The Morning Call
6/9/16
The
Market
Technical
The indices
(DJIA 18005, S&P 2119) continued to advance. Volume fell; breadth
strengthened. The VIX rose for the third
time in as many up Market days. It
remains within a short term trading range and below its 100 day moving average.
The Dow ended
[a] above its rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term trading range
{17498-18726}, [c] in an intermediate term trading range {15842-18295} and [d]
in a long term uptrend {5541-19413}.
The S&P closed
[a] above its rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] above the upper boundary of its short term
trading range for the second day {2037-2110}; if it remains there through the
close today, the trend will reset to up, [d] in an intermediate term trading
range {1867-2134} and [e] in a long term uptrend {830-2218}.
The long
Treasury (133.2) moved higher again, remaining above its 100 day moving average
and well within a short term uptrend. It
is nearing the upper boundary of its intermediate term trading range (133.8).
GLD popped 1.5%,
ending well above its 100 day moving average and the lower boundary of its
short term trading range.
Bottom
line: the upward momentum remains
unabated, with the S&P now one day away from confirming the challenge to the
upper boundary of its short term trading range.
Still, the VIX closed up for the third up Market day in a row. I can’t remember the last time that I saw
this; so it is quite unusual and seemingly contradictory. Nonetheless, price is truth; and the truth is
stock prices are advancing. So I
continue to think that the Averages will probably challenge the upper
boundaries of their intermediate term trading ranges and even possibly the upper
boundaries of their long term uptrends.
However, I don’t think that they will be successful.
Fundamental
Headlines
It
was another dull day in a very dull week for US economic releases.
The sole datapoint was weekly mortgage and purchase applications which were both strong.
The sole datapoint was weekly mortgage and purchase applications which were both strong.
Not
the case overseas where there was lots of news items, slightly weighed to the negative
side: April UK industrial output was above forecasts; the ECB began its corporate
bond buying program (QE lovers will consider this a plus; but I think not);
first quarter Japanese GDP growth was revised up from the original estimate;
meanwhile Japan’s largest bank quit as a primary bond dealer (nothing says
failure like abandonment of valued related party; also see below); May Chinese
trade data continued to deteriorate, though retail sales were above consensus
(note that the Chinese government can make up a retail sales number but they
can’t fudge on international trade because the rest of the world is on the
other side of the transaction); the World Bank lowered its 2016 and 2017 global
economic growth expectations.
***overnight,
the Bank of Korea lowered key interest rates; May Japanese machine orders fell
11%; the Japanese opposition party demanded an end to negative interest rates;
and Deutsche Bank hammers the ECB and its ‘whatever it takes’ policy. (a bit
long but a must read):
Bottom line hasn’t
changed except that stocks are even more overvalued: as long as investors believe that the Fed can do no wrong, the floor
under equity prices is likely to remain, irrespective of the fact that the
economy is softening, corporate profits are declining and stocks are in
nosebleed territory valuation wise. In that atmosphere, then why not buy stocks? First of all, to buy stocks when they are a
couple of percent below their all-time high and ~5% from the upper boundary of
an eighty year plus uptrend, is to pay a lot for the risk to own a puny
reward. Second, I am not a skilled
trader; and those are the only guys who bought stocks yesterday that have a chance
of making money in the short term. I
clearly have no clue when the current mispricing of assets ends; but I am
willing to wait to avoid getting hammered.
The
latest from Goldman (medium):
The silliness of
buying stocks because they yield more than bonds (medium):
Soros turns bearish (medium):
My thought for the day: I have often commented in these pages that
investing is a business of being wrong.
The objective is to be less wrong less times than the other guy. But we are all going to make mistakes. Just think about. When you buy/sell a stock, either you or the
guy you bought it from/sold it to, will be wrong. So it should not be surprising that in a
certain percentage of those trades, you are going to be on the losing side.
So how do we deal with this
inevitability? First, mistake minimization as a key
goal. That means keeping your bets manageable, i.e. not making such a big
bet that a loss will cripple your long term return. It also means keeping your losses small, i.e.
having a Stop Loss that prevents you from rationalizing your way to a huge
loss.
