Offshore, kayakers paddle among sandy, palm-dotted islets. Snorkelers
explore the second-largest coral reef in the world.
A kaleidoscope of tropical fish, dolphins, turtles and manatees all share
this Caribbean coast, which boasts some of the best
deep-sea diving in the world. Hidden in pristine forests, jaguars, monkeys and
566 species of birds live among ancient Mayan cities.
In Belize,
more than 40% of the country is protected as national parks, wildlife
sanctuaries and marine reserves. But this lush ecological paradise is not just
a haven for wildlife.
Belize
encourages offshore business and welcomes foreigners as local residents, too.
In fact, if you’re looking into your residency options, Belize
should be high on your list.
The only English-speaking nation in Central America,
its offshore laws ensure maximum financial privacy.
These laws allow
asset-protection trusts, maritime registration and encourage international
business and banking.
There are no local income taxes, either personal or corporate, and no
currency exchange controls. It’s a place where you can arrange your affairs so you gain residency—but
pay no taxes locally.
I’ve been to Belize
(formerly British Honduras) twice. The people are
friendly, oceanfront real estate is still relatively cheap, and Belize’s
parliament, courts and government are pro-offshore.
Designed to attract foreigners as residents, Belize’s
“qualified retired persons” (QRP) program resembles Panama’s
popular pensionado program.
The QRP offers significant tax incentives to those who become permanent
residents of Belize,
but not full citizens.
When you qualify, you’re exempted from all taxes on income from sources
outside Belize.
QRPs pay no import duties on personal effects, household goods or on a motor
vehicle or other transport, such as an airplane or boat.
You must be 45 years of age or older to qualify and be able to prove
personal financial ability to support yourself and any dependents. The minimum
financial requirements include an annual income of at least $24,000 from a
pension, annuity or other sources outside Belize
The
International Council of Shopping Centers reported weekly sales of major
retailers up 0.5% versus the prior week and up 2.7% versus the comparable
period a year ago.
Weekly
mortgage applications fell 12% while purchase applications dropped 8%.
Two
secondary economic indicators were reported yesterday: the August Case Shiller
home price index which was up though not as much as anticipated; the ICSC September
weekly retail sales were also up but also not as much as estimated. Not great,
not terrible and no impact on our forecast.
Today
could be wild and woolly with (1) two days of normal trading to catch up on,
(2) several news events [see below] to digest not counting the effects of the
hurricane and (3) it being last day of the month and the fiscal year for many
hedge funds.
That
said, futures are up in premarket trading, though why I haven’t a clue.Maybe its because the European September
unemployment rate rose to 11.6% (Italy unemployment is now 10.8% up from 10.6%
but it still has a way to go until it hits Spain's 25%) even as consumer prices
kept inflation at a steady 2.5% rate, or that French producer prices rose more
than expected even as spending missed expectations, or that Spanish housing
permits collapsed by 37.2% in August from July, or that Greek retail sales
plunged by 7.2% Y/Y and the Greek 2013 economic outlook was cut in the latest
budget with the budget deficit now seen at 5.2% from 4.2% before and that Greece now sees
189.1% debt/GDP in 2013 up from 175.6% in
2012, or that Japan just cut its economic outlook last night after
its manufacturing PMI came at 46.9, the
lowest since 2009 excluding Fukushima, or that UK consumer confidence printed
-30, vs. -28 last and the lowest since April, or that Taiwan slashed its 2012 GDP
forecast from 1.66% to 1.05%, or that nothing has been resolved on the Greek
labor reforms or the now two month overdue Troika bailout, or that insolvent
Spain has still not requested a bailout, or that virtually every company that
has reported revenues in the last two "dark days" missed expectations,
or...............well, you get the point.
Wal-Mart Stores
is the world’s largest retailer operating 629 discount stores, over 3,000 super centers, 611 Sam’s Clubs, 210
Neighborhood Markets in the US
and 5,651 foreign stores in Latin America, Canada,
Europe and Asia.The company has grown profits and dividends
at a 12-16% annualized pace over the last 10 years earning a 20% return on
equity.The company should continue to
turn in above average results as a result of :
(1) improvement
in productivity resulting from expanding international markets, in particular China
where it is growing at a 30% annual rate,
(2) a positive
impact on costs given management’s ability to ‘buy for less’,
(3) growing on
line business.
Negatives:
(1) difficulty
in entering the Indian market,
(2) the
potential for price inflation in consumer goods,
(3) its exposure
to foreign laws and regulations as well as currency fluctuations.
WMT
is rated A++ by Value Line, carries a 38% debt to equity ratio and its stock
yields 2.2%.
