Archive for category Fund Markets

The Market Is In Bubble Mode Again

Posted by Oksana Grebenjuk in Favourites, Fund Markets on Февраль 17th, 2011

The market is sending investors the wrong message. The more I watch it rise, the more concerned I get. While others applaud the market’s gains as a sporting event I think this is a new bubble pumped up by Federal Reserve policy and it’s destined to destroy investors’ savings again.

I think it is reckless and irresponsible and somewhat surprising given the recent memory of other disastrous bubbles in our economy. I am not a “perma-bear” as some of my brethren like to term anyone that doesn’t believe Apple is going to reach a $1 trillion market valuation. I am simply a realist that values equities more highly when the risk reward dynamic appears favorable. I think the notion of being “perma” anything is idiotic, as you should be a situational opportunist not a partisan market participant. I believe the market has moved heavily towards risk and I am moving into cash and shorting technology momentum stocks.

We have yet to accept the losses from the first Nasdaq technology bubble that ended in 2002. To make up for that disaster we have circulated through a series of asset bubbles in an attempt to avoid, or, at least, defer the inevitable pain.

Stock prices in the 90s rose to ridiculous levels as investor margin levels expanded dramatically driving stock prices higher. Along the way analysts found new and creative ways to value stocks to try to justify a “new paradigm” of the digital economy. Remember Dow 36,000? The Federal Reserve supported these efforts, at least tacitly, with accommodative policy until everything blew around 2001. Read the rest of this entry »

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NYSE team will run merged exchange with Deutsche Boerse

Posted by Oksana Grebenjuk in Favourites, Fund Markets on Февраль 14th, 2011

A top lawmaker on Sunday said he was told that officials at NYSE Euronext, in talks to be acquired by larger rival Deutsche Boerse, will have management control of the exchanges company if they merge.

Senator Charles Schumer, the senior senator from New York and a leader among Senate Democrats, told reporters he met with Chief Executive Duncan Niederauer on Friday and Saturday. Though he reserves judgment until a final deal is announced, Schumer said there are «a number of things to like» about the proposed deal.

Among them, «It will give managerial control of the new operation to the team from NYSE, with Mr. Niederauer installed as the new CEO,» Schumer said in a prepared statement. He also noted that NYSE and Deutsche Boerse would be equally represented on the board of directors.

Bob Rendine, senior vice president for NYSE Euronext’s global communications, did not dispute Schumer’s comments.

«We certainly have a lot of respect for Sen. Schumer. We’re delighted that he is engaged with us on this issue. We look forward to continuing keeping him up to speed on our progress, and on the potential benefits for New York and New York City.» Read the rest of this entry »

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German 2-Year Yield Rises to More Than 12-Month High on ECB Rate-Rise Bets

Posted by Oksana Grebenjuk in Fund Markets on Февраль 4th, 2011

German two-year government note yields jumped to the highest in more than a year this week on speculation the European Central Bank may act to stem inflation.

ECB President Jean-Claude Trichet said on Jan. 26 that policy makers will do “what is necessary” to keep inflation in check. German consumer-price growth accelerated to the highest level since October 2008. Irish bonds slid before a vote on the budget tomorrow. The debut auction of the European Financial Stability Facility drew bids for almost nine times the securities on offer.

The increase in the German note yield “was driven by fears of tighter monetary policy,” said Patrick Jacq, a senior fixed- income strategist at BNP Paribas SA in Paris. “This is clear when you look at the evolution of the curve. We have hawkish rhetoric coming in from the ECB so it makes sense to be short at the short end.”

The two-year note fell for a fourth straight week, pushing the yield eight basis points higher to 1.37 percent as of 5:27 p.m. in London. It earlier reached 1.43 percent, the highest since Jan. 4. The 10-year yield fell two basis points to end the week at 3.16 percent. Read the rest of this entry »

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Dow’s Surge to 12,000 Echoes April With 81% of Stocks Above Average Price

Posted by Oksana Grebenjuk in Fund Markets on Февраль 2nd, 2011

Investors who pushed the Dow Jones Industrial Average above 12,000 for the first time since 2008 this week may be getting ahead of themselves.

The gauge surpassed that level the past two days before plunging the most since 2010 today, preventing the longest stretch of weekly gains since 1995. As of yesterday, more U.S. stocks were trading above their 200-day average price than any time since April, when the Dow began a 14 percent slump, and the cost to insure against Standard & Poor’s 500 Index losses fell to an almost three-year low.

The Dow may have surged too fast following its more than 2,000-point jump since August even as analysts forecast a third straight year of profit growth for the S&P 500, said James Investment Research Inc.’s Tom Mangan and BB&T Wealth Management’s Walter “Bucky” Hellwig. Mangan and BGC Partners LP’s Michael Purves see signs investors are too optimistic about the next few months.