Second, it means recognizing
that investing, like the rest of life, is a learning experience; and a big part
of this learning experience is not just admitting that you were wrong but why you
were wrong. If you do that, then it helps
you avoid prior mistakes and improve your chances of being right.
Howard Marks, a great investor,
said ‘I often embrace being wrong even though it’s something I try to avoid.
The thing is, it’s guaranteed to happen in this business. Investors
are in the business of learning to be wrong so they can learn to be right.
No one enters this world or this business knowing everything. And
it’s the people who evolve and learn from their mistakes more quickly than
others who stick around in this business.’
Company Highlight
Tiffany & Co
is an internationally renowned retailer, designer, manufacturer and distributor
of fine jewelry, timepieces, silverware, china, crystal and gift items. The
company has grown profits and dividends at an 11-22% rate over the last 10
years earning a 14-19% return on equity.
While revenues and profits are impacted by economic activity, TIF has weathered difficult times well and should
sustain an above average growth rate as a result of:
(1) increased
marketing to modernize the brand,
(2) increased
penetration in international markets,
(3) a growing
customer base resulting from opening a line of new smaller stores with lower priced, higher margin products,
(4) expanded
capital investment in distribution, manufacturing and diamond sourcing.
Negatives:
(1) earnings
from its foreign operations are exposed to currency fluctuations,
(2) fashion
obsolescence,
(3) its
customers are sensitive to macroeconomic events.
Statistical Summary
Stock Dividend Payout # Increases
Yield
Growth Rate Ratio Since 2006
Ind Ave 3.4 8* 39 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2006 Margin
Rating
Ind Ave 37 16 NA 5 NA.
*many retailers do not pay a
dividend.
Chart
Note:
TIF stock made good 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 a downtrend (purple lines). The wiggly red line is the 100 day moving
average. The Dividend Growth Portfolio
owns a 50% position through a fairly circuitous route. In 2009, it Bought a full position in
TIF. However, in mid-2011, the company
had a serious earnings hiccup and the holding was Sold. In mid-2012, after the news was digested and
the outlook became a bit more visible, a one half position was repurchased. The upper boundary of its Buy Value Range is
$41; the lower boundary of its Sell Half range is $133.
6/16
Investing for Survival
The
silent killer among retirees
News on Stocks in Our Portfolios
C. R. Bard (NYSE:BCR) declares $0.26/share quarterly dividend, 8.3% increase from prior dividend of $0.24.
Economics
This Week’s Data
Weekly
jobless claims fell 4,000 versus expectations of up 3,000.
Other
Leveraged
loan market heats up again (short):
The
broken labor market (medium):
Politics
Domestic
More on student
loans (short):
Can philosophy stop
bankers from cheating? (medium and a must read):
International
If
there is a Brexit, will there also be a Frexit? (medium):
US believes that North Korea has
restarted plutonium production (medium):
http://www.zerohedge.com/news/2016-06-08/us-says-north-korea-has-restarted-production-plutonium-fuel
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
6/9/16
The
Market
Technical
The indices
(DJIA 18005, S&P 2119) continued to advance. Volume fell; breadth
strengthened. The VIX rose for the third
time in as many up Market days. It
remains within a short term trading range and below its 100 day moving average.
The Dow ended
[a] above its rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term trading range
{17498-18726}, [c] in an intermediate term trading range {15842-18295} and [d]
in a long term uptrend {5541-19413}.
The S&P closed
[a] above its rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] above the upper boundary of its short term
trading range for the second day {2037-2110}; if it remains there through the
close today, the trend will reset to up, [d] in an intermediate term trading
range {1867-2134} and [e] in a long term uptrend {830-2218}.
The long
Treasury (133.2) moved higher again, remaining above its 100 day moving average
and well within a short term uptrend. It
is nearing the upper boundary of its intermediate term trading range (133.8).
GLD popped 1.5%,
ending well above its 100 day moving average and the lower boundary of its
short term trading range.
Bottom
line: the upward momentum remains
unabated, with the S&P now one day away from confirming the challenge to the
upper boundary of its short term trading range.
