Saturday, May 29, 2010

Now Fear This!!!

Dow Loses 8% in May...  Worst single month since 1962...  That was the headline I read on Friday.  But, let's be honest, the real story was that the Dow has gained close to 30% since the 2009 lows of March.  While analysts and market mavens alike will continue to discuss whether this is a bull market sell-off or a resurgence of the bear market of 2009 there is genuine fear in European credit markets. Sure we can speculate about socialism's disaster in Europe... but government after government now realizes that there was a downside to GLOBILIZATION that was part of the fine print...  If the weak governments fall, they will take the stable governments with them.  Germany, and to a lesser extent France are seeking a solution... any solution to prop up the debt markets.  Tim Geithner's visit, coupled with China's promise to continue purchasing European debt will temporarily quell the markets...  But it is becoming more and more obvious that a major paradigm shift is underway.  Will deflation take grip and squeeze the savers and stock holders?  Or, will inflation save the day and allow a more simple sovereign debt solution?  According to Marty Hutchinson a Contributing editor at Money Morning 

"In that case, many of the economic advances that globalization has brought to the United States - and the world as a whole - will be reversed. The world economy will have to adapt to a much lower level of efficiency, with higher manufacturing costs and less outsourcing. Both inflation and unemployment will be high. The result: We'll be looking at a decade of inflationary recession, with declining living standards. We have already traveled a considerable distance toward de-globalization and should work towards reversing this trend. We should keep trade barriers down and international capital markets open. As protection against the possibility that governments and markets will fail in this attempt, investors should look in one direction - at gold. In a world of inflationary recession, in which international investment opportunities are blocked and government bonds are dangerous, gold remains the most reliable store of value. Others will realize this. So investors with gold in their portfolios will at least have the satisfaction of increasing their capital, while others are losing theirs."

Others view this as a great buying opportunity as the wall of worry has provided plenty of traction for certain investment sectors.  As for now, I am content to build a cash position and continue supplemental purchases of silver coins and commodity stocks like D.     

As dire as some things seem we are reminded of a couple basic principles...  The sun will still come up tomorrow.  And life will go on... 

Wednesday, May 19, 2010

Buyer Beware...

Buyer Beware...
If you think the new credit card laws which were supposed to protect consumers are going to help you, guess again. As it turns out, some of the most damning aspects of credit card abuse have been addressed. However, we would be remiss to believe that the laws have no benefit to credit card companies. Take the new finance charges that will be assessed on anyone who carries a balance. In the old days, anyone carrying a balance would be assessed a finance charge based on the amount of money they carried over from one month to the next. Now credit card companies are allowed to charge consumers on the entire balance of the credit card, not just the carry over. For instance, a customer who carries $1000.00 from one month to the next but services the remainder of a $4000.00 balance will have finance charges based on the entire bill for that month even though there was only a $1000.00 carry over.  A finance charge that should be somewhere in the area of $11.00 now becomes $46.00. Pretty scary huh?  And to think, congress actually voted on these changes and the President of the United States actually signed off on it. Something tells me this will be campaign fodder around election time.

Treasuries have become the flavor of the month once again...  It is not to say that they by any stretch are a good investment, but it sure as heck beats watching your holdings slip little by little into oblivion!!!  Of course last month stock guru's would have told you that inflation was the big fear. Now with stagnant job growth, small salary increases and in some cases cuts, and a housing market that is stabilizing at best, some on the street are whispering deflation.  I for one believe this was always a scenario that could play out... the question a reader of megatrends and I discussed is "now what?"  If the market can only be played on a short side... what are investors to do?  Ax at the Bigbigbet has opened short positions to "cover" the backside of his longs... not a bad strategy as he will undoubtedly make money on both sides of the transaction.  As I am certain banks and value-based stocks will be back by the end of the month... Especially if banking reforms are effective as credit card reforms. Maybe the best money invested are the endeavors that the individual investor has direct control over. Anything beyond the grasp of the individual investor simply becomes a parlay... and as any better will tell you the more variables involved in a parlay, the more likely it is to lose.

Precious metals seem to be a winner... and appear to have the best opportunity to move...
Foods... especially organic foods are a new item of interest...
Biomedical with emphasis on preventive medicine...
Technology as I truly believe we will innovative our way out of this mess eventually...
Banking... anyone that can arrange a loan to themselves for 728 Billion dollars has a lot of clout... even if and when the money is paid back understand that the rules of Wall Street and Main Street are worlds apart. 

Saturday, May 15, 2010

A Greek Tragedy... It Pays to Shop... Poor Man's Gold...

