Two Investing Tips
Posted by Eddy Elfenbein on July 12th, 2012 at 11:10 am

Morning News: July 12, 2012
Posted by Eddy Elfenbein on July 12th, 2012 at 7:37 am

EU’s New Crisis Model Gives Spain More Time for Cuts

ECB Zero Rate Slashes Banks’ Overnight Deposits

Europe’s Downturn Creates Unlikely Smugglers

BOJ Refrains From Adding Stimulus, Spurring Stock Decline

Housing Rebound Signaled as Banks Resume Foreclosures

S&P 500 Erases Loss as Investors Look for Stimulus Signs

Oil Drops on Demand Concern Amid Signs Economy Slowing

Corn Jumps, Dips on Data

Fed Is Torn on Tipping Point for Action

HSBC to Apologize at Senate Hearing

Many Regulators Put Their Attention on How JPMorgan Marketed Its Funds

Groupon Shares Hit New Low in Latest Plunge

Cummins Cuts Full-Year Revenue Estimate, Raises Dividend 25%

Jeff Carter: More Federal Stimulus Expected Soon

Roger Nusbaum: 401k Daytrading For Dummies!

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Cummins Plunges on Lower Forecasst
Posted by Eddy Elfenbein on July 11th, 2012 at 2:16 pm

A few weeks ago, I said that Cummins ($CMI) was going for a deep discount. I spoke too soon. The stock plunged yesterday after the company slashed its sales forecast for this year from 10% to 0%.

The culprit is, as you might guess, weakness from overseas markets. The key fact is that Cummins generates two-thirds of its revenue from outside the United States. The company said that revenue for Q2 will come in at $4.45 billion while Wall Street had been expecting $5.07 billion.

The good news for investors is that Cummins is raising its quarterly dividend from 40 cents to 50 cents per share. I still think Cummins is underpriced but it’s nowhere near the bargain I had believed.

How Many Stocks Should You Own?
Posted by Eddy Elfenbein on July 11th, 2012 at 9:53 am

Dimon Faces Analysts
Posted by Eddy Elfenbein on July 11th, 2012 at 9:50 am

From Bloomberg:

Jamie Dimon will seek to restore investor confidence this week after a trading loss wiped out $39 billion of JPMorgan Chase & Co. (JPM)’s market value and marred his reputation as one of the industry’s best risk managers.

In a departure from his customary earnings-day conference call, Dimon will meet analysts for two hours on July 13 at the bank’s New York headquarters to field questions about the loss and what he’s doing to contain the damage. The firm also is being probed over the possible gaming of U.S. energy markets and was subpoenaed in global investigations of interest-rate fixing.

There has been a “sudden change of perception in the company,” said Nancy Bush, an analyst and contributing editor at SNL Financial LC, a research firm based in Charlottesville, Virginia. “I’ve been watching banks for 30 years now and when they lose the luster, it is extremely hard for them to get it back, particularly when you have someone who was built up and lionized like Dimon.”

Bush said the 56-year-old chief executive officer did an “admirable job of saying nothing” when he appeared before Congress twice last month to testify about the trading loss, which stemmed from bets on credit derivatives at the firm’s chief investment office in London. “But I don’t know if that can go on,” Bush said.

Morning News: July 11, 2012
Posted by Eddy Elfenbein on July 11th, 2012 at 5:41 am

Rajoy Announces 65 Billion Euros in Budget Cuts to Fight Crisis

Rate Scandal Stirs Scramble for Damages

Geneva Bankers Tap Old Ties to Find Riches Amid Arab Spring

Greece Pressed to Resume Austerity Program

Wen Says Investment Now Key to Stabilizing China Growth

China Passenger-Vehicle Sales up 15.8% in June

OECD Warns of Long-Term Damage to Unemployed

In New Rules to Shine Light on Derivatives, Regulators Also Allow Exemptions

Iowa Broker PFGBest Collapses After Hiding Millions

In Manchester United’s I.P.O., a Preference for U.S. Rules

Navistar Seeks Most of $73 Billion China School Bus Sales

Advantest Falls as Applied Materials Cuts Outlook

Alcoa Offering Alba At Least $45 Million To Settle Suit

Airbus A350-1000 Buoyed as Cathay Order Ends Drought

Joshua Brown: “MF Global Had Us Angry, But This Time It’s Personal”

Credit Writedowns: European Banking Union Done Properly

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Forgotten Lessons From the Financial Crisis
Posted by Eddy Elfenbein on July 10th, 2012 at 12:37 pm

Dow-to-Gold Ratio
Posted by Eddy Elfenbein on July 10th, 2012 at 11:20 am

The St. Louis Fed’s FRED charting site just added gold prices to their database so I was playing around with some charts.

Here’s a look at the Dow divided by the price of gold.

I have no larger point to make with this chart. I just think it’s interesting to see how this relationship has played out.

At the beginning of 1980, the Dow and gold were nearly even. By August 1999, the Dow was 45 times gold. Then the trend reversed itself and the ratio fell below 6 by last August. Today the ratio is up to 8.0.

Stocks Modestly Higher on Alcoa’s Earnings
Posted by Eddy Elfenbein on July 10th, 2012 at 10:35 am

The stock market is just slightly higher this morning. There’s some optimism that a German court will approve the eurozone’s new bailout fund. The bad news is that China’s trade growth plunged in June.

After yesterday’s close, Alcoa ($AA) reported earnings of six cents per share which was one penny ahead of expectations. Since Alcoa is usually the first Dow component to report, its earnings report gets a lot of attention. The problem is that Alcoa is hardly representative of the larger economy.

On Friday, we’ll get a better idea of how earnings season is going when JPMorgan Chase ($JPM) reports earnings. Obviously, we’ll also get an idea of how badly the bank has been shaken by the big trading losses that came from their London office.

Bespoke Investment Group has a chart showing how Wall Street has chopped its earnings expectations for JPM. In May, the Street had been expecting $1.24 for JPM’s second quarter. Today it’s down to 79 cents per share. There have been similar drops from Morgan Stanley, Goldman Sachs and other big Wall Street firms.

I’m hesitant to make any forecasts for JPM’s earnings report because the company has been very tight-lipped about what exactly happened. The key for us will be to see how well the bank’s fundamental business has performed. For the most part, that’s been good this year.

On the Buy List, I see that Reynolds American ($RAI) has matched its 52-week high this morning. Johnson & Johnson ($JNJ) is only a few pennies away from hitting a fresh 52-week high. JNJ is up by more than 10% since its June 1st close. Not many people saw that rally coming.

High-Conviction Stocks on the Buy List
Posted by Eddy Elfenbein on July 10th, 2012 at 9:07 am