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September 21, 2008
Week in Review #38 (2008-09-21)
Very few of you it seems, and very few of the “gurus” as well, agree with my opinion that the 2007-2008 Bear market is over. You probably also won’t agree with my opinion that the next few years will be much like the period from 1974 through mid-1982. But that’s not the problem we face today. This emergency legislation in Washington is.
I think the crisis is not on Wall Street, but in the White House.
Kim sent us this news about what Treasury Secretary Henry Paulson is up to:
Mike Morgan's Quick Notes
- Behind Enemy Lines -
King Henry is now officially taking over. If you don't write your Senators and Congressman immediately, this one man will have complete control over everything we ever stood for or ever hoped to be. If you think I am being dramatic, just read what he asked Congress and the Senate to approve in the Bail Out Act . . .This deals with what he can do and who can review his decisions of hold him accountable . . . No One. He is demanding complete, ultimate and absolute authority. This is directly from the draft he sent to Washington.
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Sec. 8. Review. Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
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You had better start emailing and calling your Senators and Congressman. He already has enough votes to get this passed. If you don't act, King Henry rules.Access to Senators
Access to Congressmen
I never imagined that I would witness a political coup in the US in my lifetime. This situation and the draconian action being taken by Paulson and unnamed cronies makes writing the WIR extremely difficult. However, maybe sanity will prevail in Washington, and maybe Congress will rein in the Treasury Secretary.
In that case, I had better keep writing the usual stuff.
Some of you have asked for a clarification of the following paragraph that I wrote and re-used Thursday and Friday.
I continue to believe the equity market will split the financials from the non-financials, where the non-financials started a new Bull market on Thursday afternoon, but where the financial stocks will only rally for a time before falling again to test the sector bottom. In time, the financial sector will likely be seen to have missed the first leg of this new Bull because traders know: (i) the balance sheet liabilities of banks are understated and their assets over-stated, and (ii) the central banks that have been coordinating this emergency lending must recover those funds to then restore the health of their own banks and the confidence of government legislators… Home-owners are still beleaguered and consumers are still facing hugely inflated prices and have less purchasing means, so the financial services and consumer discretionary-spending companies will (ultimately prove to) lag.
The 2002-2007 Bull market is believed (by almost all people) to have started in 4Q02, but after an initial rally in the Financials (XLF), the sector failed and returned in the 1Q03 to re-test the previous low. Only in the second up-leg of the Bull market did the Financials catch fire. This link will show that.
What I am saying in the paragraph above is that I believe there will be a repeat of the 2002-2003 cycle bottom process with XLF.
Moreover, because inflation is so much higher and consumers much less well off at this point than they were in 4Q02, I also think that the Consumer Discretionary sector (XLY) will lag as well. However, those stocks in the Consumer Discretionaries that are most affected by oil prices, like the airlines and cruise lines, will lift first as fuel costs drop and fuel surcharges are better accepted in the future, which I expect.
The Financial sector still must resolve its problems with bad assets that have been kept on their balance sheets at overstated prices. This week the US Treasury devised a two-part plan to relieve the financial services companies of these problems so that they could return to their usual lending and borrowing practices in the credit market. The steps taken were: (i) for Treasury to set up a $800 billion fund to buy “bad” mortgages, so that these financial services companies would not have to write them off, causing the need for immediate new replacement reserves, and a $400 billion fund to return Money Market Funds to par, so that the banks could permit clients to redeem them without losses, and (ii) for the SEC to immediately prohibit the short-selling in 799 financial services companies for a period of up to 30 days.
A week ago, I referenced the problem:
If every financial services company that is presently holding supposedly asset-backed debt instruments in inventory were to value those holdings at real cash market prices, there would be devastation across the board. Maybe a trillion dollars around the world – half in the US apparently – would need writing down, and that would result in the immediate need for most of these companies to raise additional capital. The problem is that most of them could not raise capital – like Lehman on Wednesday in the debt market -- without eliminating their existing shareholder equity.
This week, Lehman declared bankruptcy and lost over -98% of its market valuation, including -57% on Friday. Until this quarter, Lehman Brothers had not had a losing quarter in its storied 150 year history, or so it’s said.
The events happening this month in the financial services industry are simply astonishing. This week, the once greatest broker-dealer, Merrill Lynch, was taken over by Bank of America, and this weekend, the second greatest, Morgan Stanley is in emergency amalgamation meetings with Wachovia Bank. All four of these entities are in financial trouble, and the resultant combinations will still have to be saved by the US taxpayer, now that Treasury Secretary Paulson has gone down that slippery slope.
But right to the end, the managers who caused these bankruptcies or who were recruited to steady the ship have managed to make themselves rich off the backs of creditors, bondholders and shareholders. This story about John Thain and two friends is enough to make you sick—unless of course you were reading me all along about Thain. Thain and friends are now walking away from Merrill Lynch with a combined $200 million for less than a year’s “work”. There were reports he cried in front of his staff when he announced the deal with Bank of America. He cried alright, all the way to the next bank.
This world has lost common sense.
I am trying to say that in my experience it is unwise to bet against the central bankers of the world when they intend to build economies via reflation. Money buys bids and bids buy Bull markets. Traders go with the flow.
