If we back out BAC, who had the crap fined out of them this Q, then the S&P earnigs are up a more respectable 4.9% but, on the other hand, that includes superstars like AAPL, who dropped $13Bn on the S&P by themselves, and it's very unlikely the rest of the S&P will bring up the curve. In fact, Zacks is now estimating that overall earnings will be DOWN 0.9% for the quarter compared to last year and DOWN 4.6% from last quarter.
No wonder we are seeing the continued exodus of "smart money," who sell in volume into every rally we have. What's getting scary (and keeping us bearish) is that now we aren't even making gains on weak volume. Yesterday's move up was 100% due to AAPL, which gained over 8% on the day.
Since AAPL is 15%+ of the Nasdaq, that 8% gain should have popped the Nasdaq 1.2% and the rally in AAPL suppliers should have lifted the index even more. But it didn't. The Nasdaq was only up 0.8%, so it would have been down 0.5% without AAPL's contribution and even further without the rally in suppliers and the sectors that support them.
David Rosenberg provided a nice list of risk in this morning’s client letter. The one major risk that Rosenberg and the market is largely overlooking at this juncture is the housing double dip. This has the potential to be THE most important story of 2011. As I’ve previously explained, declining asset values are highly destructive during a balance sheet recession. If the housing double dip surprises to the downside the problems that we’ve swept under the rug will quickly reemerge and this time there won’t be any political will for government intervention.
I still believe we are mired in a balance sheet recession that will result in below trend growth, deflationary risks and leaves us extremely vulnerable to exogenous risks that could exacerbate the current malaise. Rosenberg’s excellent list follows:
1. China is getting more active in its policy tightening moves as inflation pressures intensify. It’s not just food but wages too. Headline inflation, at 4.4%, is at a 25-month high. The People’s Bank of China (PBOC) just hiked banking sector reserve ratios by 50 basis points to 18.5% — the second such increase in the past two weeks and the fifth for the year. This could well keep commodity prices under wraps over the near-term.
2. European debt concerns will not be fully alleviated just because a rescue plan has been cobbled together for Ireland as it deals with its banking crisis. The focus will now likely shift to other basket cases such as Portugal and Spain. Greece has a two-year lifeline before it defaults. This saga is going to continue for some time yet.
3. Massive tightening in U.S. fiscal policy coming via spending cuts and tax hikes. This is the part of the macro forecast that is not given enough attention. See States Raise Payroll Taxes to Repay Loans on page A5 of the weekend WSJ.
4. Gasoline prices are about six cents shy of re-testing the $3-a-gallon threshold for the first time since mid October 2008. On a national average basis, prices at the pump are up 26 cents from a year ago — effectively draining about $25 billion out of household cash flow. Tack on the coming
Overview of retail sales in November. On the surface, retail sales exceeded expectations, but there are a few underlying problems--for instance, increases in gasoline prices, sampling changes, and an unclear effect of a seasonal adjustment. - Ilene
Sales at U.S. retailers rose more than expected in November as consumers spent more on gasoline and a wide range of other goods, data showed on Friday, raising hopes of a self-sustaining economic recovery.
The Commerce Department said total retail sales increased 1.3 percent last month, the largest advance since August, after rising by a downwardly revised 1.1 percent in October. It was the second straight monthly gain. Sales in October were previously reported to have increased 1.4 percent.
Analysts polled by Reuters had forecast retail sales gaining 0.7 percent last month. Overall sales in November were boosted by strong receipts from gasoline stations, increased purchases of motor vehicles and parts, building materials and electronic goods among others. Gasoline sales surged 6 percent, the largest increase since June.
Compared to November last year, sales were up 1.9 percent, the first year-on-year gain since August 2008, a Commerce official said.
The Commerce Department reported that retail sales rose more than expected last month, up 1.3 percent in November after a gain of 1.1 percent in October. The November gain was the biggest increase since a 2.4 percent surge in August and brings the year-over-year change (unadjusted for inflation) back into positive territory for the first time in 15 months.
This came as something of a surprise to analysts because retailers across the country had been reporting lackluster sales during the holiday shopping season so far.
