Monday, July 31, 2017

Monday Morning Chartology

The Morning Call

7/31/17

The Market
         
    Technical

            The S&P chart continues to need little comment.  It is going up no matter what measure you use.



            The long Treasury broke below the lower boundary of its very short term downtrend and remained there long enough to negate the trend. However, it has a lot of support from both its 100 and 200 day moving averages, the lower boundary of its short term trading range and the lower boundary of its long term uptrend.  If TLT starts breaking these support levels, it would likely mean bond investors are starting to question the weak economy, dovish Fed scenario.



            The dollar continues to get hammered and is rivaling GLD’s late 2016 plunge in ugliness.  It also seems clear that dollar investors are not buying the improving economy, higher interest narrative.



            GLD maintained its upside momentum, closing above its 100 and 200 day moving averages, above the lower boundaries of its short term trading range and a very short term uptrend.



            The VIX bounced hard at the end of last week, closing above the former lower boundaries of its intermediate and long term trading ranges.  The question is, is this rebound a rally within the established downtrends or was the prior decline an emotional bottom and those trading ranges are the true trend.  Follow through.



    Fundamental

       Headlines

            The ticking time bomb in margin debt (medium and a must read):

            ***overnight, the July Chinese manufacturing and services PMI’s were below estimates.

       Investing for Survival
   
            How investors fool themselves.
               

    News on Stocks in Our Portfolios
 
Donaldson (NYSE:DCI) declares $0.18/share quarterly dividend, 2.9% increase from prior dividend of $0.175.

Economics

   This Week’s Data

   Other

            The ostrich approach to monetary policy (medium):

Politics

  Domestic

  International

            Latest on North Korea/China/US (medium):

           
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Saturday, July 29, 2017

The Closing Bell

The Closing Bell

7/29/17

Statistical Summary

   Current Economic Forecast
                       
2016 actual

Real Growth in Gross Domestic Product                          1.6%
Inflation (revised)                                                              1.6%                    
  Corporate Profits (revised)                                                     4.2%

2017 estimates (revised)

Real Growth in Gross Domestic Product                      -1.25-+0.5%
                        Inflation                                                                         +.0.5-1.5%
                        Corporate Profits                                                            -15-0%



   Current Market Forecast
           
            Dow Jones Industrial Average

                                    Current Trend (revised):  
                                    Short Term Uptrend                                 20558-23069
Intermediate Term Uptrend                     18537-25786
Long Term Uptrend                                  5751-24198
                                               
                        2016    Year End Fair Value                                   12600-12800

                        2017     Year End Fair Value                                   13100-13300

            Standard & Poor’s 500

                                    Current Trend (revised):
                                    Short Term Uptrend                                     2400-2702
                                    Intermediate Term Uptrend                         2201-2975
                                    Long Term Uptrend                                     905-2763
                                               
                        2016   Year End Fair Value                                      1560-1580
                       
2017 Year End Fair Value                                       1620-1640         

Percentage Cash in Our Portfolios

Dividend Growth Portfolio                          59%
            High Yield Portfolio                                     55%
            Aggressive Growth Portfolio                        55%

Economics/Politics
           
The Trump economy is providing an upward bias to equity valuations.   By volume, the data flow this week was weighed to the positive: above estimates:  the May Case Shiller home price index, month to date retail chain store sales, July consumer confidence and sentiment, the July Richmond Fed manufacturing index, the July Markit composite, manufacturing and services PMI’s; below estimates: weekly mortgage and purchase applications, June new and existing home sales, weekly jobless claims and the Kansas City Fed manufacturing index; in line with estimates: June durable goods orders, the June trade deficit, the June Chicago national activity index and second quarter GDP.

Note on ‘in line with estimates’ numbers: the June trade deficit and the June Chicago national activity index were positive but their prior month’s readings were revised down enough to completely offset that improvement.  As a result, I rated those a neutral---with no qualms.  The June durable goods orders was different.  Its headline number looked very good but when the highly erratic transportation data was removed, it was a big disappointment.  I think that rates as a negative; but in the interest of being sure our score is does not reflect my prejudice, I rated it a neutral.