At this point I would like to recall the Bull market that started after the October 1987 Black Monday. I jumped on board the Bull from the beginning because I recognized the cathartic event that was Black Monday. Yet, some of the best analysts in the world, including my friends Ian Notley and Martin Pring waited for over a year to finally buy into the fact the Bull started much earlier. At most major turning points in markets, both at the top and the bottom, you will find a purging of emotions. I think we had it this week.
I think there was actually a panic on Thursday at mid-day with the bankruptcy of Lehman Brothers, and then the central banks of the world convened to work out a $180 billion stopper package. Then they got together to agree to stop short-selling in the Financials, and to bail-out the banks in trouble. I figure the first relief package they put on the table cost $2 trillion at least. Another $2 trillion or $4 trillion will back it up.
Central banks have drawn a line in the sand. Banks and Broker-dealers will fall in line. Treasury Secretary Paulson is issuing the marching orders. Was this necessary? I think yes; but I also rail against the removal of rights of independent traders and the utter disregard for free capital markets. But it is what it is. We just have to hope that the US Congress and their counterparts in the G-20 nations are able to keep the global financial system under control, and out of the grasp of Henry Paulson and his friends.
Nobody has the answer to that on this Sunday morning, and I refuse to speculate. Traders don’t deal in hope; they watch prices and make decisions. Bigger people than us will be putting in their bids on Monday. This battle for control of America’s future will not take long to end in a visible result. So we eagerly await the market’s decision on Monday.
I protest the manner in which this action is being taken, but as a trader, I have to trade prices, and they have turned. Did you see the list on Buy Alerts on Thursday and Friday? If you can beat those prices (non-financials only please!), then your new positions will have a good risk:reward profile.
These days are very interesting, for all students of the market.
I received the following anon letter today, which I answered.
Dear Bill,
You have a wonderful site that I share with my Grade 12 economics and business students. Very insightful and informative – I have my students read your blogs – much of the information is above them but I attempt to simplify it all – not an easy task. Your open letter to the SEC was exactly how I feel and mentioned this to my students two days ago. Here in Canada we have not had the abuses of the system that you have had stateside but they do exist as you know. I was happy when my students recognized that by printing too much money inflation is sure to follow. If I may be so bold as to ask you a question: yesterday on CNN Ali Velshi commented that when the government intervenes in the free market the taxpayer ultimately wins. I emailed him for clarification but have yet to hear back – I don’t suspect I will. How is this possible? Perhaps if the taxpayer buys shares in the company once the cheats and fraudsters are extricated from their corporate Lazy Boys. Once again, Bill a wonderful site for all of us. All the best!
Kind Regards/Anon
Thanks (anon) for your kind words. As for the students, I do hope they learn that with (i) a basic understanding of capital markets, (ii) the application of independent and objective thinking, (iii) the focus on risk management above all, (iv) the search for value, and (v) the study of price trends and cycles, they ought to do a good job at managing their portfolios. Of course, if they over-spend and don't save, they will have a very difficult time of acquiring the financial resources they will need to have a portfolio.
Government intervention in markets costs money, which means the taxpayers have to pay for it at some point. Government will not earn an income by going into debt unless they invest the money wisely in equities. That's no different than for any investor. What they are doing today, however, is buying bad mortgages, which will never pay a positive return. They have also guaranteed the $85 billion loan by the Fed to AIG to help that insurance company stay in business, but the 80% share ownership taken back goes to the Fed, which if AIG survives and grows, as I think it will, the Fed (but not the government) will be the richer for it. The taxpayers are being taken advantage of. If I were the Treasury Secretary, I would have negotiated a very significant guarantor fee from the Fed for backstopping that $85 billion loan, and the other loans that the Fed has required the government to support.
The Fed is a public-private entity, which, like a broker-dealer, is conflicted to the core. Capitalism is a wonderful system, but to do its job it needs these pervasive conflicts of interest ended by new legislation. The Fed should be the government's banker, and the public's representatives to government should be elected to run our government like we have to run our households and businesses in the private sector. Because of conflict of interest, the most basic financial and economic concepts are being ignored, and taxpayers are being charged the costs. We need leadership in government that will put a stop to it.
Nothing I have written here is too complex to be understood by a secondary school student or by anybody in government. I hope your students agree.
Best regards,
/Bill
Statements will be made by politicians that with higher prices, the market must be saying they endorse the actions being taken in Washington. That would be unadulterated hogwash. Traders see the writing on the wall and merely go with the flow at times like this. The fact is that independent traders are also taxpayers and they are furious at the boondoggle caused by the banks, regulators, and governments, which will end up costing them and their offspring trillions.
Remember that; just because a trader is making a defensive move, it can also be one that moves prices higher. They do it so as to not take a loss. This week many traders did it by covering shorts. There is nothing in these particular actions that is done in support of the Interventionists. In fact, we on the buy-side desperately want our freedom from these Interventionists. We want them to stop controlling our capital markets.
In wrapping up, what I truly enjoy in writing this blog is that I get to inform and educate and facilitate people who have less experience at trading than I. I do see that I make an impact and the bigger the impact, the bigger the responsibility. Sometimes that’s tough because this is after all a free blog. But, judging from your letters, it is important that I do it. All I can pledge to you is to remain true to my values, and hope things work out for all of us.
Global Economics Review
Weekly International Economic Report .
