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March 1, 2008
Week in Review #9 (2008-03-01)
A week ago I opined: “Bears (being killed) on Friday; Bulls next week. It’s not right such capital slaughtering moves can be orchestrated by rumor and innuendo. This isn’t entertainment; for that we have casinos. The capital market is supposed to be the place where value is priced, and that process has become secondary to the desperate gang in charge.”
Yes, this week the Bulls got killed. At least, what happened from the outset on Friday wasn’t pretty.
Not unsurprisingly, the previous Friday’s afternoon market intervention by a TV “personality” never panned out as per the man’s rumor and innuendo. That was just more proof of concept that regulators have to put the hammer down on financial media that no longer reports the facts, but contrives stories that may be entertaining, but at the same time can cost trillions of dollars as was the case in this example.
Let’s follow the trajectory of that +230 point rocket in the DJIA last Friday, as happened minutes before the close. This week, the DJIA dropped from 12381 to 12226. The Nasdaq dropped from 1353 to 1330. This were not startling moves week over week, but the damage on Friday was between -2.5 pct and -2.7 pct.
This week, 21 of the 30 Dow stocks dropped, including ten by at least -2.38 pct and eight by -3.32 pct or more. More importantly, the previous week ending rumor and innuendo directly affected the financials. This week, the huge loser was the Financial sector (XLF -4.9 pct).
Last week’s pump became this week’s dump. Is anybody surprised?
Did I not say, this incident was “proof of concept” in the making? The notion of course is that traders were herded and slaughtered.
Last week I explained:
”…in a famine, which is the case at HB&B today, the equity market is like the Serengeti Plains of Africa. Predators kill anything in sight.As I see it, there is little difference between the zebra or wildebeest and the market short-sellers. The Maasai and lion population who, like HB&B traders, need to eat and have the tools to do so.
On Friday this week in the equity market, the Bears were herded and slaughtered. Next week it may be the Bulls. Meanwhile the famine (ie, the liquidity crisis) will worsen. Bids will drop. Hot money will continue to flood into and out of so-called “safe-havens”.
At the end of the day, conditions will change; the predators will be sated – at least those (at HB&B and their friends) who survive the carnage, because they too can and do fall victim to famine.
The market is a natural phenomenon. That’s true because we are the market, driven by our instincts and emotions.
Some of us are just a little better at it, that’s all.
What some of us see today “is a horrible liquidity crunch coming the market's way as Humungous Bank & Broker works through its deep problems. The owners of capital should not treat this lightly.” I wrote that last week.
Given that interest rates do not balloon, the sub-prime fiasco at HB&B is mostly under control at this point... But, the next problem is going to be more difficult to resolve. The Treasury Secretary will find it politically impossible to run up the 1-800-HELP flag for owners of real estate that fall into the alt-A and Prime rate crowd who cannot make their payments because they too speculated on price increases by purchasing with ARM instruments. Moreover, these typically successful business people did not figure on the prospects of economic recession (or worse), and now they already cannot get the rents they need to keep up the debt service… 1-800-HELP for the successful, working, middle-class of America: Think about it.”
Two weeks ago, I wrote:
(WIR #7 Feb. 17) Smart traders are waiting for the massive liquidity crunch that must happen to bring the spending back into line with the savings and income needed to pay for it, with commodity prices under control…I hardly think that the S&P 500 at 1350 or the DJIA at 12348 or Nasdaq Composite at 2322 can stand up to the pressures of “the price of a barrel of crude at $100, $110, $125… or an ounce of platinum at $2100, $2200, $2500…” Remember, prices are merely bids. The liquidity crunch happens when bids are withdrawn, as we saw starting in 2005 as house prices reached a very high level… To parody the dim-witted TV advertising that runs day and night for one of Canada’s largest banks, “We are not as rich as we think we are.” In fact, a lot of us in six months are going to be that much poorer… I wonder if that bank will refrain from margin calls.” (LOL)
Long-time investors in Canada’s banks, like BMO and CIBC, are finding it difficult to hold and prosper. When the managers of those banks were ripping off shareholders with their humungous profit bonuses, “mum” was the word. Now that we’re discovering the profits of HB&B were not so “rich”, do you think those fortunate souls will kick a little back into the kitty? (LOL) The shareholders would like to know.
Global Economics Review
This will be the biggest week of the month, other than the March 18th FOMC report, for US Econ data to consider.
US Economic Calendar for next week.
It is important to review economics reports published this past week on the US economy that continues to worsen. As I say, the positive news is now infrequent.
(Published in previous WIRs) Whether the case is negative or very slow real economic growth, the fact is that global inflation is now in the 3- and 4-pct range by even the most positively-biased calculations, so investment returns from dividends and short-term debt instruments and money market funds is clearly negative. Moreover, as equity prices are falling, the total returns from most stocks are negative. In summary, wealth is being destroyed by the trillions, month after month. One of the reasons is that the economy is in a downswing.
Along with many weekly reports, the big monthly reports that arrived this week were all negative, as follows. Going forward, I don’t see major changes to the landscape.
US Existing Home Sales for January.
US Producer Price Index for January, which is a forerunner of consumer inflation.
US Consumer Confidence for February by the Conference Board.
US Durable Goods Orders for January.
US New Home Sales for January.
US Personal Income and Spending Data for January.
So much for last week. Let’s look ahead.
US Construction spending for January, which is a forerunner of consumer inflation.
US Motor Vehicle Sales for February .
The Bank of Canada monetary policy report .
US Productivity and Costs report for February.
US Personal Income and Spending Data for 4Q2007 revised figures.
US Durable and Non-durable Goods Factor Orders for January.
US ISM Non-Manufacturing Data for February.
US Pending Home Sales Data for January.
In addition, on Thursday morning, the central bankers of the UK and Europe will deliver their monetary policy decision. Along with the Bank of Canada’s decision on Tuesday, there could be decisions to hold the line on rate cutting, which would weaken the $USD temporarily. But if the Fed follows with the same decision on March 18, that would be a signal that the precious metals and oil price rally is over and that the $USD would begin to strengthen.
That’s not to say what is likely to happen. It is still early in the month. But, if there seems to be extra spin that inflation is over the top and the economy likely to recover soon after the US government hand-outs in June (it won’t, but it’s the spin you need to look for), then the Fed could be positioned as an inflation-fighter (hahaha), with no rate cut in the cards. Cuts in the rates by Canada, the UK and Europe would help out the $USD, but also keep the fire under the inflation pot.
Industry and Cara 100 “Impulse” Review
Applied weekly to major industry groups, the “impulse system”, based on the excellent work of Dr. Alex Elder, gives a sense of market internals.
“Jock” reports:
THIS WEEK closed with 4 GREEN industry (chemicals, energy, mining, and food/beverage) and 2 RED’s (drugs, health services) compared to last week's 3 green and 4 Red.This week’s “market tenor” of 2 net GREEN was a gain of 3 industries vs. last week. Drugs have been RED for 9 of the past 10 weeks!
MACD-H rose on all industries but tobacco, drugs, and health services. Prices over the week rose in 19 industries and fell in 12.
My formula for assessing Cara100's is busted, and there’s no time to fix it. Perhaps Jeff will supply this.
[Jeff: My algorithm has some slight differences from Jock's, but I show I net of 22 green versus 2 net green last week, showing continuing improvement over the last few weeks -- see chart below.]
Ticker Name Score
-5wksScore
-4wksScore
-3wksScore
-2wksScore
-1wksScore
-0wksABB ABB Ltd. -2 -2 -2 -2 +0 +0 ABV COMP DE BEBA AM ADS -2 +0 +2 +2 +2 +2 ABX Barrick Gold Corp. +2 +2 +0 +0 +0 +2 ADBE Adobe Systems Inc. -2 -2 -2 +0 +0 +0 AET Aetna Inc. -2 -2 -2 -2 -2 -2 AMAT Applied Materials Inc. +0 +0 +0 +2 +2 +2 ATVI Activision Inc. +0 +0 +0 +0 +0 +0 BA Boeing Co. -2 +0 +0 +0 +0 +0 BBBY Bed Bath & Beyond Inc. +2 +2 +0 +0 -2 -2 BBD Banco Bradesco S.A. -2 -2 -2 +0 +2 +2 BC Brunswick Corp. +0 +2 +0 +0 -2 -2 BDK Black & Decker Corp. +0 +0 +0 +0 +0 +0 BHP BHP Billiton Ltd. -2 +0 +0 +0 +2 +2 BMY Bristol-Myers Squibb Co. -2 -2 -2 +0 +0 +0 CCJ Cameco Corp. -2 -2 -2 +0 +0 +2 CCL Carnival Corp. +0 +2 -2 +0 +0 -2 CEO CNOOC Ltd. -2 -2 -2 +0 +2 +2 CHA China Telecom Corp. Ltd. -2 -2 -2 +2 +2 -2 CHL China Mobile Limited -2 -2 -2 -2 +0 +0 CHRW CH Robinson Worldwide Inc. -2 +2 +2 +2 +0 -2 COST Costco Wholesale Corp. +0 +2 -2 -2 +2 -2 CSCO Cisco Systems, Inc. -2 -2 -2 +0 +0 +0 CTSH Cognizant Technology Solutions Corp. -2 +0 +0 +2 +2 +0 CVX Chevron Corp. -2 -2 -2 +0 +0 +2 DB Deutsche Bank AG -2 -2 -2 -2 +0 +0 DELL Dell Inc. +0 -2 -2 +0 +0 +0 DEO Diageo plc -2 -2 -2 +2 +0 +0 DIS Walt Disney Co. -2 +0 +2 +2 +2 +2 DOW Dow Chemical Co. -2 +0 +0 +0 +0 +0 DNA Genentech Inc. +0 +0 +0 +2 +2 +2 ECA EnCana Corp. -2 +0 -2 +2 +2 +2 ERJ EMBRAER - Empresa Brasileira de Aeronutica S.A. -2 -2 -2 +2 +2 +0 ERTS Electronic Arts Inc. -2 -2 -2 +0 +0 +0 EXC Exelon Corp. -2 -2 -2 +0 +2 -2 GE General Electric Co. -2 +0 -2 +0 +0 +0 GFI Gold Fields Ltd. +2 -2 -2 -2 +0 +0 GG Goldcorp Inc. +2 +0 +0 +0 +2 +2 GGB Gerdau S.A. -2 -2 -2 +2 +2 +2 GOL GOL Linhas Areas Inteligentes S.A. -2 -2 -2 +0 -2 -2 GOOG Google Inc. -2 -2 -2 -2 -2 -2 GRMN Garmin Ltd. -2 +0 +0 +0 +0 +0 GS Goldman Sachs Group Inc. -2 +0 -2 -2 -2 -2 GSK Glaxosmithkline plc -2 -2 -2 -2 +0 +0 HBC HSBC HLDGS PLC ADS +0 -2 -2 +0 +0 +0 HDB HDFC Bank Ltd. -2 -2 -2 -2 -2 -2 IBKR Interactive Brokers Group, Inc. +0 +2 +0 +0 +0 -2 IBN ICICI Bank Ltd. -2 +0 -2 -2 -2 -2 IMO Imperial Oil Ltd. -2 -2 -2 +2 +2 +2 INFY Infosys Technologies Ltd. -2 +0 +0 +0 +0 -2 INTC Intel Corp. -2 -2 -2 +0 +0 +0 JCP J. C. Penney Company, Inc +0 +2 +2 +0 +2 +0 JNJ Johnson & Johnson -2 -2 -2 -2 +0 -2 KB Kookmin Bank +0 +0 -2 -2 +0 +0 KO Coca-Cola Co. -2 -2 -2 -2 -2 -2 KSS Kohl's Corp. +0 +0 +0 +0 +0 +0 LEH Lehman Brothers Holdings Inc. +0 +2 -2 -2 -2 -2 LLTC Linear Technology Corp. -2 -2 -2 +0 +0 +0 MBT Mobile Telesystems OJSC -2 -2 -2 -2 +0 -2 MFC Manulife Financial Corporation -2 +0 -2 +0 +0 +2 MICC Millicom International Cellular SA -2 +0 -2 +2 +2 +2 NKE Nike Inc. -2 +0 +0 +2 +0 -2 NOK Nokia Corp. +0 +2 -2 +0 +2 +0 NTES Netease.com Inc. -2 -2 -2 -2 +2 +2 NUE Nucor Corp. +2 +2 +2 +2 +2 +2 ORCL Oracle Corp. -2 -2 -2 -2 -2 -2 OXPS optionsXpress Holdings, Inc. -2 -2 -2 -2 -2 -2 PAYX Paychex Inc. -2 +0 +0 +0 +0 +0 PBR PETROLEO BRASILEIRO +0 +0 +0 +2 +2 +0 PDA Perdigao S.A. -2 -2 +0 +2 +2 +2 PG Procter & Gamble Co. -2 -2 -2 +0 +0 +0 PTR PetroChina Co. Ltd. -2 -2 -2 +0 +0 +0 QCOM QUALCOMM Inc. +2 +2 +2 +2 +2 +2 RIO COMPANHIA VALE ADS -2 +0 +0 +2 +2 +2 RIMM Research In Motion Ltd. -2 -2 -2 +0 +2 +2 RY Royal Bank of Canada +0 +0 +2 +0 +0 +0 SBUX Starbucks Corp. +0 +0 +0 +0 +0 +0 SLW Silver Wheaton Corp. +0 -2 -2 -2 +2 +2 SNDK SanDisk Corp. -2 +0 +0 +0 +0 +0 STO StatoilHydro ASA -2 -2 -2 +0 +2 +2 SU Suncor Energy Inc. -2 -2 -2 +0 +0 +2 SWK Stanley Works +0 +2 +0 +2 +2 +0 TCK Teck Cominco Ltd. -2 +0 +0 +0 +2 +2 TEF Telefonica SA -2 -2 -2 -2 -2 +0 TGP Teekay LNG Partners LP. -2 -2 +2 +2 +2 +0 TGT Target Corp. +0 +2 +0 +0 +0 +0 TM Toyota Motor Corp. -2 +2 +2 +2 +2 +2 TOT Total SA -2 -2 -2 -2 +0 +0 TS Tenaris SA -2 +0 -2 +0 +0 +2 TT Trane Inc +0 +0 +0 +0 +0 +0 UBS UBS AG +0 -2 -2 -2 -2 -2 UTX United Technologies Corp. -2 +0 -2 +0 +0 -2 VCP Votorantim Celulose e Papel S.A. -2 +2 +0 +2 +2 +2 VIP Vimpel-Communications -2 -2 -2 +0 +2 -2 WAG Walgreen Co. +0 +0 +0 +0 +2 +2 WBK Westpac Banking Corp. -2 +0 -2 -2 -2 +0 WFMI Whole Foods Market Inc. +0 +0 +0 +2 -2 -2 WHR Whirlpool Corp. +0 +2 +2 +2 +2 +0 WMT Wal-Mart Stores Inc. +2 +2 +0 +0 +0 +0 XOM Exxon Mobil Corp. -2 -2 -2 +0 +2 +0 YHOO Yahoo! Inc. -2 -2 +2 +2 +2 +2 Summary: (+2/-2/other) 7/67/26 18/47/35 11/58/31 26/24/50 38/16/46 31/26/43 Net: (+2)-(-2) -60 -29 -47 +2 +22 +5 All the major US stock indices stayed NEUTRAL. The Bombay and Shanghai composites were RED. The US$ index slid from neutral to RED, while the CRB index stayed GREEN.
In fact, CRB index leapt 3.72% to an all-time high for my chart (my data goes back to 1992).
GOLD stocks stayed neutral, while SILVER stocks moved from RED to GREEN.
BOTTOM LINE: The “ market tenor” crossed into positive territory - the 2nd week of advance, +3 vrs. +16 last week.
Silver flipped from RED to GREEN, while GOLD stocks stayed neutral. Some believe that when silver advances vrs. Gold, speculative money is flowing into the market. (This is because central banks don’t hold silver, and therefore can’t act to dampen the price as they can with gold.)
1 week’s change in precious metals doesn’t tell much, but does bear watching.
Jock
NOTE: Alex Elder’s “impulse system” considers both the “inertia” in prices (where prices stand vs. their 26 wk. moving average) and their “momentum” (the rate their 13wk. and 26wk. moving averages are converging or diverging).
When both indicators (EMA and MACD-H) tick up, the reading is “green”; when both decline, it’s “red”. Applied weekly to major industry groups, indices, and their components, a sense of market internals emerges.
US Equity Markets Review
DJIA stockcharts.com chart
This week, for the Dow 30 stocks: 9 were up, 21 down. The damage was done on Friday as Dow component AIG started off the session with a $5 billion reported loss, and the economic data was terrible as well.
DJIA dropped -115 points from 12381 to 12266.39. Both the S&P 50 and Nasdaq Composite were knocked down further, percentage wise.
A week ago, the biggest winners in the Dow 30 included some banks and companies that have a huge financial component. AIG (+7.4 pct W/W) and JPM (+3.1 pct) had been winners, but then I opined: “I believe it was a short-covering rally late Friday.”
The biggest losers this week were those financial stocks that were pumped right before the horrendous AIG report and the take-down of the whole sector.
In the Dow 30, the financials: JP Morgan (JPM -7.47 pct), Bank of America (BAC -6.71 pct), American Express (AXP -6.13 pct), Citigroup (C -5.61 pct) and AIG (AIG) -4.13 pct) were trashed.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
The Nasdaq Composite dropped from 2321.8 to 2303.4 to 2271.5 this week. Nothing seems to be working, although on the strength of an early in the week move, largely on the promise of a share buy-back, IBM gained +5.36 pct W/W.
Several weeks ago I wrote in this space, “Here is the list of the ten highest-weighted non-financial stocks in the Nasdaq Composite. Put them in a watchlist (see Google Finance Portfolio) and watch them like a hawk:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY” I said that the Techs would lead the market one way or the other, and you know which way I was indicating.
Daily RSI-7 for the Nasdaq 100 Big-10
Weekly RSI-7 for the Nasdaq 100 Big-10
Monthly RSI-7 for the Nasdaq 100 Big-10
The US equity market Sector ETF Summary
Two weeks ago, I added charts for the S&P 500 ETF (SPY) as well as put SPY into the expanded sector performance tables so that you can see how each sector is doing relative to the industry benchmark.
This week SPY futures lost -1.37 pct on the week to close at 133.76. The S&P 500 closed at 1330.63.
Here’s the SPY Monthly, Weekly and Daily data charts:
SPY Monthly data:
SPY Weekly data:
SPY Daily data:
The tables I now show are for eleven GICS Sector Index Funds (ETF’s), including two for Technology (XLK and SMH), for a total of ten GICS sectors. They cover the full spectrum of the US equity market.
In this space two weeks ago, in discussing liquidity, I commented,
“… stagflation in the 1970’s took equities through a grinding 1973-74 bearish period and another milder one in 1978. At the end of the decade, however, the liquidity that had to be pumped into the system (similar to today) pushed inflation higher and interest rates soaring.But in today’s reality, soaring rates in the next two years would cause a run on mortgage foreclosures, evictions, property tear-downs and financial service company failures. So, the interventionists are likely to stay the course with more Northern Rock-type deals to come.
That is not the picture of a capital market ready to snap back to health. Good health will return as and when the dubious assets on the books of banks and investors have been written off to their realistic economic value. The prospects of that, as I say, will take time.
In the past couple weeks, the house mortgage rates have lifted, going against the grain of bond yields that are falling quickly as traders pour into risk-free US Treasuries.
Table 1: Cara ETF List is sorted by price performance Week over Week (W/W), i.e. 1W%N.
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summary window at Billcara2.com and then clicking on the link for Performance. SPY XLE XLB XLI XLY XLP IYH XLF XLK SMH IYZ XLU . You can also add more ETF’s – up to 30 in total.
For a list of components to any ETF, go to the AMEX.com web site, and click on ETF’s.
10 (energy: XLE)
15 (basic materials: XLB)
20 (industrial: XLI)
25 (consumer discretionary: XLY)
30 (consumer staples: XLP)
35 (healthcare: IYH)
40 (financial: XLF)
45 (technology, semiconductor: SMH)
50 (telecom: IYZ)
55 (utilities: XLU)
Individual Sector ETF Review
A week ago I wrote, “There are almost seven billion people living on this planet. So how is that capital market prices can be jerked around on rumor and innuendo from an individual TV “personality” to skyrocket +1.83 pct, some $2 trillion, in 30 minutes?... Same old, same old, nonsense… Do I think the equity market turned bullish at 3:00pm ET Friday in New York? Could have happened, I suppose; but I wouldn’t hold my breath waiting for that outcome.”
There was no government bail-out to the bond insurers on Monday or even Tuesday, as “reported” in advance. (LOL) As it became obvious that insurers like AIG were in deep doo-doo, traders, by Friday, decided to bail out themselves. The Financials plunged -3.32 pct on Friday, which led to a loss W/W of -4.85 pct.
This coming week, bullish traders will be staring down the barrel of the econ gun. There is a lot of heavy-duty reports to come.
Sector 10 (energy: XLE, IYE, VDE, OIH, PBW and IXC)
Here’s the XLE Monthly, Weekly and Daily data charts:
XLE Monthly data:
XLE Weekly data:
XLE Daily data:
The Energy sector ETF (XLE) started on a very strong note, but then got crushed -3.40 pct on Friday, closing the week with the only gain (+1.54 pct) of any of the ten sectors.
Speculators pumped the price of West Texas Intermediate Crude Oil by +3.88/bbl to 102.69, which managed to hold its ground on Friday. But XLE traders decided to take profits in the stocks any way.
With more problems this week from Venezuela and Nigeria, Canada’s energy industry was lit up. By far the big winners among the ten Cara 100 Energy stocks were Canada’s ECA (+7.4 pct), SU (+6.7 pct), and IMO (+6.0 pct).
Table 2: Senior oil & gas equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Oil & Gas Exploration & Production -Canada
Sector 15 (basic materials: IYM, XLB, IGE and VAW)
Here’s the XLB Monthly, Weekly and Daily data charts:
XLB Monthly data:
XLB Weekly data:
XLB Daily data:
Basic Materials (XLB -0.94 pct W/W) was crushed -3.07 pct on Friday, despite a USD that hardly moved on the day.
Regarding the metals and precious metals, a week ago I pointed out, once again, the parabola that defines these charts. That’s another way of saying INFLATION. HIGHER RATES OR MASSIVE RECESSION TO COME!! TAKE YOUR PICK.
I think the two weeks into the March 18 monetary decision of the FOMC will decide the near-term outlook for precious metal prices. I think they are headed down for a couple months as the $USD strengthens. Later, of course, is a different matter because I think, following the extreme volatility, there will be more upside from even the lofty prices of today.
This week, TCK +10.3 pct, TS +7.4 pct, EGO +15.7 pct, LIHR +7.4 pct, KGC +7.3 pct, and GG/G up +10 pct Monday through Thursday and then I put out a negative report. (LOL) GG/G dropped -3.4 pct on Friday.
Table 3: Senior metals and steel equities:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 20 (industrial: IYJ, XLI, VIS, and IYT)
Here’s the XLI Monthly, Weekly and Daily data charts:
XLI Monthly data:
XLI Weekly data:
XLI Daily data:
Table 4: Senior capital goods makers and transportation:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
XLI (Industrials) lost -1.33 pct W/W, closing at 36.42. XLI dropped -2.28 pct on Friday.
ABB gained +4.8 pct after being up +3.9 pct the week before. FLR jumped +5.6 pct. TXT dropped -4.6 pct. FDX and UPS were down -1.1 pct and -2.3 pct respectively.
Last week, I wrote: “A week ago, the aircraft manufacturers had a good one with BA +6.9 pct … taking off. This week the market grounded them again: BA -2.6 pct and those jet engines of GE -2.4 pct.” I suppose there was wind of Northrup Grumman’s (NOC) $40 billion win of the Air Force contract to replace tanker planes.
I wonder if the votes in California and the Governor Schwarzenegger’s grandstanding (ie, endoresent) for McCain had an iota of involvement here.
Yes, I think political chips get called, but I’m not going to waste time thinking about it. If you’re not in the room, you’re not in the deal. We got our own stuff to worry about.
Sector 25 (consumer discretionary: XLY, IYC and VCR)
Here’s the XLY Monthly, Weekly and Daily data charts:
XLY Monthly data:
XLY Weekly data:
XLY Daily data:
Consumer Discretionary (XLY) was crushed -2.99 pct on Friday, taking it down -2.78 pct on the week.
The Cara 100 winner was BDK (+2.8 pct), while there were a bunch of losers: CCL (-6.0 pct), JCP (-5.3 pct), and WHR and EBAY (-4.9 pct).
Higher Crude Oil prices have moved to higher prices at the fuel pump, which is going to hurt the consumer spending. The economic report that was published this week showed that inflation has accounted for all the increase in spending for December and January. Does anybody believe that February or March will be any different?
At $102 this week, the Crude Oil price hit a +100 pct gain over the price ($51) of a year ago January. Thirteen months… $51 to $102… man, that’s inflation.
Who would have thought, just a few years ago, that Americans would have been pushing their shopping cart down the yellow brick road to… a warehouse?
Tell me, how do these Big Box stores look any different than the old Soviet Russian GUM department stores, other than all the goods on the shelves that nobody seems to have the money to buy.
Well, buying and paying for it are two different stories. Depends on whether you are the government or Mom & Pop.
"Wait, what did you just say? You're predicting $4-a-gallon gasoline?" Bush responded to a reporter who said some analysts expect prices to soon climb that high. "That's interesting. I hadn't heard that. . . . I know it's high now."
The price of Crude Oil set another record Thursday, but I guess the President doesn’t get out of the limousine much to smell the fumes. (LOL)
You know, given the decision to fight a war in the Middle East, I don’t think the President can really do much about the cost of oil. Congress wants theirs too, so spending just keeps going higher and higher. Who can pay? …Certainly not Mom & Pop. I guess their grandchildren get stuck with the tab. Again.
Table 5: Senior consumer discretionary equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Sector 30 (consumer staples: XLP, VDC, RTH and IYK)
Here's the XLP Monthly, Weekly and Daily data charts:
XLP Monthly data:
XLP Weekly data:
XLP Daily data:
Table 6: Senior consumer staples equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
It used to be that XLP (consumer staples) was a defensive sector. This week, XLP dropped -1.27 pct. The loss on Friday was -1.81 pct.
Beer giant ABV was a winner this week (+1.4 pct W/W). But Friday, ABV gave back -7.6 pct. A little head, ie, froth, was cleared away.
PDA, also of Brazil, felt like a sausage, squeezed down by -6.9 pct W/W. A week ago, PDA (+6.7 pct) and ABV (+6.6 pct) had sated consumers in Brazil. Now they appear to be throwing up.
Sector 35 (healthcare: IYH, XLV, VHT, IXJ, and IBB)
Here’s the IYH Monthly, Weekly and Daily data charts:
IYH Monthly data:
IYH Weekly data:
IYH Daily data:
Table 7: Senior healthcare equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
IYH (healthcare) lost -0.42 pct this week, just like the past couple weeks, to close at 65.66.
DNA, which had lifted +3.2 pct the previous week, but enjoyed over-the-top Talking Head support a week ago while losing -0.7 pct, caught up to the hype this week, lifting +5.8 pct.
WLP (-5.2 pct) and NVS (-2.3 pct) were losers.
Sector 40 (financial: IYG, IYF, XLF, VFH, IXG, VNQ, RWR, IYR, and ICF)
Here’s the XLF Monthly, Weekly and Daily data charts:
XLF Monthly data:
XLF Weekly data:
XLF Daily data:
Table 8: Senior financial company equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
A week ago I wrote, “The Financials (XLF) finally stopped getting creamed. After being flat all week, probably awaiting the CNBC bombshell late Friday, XLF popped +2.18 pct on the day and (surprise) +2.18 pct on the week. XLF had plunged -8.25 pct two weeks ago, and a further -3.76 pct last week… Ambec to get help from NY State? Brother can you spare a dime?”
This week, the Financials ($XBD -5.5 pct and $BKS -4.2 pct losers on Friday) was hammered. XLF sunk -4.85 pct W/W.
This picture is so unhealthy that I don’t want to write about it anymore. Month after month, I kept writing, “I wouldn’t touch these Financials with your ten-foot pole… How big is the disaster?... Country wide.”
For the record, America’s biggest mortgage lender is down -83.6 pct over 52-weeks and nobody truly knows if there’s any equity left. And the so-called Government Sponsored Enterprises FNM and FRE are down -51.3 pct and -60.8 pct respectively over that span.
Why speculate?
Among the humungous banks and brokers this week, JPM -7.5 pct, MER -6.6 pct, LEH -6.0 pct, C -5.6 pct, MS -4.7 pct, and GS -4.6 pct suffered greatly as talk of handouts ceased. It seems that liquidity is drying up all over.
Not all banks are suffering. As you know, my private banker EFG is doing pretty well. I know how to pick ‘em.
George N. Buxton, Senior Managing Director
Bear, Stearns & Co. Inc.
383 Madison Avenue
New York, New York 10179
Tel: 212-272-3403; Fax: 917-849-0594
e-mail: gbuxton@bear.comDISCLOSURES & REG AC BELOW
February 26, 2008
EFG International (EFGN.S, SFr35.62, Outperform)
2007 Results - Net New Money Back on TrackEFG International (EFGI) announced net income for 2007 of SFr302.2m, just below our forecast but ahead of consensus. The result was also some 44% ahead of 2006. Diluted EPS came in at SFr2.05, also over 40% ahead of 2006. However, net income in H2 2007 was SFr129.8m compared to SFr172.4m in H1 2007. That illustrated the tougher second half for most financial institutions. EFGI also announced a dividend of SFr0.35, some
17% ahead of the payment made in respect of 2006.As we expected, net new money in Q4 recovered strongly, after a weak performance in Q3. Net new money in Q4 was SFr3.8bn (SFr4.3bn if the new inflows since the announcement of the acquisition of the hedge fund Marble Bar are included). This compared to SFr1.5bn in Q3 and is in line with or above the net new money in the first two quarters of 2007.
Assets under management (AuM) came in at SFr82.9bn (before announced acquisitions). This was an increase of 27% compared to 2006 and an increase of 4% since the end of H1 2007. This rises to SFr94bn if the announced acquisitions are included. The number of Client Relationship Officers (CROs) at the end of 2007 was 524, bang in line with our forecasts. A further 38 were added in Q4 2007. This was ahead of the 30 and 20 added in Q1 and Q3 2007, respectively, and in line with the number of hires in Q2. We expect that EFGI will attribute this to the issues surrounding some of the larger Swiss wealth managers. Again, the number of CROs rises to 554 if announced acquisitions are included.
The Tier ratio at the end of 2007 stood at 25.4% compared to EFGI's target of 10%. However, this falls to 14.6% after the completion of the acquisitions announced in December 2007 and the payment of the dividend. This gives EFGI a war chest of excess capital of SFr500m to pursue its acquisition strategy. However, the bank looks set to boost this by a similar amount, with the help of retentions and the issuance of non-dilutive Tier 1 capital.
EFGI was keen to point out that it had met its ambitious targets for 2007. It also reiterated its 2008 targets, which include taking clients' AUM up to SFr121-131bn, the number of CROs to 675 and maintaining a gross margin in excess of 110bp.
More interestingly, EFGI introduced very aggressive targets for 2010 of 1,000 CROs, and attributable net income of SFr800m-900m.This suggests a CAGR for net income during this period of over 40%. Clearly the EFGI believes that a combination of both organic growth and selected acquisitions within the wealth management business, together with the development of the funds of funds, hedge fund and financial products units, will provide the momentum. In addition, they will obviously see a window of opportunity if snatching market share for the large wealth managers globally who have problems within their investment and commercial banking operations.
EFG International is trading on a 2008E P/E of 11.1x, which discounts a large part of this projected growth. While the wealth management industry will be buffeted by the current storm in the financial markets, we believe that EFGI can continue to demonstrate the features of a growth stock and its current share price does not reflect this. As a result, we continue to rate the stock Outperform.
Christopher Wheeler
Equity Research Analyst
Sector 45 (technology: IGM, IGV, IGW, XLK, VGT, IYW, IGN, IXN, MTK and SMH)
Here’s the SMH Monthly, Weekly and Daily data charts:
SMH Monthly data:
SMH Weekly data:
SMH Daily data:
Here’s the XLK Monthly, Weekly and Daily data charts:
XLK Monthly data:
XLK Weekly data:
XLK Daily data:
Table 9: Senior technology equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Semi-conductors (SMH) lost -0.83 pct W/W due to the -3.06 pct smashing received on Friday.
General Tech (XLK -0.45 pct) did not fall as far. The loss there on Friday was just -1.15 pct.
AAPL dropped -6.3 pct a week ago and gained +4.7 pct back. Still a loser over two weeks.
ADSK plunged -19.5 pct W/W on a crummy quarterly report and SNDK was down -8.2 pct after the company failed to impress analysts who believe that NAND chip pricing will continue to fall.
Sector 50 (telecom: IYZ, VOX and IXP)
Here’s the IYZ Monthly, Weekly and Daily data charts:
IYZ Monthly data:
IYZ Weekly data:
IYZ Daily data:
Telecom (IYZ) suffered a loss W/W of -1.71 pct to 23.63. The loss on Friday was -3.12 pct.
Over the past 60 days, IYZ was a high of 30.60. That -22.8 pct loss in two months was not helped by being a relatively conservative sector, high dividend payer fund.
T dropped -0.44 pct W/W after a loss of -3.14 pct on Friday. VZ gained +0.33 pct on the week, but did fall -2.31 pct on Friday.
Sector 55 (utilities: IDU, XLU, and VPU)
Here’s the XLU Monthly, Weekly and Daily data charts:
XLU Monthly data:
XLU Weekly data:
XLU Daily data:
XLU (Utilities) lost -4.29 pct W/W to 37.73, and lost -2.63 pct on Friday.
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 1.71 | 1.82 | 2.12 | 2.07 |
| 6 Month | 1.71 | 1.87 | 2.06 | 2.13 |
| 2 Year | 1.62 | 1.81 | 2.02 | 2.18 |
| 3 Year | 1.60 | 1.78 | 2.01 | 2.14 |
| 5 Year | 2.47 | 2.67 | 2.83 | 2.85 |
| 10 Year | 3.51 | 3.67 | 3.80 | 3.67 |
| 30 Year | 4.40 | 4.51 | 4.57 | 4.39 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.69 | 2.63 | 2.48 | 2.27 |
| 2yr AAA | 2.77 | 2.63 | 2.43 | 2.35 |
| 2yr A | 2.83 | 2.86 | 2.63 | 2.70 |
| 5yr AAA | 3.20 | 3.15 | 2.89 | 2.80 |
| 5yr AA | 3.25 | 3.09 | 2.93 | 2.74 |
| 5yr A | 3.49 | 3.29 | 3.07 | 3.09 |
| 10yr AAA | 4.01 | 3.96 | 3.65 | 3.52 |
| 10yr AA | 3.93 | 3.86 | 3.53 | 3.58 |
| 10yr A | 4.23 | 4.01 | 3.80 | 3.75 |
| 20yr AAA | 4.93 | 4.83 | 4.42 | 4.33 |
| 20yr AA | 4.98 | 4.90 | 4.74 | 4.47 |
| 20yr A | 5.02 | 5.01 | 4.91 | 4.44 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 3.21 | 3.40 | 3.42 | 3.48 |
| 2yr A | 3.11 | 3.30 | 3.46 | 3.50 |
| 5yr AAA | 3.68 | 3.89 | 3.95 | 3.96 |
| 5yr AA | 3.85 | 4.02 | 4.29 | 4.26 |
| 5yr A | 4.26 | 4.52 | 4.48 | 4.26 |
| 10yr AAA | 5.08 | 5.18 | 5.29 | 5.07 |
| 10yr AA | 5.22 | 5.35 | 5.45 | 5.19 |
| 10yr A | 5.41 | 5.56 | 5.75 | 5.30 |
| 20yr AAA | 6.40 | 5.73 | 5.76 | 5.46 |
| 20yr AA | 6.24 | 6.33 | 6.37 | 5.78 |
| 20yr A | 6.27 | 6.31 | 6.34 | 6.07 |
Despite inflation concerns, traders made a massive move into US Treasuries this week. Rather than worry about losing wealth with yields that are lower than inflation, there is a bigger fear that banks may fail. They listened closely as Fed chairman Bernanke admitted to Congress the prospects of bank failures.
Yields on the 30-year, 10-year, 5-year and 2-year US Treasuries dropped by -17 basis points, -29bp, -36bp, and -40 bp to 4.40, 3.51, 2.47 and 1.62 pct respectively.
As the short- and medium-duration yields are under the inflation rate, wealth is being lost in holding these risk-free liquid holdings. By withholding that capital from the market, traders are contributing to the liquidity crunch, but they don’t want the capital to work for them if they fear equity prices are likely to collapse.
As I wrote a week ago, “It seems that HB&B (equity) prop desks are waiting to hit every bid.”
Here is the $USB 30-year Treasury Bond chart.
Interest rates and bond yields.
Interactive Daily data charts:
Interactive Chart of Interest rates and bond yields.
Countrywide, Fannie and Freddie all moved lower this week.
CFC (-9.21 pct W/W), FNM (-3.73 pct) and FRE (-5.37 pct) were serious losers again. That Friday all of them dropped, but CFC (-5.0 pct) was hit the worst. The stock is now $6.31, down -83.6 pct over 52 weeks.
As I say, “The suspect ARM roll-overs will continue to happen this year and next. The losses will continue unabated. The problem is not just sub-prime but Alt-A and Prime. The slowing economy is not helping. All of these assets were syndicated so the so-called better quality packages will now come under closer review.”
I am often asked if the TIP is a better choice than TLT. To me, I only use the data one way. If I see the yield on the TIP drop faster than on the TLT, like it did for a couple weeks in mid-September last year and from late-January through this Friday, then I’d say that inflation is on traders’ minds.
It could be a tip (no pun intended) that traders are starting to doubt whether the Fed is really going to fight inflation when you see the TIP soar faster than the TLT, so maybe they think that the FOMC might not cut rates on March 18. As we get closer to the big day, watch the TLT/TIP comparative strength.
In any case, I am not a bond trader, and my decisions are too short in time horizon to trade TIPs. I think the probability of an extreme move in the bond market is too high not to just want to stay in cash while waiting for entry points (long or short) in the equity market.
It all depends on what you feel comfortable with. In my case, I think HB&B and traders like the PIMCO group that move humungous bond positions in and out of markets have the edge, particularly HB&B which trades against the order flow.
US Bond Funds -- Interactive Monthly Data Charts
SHY Monthly data series chart:
IEF Monthly data series chart:
TLT Monthly data series chart:
AGG Monthly data series chart:
LQD Monthly data series chart:
TIP Monthly data series chart:
US Bond Funds -- Interactive Weekly Data Charts
SHY Weekly data series chart:
IEF Weekly data series chart:
TLT Weekly data series chart:
AGG Weekly data series chart:
LQD Weekly data series chart:
TIP Weekly data series chart:
US Bond Funds -- Interactive Daily Data Charts
SHY Daily data series chart:
IEF Daily data series chart:
TLT Daily data series chart:
AGG Daily data series chart:
LQD Daily data series chart:
TIP Daily data series chart:
Table 11: Interest-sensitive securities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Consumer Finance -USA -- Interactive Weekly Data Charts
Consumer Finance -USA -- Interactive Daily Data Charts
Commodities Review
The $CRB lifted sharply +14.06 (+3.93 pct) this week to 412.73, after being up a week ago +14.45 (+3.76 pct) from 384.23 to 398.68. Four weeks ago, $CRB had been 364.34. Prices of all commodities are bursting out. This is not a matter of shortages. It’s about a $USD comprised of twenty wooden nickels.
Long-time Caraistas; how long ago did I first write about that 20-wooden nickel dollar. Isn’t it pathetic to see the trade-weighted $USD plunge to 73.70 from over 91 in 4Q05, just a little more than two years?
In the 4Q04, when I was early in my blogging, the USD was .86 Euro and now its .65.
And the USD to the JPY (Yen) was up around 1 to 135 last June and now is close to 1 to 103.
If you think this is not inflationary, consider how much you have to pay to import the same goods and services now vs two and three years ago.
I think the short-term market cycle must be playing itself out, however, because, as I was saying the talk in cabs and pubs now is about pork bellies. Exactly the same thing happened in the late 1970’s at the peak of the commodity price cycle.
Unfortunately, there will be plenty of amateurs who will lose a tonne (smiling) because commodities is a professional’s game. The volatility can be huge.
You can even wake up one day and find yourself out of the loop as the last person to hear that commodity house margins have been increased. That would be just another slap in the head to remind you that you are out of the room, out of the deal. Consider yourself “made” if you happen to be on Henry Paulson’s “A” list of daily telephone calls.
$CRB Index
Interactive Chart of Weekly CRB Commodities Index:
Interactive Chart of Daily CRB Commodities Index:
Oil Review
$WTIC (US Light Sweet Crude called West Texas Intermediate) moved a further +3.88/bbl (+3.93 pct) to 102.69. The price had been 88.96 four weeks ago.
“How quickly we forget. How many remember $51/bbl in January 2007?”
The 50d MA for $WTIC is now at 94.07, and the 200d MA is 82.62.
Here is the e-miNY Dec-07 Crude Oil chart.
Interactive Chart of Weekly Crude Oil:
Interactive Chart of Daily Crude Oil:
Gold & Precious Metals Review
The $GOLD price gained +26.51 (+2.80 pct) to 974.31 this week. It was a golden week. Another one.
A week ago, $GOLD had lifted up on a rocket, +38.50 (+4.25 pct) to 944.60. The moon is now in sight.
The 50-day MA for $GOLD is now 896.58, and the 200d MA is 763.62.
“How long this move persists is anybody’s guess. It’s day to day, not week to week or month to month.” (LOL)
Well, maybe it’s week to week.
Interactive Chart of Weekly Gold EOD Continuous Contract Index:
Interactive Chart of Daily Gold EOD Continuous Contract Index:
Interactive chart of recent trading for the Gold Bullion index.
Spot silver chart for the week
This week, $SILVER lifted +1.79 (+9.93 pct) to 19.83 after being up +0.91 (+5.29 pct) from 17.12 to 18.02 a week ago. Four weeks ago, $SILVER closed at 16.87.
For $SILVER, the 50d MA is now 16.54, and the 200d MA is 14.20.
Clearly, at the G-7 meeting of finance ministers and central bankers three weeks ago, the decision was made to let the $USD collapse, and precious metals run.
Interactive Chart of Weekly Silver EOD Continuous Contract Index:
Interactive Chart of Daily Silver EOD Continuous Contract Index:
Interactive chart of the Silver Bullion index.
$PLATINUM continues to roar. I’m short of time, and the charts don’t look accurate, so I’ll leave it at that.
Spot platinum chart for the week
Interactive Chart of Weekly Platinum EOD Continuous Contract Index:
Interactive Chart of Daily Platinum EOD Continuous Contract Index:
Interactive chart of the Platinum metal index.
$PALLADIUM has also soared and the charts may be wrong for the second week. I’ll just leave this for now, rather than be wrong.
Spot palladium chart for the week
Interactive Chart of Weekly Palladium EOD Continuous Contract Index:
Interactive Chart of Daily Palladium EOD Continuous Contract Index:
Interactive chart of the Palladium metal index.
This week, $COPPER lifted from 380.45 to 387.00. There was a small loss on Friday.
I will not comment further because I don’t trust the market or the data.
Interactive Chart of Weekly Copper EOD Continuous Contract Index:
Interactive Chart of Daily Copper EOD Continuous Contract Index:
Interactive chart of the Copper metal index.
Table 12: Senior gold equities
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
This week, $XAU (the Philadelphia Exchange goldminer index) gained +6.64 (+3.50 pct) to 196.58 from 189.94.
Despite a huge gain of +7.12 pct a week ago, I wrote, “The Weekly RSI-7 is just at 61, and the Daily at 67, so there could be room to run higher. Then again, if the RSI-7 on the Daily and Weekly turn south early before getting into extreme over-bought conditions, that would be an indication of serious downside action likely to come.”
Keep your eye on it.
The 50d MA for $XAU is 182.47, and the 200d MA is 162.55.
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows:
NEM ABX AU GFI GG HMY AUY KGC BVN
Interactive Daily data
Interactive Weekly data
MDG LIHRY AEM BGO IAG EGO RGLD GOLD CDE GRS
Interactive Daily data
Interactive Weekly data
SSRI SIL NG KRY UXG GRZ TSE_HRG TSE_GUY TSE_AGI
Interactive Daily data
Interactive Weekly data
NXG GSS MNG DROOY MFN RNO RANGY MRB CLG
Interactive Daily data
Interactive Weekly data
Here are the key Silver miners and the SLV ETF:
SLV SIL CDE HL PAAS SSRI SLW MGN
Interactive Daily data
Interactive Weekly data
Here are the Weekly and Daily Data charts of the indexes:
Interactive Chart of Weekly U.S. Goldminers Index:
Interactive Chart of Daily U.S. Goldminers Index:
The U.S. goldminer share trust ETF trades under the ticker symbol GDX.
Here are the U.S. Goldminer ETF (GDX) index Weekly and Daily data charts:
GDX Weekly data:
GDX Daily data:
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD. Yes, just like GDX on the AMEX, you can trade XGD on Toronto.
Here are the Weekly and Daily data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Weekly data:
Interactive Chart of XGD Daily data:
Forex Review
A week ago I wrote, “The North American currencies lost out this week to those of Europe and Asia-Pacific regions. If anything, the charts indicate more to come next week, which should give one more boost to commodity prices.”
This week, the $USD plunged -2.40 pct to 73.70 from 75.52. Traders are scared now, fleeing into US Treasuries.
A week ago I wrote, “The charts indicate that possibly there is more $USD weakness to come, but frankly if it drops much lower, the technical support will fail and a whole new trading range in the 73-74 range could develop. Should that occur, I believe Crude Oil would move to the $110 level and gold to over $1,000. If you are trading this market and not watching it every few minutes, then you are doing a disservice to your capital.”
Well, gold hit a high of 976.13 on the spot market on Friday, and closed at 974.31 earlier in the futures market. There are going to be 20,000 people at the PDAC this week ready to ring the $1,000 bell. I can see the Dom flowing in the hospitality suites, toasting some professor with the nickname “Helicopter”.
But we all know that what goes up also comes down. The most popular exhibitors will be the ones with real-time quotes. The most common sight will be exhibitor staff and attendees alike with cell phones stuck on both ears.
Don’t you wish you could be there?
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) has surged in two weeks from 1.4668 to 1.5188 to the USD. This week the gain was up from 1.4822.
“The ECB would like to see it lower, which could mean they drop rates soon, but so far they haven’t.”
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound rallied again from 1.9676 to 1.9873. This helps keep inflation down a bit, but the UK, like the EU, is dealing with other issues too. The econ problems of the US are also present in Europe.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) surged from 92.90 to 93.57 a week ago, and this week up to 96.18, putting the USD on the ropes.
“As the Yen gains, the money flow is out of US and Japanese equities and back into the banks to repay loans… And vice versa.” Banks are getting reliquified on a Just In Time basis…
Daily Japanese Yen Index:
The Loonie (Cdn Dollar) rocketed this week from 98.77 to 101.40.
Two weeks ago I opined, “Although the Loonie is strengthened by higher oil and metals prices, I feel it is likely to stay in a trading range just below par with the $USD.” I was wrong.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
International Equity Markets Review
The Toronto Exchange moved from 13583.90 to 13582.69, largely on the basis of an early in the week rally followed by a crash of -291 points on Friday.
The FTSE (5888.5 to 5884.3), DAX (6806.3 to 6748.1) and CAC (4824.6 to 4790.7) were also largely unchanged after the sell-off on Friday.
I added 16 country index charts from StockCharts.com (with their formal approval btw as long as I don’t publish too many) because I think it is important to be watching these markets move through a trend juncture together, and in relation to currency and commodity strength or weakness.
I also made some additions to the country-based ETF tables as I intend to focus more on ETF’s in 2008. In time, I will also set up tables and track the domestic market prices.
The world is now a very small one in capital markets and international business. No longer are corporations just American, British, French, German, Italian, Canadian or Japanese. Most do business internationally. We need to observe their businesses and capital market prices on a global basis.
Here is the latest session data for the exchanges of the Americas.
Here is the latest chart for the Brazilian Bovespa stock exchange in Sao Paulo.
Brazilian Bovespa stockcharts.com chart
Here is the latest session data for the Toronto Stock Exchange composite index.
Toronto 300 stockcharts.com chart
Toronto CDNX stockcharts.com chart
Europe
Here is the latest session data for the bourses of Europe.
Here is the latest session data for the London stock exchange FTSE.
FTSE 100 stockcharts.com chart
Here is the latest session data for the German DAX.
Here is the latest session data for the French CAC 40.
Here is the latest session data for the Milan Italy stock exchange MIBTEL.
Italian Milan Index stockcharts.com chart
Here is the latest session data for the Swiss market index.
Swiss Market Index stockcharts.com chart
Asia-Pacific
Here is the latest session data for the Asia-Pacific stock exchanges.
Here is the latest chart for the Japanese Nikkei 225 index.
Tokyo Nikkei 225 Index stockcharts.com chart
Here is the latest chart for the Singapore index .
Singapore Straits Times Index stockcharts.com chart
Here is the latest chart for the Shanghai Composite index .
Shanghai Composite Index stockcharts.com chart
Here is the latest chart for the Hong Kong Hang Seng index .
Hong Kong Hang Seng stockcharts.com chart
Here is the latest chart for the India BSE 30 index .
Mumbai BSE 30 Sensex Index stockcharts.com chart
Here is the latest chart for the Australian All Ordinaries index .
Sydney All Ordinaries Index stockcharts.com chart
Russia (RTS) stockcharts.com chart
Table 13: International equities via an ETF perspective (in $USD)
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Japanese equity market ETF: EWJ
Here is the Japanese (EWJ) equity market ETF Monthly, Weekly and Daily data charts:
U.K. equity market ETF
Here is the United Kingdom (EWU) equity market ETF Monthly, Weekly and Daily data charts:
EWU Daily data:
Canada’s equity market
Here is the Canadian (EWC) equity market ETF Monthly, Weekly and Daily data charts:
US Equity Markets Review
The DJIA, S&P 500 and Nasdaq Composite lost a little of the ground they had regained the previous week. The losses happened at the end of the week.
A week ago, I opined in this space, “I see nothing happening to inspire the Bulls. I think the market is biding time until the next decline.” That could have started on Friday.
A dozen NASDAQ stocks to watch.
Here is the Monthly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Weekly data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Here is the Daily data chart of the Interactive Chart of Nasdaq Composite, S&P 500, Dow30, and Russell 2000 (small cap) indexes.
Table 14: Dow 30 List
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
You can do this table yourself by entering the following string into the Summaries window at www.billcara2.com and then clicking on the link for Performance.
AA AIG AXP BA C CAT DD DIS GE GM HD HON HPQ IBM INTC JNJ JPM KO MCD MMM MO MRK MSFT PFE PG T UTX VZ WMT XOM
Here are the links to interactive Dow charts from Billcara2.com that I broke into groups of ten, which you can add technical indicators for as well. (list one) (list two) (list three)
Value Line Report(s) this past Friday
This week, Value Line reported on General Motors (GM) and (Cara 100) Johnson & Johnson (JNJ). While I do admit that I like the new styling of the cars, the stock will not likely ever be a Cara 100, not even for the State of Michigan.
General Motors
(GM: Value Line Report Feb. 29: next one is due May 30)
With GM, the mind boggles at how the company can stay afloat. Maybe it’s a case of the US government not being able to allow the company to fail. After all, they did parachute ex-Treasury Secretary John Snow in to take the control of GMAC off the shareholders’ hands.
Seriously, how does a company that has negative shareholder equity of -$37.5 billion stay in business, and why is the market cap $14.7 billion? How does the company pay off its long-term debt of $45.4 billion, including $16.1 billion due within 5 years? I mean this is a company that has Current Liabilities that are $11.4 billion greater than Current Assets. Sure they might earn $200 million this year from ongoing operations, but that’s considerably less than the company lost a year ago, and they have to practically give away cars and trucks to book those so-called profits.
Things are so tight at GM, the working capital dropped from a positive $116 billion in 2005 to that deficit of -$11.4 billion at Dec 31, 2007.
Now, that’s just the on-star type of stuff, ie, the figures on the balance sheet. How about the unfunded pension liability of $46 billion?
You know, I recall a judge in Canada that ruled bankruptcy for a pittance of unfunded pension liability when the company involved, Canada’s largest steelmaker, was in the midst of its most profitable year ever. And that was a company that had no credit derivatives disaster on its hands or any failed SIV hidden away in subsidiaries – just precious iron ore properties on the books at… well book, which meant they could be stolen in bankruptcy court by the sharpies of Bay Street.
Just think what the Brascan/Brookfield Boys, and a friendly judge, court-appointed re-org officer, court monitor CA firm, and half the big-shot lawyers in Toronto could do with that GM situation…?
Tata… I shouldn’t drive down that road. (LOL)
As VL analyst says, the GM restructuring continues. It’s all the US employees’ fault. Ninety-eight percent of the US workforce has been offered early retirement buyouts with the plan to cut half the wages of the replacement workers.
Do you think the company might start at the top? I’m sure the guy who put the company in this mess could be replaced for half what he’s been paid.
But then, the new guy would not permit a dividend, $1.00 or otherwise, so the string-pullers behind this company wouldn’t receive their 4-pct dividend yield, which btw is a return OF capital that doesn’t exist as I started this section off by pointing to the “negative shareholder equity of -$37.5 billion.”
Why doesn’t the SEC, or maybe a judge, stop this nonsense before the capital market has zero credibility with Mom & Pop?
Johnson & Johnson
(JNJ: Value Line Report Feb. 29: next one is due May 30)
When you’re hurtin’ you can look to Johnson & Johnson for solutions. Even the baby’s bum feels the better for it.
Value Line analyst Tom Nikic likes this one, as I do.
Even more so. You see, although J&J is a Cara Global 100, there are some concerns.
Where do I start? Well, in two years, the working capital has deteriorated from a plus $19 billion to a plus $9.6 billion, and now the management says they want to buy back shares. The important one time superlative operating and capital metrics have also fallen and are expected to be some 40 pct lower over the next 3 to 5 years for cash flow, earnings and dividends growth rates. The operating margin over the past two years has fallen. The return on shareholders’ equity has fallen. The PE ratio is a fraction of what it used to be, back when investors used to think of J&J as a growth large cap. Finally, the patent expired on the company’s top selling drug, so sales are going to slow.
But there is always hope, as expressed by the VL analyst in the headline to his concluding paragraph: “This stock may prove to be an excellent long-term option if recent stock market turbulence continues.”
Can you figure out the operative part of that statement? If so, traders will want to wait until the current price dips a further -10 pct (to maybe $56) before entering new positions on the long side. That would be nice because the dividends over the next two years will increase (probably $1.77 for 2008 and $1.95 for 2009) and the stock will likely hit $100 before the end of 2009, which I base on 17 times 2009-cash flow of $5.90.
For a strategy, I might look into writing the 4 to 6 month 55 puts on JNJ – but only after more really bad days in the market. When you see the fear in their eyes and the headlines are screaming blood in the water, load up the truck. As I say, the picture is deteriorating for JNJ, but we’re all getting older, right? When the JNJ stock price is getting hammered down, just think about that baby’s bottom.
If you can get your cost basis down to 56, that dividend over the next two years will average a yield of 3.32 pct annually. Did you see what the 10-year US Treasury bond is yielding today? 3.534 pct. I think I’d rather wait and put my faith and trust in J&J.