Though the overall increase was paced by a 6.0 percent gain in gasoline station sales, due largely to higher gasoline prices, gains were broad based, only three of the 13 retail sales categories posting declines. Excluding gasoline,
I am not pointing this stuff out to say "I told you so", I am simply aghast at what passes for reporting nowadays. It is also a good way to show, it really does not matter what reality is, it simply is our perception of reality. Since I’ve been around a while, and I know some portion of the readers are new to "the game", I am just trying to show you how it all ties together. Behold…
And in between these two auctions are tomorrow morning’s retail sales. Remember, when we analyze a government report we have to ignore everything the actual retail companies are saying in their reports and trust statisticians from D.C. (who know better than retailers on the ground) Since gasoline prices alone jumped substantially in the past month, this alone should provide "better than expected" retail sales (remember, high gasoline prices are a good think because they stoke monthly retail sales – just wait how "good" $4 gas will be for this number)… and boy oh boy the only thing the market needs to confirm green shoots is the "consumer is back".
As for economic reports we have a light week – we have a government retail report (in which we ignore everything the retailers are telling us and instead await the government to tell us what is correct)… with gas prices rising I can already see it now, we see futures surging Thursday as retail sales came in ‘better than expected’. No one will point out the fact that gas prices jumping month over month will account for much of the ‘surge in spending’.
So what was the headline today? You guessed it.
The Commerce Department said total retail sales rose 0.5 percent, the first advance in three months….
Gasoline sales jumped 3.6 percent in May after dropping 0.8 percent the previous month. Excluding gasoline, retail sales rose 0.2 percent.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
If you like your disposable income... forget it. Health-care insurance premiums for individuals in California rose between 22% and 88% in 2014 from last year, even after the federal health-care overhaul. This has led, as Bloomberg reports, to Proposition 45 - a bill that would grant regulatory say on proposed premium increases. "Unless Proposition 45 is passed we are going to continue to see dramatic year-over-year increases," warned Insurance Commissioner Dave Jones.
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The first estimate of GDP for the second quarter of 2014 came roaring in at 4% annualized growth. The following is an initial analysis as written by Neil Irwin from the NYT:
"First, here’s the overall growth number. As it shows, the 4 percent rate of economic expansion in the April-through-June quarter was the strongest since last summer and the third-strongest quarter in the expansion that began five years ago.
But there is an important qualifier. Of the 4 percent reported growth, 1.66 percentage points was attributable to businesses increasing their inventories. But when companies ma...
Memo to CAPE Slaves
Courtesy of Joshua M Brown
You don’t hear much out of the adherents of CAPE these days, as even its most ardent fans have given up on it as a timing tool.
Earlier this year and during much of last year, I’d taken the Cyclically Adjusted Price-Earnings ratio to task for various reasons, most notably the fact that it didn’t allow for accounting changes (GAAP losses are recorded differently), structural changes in our economy (are we all still farmers?), structural changes in the makeup of the stock market (isn’t software inherently more profitable than railroading?), taxation (dividends get preferential treatment versus ordinary income) etc. See ...
Shares in packaged foods producer Kellogg Co. (Ticker: K) are in positive territory on Monday afternoon, trading up by roughly 0.20% at $65.48 as of 2:20 p.m. ET. Options volume on the stock is well above average levels today, with around 12,500 contracts traded on the name versus an average daily reading of around 1,700 contracts. Most of the volume is concentrated in September expiry calls, perhaps ahead of the company’s second-quarter earnings report set for release ahead of the opening bell on Thursday. Time and sales data suggests traders are snapping up calls at the Sep 67.5, 70.0 and 72.5 strikes. Volume is heaviest in the Sep 72.5 strike calls, with around 4,600 contracts traded against sizable open interest of approximately 11,800 contracts. It looks like traders paid an average premium of $0.37 per contrac...
Once again, stocks have shown some inkling of weakness. But every other time for almost three years running, the bears have failed to pile on and get a real correction in gear. Will this time be different? Bulls are almost daring them to try it, putting forth their best Dirty Harry impression: “Go ahead, make my day.” Despite weak or neutral charts and moderately bullish (at best) sector rankings, the trend is definitely on the side of the bulls, not to mention the bears’ neurotic skittishness about emerging into the sunlight.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, incl...
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We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about."
All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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