I encourage everybody to read these reports and discuss them in the Discourse, but check the publishing date if you are looking for the latest data. This one is current.
Here are the key US economic reports and the Econoday analysis from last week.
US Economic Calendar.US Empire State Manufacturing Surver for Sept. Econoday reported: “Activity is stable and cost pressures are easing, the results of a solid Empire State report that belies a -7.4 headline reading. Though the headline index came down, new orders, the most important reading of all, showed month-to-month improvement to 4.4 vs. August's -2.2. Contraction in unfilled orders eased, -3.4 vs. -9.0, and there was even a little month-to-month strength in shipments, at 0.6 vs. month-to-month contraction of -0.9 in the August report. Manufacturers in the region successfully pared inventory in the month, at an index of -2.3 in September, while they also continued to cutback on their workforces with the ‘number of employees’ index at -4.6 vs. July's -4.5… Some of the best news in the report is on prices with input pressures easing substantially to 44.8 vs. 65.2 in August and 77.9 in July and with output prices also easing, at 24.1 vs. August's 32.6. But the best news in the report may be the six-month outlook where respondents see substantial strength in general business conditions, 43.1 vs August's 34.6; new orders, 46.3 vs. 47.3; and shipments, 49.5 vs. 45.4. The outlook readings are a reminder that the manufacturing sector isn't hostage, at least yet, to the sweeping turbulence underway in the financial system. Financial markets, focused on counterparty risk and the unfolding of the weekend's events, showed no reaction to the report.”US Industrial Production for August. I recommended you review the International Report last week that shows the decline in IP across Europe and Japan. For the US, Econoday reported this week: “Industrial production in August fell sharply with declines somewhat widespread. Overall industrial production fell 1.1 percent in August, following a 0.1 percent rise in July. The August decrease was worse than the consensus forecast for a 0.3 percent decline. The manufacturing component dropped 1.1 percent, after a 0.1 percent rise in July. Utilities output fell 3.2 percent in August, while mining output decreased 0.4 percent… For manufacturing, weakness was heavily from an 11.9 percent drop in motor vehicles & parts. Excluding motor vehicles, manufacturing output slipped 0.3 percent after a 0.1 percent dip in July. Notable declines were also seen in nonmetallic minerals, electrical equipment, furniture, apparel, petroleum & coal, and plastics & rubber products. Notable gains were found in wood products, primary metals, and printing… On a year-on-year basis, industrial production in August slipped to down 1.5 percent from down 0.4 percent in July… Overall capacity utilization in August declined to 78.7 percent from 79.1 percent in July and compared to the market forecast for 79.5 percent for the latest month… Today's report shows manufacturing to be weak and should weigh on equities and will only add to market concerns over the Lehman Brothers' bankruptcy.”
US Consumer Price Inflation index for August. Econoday reported: “Consumer price inflation in August eased sharply on lower energy costs. The headline CPI declined 0.1 percent, following a 0.8 percent jump the month before. August's decrease matched the market forecast for a 0.1 percent dip. The core rate slowed to a 0.2 percent rise from July's boost of 0.3 percent. The consensus had forecast a 0.2 percent increase… Pulling the overall CPI down was a monthly drop of 3.1 percent in the energy component, after a 4.0 percent boost the month before. Gasoline dipped 4.2 percent in August. Food inflation also slowed but remained quite elevated with a 0.6 percent increase, following a 0.9 percent surge in July. Higher production costs are still feeding into food production… The modest easing in the core was led by a 1.1 percent drop in lodging away from home, along with decreases for new vehicles and used cars & trucks, down 0.6 percent and 0.3 percent, respectively. Also, owners' equivalent rent remained low with a 0.1 percent increase - matching July's rise. Apparel slowed but remained high at 0.5 percent, following a 1.2 percent jump the month before. Recreation firmed to 0.5 percent after a 0.4 percent gain in July… Year-on-year, the overall CPI eased to 5.4 percent (seasonally adjusted) in August from 5.5 percent in July. The core rate was unchanged at 2.5 percent… The latest inflation news looks good at face value for both headline and core numbers. But the detail shows mixed trends. The decline in energy costs was expected but we may see some reversal from shortages of gasoline and natural gas due to the impact of Hurricane Ike. Elevated energy costs are keeping food inflation high. For core components, economic weakness is pulling some prices down as is a glut of new and used motor vehicles. But import prices are keeping apparel on the high side… The Fed likely is glad to see today's improvement but despite fragility in the financial markets will likely still be worried about too low interest rates fueling future inflation. The Fed will likely focus on providing adequate liquidity rather than on lowering interest rates.” The Fed maintained policy right after this report by Econoday.
US Housing starts for August. Econoday stated: “Housing starts in August continued its downward spiral as tight credit and bloated supplies of unsold homes continue to depress new construction. Starts fell 6.2 percent, following a 12.4 percent drop in July. The August pace of 0.895 million units annualized was down 33.1 percent year-on-year and fell short of the market forecast for 0.950 million units. The decrease in starts was led by multifamily starts, which dropped 15.1 percent, after a 28.7 percent fall in July. Single-family starts also declined but at a much more moderate pace, decreasing 1.9 percent in the latest month, after dropping 3.2 percent in July… By region, the drop in starts was led by a monthly 14.5 percent decline in the Northeast with the Midwest and South also declining, by 13.6 percent and 7.4 percent, respectively. The West rebounded 10.8 percent… Permits also declined in August, falling 8.9 percent, following a 17.7 percent decrease in July. August's 0.854 million unit pace for permits was down 36.4 percent year-on-year… Today's report shows further deterioration in the housing sector. Equities will not like the news but bonds should. The further decline in this sector will give next week's existing and new home sales reports even more attention. The latest starts numbers also point to a decline in the residential investment component of third quarter GDP.”