“We expect a setback of 10 percent or more in the S&P 500 and the Dow,” said Mangan, who helps oversee $2.4 billion in Xenia, Ohio. “The market is going to face much stronger headwinds over the next months as the rally gets old and it gets increasingly difficult to find a rationale for further gains, but there will be a lot of buyers on a pullback and it would probably be a short-lived decline.” Read the rest of this entry »

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Strong Stocks and Euro, Weak Dollar on GE’s Earnings

Posted by Oksana Grebenjuk in Fund Markets on Январь 25th, 2011

After a weak 2 days, stocks bounced back. Strong euro is on its 8-week high versus the dollar and against 14 more out of 16 currencies. Companies’ earnings such as General Electric Co.’s are higher than estimates while commodities gain is led by sugar and cotton and German business confidence increased.

The S&P 500 Index was at 1,283.35 (0.2%) in New York at 4p.m. Stoxx Europe rose 0.7%. Credit-default swaps that support Europe’s indebted nations went to largest 2-week drop. 10-year treasuries yield dipped 4 basis points (3.41%).

GE’s 1st increase in 2 years encouraged earning season’s optimism. Since Jan. 10, out of 57 companies, 42 topped per share profit. Fiduciary Trust Co.’s Michael Mullaney said the strong earning season shows sustainable economic recovery and that good sales momentum is promising for the stock market.

S&P 500’s 43 companies in 57 reported 8.4% increase. GE, since March 2009 rallied at 7.1% whose CEO, Jeffrey Immelt, incidentally, will be named by President Obama as outside economic advisers panel head.

Bank of America Corp. was down 2% after $1.24 billion 4th quarter loss report.

Europe’s Stoxx 600 showed 2 gained for every stock decline while Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA were 3.3% up. Following UK bank discussion report on Financial Times, Royal Bank of Scotland Group Plc surged 6.5%. Read the rest of this entry »

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U.S. Stocks Decline, S&P 500 Ends Longest Weekly Winning Streak Since 2007

Posted by Oksana Grebenjuk in Favourites, Fund Markets on Январь 24th, 2011

U.S. stocks fell, ending the longest weekly winning streak for the Standard & Poor’s 500 Index since 2007, after Goldman Sachs Group Inc. and Citigroup Inc. failed to beat analysts’ earnings estimates and housing starts slid more than forecast.

The S&P 500 pared its weekly slump yesterday after General Electric Co. reported higher-than-projected profit, driving its shares up 7.1 percent. Goldman Sachs and Citigroup fell more than 4.6 percent this week after less trading hurt their earnings. Freeport-McMoRan Copper & Gold Inc. plunged 8.4 percent after cutting its sales forecasts, while Massey Energy Co. lost 4.8 percent, the most for a week since September.

The S&P 500 declined 0.8 percent to 1,283.35 this week, the first drop after seven straight weeks of gains. It retreated 1 percent on Jan. 19, the biggest one-day drop since November. The Dow Jones Industrial Average added 84.46 points, or 0.7 percent, to 11,871.84. The indexes hadn’t moved in opposite directions since October. Stock exchanges were closed on Jan. 17 for the Martin Luther King Jr. holiday.

“You came into earnings season with the bar set pretty high,” said Scott Migliori, the San Francisco-based U.S. chief investment officer at RCM, a unit of Allianz Global Investors that oversees more than $145 billion in assets. “Expectations have been ratcheted up over the last couple of months as the macroeconomic data points and macroeconomic outlook have improved. A pullback in late January, early February is reasonable and shouldn’t scare anybody.” Read the rest of this entry »

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Egypt Stocks Drop Most in Six Weeks on Concern Tunisia Unrest May Spread

Posted by Oksana Grebenjuk in Fund Markets on Январь 19th, 2011

Egyptian stocks fell the most since November after a popular uprising in Tunisia forced the ouster of President Zine El Abidine Ben Ali, raising concern Egypt’s regime may face similar pressure.

Commercial International Bank Egypt SAE, the country’s biggest publicly traded lender, closed at the lowest level in more than a month. EFG-Hermes Holding SAE, Egypt’s biggest publicly traded investment bank, declined 2.4 percent. The EGX30 Index lost 1 percent, the biggest drop since Nov. 30, to 7,082.09 at the 2:30 p.m. close in Cairo. Tunisia’s benchmark Tunindex tumbled 13 percent last week as increasing violence lead to the toppling of the country’s leader on Jan. 14.

The Tunisian protests may embolden demonstrators who have recently taken to the streets in other North African and Middle Eastern countries, including Egypt, Morocco and Jordan, all of which have experienced demonstrations about economic conditions, said Marina Ottaway, director of the Middle East program at the Carnegie Endowment for International Peace in Washington.

