The Morning Call
2/19/15
The Market
Technical
The indices
(DJIA 18029, S&P 2099) basically rested yesterday, ending within uptrends
across all timeframes: short term (16611-19383, 1932-2913), intermediate term
(16663-21818, 1755-2469) and long term (5369-18860, 797-2093). They both closed above their 50 day moving
averages and their mid-December highs.
The S&P finished above the upper boundary of its long term uptrend
for the second day. That break will be confirmed
if it remains above that upper boundary through the close next Monday.
Volume
fell; breadth was mixed. The VIX declined,
ending within its short term trading range, its intermediate term downtrend and
below its 50 day moving average.
The
latest from TraderFeed (short):
The
long Treasury recovered slightly. It finished
below its 50 day moving average but managed to recover the lower boundary of
its short term uptrend. That negates
Tuesday’s break. In addition, it closed well
within its intermediate term and long term uptrends. This
bounce was a bit pathetic given the distance of TLT’s decline and the support
of good fundamental news.
And (short):
GLD’s
inched higher, leaving it near but above the lower boundary of its a short term
uptrend, below its 50 day moving average and within an intermediate term
trading range and a developing a very short term downtrend. A close below the lower boundary of its short
term uptrend will prompt the sale of the remainder of our Portfolios’ positions
in GLD.
Bottom
line: despite yesterday’s rest in the
pin action, the momentum remains to the upside.
The levels to watch in my opinion are the upper boundaries of the
Averages long term uptrend. The S&P
is already challenging its upper boundary, though a break won’t be confirmed
unless it remains above that level through the close next Monday. The Dow hasn’t even started yet. So even if the S&P’s challenge is
successful, the indices will be out of sync.
The last time the S&P assaulted its upper boundary, the Dow failed
to get even near to its own and the S&P just bumped along its boundary and
eventually sold off. That is not a
prediction, it is history.
Fundamental
Headlines
The
trend in subpar US economic news continued yesterday: mortgage and purchase
applications were abysmal, January housing starts and building permits came in
below estimates, January PPI was weaker than expected as was January industrial
production and capacity utilization. The
one positive stat was the month to date retail chain store sales.
In addition, the
Fed released the minutes of its last FOMC meeting which I thought had a more
dovish tone than the statement it issued immediately following that meeting (lots of whining about all things that they
didn’t know and all the reasons why they couldn’t act until they did know). The yellow light is flashing, perhaps a bit
faster.
This
author asks a great question, if QE has been so great, why all the gnashing of
teeth over a 0.25% increase in rates?
You probably won’t be surprised by the answer. (medium):
Overseas,
UK jobless claims declined. The Japanese
restated their undying devotion to QEInfinity.
Why don’t I feel better?
In
Ukraine, it appears that the rebels (Russia) now has control of the one bit of
territory they needed to assure territorial integrity and logistical simplicity
within the new ?? what…land/country/province/vassal. In any case, as I opined yesterday, Putin
seems to have this situation in hand.
Greece
continues to dominate the news coverage with the primary event yesterday being
a statement from the ECB that it would OK the disbursement of additional funds
to Greece. More fodder for those
assuming that all is and will be well? I
have no clue.
***overnight,
apparently all is not or will be well (short):
The
author’s conclusion may be a touch too dramatic; but his point is, that the
Greek/EU showdown contains elements that have not been dealt with in previous
EU ‘financial crisis’ and hence the outcome may not be as predictable as many
think (medium):
Bottom
line: if you are looking for something
positive in the economic data to boost your bullish case, you are out of
luck. I ain’t happenin’. If you are looking to our ruling class to
rein in taxes, spending and regulation, you are also out of luck. They are on another vacation (see below).
If you are
looking for endless ‘money for nothing’, then you have got to be wee weeing in
your pants over yesterday’s announcements from the Bank of Japan as well as our
own beloved Fed. It was like ground hog
day---they saw their own shadow, scampered back into their hole and we now know
that we have (at least) six more weeks of the easiest global central bank monetary
policy in recorded history---wait, I am being told that I am wrong, the Weimar
Republic and Zimbabwe still have the record.
The only problem is all that money hasn’t done jack shit for the global
economy except to promote massive misallocation of investment---but who is
counting when you are a Master of Universe, can borrow billions for free,
invest in Greek bonds and make all that money with which to chase skirts, drink
whisky and tell each other how smart you are?
If you are looking
for positive news from the Greek/EU standoff….well, you are just wasting your
time; because the investing universe has already made up its mind that the
problem is solved. In fact, it appears
to have made up its mind that any future as yet unnamed problems have also been
solved.
So obviously the
next thing to do is be sure that you are fully invested, on margin; then go to
the beach and have great life.
Just kidding.
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
distortions created by market cap weighted funds (medium):
Company Highlights
United Parcel
Service (UPS ) is the world’s
largest integrated air and ground package delivery service, operating in over
200 countries. The company also offers specialized transportation and logistics
services. UPS had grown its
dividends and profits at a 7-11% pace in the last ten years earning a 20%+
return on equity. UPS should be able to generate above earnings
growth as a result of:
(1) new,
innovative delivery solutions,
(2) price
increases,
(3) its
continued investment in technology and service enhancements,
(4) acquisitions,
(5) an ongoing
share repurchase program.
Negatives:
(1) it is in a
highly competitive industry,
(2)
approximately 60% of its work force in unionized subjecting it to the risks of
work stoppages and slowdowns,
(3) its
international exposure increases the risks of economic difficulty from both the
EU and the more volatile emerging markets,
(4) rising
pension and healthcare costs.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2005
Ind Ave 1.4 10 20 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2005 Margin Rating
Ind Ave 48 19 NA 8 NA
*many companies in UPS industry do not pay dividends
Chart
Note:
UPS stock made great progress off its March 2009 low, quickly surpassing the downtrend
off its October 2007 high (straight red line) and the November 2008 trading
high (green line). Long term, the stock
is in an uptrend (blue lines).
Intermediate term, it is in an uptrend (purple lines). The wiggly red line is the 50 day moving
average. The Dividend Growth and High
Yield Portfolios own 50% positions in UPS, having Sold Half in late 2013. The upper boundary of its Buy Value Range is
$73; the lower boundary of its Sell Half Range is $100.
02/15
Investing for Survival
Active
investing is a zero sum game (long):
News on Stocks in Our Portfolios
·
Revenue of $2.4B (+7.1%
Y/Y) misses by $70M.
·
Revenue of $4.65B (+24.0%
Y/Y) beats by $510M.
·
Revenue of $354.41M (+21.9%
Y/Y) beats by $6.44M.
Economics
This Week’s Data
January
industrial production rose 0.2% versus expectations of up 0.4%; capacity
utilization came in at 79.4 versus estimates of 79.9.
The Fed released the
minutes from its latest meeting. It left
the ‘patience’ language (code for a rate hike is at least two meeting away) in
the summary and generally sounded a bit more dovish than the official statement
issued immediately following the meeting---the rationale for that judgment
being that a lot of ink was spilled worrying about all the economic indicators
that they are unsure of and all the reasons that they need more data before they
can be sure. In short, in an environment
where ‘beggar thy neighbor’ is the prevailing central bank dogma, the Fed has
no desire to swim against the current.
Weekly jobless claims
fell 21,000 versus forecasts of a 14,000 decline.
Other
Seven
charts that suggest investors should be less sanguine (medium):
The
conundrum of retail sales (medium):
The
US cannot remain insulated from the global economy indefinitely (medium):
A
new study from the IMF on asset bubbles (medium):
Politics
Domestic
Quote of the day
(short):
International War Against Radical Islam
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