You wouldn’t invest in a stock with a sky-high commission rate, would you? How about buying a stock that promises you won’t lose money—but with the caveat that you’ll be capped at a maximum 6% or 8% yearly gain even if the stock surges well beyond that? How about being penalized if you need to sell within 10 years, for example, because you realize what a mistake you made buying it in the first place? Such is life for most long-term, equity-indexed annuity holders. Good luck figuring this out on your own. Believe me, the salesman isn’t going to point it out in his sales material. It takes … [Read more...]
Archives for April 2011
Still No Recovery in Housing
March data for housing starts, building permits, and existing home sales came out this week. All three economic indicators continue to point to a housing market that has yet to enter a sustained recovery. New housing starts and building permits both ticked up in March, but failed to recover the ground given up in February. Existing home sales also ticked up in March, but remain subdued. Total existing home inventory at the end of March rose to 3.55 million homes—an 8.4 month supply at current sales rates. The median price of a single family was $160,500 in March—down 5.3% from March of last … [Read more...]
Bank Stocks Signal Trouble
The KBW Bank stock index has a real troubling look. Bank stocks are rolling over. The bank index is down almost 10% from its February high. Bank of America, the fourth largest component in the index, is now trading below its pre-QE 2.0 price. Wasn’t the Fed’s money printing campaign supposed to inflate asset prices? Indeed it was ,and indeed it has, but if BofA’s price action is any indication of what is to come for the broader market, the Fed’s quantitative easing experiment has failed. And predictably so. Temporary stimulus fueled stock market rallies don’t create sustainable economic … [Read more...]
Investors Flock to Consumer Staples
Hitting new highs last week were a number of consumer non-cyclical (staples) stocks. Household names, including Kraft, Coca-Cola, JM Smucker, HJ Heinz, Unilever, and Hershey all made the new highs list. Meanwhile the major market averages have failed to regain their February peaks and show signs of breaking down. The quantitative easing trade appears to be waning. We are seeing early indicators of a flight to safety. The high beta cyclical stocks are underperforming the market. Non-cyclical stocks are now in favor. The S&P 500 Consumer Staples index has recently broken out of a … [Read more...]
What we’re Reading 4-15-11
The Recent Surge in Global Commodity Prices – Bank of Japan Federal Reserve’s path of destruction – Marketwatch Alan J. Reynolds: Obama's Soak-the-Rich Tax Hikes Won't Work – WSJ THE MORE YOU MAKE, THE LESS YOU PAY - By Jesse Drucker … [Read more...]
Are Investors Expecting too Much From Earnings?
Alcoa kicked off the first-quarter earnings season this week with a big thud. The aluminum producer reported strong earnings, but Alcoa shares dropped as much as 7% following the announcement. Earnings per share exceeded consensus estimates, but the top line came in below expectations. Has the two-year, 100% bull move in stocks raised investor expectations to unrealistic levels? I’m sure Jamie Dimon (the CEO of J.P. Morgan) thinks so. On Wednesday, J.P. Morgan reported first-quarter earnings of $1.28 per share compared to estimates of $1.15—that’s a huge earnings beat, but the stock is down … [Read more...]
Horizontal Drilling
S&P 500 Technical Analysis
The S&P 500 is at a key technical level. The bounce-back rally from the March low has failed to surpass the February 18th high. The index is forming a double top, and looks poised to break below its 50-day moving average. A close decidedly below the 50-day average could result in a more extended correction. How big of a correction? On a technical basis, there is minor support for stocks at 1,250 and again around 1,200, but I don’t see meaningful support for stocks until the S&P approaches the 1,100 level—that’s a long ways down from today’s level of 1,312. … [Read more...]
Chinese Fraud: Tip of the Iceberg?
Welcome to the first post in our new Stock Market Movers column. This new area of the website will focus on explaining and analyzing some of the market’s best and worst performing stocks. The focus will be on stocks reaching 52 week highs and lows, and those with extreme short term price changes. Below you’ll find the first addition to this new column, a review of a much lauded Chinese water industry company. Hitting a new low last week, was China based Duoyuan Global Water. The one-time high flying Chinese water play, closed at $3.11 yesterday, 86% below its $22.65 June 2009 IPO … [Read more...]
Import Price Inflation Leaps
Today, the Bureau of Labor Statistics released its latest import price index. Import prices spiked 2.7% in March, and they are up 9.7% over the last twelve months. Economists were anticipating a 2.1% monthly increase and an 8.6% year-over-year inflation rate. Much of the year-to-year gain in import prices is attributable to fuel. Excluding fuel, import price inflation was 4.2% for the twelve month period ending in March. Though it isn’t 9.7%, an inflation rate of 4.2% is by no means benign. If broader measures of inflation rose to 4.2% on a sustained basis, interest rates would spike. You … [Read more...]