Still, the VIX closed up for the third up Market day in a row. I can’t remember the last time that I saw
this; so it is quite unusual and seemingly contradictory. Nonetheless, price is truth; and the truth is
stock prices are advancing. So I
continue to think that the Averages will probably challenge the upper
boundaries of their intermediate term trading ranges and even possibly the upper
boundaries of their long term uptrends.
However, I don’t think that they will be successful.
Fundamental
Headlines
It
was another dull day in a very dull week for US economic releases.
The sole datapoint was weekly mortgage and purchase applications which were both strong.
The sole datapoint was weekly mortgage and purchase applications which were both strong.
Not
the case overseas where there was lots of news items, slightly weighed to the negative
side: April UK industrial output was above forecasts; the ECB began its corporate
bond buying program (QE lovers will consider this a plus; but I think not);
first quarter Japanese GDP growth was revised up from the original estimate;
meanwhile Japan’s largest bank quit as a primary bond dealer (nothing says
failure like abandonment of valued related party; also see below); May Chinese
trade data continued to deteriorate, though retail sales were above consensus
(note that the Chinese government can make up a retail sales number but they
can’t fudge on international trade because the rest of the world is on the
other side of the transaction); the World Bank lowered its 2016 and 2017 global
economic growth expectations.
***overnight,
the Bank of Korea lowered key interest rates; May Japanese machine orders fell
11%; the Japanese opposition party demanded an end to negative interest rates;
and Deutsche Bank hammers the ECB and its ‘whatever it takes’ policy. (a bit
long but a must read):
Bottom line hasn’t
changed except that stocks are even more overvalued: as long as investors believe that the Fed can do no wrong, the floor
under equity prices is likely to remain, irrespective of the fact that the
economy is softening, corporate profits are declining and stocks are in
nosebleed territory valuation wise. In that atmosphere, then why not buy stocks? First of all, to buy stocks when they are a
couple of percent below their all-time high and ~5% from the upper boundary of
an eighty year plus uptrend, is to pay a lot for the risk to own a puny
reward. Second, I am not a skilled
trader; and those are the only guys who bought stocks yesterday that have a chance
of making money in the short term. I
clearly have no clue when the current mispricing of assets ends; but I am
willing to wait to avoid getting hammered.
The
latest from Goldman (medium):
The silliness of
buying stocks because they yield more than bonds (medium):
Soros turns bearish (medium):
My thought for the day: I have often commented in these pages that
investing is a business of being wrong.
The objective is to be less wrong less times than the other guy. But we are all going to make mistakes. Just think about. When you buy/sell a stock, either you or the
guy you bought it from/sold it to, will be wrong. So it should not be surprising that in a
certain percentage of those trades, you are going to be on the losing side.
So how do we deal with this
inevitability? First, mistake minimization as a key
goal. That means keeping your bets manageable, i.e. not making such a big
bet that a loss will cripple your long term return. It also means keeping your losses small, i.e.
having a Stop Loss that prevents you from rationalizing your way to a huge
loss.
Second, it means recognizing
that investing, like the rest of life, is a learning experience; and a big part
of this learning experience is not just admitting that you were wrong but why you
were wrong. If you do that, then it helps
you avoid prior mistakes and improve your chances of being right.
Howard Marks, a great investor,
said ‘I often embrace being wrong even though it’s something I try to avoid.
The thing is, it’s guaranteed to happen in this business. Investors
are in the business of learning to be wrong so they can learn to be right.
No one enters this world or this business knowing everything. And
it’s the people who evolve and learn from their mistakes more quickly than
others who stick around in this business.’
Investing for Survival
The
silent killer among retirees
News on Stocks in Our Portfolios
C. R. Bard (NYSE:BCR) declares $0.26/share quarterly dividend, 8.3% increase from prior dividend of $0.24.
Economics
This Week’s Data
Weekly
jobless claims fell 4,000 versus expectations of up 3,000.
Other
Leveraged
loan market heats up again (short):
The
broken labor market (medium):
Politics
Domestic
More on student
loans (short):
Can philosophy stop
bankers from cheating? (medium and a must read):
International
If
there is a Brexit, will there also be a Frexit? (medium):
US believes that North Korea has
restarted plutonium production (medium):
http://www.zerohedge.com/news/2016-06-08/us-says-north-korea-has-restarted-production-plutonium-fuel
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment