The Morning Call
3/31/15
The Market
Technical
The indices
(DJIA 17976, S&P 2086) had a strong follow through from Friday’s up
day. In the process, they soared above
their 100 day moving averages, the lower boundaries of their very short term
uptrends and their 50 day moving averages.
Clearly, their 100 day moving averages once again offered enough support
to halt a downtrend. However, this move
was assisted by quarter end portfolio window dressing. The Averages remained well within their
uptrends across all timeframes: short term (16870-19647, 1971-2952),
intermediate term (16965-22116, 1785-2543 and long term (5369-18860,
797-2122). Resistance exists at the last highs
(18193/2114); and if that gets taken out then the next stop is the upper
boundaries of their long term uptrends.
Volume fell;
breadth improved. The VIX declined, finishing within its short term trading
range, its intermediate term downtrend, its long term trading range, back below
its 50 day moving average and within a developing pennant formation. I continue to think that it remains a
reasonably priced hedge.
Update on NYSE
margin debt (short):
The long Treasury
was off, but closed within its short term trading range, intermediate and long
term uptrends and above its 50 day moving average.
GLD’s price dropped,
closing within its short and intermediate term trading ranges, its long term
downtrend and below its 50 day moving average.
GLD has a number of tough resistance levels yet to overcome before we
can assume that the worst is over.
Bottom line: the
Averages had a great day, assisted by quarter end portfolio window
dressing. Related buying momentum will likely
influence today’s pin action. This move
was marked by a bounce off their 100 day moving averages---which I have noted
before has offered significant support over the last year. So our attention shifts back to the overhead
resistance levels: the prior high and the upper boundaries of the indices long
term uptrend. I continue to believe that
the latter will prove too formidable for a break away to the upside.
Fundamental
Headlines
It
was a pretty active Monday, US economic data wise. The results were basically mixed: February
personal income was better than expected, personal spending was worse and the
PCE deflator was in line; in addition, February pending home sales were much
better than estimates while the March Dallas Fed manufacturing index was much
worse.
Overseas,
Chinese banking officials made a statement suggesting that they could lower
interest rates again. While it was later
denied, investors seemed to grasp at it like a drowning sailor to a life
buoy.
***overnight,
the March EU price deflator improved from -0.3% in February to -0.1% and unemployment
went from 11.4% in February to 11.3% in March.
Bottom line:
this holiday shortened week started with mixed US economic data and a shot in
the arm for the speculator/yield chaser/carry trader hoping and praying for
more QEInfinity. And what better place
to get it than from a really big player (i.e. a central bank that has the
ability to really get the presses humming) like China.
The geopolitical
events that held the headlines last week stayed below the radar yesterday,
though none (Greek bail out; NATO/Russia face off; escalating war in the Middle
East) have been resolved. Out of sight,
out of mind.
The key issues
remain a deteriorating US economy, a weak global economy, slowing corporate
profit growth, a death wish among central bankers as they relentlessly pursue
competitive currency devaluation and a stock market that is a short hair away
from all-time high valuations.
Update on the
Buffett valuation indicator (short):
I
can’t emphasize strongly enough that I believe that the key investment strategy
today is to take advantage of the current high prices to sell any stock that
has been a disappointment or no longer fits your investment criteria and to
trim the holding of any stock that has doubled or more in price.
Bear
in mind, this is not a recommendation to run for the hills. Our Portfolios are still 55-60% invested and
their cash position is a function of individual stocks either hitting their
Sell Half Prices or their underlying company failing to meet the requisite
minimum financial criteria needed for inclusion in our Universe.
The
importance of liquidity tomorrow (medium):
Investing
for Survival
The
greatest danger to your portfolio (medium):
Company Highlight
AT&T is one
of the world’s largest telecommunications companies. The company has grown its dividend at a 5%
pace over the past ten years (profits have been flat) earning approximately
10-15% return on equity. T went through
a rough period (2008-2011) as the growth of its traditional wireline business
slowed and margins came under pressure.
Looking forward profits should regain momentum as a result of:
(1) providing fastest internet speeds,
(2)
investing heavily in enhancing spectrum and networking
capabilities as well as building out is fiber network,
(3)
acquisitions,
(4)
share repurchases.
Negatives:
(1) intense competition,
(2) losses in
wireline business,
(3) highly
regulated industry.
T is rated A++
by Value Line, carries a 41% debt to equity ratio and its stock yields 5.7%.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio Since 2005
T 5.7% 4% 68 10
Ind Ave 3.5 6* 59 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2005 Margin Rating
T 41% 15% 3 10% A++
Ind Ave 46 12 NA 8 NA
*many companies in T industry do
not pay a dividend
Chart
Note:
T stock made good progress off the October 2008 surpassing the downtrend off
the May 2008 high (straight red line) and the November 2008 trading high (green
line). Long term, it is in an uptrend
(blue lines). Intermediate term, it is
in an uptrend (purple lines). Short
term, it is in a trading range (brown lines).
The wiggly red line is the 50 day moving average. The High Yield Portfolio owns a 75% position
in T. The upper boundary of its Buy
Value Range is $31; the lower boundary its Sell Half Range is $48.
3/15
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
March Dallas Fed manufacturing index was reported at -17.4 versus expectations
of -9.0.
February
pending home sales rose 3.1% versus estimates of up 0.3%.
Other
Politics
Domestic
International War Against Radical Islam
Iraq
just keeps getting from chaotic (medium):
No comments:
Post a Comment