US Leading Economic Indicators for August. Econoday stated: “The Conference Board's leading indexes are pointing to possible recession in the fourth quarter, not necessarily recession in the third quarter. The index of leading economic indicators fell a steep 0.5 percent in August on top of July's even steeper 0.7 decline. But these readings are aimed at predicting economic activity three to six months ahead. The index of coincident economic indicators, aimed at pegging current activity, slipped only very slightly by 0.1 percent and follows a no-change reading in July. These results suggest that the economy may be able to skirt recession in the ongoing quarter, perhaps a surprise given weakness in retail sales so far in the quarter… The text of the report warns that ongoing turmoil in the financial markets may offset the benefit from lower oil prices. It also warns that the marginal degree of economic growth gives little cushion for financial shocks. The report concludes that the economy may not see improvement until the second half of next year.”
US Philadelphia Fed regional business conditions index for Sept. Econoday stated: “Manufacturers in the Mid-Atlantic states report improved activity in September with the headline index jumping to 3.8 vs. -12.7 -- rare good news for the economic outlook. New orders rose to 5.6 vs. -11.9 in August with shipments at 2.6 vs. August's -3.3. The six-month outlook for both readings posted significant gains: 44.2 vs. 39.4 for new orders and 43.1 vs. 36.3 for shipments. Unfilled orders showed another month of worrisome contraction, -10.2 vs. -8.7, but manufacturers remain cautiously positive on the six-month outlook which rose slightly to 7.6.
Manufacturers are positive on the outlook for employment, at 15.5 vs. 13.5, with the current reading, at -0.9, showing very little change from August. Inventories really fell back in September, at -22.9 vs. -6.6 in welcome news that manufacturers are responding to initial signs in last month's economic data that inventories were building too quickly… A big positive in the report is substantial easing in inflation pressures. Prices paid fell nearly 25 points to 31.5 vs. 57.5 with prices received down more than 10 points to 15.5. The six-month outlook for prices paid fell more than 10 points to 41.7 though respondents, still hoping to keep asking prices firm, see little change for prices received, at 28.9 vs. 28.1. The dollar firmed in immediate reaction to the results which however hit during a sweep of talk that China Investment Corp. is increasing its stake in Morgan Stanley. Today's report offers hope that the ISM's manufacturing survey will show steady, not deteriorating, results for the month.”
How is next week’s calendar looking?
US Economic Calendar.US Existing Home Sales for August. After the July report, Econoday reported, “Existing home sales posted their best headline since February, up 3.1% to a 5.0 million annual rate in July. But the rise didn't cut supply on the market, which remains severely bloated at 11.2 months and up from 11.1 months in June and 10.8 months in May. Bloated supply continues to pressure prices which fell 1.3 percent in the month to a median $212.4 million for a 7.1 percent year-on-year decline. Falling home prices, and related increases in foreclosures, arguably pose the greatest risk to the economy.”US New Home Sales for August. After the July data was published, Econoday reported: “New home sales show no sign of improvement though supply on the market is coming down. New home sales came in at a lower-than-expected 515,000 annual unit rate in July and, importantly, sales for June and May were both revised lower by a combined 46,000 units. Year-on-year sales, despite an easy comparison, are down 35 percent… But new homes on the market fell 23,000 in the month to 416,000, pulling down the months' supply to 10.1 from 10.7 in June and 10.8 in May. The median sales price rose 0.3 percent in the month but is down 6.3 percent on the year. Yesterday's existing home sales report showed a 7.1 percent year-on-year decline in prices… The housing sector remains by far the economy's central weakness and data for July offer no substantial hope that conditions are bottoming. Perhaps the best break for the housing market would be improvement in the jobs market, but high levels of jobless claims and poor job readings in this morning's consumer confidence report point to continued trouble here too.”
US Durable Goods Orders for August. After July, Econoday reported: “Durable goods orders in July were surprisingly strong-even after discounting a surge in aircraft orders. And businesses are looking past current weakness in the economy, continuing to invest in the economy. Durable goods orders advanced 1.3 percent in July, matching the 1.3 percent surge in June. New orders in the latest month topped the market forecast for a 0.1 percent advance. Excluding the transportation component, new orders increased 0.7 percent, following a 2.4 percent jump in June. Strength was moderately widespread. July's gain was the largest since a 4.1 percent surge in December 2007. Apparently, exports are still providing support for the manufacturing sector along with moderate a uptrend in equipment investment in the U.S., despite a slowing in consumer spending… Strength in overall orders included primary metals, up 2.2 percent; machinery, up 4.6 percent; fabricated metals, up 0.4 percent; communications equipment, up 2.9 percent; and transportation equipment, up 3.1 percent… Weakness was in computers & electronics, down 1.3 percent, and electrical equipment, down 6.0 percent… Businesses are optimistic about a return in growth in demand, based on their willingness to sink dollars into capital goods. In July, nondefense capital goods orders jumped 6.3 percent, following a 2.6 percent drop in June. Even after excluding aircraft, nondefense capital goods orders rose 2.6 percent in July after a 1.3 percent gain in June… Turning to the key source data for business equipment in GDP, shipments of nondefense capital goods rose 1.6 percent in July after gaining 0.5 percent the previous month. Despite many economists seeing a near flat third quarter for GDP, the business equipment component is off to a good start… Year-on-year, new orders for durable goods declined to down 4.5 percent in July from down 0.7 percent the month before… But in recent months, exports are still providing support for the manufacturing sector along with a moderate uptrend in equipment investment in the U.S., despite a slowing in consumer spending. Today's numbers should nudge interest rates up and provide lift to equities. However, for rates, there is some damping movement from comments by Atlanta Fed President Lockhart, making dovish comments that inflation will be coming down due to lower oil prices and a slowing economy.”