Still, the primary indicators were negative: July new home sales (-), July existing home sales (-), June durable goods orders (0) and second quarter GDP (0).      I score this week a minus: in the last 94 weeks, twenty-nine were positive, fifty-two negative and thirteen neutral. 
           
One final stat: the IMF lowered its 2017 US economic growth estimate. 

Overseas, the numbers were upbeat with more good news out of Europe.  That has been a good news story of late. 

With respect to fiscal policy reform the news was mixed.  The senate failed in its attempt to reform healthcare. Disappointing.  More important, I am not sure what that means for odds of passage of tax reform and infrastructure spending.

On the other hand, the house ditched the border adjustment tax, a measure that I believe would have done more harm than good---score one for gridlock.  The problem is that it was to be a source of revenue to pay for lowering the corporate tax rate.  So the question becomes will the GOP (1) find a new source of revenue, (2) cut back on tax cuts to make reform revenue neutral, (3) proceed with the original tax cuts and blow a hole in the budget? You know my choice and the reason why.

Finally, the FOMC met this week and the results were as expected: the economy is awesome but not we are still afraid to do much of anything for fear of wrecking the Markets.  Good luck with that strategy, Janet dear.

Bottom line: this week’s US economic stats turned back negative, confirming the pattern for the last 18 months---the economy struggling to keep its head above water.      Longer term, I remain confident in my recent upgrading our long term secular growth rate assumption by 25 to 50 basis points based on Trump’s deregulation efforts as well as his more reasoned approach to trade.  However, any further increase in that long term secular economic growth rate assumption stemming from enactment of the Trump/GOP fiscal policy is still on hold as they struggle to get anything done.

Our (new and improved) forecast:

A positive pick up in the long term secular economic growth rate based on less government regulation.  This increase in growth could be further augmented by pro-growth fiscal policies including repeal of Obamacare, tax reform and infrastructure spending; though the odds of that are uncertain. 

 Short term, the economy has seemingly lost its post-election Trump momentum meaning that our former recession/stagnation forecast is back as the current expansion seems to be dying of old age.

It is important to note that this forecast is made with a good deal less confidence than normal; so it carries the caveat that it will almost surely be revised.
                                               

       The negatives:

(1)   a vulnerable global banking system.  

Wells is at it again (medium):


(2)   fiscal/regulatory policy.  This week: 

[a] while the Russian connection/Comey firing problems hearing/hysteria continues, it had a lower profile this week. As I noted previously,…while it is not at all clear how much substance there is to the multiple accusations, in the best case where all are innocent, the opposition is still going to hang on to the prospect of delaying the Trump/GOP fiscal agenda like a dog to a soup bone.  In politics, one never knows what the next turn will bring; but at the moment its advantage dems which means lower odds of success of the Trump/GOP effort to alter the inefficient economic model this country has been operated on for the past sixteen years,

[b] the senate failed in its attempt to pass a bare bones healthcare reform bill.  I don’t know if this spells the end to any attempt at reform; but it is clear from the narrative in the press that the GOP disappointment was palpable.  You know most of the time I value gridlock as a major plus since in inhibits further government intrusion on the electorate and the economy.  But in this case in which the legislation is to remove that intrusion, I make an exception.  Plus I am concerned about what this failure means for the likelihood of passage of tax reform and infrastructure spending.

[c] GOP leadership ditched the border adjustment tax which was very controversial in the first place.  There were apparently too many unknown unknowns to take that step.  Probably, it was a smart thing to do and undoubtedly takes a negative off the table with respect of trade.  On the other hand, the Donald was relying on the proceeds generated by the tax to pay for his corporate tax cut.  As I have noted, how that impacts tax reform is important, to wit, tax reform that increases the budget deficit and federal debt will be an additional burden for the economy, inhibiting its ability to grow.

