The Morning Call
3/10/15
The Market
Technical
The indices
(DJIA 17995, S&P 2079) bounced off of Friday lows, ending within uptrends
across all timeframes: short term (16733-19504, 1949-2930), intermediate term
(16798-21949, 1768-2482) and long term (5369-18860, 797-2112). They both closed above their 50 day moving
averages and right on their mid-December highs.
Volume
declined; breadth improved. The VIX
fell, closing within its short term trading range and its intermediate term
downtrend, below its 50 day moving average and
the upper boundary of a
developing very short term downtrend.
The
long Treasury recovered, but not enough to regain the lower boundary of its
newly reset short term trading range. A
close below that boundary today, will reset the short term trend to down. It also finished below its 50 day moving
average but within its intermediate and long term uptrends.
GLD
also lifted and remained within a short term trend trading range, its
intermediate term trading range, a very short term downtrend and below its 50
day moving average.
Bottom
line: I was a little surprised with the
lack of follow through from Friday’s sell off.
Clearly, despite the S&P’s inability to surpass the upper boundary
of its long term uptrend, there is still plenty of bullish sentiment
around. So momentum remains to the
upside and will continue in the absence of any threat to the lower boundaries
of any of the Averages uptrends.
TLT busted the lower boundary of its short
term uptrend and will repeat the process to the lower boundary of the newly
reset trading range unless there is a sharp move up today. Likewise, GLD broken its short term uptrend
and reset to a trading range.
What
a key ratio says about stock market risk (short):
Fundamental
Headlines
There
was no economic news yesterday here or abroad.
***overnight,
Chinese February PPI was down 4.8% while CPI was up 1.4%.
There
was news, however:
Greece
quickly folded (again) following the EU/ECB/IMF rejection of its most recent
proposals to secure a bail out (short):
But
the pressure (food shortages) is on (short):
The
ECB started its QE (medium):
http://www.zerohedge.com/news/2015-03-09/size-matters-ecb-which-runs-unexpected-monetization-problem
With these
results---central banks will buy 100% of all new bonds issued by Japan and
Germany (short):
Bank
of Japan bond dealer survey (short):
Bottom line:
yesterday was quiet, though (1) the Troika did send Greece back to the drawing
board regarding their new proposed ‘austerity’ program (expected); and
investors apparently remained convinced that sooner or later the new Greek administration
will be beaten into submission and (2) the ECB did begin its QE (also expected),
though questions remain as to how this process is going to work.
The most
significant news was the Market bounce back following Friday’s scare about
higher interest rates sooner than expected.
I am not sure if this means that investors thought it over and decided
that (1) the Fed wouldn’t raise rates sooner, (2) or if it did, it wouldn’t be
by much and any subsequent increases would be few and far between, or (3) with
all the other central banks pumping at max capacity, it just doesn’t matter. What no one seems concerned about is the
steady drumbeat of lousy economic stats which could be presaging an economic
slowdown/recession.
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
latest from John Hussman (medium):
The
continuing search for higher yield (medium):
More
on valuation (medium):
And
(medium):
Subscriber Alert
The
stock price of Fastenal (FAST-$41) traded into its Buy Value Range. Accordingly, it is being Added to the
Aggressive Growth Buy List. The
Aggressive Growth Portfolio owns a 50% position in FAST, having Sold Half in early
2012. No new shares will be purchased at
this time.
Company Highlights
Medtronic Inc. (MDT ) is the world’s largest manufacturer of
implantable biomedical devices in the cardiac, neurological and vascular
markets. The company has grown profits and dividends 10-16% annually over the
last ten years earning a return on equity of 18-20%. Facilitating the continuation of this trend:
(1) recent
acquisition of Covidien,
(2) stabilization
in the defibrillation market,
(3) expansion
into international markets,
(4) a stock
buyback program.
Negatives:
(1) it is in a highly competitive industry,
(2) economic uncertainty can impact customer
willingness to incur the cost of new procedures,
(3) it is involved in several patent infringement
suits.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio Since 2005
Ind Ave 1.4 11* 28 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2005 Margin Rating
Ind Ave 25 14 NA 13 NA
*the majority of companies in MDT industry do not pay a dividend
Chart:
Note:
MDT stock made great progress off its March 2009 low, quickly surpassing the downtrend
off its August 2008 high (straight red line) and the November 2008 trading high
(green line). It is in uptrends across
all timeframes: long term (blue lines), intermediate term (purple lines) and
short term (brown line). The wiggly red
line is the 50 day moving average. The
Dividend and Aggressive Growth Portfolios own 50% positions in MDT, having recently
Sold Half. The upper boundary of its Buy
Value Range is $38; the lower boundary of its Self Half Range is $78.
3/15
Investing for Survival
The
problem with ‘long term’ (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
Other
Politics
Domestic
Quote of the day
(short):
International War Against Radical Islam
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