US GDP estimate that is final for 2Q08. Last month, Econoday stated: “Revisions to second quarter GDP blew away any claims of recession for spring. The Commerce Department's first revision to second quarter GDP boosted the quarter's growth rate sharply to 3.3 percent from the initial 1.9 percent. The revised estimate for second quarter GDP beat the consensus forecast for a 2.7 percent gain. The upward revision was primarily due to upward revisions to exports and durables consumption. The second quarter jump followed a modest 0.9 percent increase the prior quarter… On the inflation front, the GDP price index was revised to an annualized 1.2 percent - up from the initial estimate of 1.1 percent. The market had expected no change from the initial estimate. The sharp easing in overall price index was technical in nature, caused by a spike in nominal imports cutting into nominal GDP growth. In contrast, the inflation for final sales of domestic purchases was revised up to a strong 4.3 percent, compared to the initial estimate of 4.2 percent Headline PCE inflation was unrevised at 4.2 percent and up from 3.6 percent in the first quarter. Core PCE inflation also was unchanged--coming at 2.1 percent from 2.3 percent in the first quarter… Year-on-year growth for real GDP eased to 2.2 percent in the second quarter-down from 2.5 percent in the first quarter… The bottom line is that the economy has been growing much better than expected despite the credit crunch. It is still likely that the economy will slow during the second half-but perhaps not as much as the Fed needs. Today's report likely boosted the odds of a Fed rate increase in January.”
As Econoday reports, the economy is still firing despite the problems on Wall Street. I would like to remind you that when the President spoke to the public on Friday, introducing the actions taken by Paulson, Cox and Bernanke, he said, “This is a pivotal moment for the American economy… we have to protect our nation’s economic health…” He then told the truth in saying that all this action was being taken to save the bankers on Wall Street when he said that the legislation would take the “bad mortgages” off the balance sheets of America’s banks. Strangely, he said that “the vast majority of Americans are continuing to pay their mortgages.” Then why is there a crisis in the American economy? The problem with this speech is that it was crafted to deceive, and that’s the problem with American leadership in politics, business and banking. If only the leaders would speak the truth! I’m absolutely certain that hard-working, heavily taxed Americans would accept it. Yes, there is a crisis in confidence, but it’s not over economics. This is a political and financial crisis and the source of much of it occupies the office of Secretary of the Treasury.
US Equity Markets Review
DJIA stockcharts.com chart
This most volatile week in memory, the DJIA and S&P 500 managed to eke out a flat position. The S&P 500 gained +0.27%, while the DJIA lost -0.34%. A massive gain on Thursday and Friday pulled the fat out of the fire.
On the week, there were 12 Dow components that were up and 18 down. The trading was simply too wild to sum up quickly.
NASDAQ Composite ino.com chart
NASDAQ Composite stockcharts.com chart
The NASDAQ Composite gained +0.56% this week, and the Russell 2000 small cap index gained +4.65%, which is probably the most honest reflection of the US market – that I see anyway. Most of the gurus see it differently. They talk about short-covering and all kinds of stuff; but I look at things like international markets, stocks that move despite having almost zero shorts, and the small cap index that the Interventionists play much less with.
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. If you want, add a couple like SNDK and ADBE:
AAPL MSFT GOOG QCOM RIMM CSCO INTC ORCL GILD EBAY
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
Sector ETF Summary for the US equity market
This week, there were 3 sectors up and 7 down. It really wasn’t a good week; but the emotions behind the turn and the magnitude of the problem that governments and central banks all over the world are stepping up to the plate in a coordinated way to defeat, are impressive to me. On Friday, there was just one down sector (XLP).
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.
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 many ETFs, 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
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:
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 |
Crude Oil ($WTIC closed the week up +1.48% this week to 102.75, after sinking to a low of 90.42 (although few saw that price).
Many of the oil-heavy hedge funds are on the ropes. Not even two hurricanes in succession could help. The bigger story was the Interventionist’s need to see the commodities in order to try to protect the total collapse of the banks.
It could be that $100 holds here as it is a psychological level, and these days the most important factor in the market is psychology.
The Energy ETF (XLE) gained +3.50% this week after gaining +2.98% the prior Friday. That’s a gain of over +6.5% in six days.