[d] the administration continues to move forward in its deregulation effort.  In Wednesday’s Morning Call, I linked to some stats on cost savings to date as well as studies on improving corporate management sentiment.  No one is talking about the impact that this factor is having on US economic activity; indeed as you know, I had lost confidence that deregulation was having any effect on business attitude or investment.  If this study is valid, then my pessimism was premature.   That said, there is little evidence to date that it is having an impact on the numbers.

(3)   the potential negative impact of central bank money printing:  The key point here is that [a] the Fed has inflated bank reserves far beyond any comparable level in history and [b] while this hasn’t been an economic problem to date, {i} it still has to withdraw all those reserves from the system without creating any disruptions---a task that I regularly point out it has proven inept at in the past and {ii} it has created or is creating asset bubbles in the stock market as well as in the auto, student and mortgage loan markets.  

The FOMC met this week and performed its usual routine, i.e. talked up the economy and then mewed gutlessly about doing something in the future, depending on the data.  I will save you my usual rant; but not the conclusion: the Fed and other central banks have done little to improve their respective economies but have created enormous distortions in asset pricing and allocation.  In my opinion when those excesses are corrected it will have little impact on their respective economies but will cause the securities markets pain.

Draghi’s failure (medium):

(4)   geopolitical risks: the rhetoric ramped up again between North Korea and the US.  Unfortunately, the US keeps making its foreign policy more complicated/dangerous.  Trump turned his tweet machine on Iran this week, issuing a series of public threats. 

Plus congress, in its infinite wisdom, decide to impose sanctions on Russia for interfering in the 2016 elections---probably one of the most holier than thou, hypocritical actions on record.  I have usually end this segment with the disclaimer that…nothing may come of any of these problems; but they all pose a risk which we must remain aware of.  However Friday morning, Russia gave its initial response, ordering the US to cut its diplomatic staff and taking control of three US properties.  I doubt this will be the only reprisal.

(5)   economic difficulties around the globe.  The stats continued upbeat out of Europe this week.

[a] the July EU Markit PMI hit a six month low, but German business sentiment hit a new high and second quarter UK and German GDP’s were above estimates, while French and Spanish GDP’s were in line,

[b] second quarter Japanese CPI was in line.

Oil remains a factor in global economic health and its price continued its roller coaster ride---this week to the upside.  The main factors playing on price being inventories, rig counts and the inability of OPEC to make production cuts stick---this week, Saudi Arabia, Kuwait and the UAE promised {again} that they would stick with their quotas under the recent production cut agreement {yeah, right}; Indonesia said it will consider rejoining OPEC but only if it is not subject to production quotas.  On the other hand, adding more uncertainty to the supply picture, Trump imposed sanctions on Venezuela which could, in turn, impact its oil industry.  The point here is that [a] since energy is a major component of production, its price usually has a significant impact on economic growth, [b] this week’s oil price move to the upside notwithstanding, I don’t think that the future for oil prices is all that clear and [c] lower prices have proven not to be an ‘unmitigated positive’. 

In sum, our outlook remains that the European economy is out of the woods.  My belief is that it will eventually positively impact the US economy.

            Bottom line:  our near term forecast is that the US economy is stagnating despite, an improved regulatory outlook and a now growing EU economy. These two factors should have a positive impact on US growth though there is scant evidence of it to date. However, if Trump/GOP were to pull off a (near) revenue neutral healthcare reform, tax reform and infrastructure spending on a reasonably timely basis, I would suspect that sentiment driven increases in business and consumer spending would return; and more importantly, our long term secular economic growth rate assumption would almost certainly rise.  Unfortunately its fate is uncertain given the antics of our political class. 

For the long term, the Donald’s drive for deregulation and improved bureaucratic efficiency is a decided plus.  As you know, I inched up my estimate of the long term secular growth rate of the economy because of it.  In addition, a more reasoned approach to trade and foreign charity should support that revision. 