A "short" history lesson for readers...
After World War I, Great Britain and France forced the weaker and financially unstable government of Wiemar Germany to make reparations. After all, Germany had given the blank check to the Serbs in essence causing a great chain reaction of treaties which hurled Europe into a war. However, it was the peace treaty and reparations that truly caused a breakdown in the newly established post-war world order. Germany could not pay its debts, yet Great Britain and France continued to push Germany until Wiemar played its last card, and that was hyper-inflation. When savings were wiped out, and debt crises swept through Europe most governments elected to withdraw and tend to internal issues. However in Germany a leader rose to restore Germany's greatness, and his name was Hitler.

While the PIG nations of Europe have not quite fallen completely apart, the European Union's arm-twisting measures forced Greeks to swallow some difficult austerity measures. Don't be shocked to see, Spain, Ireland and Portugal follow suit. Socialism sounded great 40-50 years ago. Guaranteed jobs... public healthcare for all, and yes free rides for those who do not or cannot work. However, reality suggests that governments cannot create a nanny state, and expect its people to prosper, innovate, and fund government obligations with tax monies. Countries like Germany and France have to answer tough nationalistic questions at home, and more importantly, remind its citizens why the Euro was such a great idea.

It Pays to Shop
People get lazy and often over-look the savings potential of shopping for a different insurance carrier. As my wife and I prepare for our big move, we decided it was time to check house and automobile rates. It was surprising to find that Allstate beat the competition by $300.00 a year on homeowner insurance with a deductible that was half as much as rival State Farm. Furthermore, Allstate also beat State Farm in the highly competitive auto-line rate. Not only did Allstate offer the same coverage for a lower rate, but we were rewarded for being accident-free by receiving a $200.00 break in our deductible amount. Insurance is a competitive business. But let's face it, your agent will rarely call you to lower your rate. A couple of emails can save you hundreds of dollars.

Poor Man's Gold...
I was quoted prices for silver this week.  So far I have had quotes on buying silver for 6X face value all the way up to 12.9.  But silver is showing signs of a break out, and if (and it's a big if) silver hits $20.00 an ounce, $23-25 is well within reach.

Sunday, May 9, 2010

A Few Thoughts...

Market Commentary...
Last week was a bit of a rough one...  the market closed off approximately 700 points for the week...  not too bad judging that on one day alone, it was down over 900 points. Now, I can understand paranoia about he nanny state I mean socialist state of weak Eurozone countries like Spain (Unemployment over 20%), Portugal (debt to GDP a staggering 340%), and of course the weak man of Europe Greece where there is rioting and blood in the streets... any one of these in of itself could cause a market meltdown. However, I must admit that I feel much less comfortable in a market where someone can allegedly press a wrong button, which triggers a massive market sell-off.  (Click Here)

I booked profits on a portion of NEOP...  and booked a minor loss on VGPMX and will look to enter one or both of these positions when the dust starts to settle. I may even hit FAS or something of that nature knowing that the financial over-haul is getting sliced and diced faster than I can type this blog entry.

Investment Strategy

I will more than likely begin a ROTH IRA this week. I will still continue a minor contribution to our deferred comp program. However, I do not like the wide-ranging scope of mutual funds or indexes for that matter... at least on the upside. Once the ROTH is funded, I will have the flexibility of moving, and trading with or against the market. Quite simply, it is open to any and every investment vehicle known to man... and I do not have to play by the rules of a mutual fund company. What I have in deferred comp and 403b will stay there, but his is definitely my exit from a world which I have little to no control of... Give me the pin-point accuracy of a stock any day over this nonsense...

Housing Market
We had a bit of luck over the past couple of weeks. We were able to sell our home, and successfully bid on a new home. We are looking at a 4.85 interest rate. (I was going to hold off for something better but reminded myself that anything under 5% is great).  We were able to qualify for the $6,500 tax credit to boot. We were fortunate enough to find a motivated buyer, and coupled that with a real savvy real estate agent from Keller Williams who helped negotiate a very favorable deal for our family.  I will put down at least 20% on the house, but have been tempted to put down more so the monthly payment stays somewhat palatable. The other side of me says that money is cheap at 4.85 %, and inflation will hit sooner rather than later. Maybe it is in the best interests to leverage myself against higher interest rates... and a flood of U.S. dollars.  I will look forward to reader feedback on this one.