A week ago I wrote, “Which are the biggest holdings of the hedge fund speculators? Why it’s Exxon, Chevron and Schlumberger. These stocks (XOM, CVX and SLB) had a serious bounce from Thursday mid-day through Friday, and over the course of the week were up +2.5%, +5.0% and +3.4% respectively. Did you note the big losers this week were the international oil giants, CEO (-8.9%), PTR (-5.7%), both of China and Canada’s Suncor (SU -4.9%)… Alaska; drill, drill, drill. Strategic Petroleum Reserves being released. HB&B, with Treasury’s help and the Fed’s help, looking like it might help the speculators after all… Yes, I think there are a lot of politics intervening here.”
Same old, same old.
I have stated that I do like the higher risk profile junior oil and gas group. A week ago I wrote, “A week ago Friday, BNN TV interviewed the doyen of Calgary O&G analysts, the young Ms Joanne Hruska. Her top picks (high risk; high potential reward) were: Nuvista Energy (TSX:NVA); Orleans Energy (TSX:OEX); and Breaker Energy (TSX:WAV)… These tiny companies are light years removed from Big Oil, but they are also trading at 2x and 3x cash flow (vs 6x and 7x for CVX and XOM), and they have harder working, hungrier management as well as fairly strong finances. No is the time to study them. A year from now will be too late… I recommend you watch the Sept 12 taped Hruska interview if you have any interest in junior oils at all. Then on June 23 she made picks that were up almost +14% in less than 3 months. Back on April 14, she made picks that went up +36%. Is it any wonder why AstonHill Financial's Joanne Hruska is one of our favorites and one of the most popular guests on BNN?... There will be a lot of wealth grown in these oils in the next two to three years, I believe.”
Nothing this week changed that opinion.
Canada’s EnCana (ECA +6.2%/+5.7% on Friday) led the pack – at least on my monitor. China’s CNOOC (CEO +4.8%/+14.9% on Friday) had a spectacular end of the week.
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:
Table 3: Senior Basic Materials:
| Symbol | Close | 1Day Change |
1Day %Change |
1W %Change |
2W %Change |
4W %Change |
YTD %Change |
3M %Change |
6M %Change |
12M %Change |
Basic Materials (XLB +0.13% to 38.28) was up only a nickel, but the move on Friday (+5.75%), along with the Energy stocks (XLE +6.52%) should not be ignored. The Financials were supposed to be where the short covering happened, but the economic-sensitive Energy and Basic Materials carried their end of the load this week.
A week ago I started to zero in on the stocks that I think will do well in the new Bull market in this sector:
“But let’s look at what happened Friday, which was the day almost all the action took place. But first, here is what I wrote a week ago about my picks in this sector for the next Bull market. I could have added some Refiners and some Chemicals, but here is what I wrote:In this group, I have my eye on base metal miners RIO and TCK. I’d like BHP more if there was less of an oil component. I like some of the steelmakers too: MT, TS (in spite of making pipe for the oil drillers), GGB are ones to watch. The pulp & paper stock VCP is another. For goldminers, I like ABX, GG and KGC and silver royalty stock SLW. Of all these, I like the precious metals plus TCK, RIO and VCP the best.Drum roll please: ABX (+11.0%), GG (13.7%), KGC (+11.8%), SLW (+10.8%), TCK (+10.3%), RIO (+5.99%) and VCP (+4.65%). Average that group and you come up with a lift of +9.82% on Friday… Did this come as a shock? Not to those who read this linked article on Friday.
Afterwards, I wrote, “Drum roll please: ABX (+11.0%), GG (13.7%), KGC (+11.8%), SLW (+10.8%), TCK (+10.3%), RIO (+5.99%) and VCP (+4.65%). Let’s see what these stocks did this week: RIO (-2.1%), TCK (-2.0%), BHP (+2.0%), MT (-0.7%), TS (+2.0%), GGB (-1.3%), VCP (-0.2%), ABX (+18.7%), GG (+10.8%), KGC (+20.0%), and SLW (+3.7%).
The charts of the laggards here, plus most of the Oils, are looking good.
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 |
The Industrials (XLI -2.93% W/W) closed at 33.11, but enjoyed a gain of +2.25% on Friday.
A week ago I wrote here, “Btw, a week ago, I wrote about my picks in this sector, “ABB is another Industrial stock I like. It’s got a bit more to fall than BA, though.” Ergo, the ABB price came to me -6.0% this week. Thank you Mr. Market. I ask and you give. :-) This week, ABB was up +3.3% after a pop of +8.8% on Friday.
MMM gained +3.6% after a gain of +3.1% on Friday. Boeing (BA -5.6% W/W) was up +2.8% on Friday. It’s still not strong, but I like the stock at these prices for long-term accounts. Value Line reviewed the company this week.
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:
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 |
Consumer Discretionary (XLY -3.00% W/W) closed at 30.20.
There were some big moves here: Brunswick (BC +10.8% including +4.9% on Friday) was well up and JC Penny (JCP -8.0% W/W) was a big loser.
A week ago I wrote in this space, “JCP and CCL are two stocks I like for the next Bull.” BC is another. But, for CCL and BC, the oil price must stay below $100.
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 |
Consumer Staples (XLP -4.97% W/W to 27.70) had a significant losing week. This is known as the most defensive sector, which with the huge loss (ie, the worst sector performer) tells me there is a move into aggressive growth stocks.