The Market-Disciplined Investing
         
  Technical

The indices (DJIA 21830, S&P 2472) had another mixed week (Dow up, S&P flat).  Volume fell; breadth improved.  The upward momentum as defined by their 100 and 200 day moving averages and uptrends across all timeframes remains intact.  At the moment, technically speaking, I see little, except for the VIX, to inhibit the Averages’ challenge of the upper boundaries of their long term uptrends---now circa 24198/2763. 

The VIX (10.3) was up another 1 ½ % on Friday.  It finished above the former lower boundaries of both the intermediate and long term trading ranges for the second day.  To be sure, enough time has lapsed to confirm the break of both trends to the downside.  That said, given that we are talking about the VIX hitting an all-time low, there is the question of whether the last week’s decline was some kind of blow off bottom.  Follow through.

The long Treasury rose, but remained below the lower boundary of its very short term uptrend.  However, it is still above its 100 and 200 day moving averages, the lower boundaries of its short term trading range and its long term uptrend.  That is a lot of support.  If TLT starts breaking those support levels, it would probably be a sign that the underlying psychology of bond investors is changing.

The dollar plunged below the lower boundary of its short term trading range for a second time; if it remains there through the close next Tuesday, it will reset to a downtrend.  This is an ugly chart.

 GLD continues to rise, ending above its 100 and 200 day moving averages and the lower boundary of a new developing very short term uptrend. 

Bottom line: this week’s overall pin action was pretty confusing: with the Dow, S&P and NASDAQ were out of sync on a daily trading basis.  In addition, the pin action in TLT, UUP and GLD was also a bit unclear as their investors seemed unable to decide whether they believe in a weak economy/lower rates or the reverse.  I don’t pretend to know what that means, if anything.   But we do know that the Averages remain firmly in uptrends.
           
Fundamental-A Dividend Growth Investment Strategy

The DJIA (21830) finished this week about 68.0% above Fair Value (12990) while the S&P (2472) closed 54.0% overvalued (1605).  ‘Fair Value’ will likely be changing based on a new set of regulatory policies which has led to improvement in the historically low long term secular growth rate of the economy (though its extent could change as the effects become more obvious); but it still reflects the elements of a botched Fed transition from easy to tight money and a ‘muddle through’ scenario in Japan and China.

The US economic stats continue to point to a weak economy.  If I am correct about the economy slowing/stagnating, short term that means Street forecasts will begin declining.  The question is when; and more important from a Market standpoint, given investor proclivity for interpreting bad news as good news, whether they will even care.  I can’t answer that latter issue except to say that someday, bad news will be bad news; and mean reversion will likely occur.

The political class failed it first big test---healthcare reform.  Clearly that provides no reason for revising either our Economic or Valuation Models.  Plus it raises the concern as to the enactment of tax reform or infrastructure spending.  This is made all the worse given the removal of the border adjustment tax from budget considerations.  The issue is, can these clowns produce a revenue neutral tax reform---if not, it would negatively affect both Models.

Unfortunately, a portion of the Trump/GOP inability to get things done are a result of their own unforced errors (1) the Donald’s insistence in wallowing in the mud with his opponents and making it worse by his factually challenged tweets, (2) the inability to escape the Russian tar baby because of the apparent absence of political savvy, and (3) the GOP congress’ lack of preparation for assuming the reins of power.  They had eight years to construct a viable alternative to Obamacare and tax reform; and yet here they are arguing over issues that should have been resolved long ago. 

Finally, the FMOC’s action and narrative remains in line with other the central banks who continue to confuse, obfuscate and pursue a policy that has destroyed price discovery---and it is being done not to have some potential positive effect on the economy, but to avoid a Market hissy fit.  Not something that I believe is in the best long term interests of the economy or the Markets.    As you know, I have long time believed that the loss of faith in or the dismantling of QE will result in correcting the mispricing and misallocation of assets; and that most assuredly will not be a plus for equity prices.


