The Morning Call
4/7/15
The Market
Technical
The indices (DJIA 17880, S&P 2080) closed higher
yesterday, making a dramatic intraday reversal. The Dow closed above the lower boundary of its
very short term uptrend, while the S&P did not. Both finished above their 100 day moving
averages. Longer term, the indices
remained well within their uptrends across all timeframes: short term
(16902-19679, 1976-2951), intermediate term (17003-22139, 1789-2551 and long
term (5369-18860, 797-2122).
Volume rose; breadth improved. The VIX was up fractionally, ending within its
short term trading range, its intermediate term downtrend, its long term
trading range, above its 50 day moving average and within a developing pennant
formation. I continue to think that it
remains a reasonably priced hedge.
The long Treasury was down again. It closed within its short term trading
range, intermediate and long term uptrends and above its 50 day and 100 moving
averages. While TLT seems to have stabilized,
it clearly has not reversed back to the upside.
GLD’s price jumped, but still finished within its
short and intermediate term trading ranges, its long term downtrend and above
its 50 day moving average. GLD is acting
better of late, but still has a number of tough resistance levels yet to
overcome before we can assume that the worst is over.
Bottom line: short term, the Averages are trying to
move to the upside; but they have not surpassed their previous high. However, if they can do that (which implies
that the S&P breaks above its 100 day moving average), then we may see
another assault on the upper boundaries of their long term uptrends.
Fundamental
Headlines
The
US economic stats were mixed again yesterday: the March Markit Services PMI was
better than expected while the ISM nonmanufacturing index was worse---very
similar to the early data flow last week.
There was no numbers on the international economy.
QE
devotees were in control of the airwaves and print media yesterday as Friday’s lousy
nonfarm payrolls stats inspired a bad (economic) news is good (Fed easing) news
response, reinforced by the weekend report from Goldman suggesting that the Fed
hold off on any rate increases (see the last Closing Bell for the link to the report)
along with a particularly dovish speech yesterday morning by NY Fed chief.
Julian
Robertson joins Fed bubble blowing chorus (medium):
No
one seems concerned about the deteriorating economic numbers and the fact that slowing
growth tends to negatively impact corporate earnings---which also tends to be
an antecedent to a Market decline.
The
problem with a zero interest rate policy (medium):
Overnight,
both EU and UK March services PMI came in above February’s readings.
http://www.zerohedge.com/news/2015-04-07/what-european-policymakers-really-care-about-1-simple-chart
And
the Bank of Australia kept a key rate unchanged but signaled that it is
prepared for future cuts.
And
the latest on the Greek/Russia bail out talks (medium):
Bottom line: in won’t matter how negative the economic
numbers get as long as investors are captivated by the notion of QE forever and
ever. But sooner or later, either the
data has to improve or reality is going to bite---the math simply doesn’t work
for two correlated trends to diverge into infinity.
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.
This
should help resolve the Greek bailout negotiations (short):
Dividends
were up strong last quarter (short):
More
signs that we may be near a top (short):
Investing for Survival
Stay
the course (medium):
Company Highlights
Amerigas Partners
distributes propane to over two million residential, commercial, industrial,
agricultural and motor fuel customers in 50 states. It also installs and services propane
appliances and motor fuel systems.
Earnings have been flat over the past five years though dividends have
increased at a 5% rate. When coupled
with the very attractive yield of its stock, it offers an attractive total
return. In that period, return on equity averaged 15-30%. APU
should be able to continue to grow its dividend as a result of:
(1) a broadly diversified geographic and
customer base,
(2) acquisitions.
Negatives:
(1) fluctuations in commodity prices,
(2) demand is subject to seasonal and weather
factors,
(3) potential impact of new energy regulations.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio*
Since 2005
Ind Ave 3.2 4 57 NA
Debt/ EPS Down Net Value Line
Equity ROE
Since 2005 Margin Rating
Ind Ave 44 11 NA 7 NA
* this is payout to cash flow
Chart
Note:
APU stock made good initial progress off its October 2008 low, quickly
surpassing the downtrend off its May 2007 high (straight red line) and the
November 2008 trading high (green line).
Long term, the stock is in an uptrend.
The wiggly red line is the 50 day moving average. The High Yield Portfolio owns a 75% position
in APU. It is currently on the High
Yield Buy List. The lower boundary of
its Sell Half Range is $73.
4/15
News
on Stocks in Our Portfolios
Economics
This Week’s Data
The
March Markit Services PMI was reported at 59.2 versus expectations of 58.4.
The
March ISM nonmanufacturing index came in at 56.5 versus estimates of 56.7.
Other
For
the optimists among you (medium):
And
for the less sanguine among you, here is an inside look at several EU bad banks
(medium):
Following
the Japanese government’s admission that its data releases all sucked, now
comes our own Bureau of Labor Statistics (short):
Politics
Domestic
International
Larry
Summers on US global leadership or lack thereof (medium):
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