like Walmart ($WMT), have moved up their dividend dates.

Later today, the Commerce Department will release its report on new home sales.

Morning News: November 28, 2012
Posted by Eddy Elfenbein on November 28th, 2012 at 6:27 am

Greek Debt Plan Relies on Rosy Outlook

Bankia Among Spanish Lenders Winning EU Approval for Rescue

Kabul Bank Sent Millions of Dollars Abroad

AP Believes It Found Evidence Of Iran’s Work On Nuclear Weapons

Fed’s Evans Urges Near-Zero Rates Until 6.5% Jobless

Now, Homes Fuel Economy

Tycoons Buy Next Media’s Taiwan Assets for NT$17.5 Billion

BP Sells $1.1 Billion of U.K. Oil Assets to Abu Dhabi’s Taqa

Costco to Pay Investors $3 Billion With Special Dividend

Green Mountain Profit Gains 22% as K-Cup Sales Rise

With a Billion Birthdays on File, Facebook Adds a Gift Store

GE’s Service Push Could Bring Profit Margin Boost

Dimon Best to Lead Treasury in Crisis, Buffett Says

Why the Fiscal Cliff is the Wrong Thing to Worry About

Roger Nusbaum: Don’t Swim Up Stream

Howard Lindzon: Momentum Monday – Obama is Day Trading Apple…Jeff Bezos is Day Trading the US government and PayPal (EBAY) Hits Seven Year Highs and Why it’s Cool to 3D Print Dollar Bills and Guns

Be sure to follow me on Twitter.

The Special Dividend Rush
Posted by Eddy Elfenbein on November 27th, 2012 at 1:19 pm

I spent Thanksgiving weekend with my family at the Venetian Hotel in Las Vegas. Today, the owner of the hotel, Las Vegas Sands ($LVS) announced a special dividend payment of $2.75 per share. Going by yesterday’s closing price that works out to a yield of 6.25%.

The timing of this payment is hardly a coincidence. Tax rates are expected to rise next year for the wealthy. The majority shareholder of LVS is billionaire Sheldon Adelson, a known critic of the Obama administration. The dividend payment will yield Adelson $1.2 billion. On top of that, LVS also increased its regular quarterly dividend by 40%.

Las Vegas Sands isn’t alone:

Companies are paying special dividends at four times the pace of last year as Congress is poised to let the tax on dividends rise next year. Sands rival Wynn Resorts Ltd. (WYNN) declared a $7.50-a-share payout and a doubling of its quarterly dividend to $1 a share last month.

Brown-Forman Corp., the owner of Jack Daniel’s whiskey, said today that it will pay a $4-a-share special payment on Dec. 27 to shareholders as of Dec. 12. The company cited “the uncertainty surrounding future dividend tax rates.”

Since the end of September, 68 companies in the Russell 3000 have announced special dividends. That’s up from 15 over the same period last year.

Amazon Turns to the Bond Market
Posted by Eddy Elfenbein on November 27th, 2012 at 11:29 am

Ben Bernanke’s strategy of lowering interest rates to the floor and announcing to the world that he intends to keep them there until to 2015 has radically altered the investing landscape. Investors have plowed an astounding $1.33 trillion into high-yield and investment-grade bonds this year.

Not surprisingly, yields for bonds have dropped, and they’ve dropped for both the high-grade stuff and for the low-grade junk. Only with some concerns about the fiscal cliff have junk bonds recently pulled back. Besides that, it’s been a great year for junk bonds.

Amazon.com ($AMZN) went to the bond market for the first time since 1999. The company doesn’t have major plans for the money, just general business operations like buying their HQ building. Moody’s rated their bonds as Baa1 which is three levels above speculative grade.

Looking at the yield Amazon got, it was a shrewd move. The company issued $750 million of three-year notes which yield just 38 basis points more than a similar Treasury. Amazon also issued $1 billion in five-year notes (63 basis points above similar Treasuries) and another $1.25 billion in 10-year bonds (93 basis points).

Consumer Confidence Hits Four-Year High
Posted by Eddy Elfenbein on November 27th, 2012 at 10:40 am

The stock market is down again this morning, but not by much. We were actually positive for a few moments shortly after today’s open.

There was a mixed bag of economic news today. The best news was that the Consumer Confidence Index rose to 73.7 for November. That’s the highest reading since February 2008.

On the downside, there had been some initial optimism about a rescue deal for Greece, but now traders seem rather skeptical on the details.

Euro-area finance ministers cut the rates on loans made under the first bailout of Greece in May 2010. They also suspended interest payments for a decade on lending agreed under the country’s second bailout. The ministers outlined a plan for the Mediterranean nation to buy back its debt at distressed rates. They authorized Greece to receive a 34.4 billion-euro ($44.6 billion) loan installment in December.

“This has been a very difficult deal,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels after chairing a 13-hour meeting that ended early today. “All initiatives decided upon today will bring Greece’s public debt clearly back on a sustainable path.”

The Case-Shiller index showed that home prices rose 3% year-over-year in September. That’s the biggest increase since 2010. The slow recovery in housing is clearly helping consumer sentiment. The Commerce Department also released a decent report on orders for durable goods.