A week ago I gave a forewarning of the weakness this week when I wrote in this space, “Interesting that XLP didn’t budge during Friday’s afternoon rally though.”
Whole Food (WFMI +12.8% W/W) had a terrific week. Walgreen (WAG -8.6%) did not.
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 |
The Healthcare sector (IYH) lost -1.95% to close at 64.41, which is about the gain it had a week earlier.
There was no big winner but NVO did gain +2.0% W/W. Most of the stocks on my Healthcare monitor were down. If it does look like a win for Obama, I’d have to think this sector (a GOP favorite) will be down more, like AET and UNH this week.
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 |
The Financials (XLF +5.62% to 22.38) was the best performing sector; a week ago, it was the worst. These markets are extremely volatile.
A week ago I wrote, “This weekend the Interventionists (Treasury Secretary, Fed Heads, and HB&B leaders) are huddled over what to do with Lehman Brothers, Washington Mutual, Wachovia, Merrill Lynch… take your pick. Politics as usual! .. The public will be told that whatever the decisions that group makes, it will be strictly on account of their duty to save Mom & Pop. Isn’t this stuff funny? Well, it would be if it wasn’t fraud.”
This weekend, after the Bank of America (BAC) take over of Merrill Lynch (MER), it looks like Wachovia Bank (WB) and Morgan Stanley (MS) are in merger talks. In my opinion, they are all bankrupt because of the unwinding of the credit derivatives, and these mergers are merely show-time. I would never invest in these companies. With the short-sell rule in effect, I gather that the SEC agrees with me.
The big winner this week was MER (+73.0% W/W). Can you imagine that? I guess that Messrs Merrill and Lynch et al are turning over in their graves. Citi (C +15.0% W/W was up +24.0% on Friday!). Lehman Brothers (LEH) is toast, having declared bankruptcy a few days after CEO Dick Fulds (a Fed of NY “A” Director btw) stated that his company had sufficient capital. That, folks, is why you cannot trust a cornered animal. These people are desperate. LEH just dropped -98.2% this week, including -56.7% on Friday.
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 |
Tech (XLK -3.52% to 20.85) and Semi-conductors (SMH +2.91% to 26.50) were headed in different directions. Of course, the SanDisk (SNDK +43.5%) move earlier in the week on the take-over news carried the industry group. Intel (IN TC) dropped -4.6% W/W.
For the tech stocks, Cisco (CSCO +3.5% W/W after being up +5.4% a week ago) was a leader. It was up +6.5% on Friday.
Oracle (ORCL +2.4% W/W) was also up. Several others were down, but the Friday action had them winners on the day and possibly into next week: INFY, QCOM, GOOG, CTSH, RIMM, and AAPL.
Apple (AAPL) had been down -7.0% a week earlier, but did have a turn on Friday. Maybe just some short-covering; but also maybe a renewed interest in the company? There was a low of 120.68 this week, which seems to be a test of the low going back to early 2007. Yes, it could be early, but if the Bull is starting, then AAPL (140.91) will be a “tell”. Get it? William Tell! (bad joke.)
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 -3.91% W/W) closed at 22.14. This sector has been very weak recently. Typically, it tracks Financials fairly closely.
Verizon (VZ -3.5% W/W but up +2.2% on Friday) and AT&T (T -3.5% W/W but up +4.6% on Friday) seemed to tell the story. If Financials go well here, so too should the telcos for a while anyway.
But, as I stated a week ago, “Like the most Financials, I think I’ll avoid the Telco sector when selecting companies whose stocks I want to buy for the next Bull market.”
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:
Utilities (XLU -4.06% to 35.00 W/W) was the second worst performing sector, next to Consumer Staples.
I have just started running this table to help you with the higher income utilities.
Here is the list of North American Utilities that I will be following more closely:
AEP D DUK ED EXC FE FPL NGG PCG PEG SO TRP
For study purposes, there is a good mix of electric (AEP, D, DUK, FE, FPL and SO), gas (NGG, TRP) and diversified (ED, EXC, PCG, PEG) utilities.
