The Morning Call + Subscriber Alert

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The Morning Call

2/13/13

The Market

           

    Technical

            The indices (DJIA 14018, S&P 1519) continued to edge higher yesterday.  The Dow, once again, closed above the upper boundary of its short term uptrend (13352-13998) while the S&P remained below its comparable level (1453-1523).  Both finished within their intermediate term uptrends (13333-18333, 1409-2004).

            Volume rose; breadth improved modestly.  The VIX declined and stayed well within its intermediate term downtrend.

            GLD rose but could not regain the lower boundary of its very short term uptrend.  Under out time and distance discipline, this close confirmed the break of that trend---clearly not a positive for GLD.

Bottom line: with the Dow above and the S&P below the upper boundary of their short term uptrends, the notion that these boundaries are acting as a magnet remains credible.  Of course, it also speaks to the continuing strength underlying the Market.  14140/1576 remains the near term price objective.   Our Portfolios will continue to Sell as prices advance.

           

            Troubling signs from junk bonds (medium):

            http://www.marketwatch.com/story/a-troubling-sign-from-junk-bonds-2013-02-11?dist=countdown

            Lead/lag report (medium):

            http://www.minyanville.com/business-news/markets/articles/The-Lead-Lag-Report253A-Status-Quo/2/12/2013/id/48050

            Bank of America’s sentiment indicator (short):

            http://www.zerohedge.com/news/2013-02-12/sentiment-more-bullish-99-all-prior-readings

    Fundamental

      Headlines

            Yesterday’s economic news included (1) weekly retail sales which were mixed and (2) a January US budget surplus of $2.9 billion versus estimates of a deficit.  On the latter, there were some unusual factors underneath the headline numbers.  I suppose that I would be regarded as too much of a cynic to observe the coincidence of a budget surplus on the eve of the state of the union.

            The rest of the news flow was a continuation of Monday’s chatter: the upcoming G20 meeting (the G7 met yesterday and mewed over the Japanese new money printing spree) and the SOTU speech---its likely content, tone and the GOP rebuttal.  I forced myself to sit through all the high minded rhetoric and tried not to fall a sleep.

Bottom line:  Obama turned in another soaring/boring speech calling on America to embrace a myriad of programs that won’t cost one dime---and if you believe that I have a bridge I will sell you.  I am encouraged that the GOP isn’t budging on sequestration which if allowed to occur may cause some heartburn.

But heartburn is what the Market needs right now---in my opinion.  It is overvalued even on our sanguine outlook and in no way anticipates the ultimate resolution of problems created by either the massive global injection of liquidity into the banking system or the EU sovereign/bank insolvency.  Any decline into more rational valuations will likely generate some Buying by our Portfolios. 

            Greek construction activity implodes (short):

            http://www.zerohedge.com/news/2013-02-12/greek-economy-grinds-halt-new-construction-implodes-666

            Update on this earnings season (short):

            http://www.bespokeinvest.com/thinkbig/2013/2/12/q4-earnings-outpacing-estimates.html

In the meantime:

     Subscriber Alert

            At the Market open this morning, our Portfolios will reduce the size of the following holdings:

            In the High Yield Portfolio: Home Depot ($67) and Sysco ($32).  In addition, a small amount of Oneok Energy Ptrs ($59) will be reinvested in Pioneer Southwest ($25) and a small amount of Altria ($35) will be reinvested in Lorillard ($39).

            In the Dividend Growth Portfolio: South Jersey Industries ($55) and Automatic Data Processing ($60).

            In the Aggressive Growth Portfolio: Mastercard ($514).

            Barry Ridholtz on whether the secular bear market is over (medium):

            http://www.ritholtz.com/blog/2013/02/explaining-my-position-on-secular-bear-markets/

            The probability of recession (short):

            http://www.ritholtz.com/blog/2013/02/probability-of-recession-economic-indexes-say/

    

            Japan goes full Ponzi (medium):

            http://pragcap.com/japan-does-the-full-ponzi

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 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.