Net, net, my biggest concern for the Market is the unwinding of the gross mispricing and misallocation of assets caused by the Fed’s (and the rest of the world’s central banks) wildly unsuccessful, experimental QE policy.   While I am encouraged about the changes already made in regulatory policy, a more rational approach to trade and our global commitments, fiscal policy remains a mess.  Whatever happens, stocks are at or near historical extremes in valuation, even if the full Trump agenda is enacted; and there is no reason to assume that mean reversion no longer occurs.


Just when you think things can’t get more absurd, they do (short):

Counterpoint (short):


Bottom line: the assumptions on long term secular growth in our Economic Model are beginning to improve as we learn about the new regulatory policies and their magnitude.  Plus, there is a tiny ray of hope that fiscal policy could make progress though its timing and magnitude are unknown.  I continue to believe that the end results will be less than the current Street narrative suggests---which means Street models will ultimately will have to lower their consensus of the Fair Value for equities. 

Our Valuation Model assumptions are also changing as I raise our long term secular growth rate estimate.  This will, in turn, lift the potential ‘E’ component of Valuations; but there is a decent probability that short term this could be at least partially offset by the reversal of seven years of asset mispricing and misallocation.  In any case, even with the improvement in our growth assumption, the math in our Valuation Model still shows that equities are way overpriced.

                As a long term investor, with equity valuations at historical highs, I would want to own cash in my Portfolio and would use the current price strength to sell a portion of your winners and all of your losers.
               

DJIA             S&P

Current 2017 Year End Fair Value*              13200             1630
Fair Value as of 7/31/17                                  12990            1605
Close this week                                               21830            2472
Over Valuation vs. 7/31
             
55%overvalued                                   20069              2480
            60%overvalued                                   20716              2560
            65%overvalued                                   21364              2640
            70%overvalued                                   22011              2720


* Just a reminder that the Year End Fair Value number is based on the long term secular growth of the earning power of productive capacity of the US economy not the near term   cyclical influences.  The model is now accounting for somewhat below average secular growth for the next 3 to 5 years. 

The Portfolios and Buy Lists are up to date.


Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973.  His 47 years of investment experience includes institutional portfolio management at Scudder. Stevens and Clark and Bear Stearns, managing a risk arbitrage hedge fund and an investment banking boutique specializing in funding second stage private companies.  Through his involvement with Strategic Stock Investments, Steve hopes that his experience can help other investors build their wealth while avoiding tough lessons that he learned the hard way.








Friday, July 28, 2017

The Morning Call--Confusing day

The Morning Call

7/28/17

The Market
         
    Technical

The indices (DJIA 21796, S&P 2475) had another mixed day (Dow up, S&P flat).  Volume rose; breadth improved.  The upward momentum as defined by their 100 and 200 day moving averages and uptrends across all timeframes remains intact.  At the moment, technically speaking, I see little, except for the VIX, to inhibit the Averages’ challenge of the upper boundaries of their long term uptrends---now circa 24198/2763. 

The VIX (10.1) was up 6 ¾ %, unusual for the day’s pin action.  It finished above the former lower boundaries of both the intermediate and long term trading ranges.  To be sure, enough time has lapsed to confirm the break of both trends to the downside.  That said, given we are talking about the VIX hitting an all-time low, there is the question of whether the last week’s decline was some kind of blow off bottom.  Follow through.

The long Treasury declined, ending back below the lower boundary of its very short term uptrend.  But it remained above its 100 and 200 day moving averages.  The gap between the uptrend and the moving average is very small; so TLT is in a sort of no man’s land.  Any follow through in either direction (i.e. above the lower boundary of its very short term uptrend or below the moving averages) will likely determine its next big move.

The dollar finished back above the lower boundary of its short term trading range, negating Wednesday’s break; but that did little to improve an otherwise ugly chart.

 GLD fell slightly, ending above its 100 and 200 day moving averages. 

Bottom line: yesterday’s overall pin action was pretty confusing: Dow up, S&P flat; the VIX up big on a rise in the Dow; and a third day of uncertain vacillation by the TLT, UUP and GLD.  I don’t pretend to know what that means, if anything.   But we do know that the Averages remain firmly in uptrends.