“People are selling because they think the same might happen here” given unemployment and inflationary pressure, Alia Khalil, senior equity trader at Cairo-based Pharos Holding for Financial Investments, said by telephone. Read the rest of this entry »

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Why The Market Multiple Will Be Higher In 2011

Posted by Oksana Grebenjuk in Fund Markets on Декабрь 17th, 2010

Market relationships differ depending upon the time frame. Right now, higher bond yields are bullish for stocks. This article explains why.

The most important question for equity investors relates to rising interest rates and the implications for stocks. Nearly everyone (including us) agrees that long-term rates are moving higher. That has been the recent move and it implies significant capital losses for those holding long bonds. Here is a nice analysis of the risk by John Lounsbury.

Several pundits have weighed in on the effect of an interest rate increase. Let us take a closer look.

Background

On a theoretical basis, lower interest rates are bullish for stocks. Companies can borrow more cheaply. The choice for those doing asset allocation tilts toward equities. The data support the traditional stock/bond relationship — usually.

But these are not typical times. Higher interest rates may be consistent with higher stock multiples. Abnormal Returns covers the topic and also highlights other sites on bond yields. I want to go beyond the generalized arguments and look to some strong supporting data. Read the rest of this entry »

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Cheapest Dow Dividend Stocks For 2011

Posted by Oksana Grebenjuk in Fund Markets on Декабрь 8th, 2010

Merck(MRK: 35.12, -0.18) sells pharmaceuticals including Nasonex, Pepcid and Crixivan.

Quarter: Merck’s third-quarter net income tumbled 90% to $342 million and earnings per share fell 93% to 11 cents, hurt by a higher share count. However, excluding one-time items, earnings decreased a modest 6% to 85 cents. Revenue surged 94%. The gross margin rose from 83% to 91%, but the operating margin stagnated at 30%. Merck held $11 billion of cash and $18 billion of debt at quarter’s end, equal to a quick ratio of 1 and a debt-to-equity ratio of 0.3.

Valuation: Merck’s stock sells for a forward earnings multiple of 9.2, a book value multiple of 1.9 and a sales multiple of 2.5, 21%, 60% and 22% discounts to pharmaceutical industry averages. Its cash flow multiple of 12 is on par with its pharma peer average. Merck commands a trailing earnings multiple of 13, compared to a five-year average earnings multiple of 15. The stock has underperformed the Dow in 2010, falling 3.9% as the broader index rose 9%.

Dividend: Merck pays a quarterly dividend of 38 cents, equaling a yield of 4.3% with a payout ratio of 54%. It has paid a 38 cent dividend since 2004. Prior to 2004, Merck had a record of distribution increases.

JPMorgan Chase(JPM_) is a diversified financial company whose commercial bank serves 26,000 clients. It also has an investment banking unit.  Read the rest of this entry »

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Bernanke Threatens Extension Of QE Past $600 Billion

Posted by Oksana Grebenjuk in Favourites, Fund Markets on Декабрь 7th, 2010

Bernanke the chairman of the federal reserve has said that the US might need to extend bond purchases past the the $600 billion announced last month to spur on economic growth. The argument for this extension is based upon fears that the US economy is expanding at a bairly sustainable pace and ongoing fears that the employment sector is still faltering after Non Farms last week. The unemployment rate last month rose to 9.8 percent and surprised the markets after a previous string of positive news, this is the highest level since April and has dampened economic sentiment significantly.

Bernanke appeared on CBS Corp’s ’60 Minutes’ program and defended the Fed’s efforts to prop up the US recovery. He argued thatthe economy was clearly still very weak and that just 39,000 jobs were created in November. He stated that the potential for the purchase of more bonds than previously planned last month is «certainly possible,»; dependant on the outlook for inflation and the US economy over the coming months. Bernanke went on to say that although growth looks set to continue at a slow pace, a return to recession ‘seems unlikely’.

The Fed’s decision to undertake a new bond purchasing program, known as quantitative easing, has been criticized heavily by the worlds finance officials, amidst fears of a global currency war and competitive devaluation. Policy makers in emerging markets have expressed concern that this kind of devaluation could drive down the dollar and cause a re-surgence of capital abroad.

Today has been a relatively quiet day in the currency markets. The week ahead is likely to continue to be dominated by the European sovereign debt crisis. The much awaited budget for 2011 will be a key release for the Euro tomorrow as traders speculate on the austerity measures set to reign in €6bln (3.7%) of GDP. Two thirds of the planned austerity will come from spending cuts with one third from higher taxes. Read the rest of this entry »

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