Statistical Summary
StockDividendPayout# Increases
YieldGrowth RateRatioSince 2002
WMT2.2%10%32%10
Ind Ave1.5925NA
Debt/EPS DownNetValue Line
EquityROESince 2002MarginRating
WMT38%21%04%A++
Ind Ave4418NA3NA
Chart
Note:
WMT stock made slow initial progress off its
March 2009 low.It quickly surpassed the
downtrend off its September 2008 high (straight red line); however, it took
almost three years to overcome the November 2008 high (green line). Long term the stock is in an uptrend (blue
lines).Intermediate term, it is in an
uptrend (purple lines).Short term it is
on a moon shot (brown line).The wiggly
red line is the 50 days moving average.The Dividend Growth Portfolio does not own WMT,
having Sold it (and reinvested the funds in Target) back in 2008 when WMT
traded into its SellHalfRange.The upper boundary of its BuyValueRange
is $42; the lower boundary of its SellHalfRange
is $61.
As
you know, the Market was closed yesterday and will be again today as a result
of Hurricane Sandy.Hence there is
nothing to add to our prior comments.
Fundamental
Headlines
Yesterday’s
economic news was reasonably good: September personal income was up (in line)
as was personal spending (better than expected); the PCE price index was up
slightly (in line); finally, the Dallas Fed October manufacturing index was up
(less than estimates).These datapoints
fit our forecast; so there is little to add.
It
is important to note that Hurricane Sandy is going to play merry hell with the
data for the next couple of month or so.Initially, the impact will be negative as businesses close, individuals
are homebound and power will be lost in many locations.Later, activity will surge and people and
businesses catch up and clean up.
To make it all
the more confusing, these effects will havea rolling impact, i.e. the weekly numbers will first reflect these
changes followed by monthly indices and then quarterly measures.Then they will start to overlap, i.e. next
week’s reports on weekly data will be negative while the monthly stats will
appear fine, etc; then the whole process will reverse as the shortest term
indicators will rebound as the monthly numbers will still be impacted by the
storm.
Bottom line: this
all goes to say that this period of disruption and recovery is going to make it
difficult to draw firm conclusions about the economy’s progress---and any inferences
to the contrary should be taken lightly.
The
S&P confirmed the break of the triple support zone (short term uptrend
[brown lines], 50 day moving average [wiggly red line] and 1422 support).Under our technical system, it must now set a
trading range; and 1395 looks the most likely candidate.However, that is a minor support level and
the S&P may have to drop to the lower boundary of its intermediate term
uptrend (purple lines) before it can stabilize.
GLD
broke through the lower boundary of its very short term uptrend.Then broke through its interim support
level.It may try to stabilize but there
is no visible support above the lower boundary of its short term uptrend (brown
line).In the meantime, it is developing
a very short term downtrend.
The
VIX spiked last week and may be preparing an assault on the upper boundary of
its short term downtrend.It has traded
through both its 50 day moving average (wiggly red line) and 200 day moving
average; so it is carrying some momentum into that potential challenge.The indicator is now neutral to negative; a
break above the upper boundary of the short term downtrend would be very
negative.
September
personal income rose 0.4% in line with expectations; personal spending
increased 0.8% versus estimates of +0.6%; the PCE price index came in at +0.1%
as anticipated.
I am going to fade the Closing
Bell again this week.OU plays Notre
Dame at home.So I leave after
publishing this note for another party/football weekend.See you on Monday morning.Go Sooners.
The Market
Technical
The
indices (DJIA 13103, S&P 1412) tried to rally again yesterday with a bit
more luck.However, the assault on the
triple support level (short term uptrend, 50 day moving average, 13302/1422
support) continued.The Dow closed for
the third day below 13302 and for the fourth day below its 50 day moving
average (13346).The S&P finished
for the third day below 1422 and its 50 day moving average (1433).Without more follow through to the upside, at
the close today, the Averages will confirm the break of all components of the
triple support level.That’s not
positive.
As
I noted yesterday, the task now is to identify the lower boundary of a newly
re-set short term trading range.The
nearest candidate is a minor support level at 12973/1395.
The
indices remain well within their intermediate term uptrends (12627-17627,
1331-1929).
Volume
declined; breadth improved somewhat.The
VIX fell slightly but remains near the upper boundary of its short term
downtrend and above both its 50 day and 200 day moving averages (not
positive).It is also above the lower
boundary of its intermediate term trading range.
GLD
was up a bit but is trading below the upper boundary of a developing very short
term downtrend.On the other hand, it is
well above the lower boundaries of its short term uptrend and its intermediate
term trading range.