A week ago in this space, I reviewed the four DJIA banks, not very favorably. I was totally unimpressed by that Friday’s last minute antics by what I presume are pump and dumpers. This week the losses were: AIG (AIG -4.13 pct), American Express (AXP -6.13 pct), Citigroup (C -5.61 pct), and JP Morgan (JPM -7.47 pct).
That’s this week, not this year or over the past 52 weeks.
Anyway, I warned as follows:
With AIG, … The liquidity squeeze that is bound to carry on for many months makes this stock a speculation. One serious problem the company faces is in the area of credit derivative swaps.
With American Express, the $64 million question (hey with inflation you can add three zeros) is how big will be their reserves for credit losses.
At Citigroup, the situation is succinctly wrapped up in a single paragraph by VL analyst, Douglas Maurer:
Citigroup reported a fourth-quarter loss of $1.99 per share. Results were impacted by $18.1 billion in write-downs related to sub-prime mortgage exposures, as well as a $4.1 billion increase in estimated U.S. consumer loan losses. Too, management has taken $49 billion of off-balance sheet SIV (structured investment vehicle) assets onto the balance sheet to protect them from possible rating down-grades, reduced the quarterly dividend from 54 cents to 32 cents, and announced plans to cut about 4,200 jobs.
With JP Morgan Chase, the VL analyst Theresa Brophy seems not too interested in near-term prospects (for JPM).
The Dow 30 Company links in chronological order of next reports
McDonalds [GICS 30, Dow 30]
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Dec. 7: next one is due Mar. 7)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Dec. 14: next one is due Mar. 14)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Dec. 21: next one is due Mar. 21)
AT&T [GICS 50, Dow 30]
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Billcara2 chart)
(T: ADVFN Financial Data)
(T: Value Line Report Dec. 28: next one is due Mar. 28)
Verizon [GICS 50, Dow 30]
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Dec. 28: next one is due Mar. 28)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Jan. 4: next one is due Apr. 4)
Home Depot [GICS 25, Dow 30]
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Jan. 4: next one is due Apr. 4)
General Electric [GICS 20, Dow 30, Cara 100]
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jan. 11: next one is due Apr. 11)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Billcara2 chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jan. 11: next one is due Apr. 11)
Honeywell [GICS 20, Dow 30]
(HON: Yahoo Finance file)
(HON: StockChart chart)
(HON: Billcara2 chart)
(HON: ADVFN Financial Data)
(HON: Value Line Report Jan. 11: next one is due Apr. 11)
IBM [GICS 45, Dow 30]
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jan. 11: next one is due Apr. 11)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jan. 11: next one is due Apr. 11)
Alcoa [GICS 15, Dow 30]
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jan. 18: next one is due Apr. 18)
Dupont [GICS 15, Dow 30]
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jan. 18: next one is due Apr. 18)
Merck [GICS 35, Dow 30]
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jan. 18: next one is due Apr. 18)
Pfizer [GICS 35, Dow 30]
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jan. 18: next one is due Apr. 18)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jan. 25: next one is due Apr. 25)
Caterpillar [GICS 20, Dow 30]
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jan. 25: next one is due Apr. 25)
Altria Group Inc [GICS 30, Dow 30]
(MO: Yahoo Finance file)
(MO: StockChart chart)
(MO: Billcara2 chart)
(MO: ADVFN Financial Data)
(MO: Value Line Report Feb. 1: next one is due May 2)
Coca Cola [GICS 30, Dow 30]
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Feb. 1: next one is due May 2)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Feb 8: next one is due May 9)
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Billcara2 chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report Feb. 15: next one is due May 16)
3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Billcara2 chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Feb. 15: next one is due May 16)
American International Group [GICS 40, Dow 30]
(AIG: Yahoo Finance file)
(AIG: StockChart chart)
(AIG: Billcara2 chart)
(AIG: ADVFN Financial Data)
(AIG: Value Line Report Feb 22: next one is due May 23)
American Express [GICS 40, Dow 30]
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Billcara2 chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Feb 22: next one is due May 23)
Citigroup [GICS 40, Dow 30]
(C: Yahoo Finance file)
(C: StockChart chart)
(C: Billcara2 chart)
(C: ADVFN Financial Data)
(C: Value Line Report Feb 22: next one is due May 23)
JP Morgan [GICS 40, Dow 30]
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Billcara2 chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Feb 22: next one is due May 23)
Microsoft [GICS 45, Dow 30]
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Billcara2 chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Feb 22: next one is due May 23)
General Motors [GICS 25, Dow 30]
(GM: Yahoo Finance file)
(GM: StockChart chart)
(GM: Billcara2 chart)
(GM: ADVFN Financial Data)
(GM: Value Line Report Feb. 29: next one is due May 30)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Yahoo Finance file)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Feb. 29: next one is due May 30)
Wrap up:
My friend Jim Watt will have been married to Lyn today in Nassau, and I’m stuck here knee-deep in snow in Toronto. Yes, people say, “It’s better in The Bahamas”.
But Jim will not be at PDAC. Even my banker arrives tomorrow from Nassau. I will also be putting the finishing touches to an SEC-registered Forex trading fund in the next 10 to 12 days. I’m not the trader. With $500 million AUM, I’d have to walk around with my fingers glued to a keyboard.
Speaking of keyboards, there is a little company on the TSX called “01 Communique” (TSX:ONE). I think I’ve written about them before. I haven’t checked the stock price but after meeting the CEO and principal owner (Andrew Cheung) for lunch Friday for the second time in the past year, I think speculators may want to check it out (http://01com.com) The company patented a technology in the 1990’s that Citrix apparently disregarded. Now there are several companies that have copied the work that Andrew developed. He’s spent $6 million in legal fees plus another million in related costs to get Citrix into court. Finally, after years of trying, the case heads to trial inside two weeks. Andrew already rejected a sizeable settlement offer because he wants to maximize the award so he can chase the other corporate reprobates. Could be interesting. There are maybe 55 million shares outstanding at less than a buck, and this is a billion dollar market at dispute.
Pending a favorable ruling or satisfactory settlement, the company has a small $400 computer ready for production in Taiwan. The difference is that the ONE computer has no disk drive. The key feature is that it is a regular computer that specializes in wireless communication to a central server that is not quite like what Google and others offer. In the ONE case, your data is completely protected and backed up, so that if you have your laptop stolen, for example, it can be replaced at a cost of $400 as fast as Fedex, UPS or DHL can ship one to you. You plug it in, and nothing changed. I intend to use this technology because of the confidential nature of my business. I have even been contemplating doing a deal with ONE to provide systems free to clients. Of course, we would package ours with a complete trading, research and portfolio management system.
You know, I wish I started all this twenty years before I retired seven years ago (LOL).
Another lunch companion Friday was Ermanno Pascutto who is a director of Melco China Resorts. This is a shell company the former owner of which I introduced him to a year ago. His associate, Lawrence Ho of the famous Macau Ho clan and of Melco fame, decided to buy that shell and start what will be the Intra-West of China. They even hired some of the former Intra-West staff. But more than just a destination tourism company, Melco is one of the world’s premier gaming and hospitality companies. The new company acquired what I am assured is the best two ski hills nearby the major cities of China. What’s not to like.
If you happen to be a Qualified Investor interested in looking at the package, I can have one sent to you from an associate. I’d do it myself except Cara Trading Advisors (Bahamas) Ltd is not yet registered to trade in securities. Soon, I believe, but not quite yet.
In the case of the Forex fund I referred to earlier, my CFO is the company chairman, so I’m connected that way.
CNQ stock exchange president Rob Cook, also an old friend, joined us for lunch on Friday. He was enquiring as to how much time I spend blogging, and said he was amazed at the quantity of info, detail, etc. I told him I blog for two hours a day. I didn’t mention the WIR. This one takes me all day. I barely take time to breathe.
As long as we’re breathing, we’re vertical. Right?
Cheers.
btw, I'll check in Sunday night from PDAC. What kind of shape I'm in I cannot say.
Posted by Posted by Bill Cara on March 1, 2008 05:16:06 PM | Category: Cara Week in Review