    Fundamental

       Headlines

            The pin action wasn’t the only thing that was a bit confusing yesterday.  The economic data was also not what it appeared on the surface.  The June durable goods headline number was strong, but that was due to a huge increase in the erratic transportation orders, leaving core orders down.  The June trade deficit shrunk, but the May deficit was revised up by an equal amount.  The June Chicago national activity index was up more than expected, but the May number was revised down.  I scored all these a neutral; but that durable goods stat is a negative.

            ***overnight, Spain and France reported second quarter GDP in line with estimates, while Germany was above expectations; second quarter Japanese CPI was in line.

            On fiscal policy, GOP leadership killed the border adjustment tax.  It was never very popular anyway; but it did provide revenue for a corporate tax cut.  The question is, will this result in a scale back in the corporate tax cut or a revenue negative tax cut?  I believe that the answer is important because this country can’t afford to expand either its deficit or its debt.

                ***overnight, the senate GOP failed to pass the ‘skinny repeal’ healthcare reform bill.

            It is hard for me to go a day without ragging on the Fed, especially after a major event.  I will let Lacy Hunt do it for me as he addresses the effectiveness (or lack thereof) of the Fed’s dual mandate (medium):

Bottom line: the two notable events of the day for me were (1) the schizophrenic performance of all of the Markets.  As I said above, I don’t know that it means anything; but I don’t know that it doesn’t and (2) the demise of the border adjustment tax.  I believe that is a plus as regards our trade policy.  But I fear it could be a negative if Trump/GOP proceed with their promised tax cuts without finding alternative sources of revenue to pay for them.  To do so would just continue the irresponsible fiscal policies of the Bush and Obama reigns.  Adding to the deficit/debt would simply place a heavier burden (debt service) on the economy, further stifling growth.

For those who haven’t yet, I would sell a portion of my winners and all my losers in order to build a cash position.  Sell high, buy low.

       Investing for Survival
   
            Are ETF’s and index funds more dangerous in a bear market?

           
    News on Stocks in Our Portfolios
 
C. R. Bard (NYSE:BCR): Q2 EPS of $2.92 beats by $0.08.
Revenue of $979.7M (+5.2% Y/Y) beats by $3.23M.

Exxon Mobil (NYSE:XOM): Q2 EPS of $0.78 misses by $0.06.
Revenue of $62.9B (+9.0% Y/Y) beats by $980M.

McDonald's (NYSE:MCD) declares $0.94/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

            The July Kansas City Fed manufacturing index was reported at 10 versus its June reading of 11.

            Second quarter GDP was up 2.6%, in line; but the first quarter number was revised from up 1.4% to up 1.2%.

   Other

            Quote of the day (short):

Politics

  Domestic

  International War Against Radical Islam

            The balance of power in Saudi Arabia (medium):

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.




Thursday, July 27, 2017

The Morning Call--A nothing burger

The Morning Call

7/27/17

The Market
         
    Technical

The indices (DJIA 21711, S&P 2477) had a so so day (Dow up, S&P flat).  Volume declined; breadth was mixed.  The upward momentum as defined by their 100 and 200 day moving averages and uptrends across all timeframes remains intact.  At the moment, technically speaking, I see little, except for the VIX, to inhibit the Averages’ challenge of the upper boundaries of their long term uptrends---now circa 24198/2763. 

The VIX (9.6) was up, but still finished in downtrends across all timeframes.  It is not surprising that it is at all-time lows at a time when stocks are at all-time highs; but it does suggest that further highs in stocks may be limited in magnitude. 

The long Treasury rose, ending right on the lower boundary of its very short term uptrend---a reversal of Tuesday’s break.  It remained above its 100 and 200 day moving averages. 

The dollar finished below the lower boundary of its short term trading range; if it remains there through the close on Friday, it will reset to a downtrend.  It remains in a very short term downtrend and below its 100 and 200 day moving averages.

 GLD moved higher, ending above its 100 and 200 day moving averages. 