Bottom
line:stocks tried to rally again
yesterday on the back of some pretty solid economic numbers reported early in
the day.Yet once again, even though the
indices ended up on the day, they could not finish any where near their
intraday highs nor did they recoup much of the ground lost since challenging
all components of the triple support levels.So the underlying strength of this Market deteriorated further.
Support exists
at 12973/1395 (minor support), 12973/1375 (the 200 day moving averages) and the
lower boundaries of their intermediate term uptrends.If I had to guess, I would view the latter as
the most likely area to provide stabilization---all other things being equal
(i.e. no collapse in EU).
Fundamental
Headlines
The
day started with some positive economic news: weekly jobless claims fell more
than anticipated and, more important, September durable goods orders were
stronger than expected.The latter along
with Wednesday’s solid new home sales continues the string of better growth
among the primary economic indicators and helps to further the distance of the
economy from recession---at least for the near term.It also keeps me confident in our forecast.
Nevertheless,
it is important to point out that conditions could begin to change radically
after the elections.As I have noted, an
Obama victory will likely raise the odds that we will experience the ‘fiscal
cliff’, while a Romney win may improve the chances of some resolution to that
problem.On the other hand, if he gets
tough on bringing the budget deficit under control and fires Bernanke, we will
probably get a recession by mid 2013---though as I have said, that is really
the good news scenario (take less pain sooner versus more pain later).
David
Einhorn on Bernanke and Fed policy (long but a must read):
The
point here is that as happy as an improvement in the readings that we are
getting on the economy makes me, the country is nearing a policy crossroads
that could profoundly influence (assuming Romney does what he has said that he
is going to do) our forecast for 2013 and beyond.
Bottom line: ‘stocks are creeping back to Fair Value
which is a positive; and the primary economic indicators continue to turn in a
solid performance which makes our forecast right on.....but I continue to
believe that in the absence of clarity on how the eurocrats are going to hold
the eurozone together and maintain it as a viable economic entity, caution is
essential for the principal reason that the economic downside for the US and
its banking institutions is so great.At
the risk of being repetitious, I am not saying the EU will implode.I am saying that the probability of such is
high enough and the damage it would do to our economy is high enough, that an
above average cash position is warranted at current price levels.
We also can’t forget about the ‘fiscal
cliff’.As I noted yesterday, the odds
of it occurring have increased of late; however, I don’t think that it carries
the magnitude of downside that an implosion in the EU does.In addition, as I have also mentioned, a Romney
victory is more likely to lead to more immediate economic pain than an Obama
win---we should be so lucky.Investors
have to come to grips with this idea (Romney win, more immediate pain) and that
could cause stock price heartburn while it is happening.
All that said, a decline to the 1270-1330
zone would find me a buyer.’
The
stock price of Sigma Aldrich (SIAL-$70) has
traded into its BuyValueRange.Accordingly, it is being Added to the
Dividend Growth and Aggressive Growth Buy Lists.Both Portfolios own a full position in SIAL,
so no new shares will be Bought.
Walgreen’s (WAG)
is the largest drugstore operator in the US,
operating over 7700 drugstores. The company has grown earnings and dividends 12-16%
annually over the past ten years, earning a 15-16% return on capital. Like most
retail firms, WAG experienced an earnings
hiccup in 2009; but it should be able to sustain an above average earnings
growth rate in the future because:
(1) the +60 year
old population, which is the largest user of drugs, is growing faster than any
other segment of the population; in addition, the improvement in the quality of
drugs for the maintenance of medical conditions should drive enhance revenue
growth,
(2) renewal of
its contract with Express Scripts,
(3) acquisitions,
(4) an
aggressive stock buy back program.
Negatives:
(1) it must
still earn back customer losses resulting form Express Scripts dispute,
(2) a highly
competitive industry,
(3) the sluggish
economy impacts consumer spending that in turn hampers its growth,
WAG
is rated A+ by Value Line, has a 14% debt to equity ratio and its stock yields 3.1%
Statistical Summary
StockDividendPayout# Increases
YieldGrowth RateRatioSince 2002
WAG3.1%16%39%10
Ind Ave1.28*21NA
Debt/EPS DownNetValue Line
EquityROESince 2002MarginRating
WAG14%19%14%A+
Ind Ave3014NA4NA
*few of the companies in this
industrypay a dividend
Chart
Note:
WAG stock made good initial progress off its
March 2009 low, quickly surpassing the downtrend off its August 2007 high
(straight red line) and the November 2008 trading high (green line).Long term the stock is in a trading range (blue
lines).Intermediate term, it has struggled
to hold an uptrend (purple lines).The
wiggly red line is the 50 day moving average.The Aggressive Growth Portfolio owns a full position in WAG.The upper boundary of its BuyValueRange
is $27; the lower boundary of its SellHalfRange
is $43.