Week Ahead
DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised FromMay 1110:00 AMWholesale InventoriesMar-0.5%0.5%0.6%-May 128:30 AMTrade BalanceMar--$39.5B-$40.0B-$39.7B-May 1210:30 AMCrude Inventories05/08-NANA2.75M-May 122:00 PMTreasury BudgetApr-NA-$20.0B-$20.9B-May 138:30 AMContinuing Claims05/08-4600K4590K4594K-May 138:30 AMExport Prices ex-ag.Apr-NANANA-May 138:30 AMImport Prices ex-oilApr-NANANA-May 138:30 AMInitial Claims05/08-440K440K444K-May 138:30 AMExport Prices ex-ag.Apr-NANA0.6%-May 138:30 AMImport Prices ex-oilApr-NANA0.2%-May 148:30 AMRetail SalesApr-0.6%0.2%1.9%-May 148:30 AMRetail Sales ex-autoApr-0.7%0.5%0.9%-May 149:15 AMCapacity UtilizationApr-73.7%73.8%73.2%-May 149:15 AMIndustrial ProductionApr-0.6%0.6%0.1%-May 149:55 AMMich SentimentMay-73.773.572.2-May 1410:00 AMBusiness InventoriesMar-0.4%0.4%0.5%-

Sunday, May 2, 2010

Earnings... Economic Calendars...

The Earnings Calendar is as busy as it can get. Some of the data William Trent will be watching:
• Altera (ALTR) - Xilinx (XLNX) filed an awful report. Can Altera do any better? Consensus is $0.19 EPS on sales of $314 million.
• Hexcel (HXL) - This Small Cap Watch List member was seeing rising estimates until last month, when they were cut from $0.20 to the current $0.17.
• Steel Dynamics (STLD) - The Mid Cap Watch List member is expected to earn $1.04 on sales of $948 million.
• Texas Instruments (TXN) - expected to earn $0.42 on $3.45 billion in sales.
• CH Robinson (CHRW) - estimates have been rising and now stand at $0.47, but Landstar (LSTRdisappointed.
• CDW Corporation (CDWC) - stellar monthly sales reports have kept estimates rising. They now stand at $0.97.
• EMC Corporation (EMC) - The big news is still the VMWare IPO, but it is also a decent look at enterprise tech spend.
• Laboratory Corporation of America (LH) - The Mid Cap and Large CapWatch List member has been seeing positive earnings revisions and is now expected to earn $1.09 on $1.03 billion in revenue.
• Lexmark (LXKpreannounced and will probably offer poor guidance.
• Linear Technology (LLTC) - expected to earn $0.35 on $267 million in sales.
• Norsk Hydro (NHY) - The Large Cap Watch List member has no analyst coverage right now.
• Plantronics (PLT) - my covered call position is now being cashed out so I’ve no skin in this one. But it is often volatile.
• United Parcel Services (UPS) is a great read on the health of the economy. Expectations are $1.03 on $12.23 billion in revenue.
• Arkansas Best (ABFS) - after Landstar’s (LSTRweak quarter I’m expecting a poor showing. Estimates have come down to $0.67, but may not have come down enough.
• Colgate Palmolive (CL) - Large Cap Watch List member unlikely to surprise much. Consensus is $0.83 on $3.31 billion.
• Corning (GLW) - is LCD supply/demand back in balance?
• Freeport McMoRan Copper & Gold (FCX) -Another Large Cap Watch List member with dramatic positive earnings revisions, now standing at $2.71.
• Graco (GGG) is another Large Cap Watch List member. Estimates have been coming down and are now at $0.61.
• MEMC Electronic Materials (WFR) - Is polysilicon supply catching up to demand for this Large Cap Watch List member?
• Xerox (XRX) - can they make the numbers without asking investors to ignore a bunch of stuff? I don’t doubt they will earn $0.27 as expected but wonder how they’ll get there.
• Federated Investors (FII) is on the Large Cap Watch List and expected to earn $0.54.
• Ingram Micro (IM) is on the Small Cap Watch List and expected to earn $0.36.
• KLA-Tencor (KLAC) - I know the semiconductor equipment fundamentals stink. I want to know how much and whether it is priced in.
• NII Holdings (NIHD) is on the Large Cap Watch List and expected to earn $0.49. 
DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
May 38:30 AMPersonal IncomeMar-0.3%0.3%0.0%-
May 38:30 AMPersonal SpendingMar-0.6%0.6%0.3%-
May 310:00 AMConstruction SpendingMar--0.3%-0.3%-1.3%-
May 310:00 AMISM IndexApr-60.360.059.6-
May 32:00 PMAuto SalesApr-NA4.2M4.3M-
May 32:00 PMTruck SalesApr-NA4.6M4.8M-
May 410:00 AMFactory OrdersMar--0.4%-0.2%0.6%-
May 410:00 AMPending Home SalesMar-7.0%5.0%8.2%-
May 58:15 AMADP Employment ChangeApr-20K30K-23K-

• Western Digital (WDC) is on the Large Cap Watch List and expected to earn $0.36.