Bottom line: additional positive earnings reports and a more dovish Fed seemed to provide the fuel for the move up in the Dow.  The latter also appeared to have an impact on TLT, UUP and GLD, all of which moved in a way that suggests their investors are not expecting a strong economy or higher interest rates.

    Fundamental

       Headlines

            The economic data took a turn for the worse as mortgage applications rose fractionally, purchase applications fell and June new home sales were below expectations.  Overseas, second quarter UK GDP was slightly ahead of forecasts.

            The highlight of the day was the release of the FOMC minutes; but it was a nothing burger.  The Fed narrative cooed about economic improvement, left rates unchanged and said that it would start shrinking its balance sheet ‘relatively soon’.  That was slightly more dovish than expected; but given the latest dovish statements from the Fed, it was right in line with the usual Fed incongruity: everything is awesome, but we still don’t have the balls to pull the (normalization) trigger.

            Paul Singer on the Fed and central banks in general (short):
           
            The primary focus on fiscal policy is now how healthcare reform works its way through the legislative process.  Here is a primer on what happens next (medium):

            The impact of Trump’s deregulation effort (medium and a must read):

Bottom line: earnings continue to surprise to the upside, which is a clear plus for stocks.  In addition, we received more good news on (1) the positive impact the Donald’s push for deregulation is having on business attitudes and activities [see above] and (2) improving numbers out of Europe.  To date, they have seemingly had little effect; but perhaps that is changing. 

The Fed retains its role as the cowardly lion.  It has created a time bomb that it refuses to acknowledge; and the longer it doesn’t, the more pain stocks will likely experience either when it finally does or some exogenous event hits investors between the eyes and they realize the emperor has no clothes.

            Update on the trend in dividend cuts (short):

            Troublesome facts (short):

            My thoughts for the day: most investors have an aversion to going against the trend/crowd.  Nobody wants to miss a move.  In addition, few institutional portfolio managers want to risk his/her career by betting against majority.  When I was at Scudder, Stevens and Clark, the mindset was that it was better to lose money in IBM (an institutional favorite at that time) than risk being wrong by selling it.  The problem is that at valuation extremes, the crowd is wrong.

       Investing for Survival
   
            Money manager clich├ęs.

          

    News on Stocks in Our Portfolios
 
Exxon Mobil (NYSE:XOM) declares $0.77/share quarterly dividend, in line with previous.

W.W. Grainger (NYSE:GWW) declares $1.28/share quarterly dividend, in line with previous.

MasterCard (NYSE:MA): Q2 EPS of $1.10 beats by $0.06.
Revenue of $3.05B (+13.4% Y/Y) beats by $80M.

United Parcel Service (NYSE:UPS): Q2 EPS of $1.58 beats by $0.11.
Revenue of $15.75B (+7.7% Y/Y) beats by $280M.

Automatic Data Processing (NASDAQ:ADP): Q4 EPS of $0.66 misses by $0.01.
Revenue of $3.1B (+6.9% Y/Y) beats by $60M

Procter & Gamble (NYSE:PG): Q4 EPS of $0.85 beats by $0.07.
Revenue of $16.08B (-0.1% Y/Y) beats by $60M.

Praxair (NYSE:PX): Q2 EPS of $1.46 beats by $0.03.
Revenue of $2.83B (+6.0% Y/Y) in-line
Praxair (NYSE:PX) declares $0.7875/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

            June new home sales were flat versus expectations of a 1,000 increase; however, May was revised down 5,000.

            June durable goods orders rose 6.5% versus estimates of up 3.5%; but ex transportation, they were up 0.2% versus forecasts of up 0.4%.  In other words, core capital goods fell 0.1% versus consensus of +0.3%.

            The June trade deficit came in at $63.9 billion versus projections of $65.0 billion; but May was revised down by making the two months a wash.

            Likewise, the June Chicago national activity index was reported at .13 versus expectations of .10; but May was revised down making the two months a wash.

            Weekly jobless claims rose 10,000 versus estimates of +7,000.

   Other



Politics

  Domestic

  International War Against Radical Islam


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