Table 12: US Utilities
Bonds & Yields Review
Table 10: US Treasury Yields
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 3 Month | 0.84 | 0.05 | 1.39 | 1.63 |
| 6 Month | 1.41 | 0.61 | 1.74 | 1.84 |
| 2 Year | 2.13 | 1.64 | 2.20 | 2.24 |
| 3 Year | 2.03 | 1.55 | 2.06 | 2.10 |
| 5 Year | 3.03 | 2.61 | 2.94 | 3.01 |
| 10 Year | 3.80 | 3.53 | 3.72 | 3.80 |
| 30 Year | 4.37 | 4.18 | 4.31 | 4.44 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 2.49 | 2.35 | 2.17 | 2.17 |
| 2yr AAA | 2.33 | 2.32 | 2.16 | 2.07 |
| 2yr A | 2.59 | 2.55 | 2.38 | 2.36 |
| 5yr AAA | 3.10 | 2.92 | 2.71 | 2.68 |
| 5yr AA | 3.09 | 2.85 | 2.73 | 2.80 |
| 5yr A | 3.41 | 2.96 | 2.82 | 2.99 |
| 10yr AAA | 3.76 | 3.55 | 3.41 | 3.54 |
| 10yr AA | 3.83 | 3.58 | 3.43 | 3.50 |
| 10yr A | 3.92 | 3.65 | 3.46 | 3.59 |
| 20yr AAA | 4.89 | 4.86 | 4.51 | 4.50 |
| 20yr AA | 4.99 | 4.90 | 4.57 | 4.56 |
| 20yr A | 4.73 | 4.78 | 4.76 | 4.78 |
| Maturity | Yield | Yesterday | Last Week | Last Month |
|---|---|---|---|---|
| 2yr AA | 4.40 | 4.31 | 3.98 | 4.01 |
| 2yr A | 8.10 | 7.47 | 6.69 | 4.79 |
| 5yr AAA | 4.73 | 5.32 | 4.78 | 4.80 |
| 5yr AA | 6.08 | 5.74 | 5.58 | 5.28 |
| 5yr A | 5.72 | 5.66 | 5.63 | 5.53 |
| 10yr AAA | 4.91 | 5.11 | 4.83 | 4.60 |
| 10yr AA | 6.19 | 6.70 | 6.19 | 5.84 |
| 10yr A | 6.30 | 6.40 | 6.44 | 6.12 |
| 20yr AAA | 5.98 | 5.82 | 5.70 | 6.04 |
| 20yr AA | 5.92 | 5.77 | 5.75 | 5.84 |
| 20yr A | 6.45 | 6.40 | 6.20 | 6.29 |
Bond prices peaked late in the day Thursday. I belive they are headed south from here.
In last week’s WIR, I warned, “Bond prices were stronger this week again, until Friday. On Friday it appeared the wheels were coming off the HB&B train. The little engine known as Lehman stopped running, and the DC and NYC trainmasters came running. That means probably a flood of new liquidity, higher gold prices, a lower USD, and higher bond yields to compensate for the risks. Ergo the hit to bond prices on Friday, especially in the short-end.”
The prices remained firm this week until Thursday. The prices cratered and yields zoomed. By Friday, the 20-year US Bonds (TLT) had sunk in price -1.02% after a hit on Friday of -3.17%, closing at 93.97, down from 94.94 a week ago.
For the week, the yields for the US Bills, Notes and Bonds had moved from +1.39% to +0.84% for the 3-month T-Bills, after hitting almost zero mid-week, and from +2.20 to 2.13% for the 2year Note. But the 5, 10 and 30-year yield lifted from 2.94 to 3.03 (with a mid-week low of 2.61), from 3.72 to 3.80 (with a mid-week low of 3.53), and from 4.31 to 3.37 (with a mid-week low of 4.18), respectively.
The TIP dropped -1.32% W/W to 103.66.
As I opined two weeks ago, “The bail-out of Fannie and Freddie (and other Financials) will now likely push rates higher in order to save the $USD from cratering.” There was a mid-week safe-haven move into bonds, which crushed yields, but by the end of the week, with Paulson’s cards on the table, the yields were soaring.
The thing is, Paulson is fooling nobody at this point. These people are desperate. However, my earlier point is that all central banks are now in lock-step, so I think capital will come out of bonds and move into equities, for purposes of seeking capital growth and avoiding the high inflation levels of the times.
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.
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 |
Three weeks ago, after Fannie and Freddie gained +36.8% and +60.5% respectively that week. I wrote:
“This wasn’t the work of serious traders or even speculators. This was the work of (i) HB&B, and (ii) gamblers. I say that because if you weren’t in the back room in the deal, then you had to be gambling. No one group in the public, and probably no one at Fannie/Freddie or the Admin/Treasury knows how much more ABCP crap will need to be written off. So, roll the dice… I am not interested.”
This week, the US Treasury agreed to put up $800 billion to buy “bad” mortgages. No longer is Fannie and Freddie caught in the middle. On Friday, after the new legislative bill was announced (and sure to pass) that will remove $800 billion in “bad mortgages, the shares of FNM soared +40.8% and those of FRE rocketed +66.7%. The weekly result was a gain of -19.6% for Freddie and a loss of -6.8% for Fannie.
The NYSE is still listing and trading these penny stocks because HB&B absolutely needs that. Else, HB&B is bankrupt the moment they have to write off the shares of Fannie and Freddie to zero along with the worthless preferred shares and debt. It’s all worthless, but Wall Street and DC cannot afford to admit it. That in itself is criminal.
As I stated a week ago, “I fear there is no morality left in America. What represents itself as having strong values is a charade. For two years, I have stated this was the case, that HB&B was toast. Now that all of us can see it is toast, we have to stand by while criminals masquerading as bankers, advisors, politicians, regulators and so forth are telling to our faces that the situation is not what we know it is – bankrupt.”
There are a slew of take-overs in the financial services industry, forced on the banks that cannot borrow capital because their pers reject the collateral that sits on their books but is in fact “bad” mortgages.
Do you recall my statements, “What will happen is what I wrote about months ago: there will be a slew of take-overs, where the next set of books and records will deliberately hide the fraud, and the regulators and prosecutors in America will give them all a Get Out Of Jail Free card – just because they’ve “saved Mom & Pop”.
I am not in the least impressed with the Bank of America purchase of Merrill Lynch or the possible deal where Wachovia takes over Morgan Stanley. They are all bankrupt, but seem to think they can buy time with a merger. At the end of the day, these deals only work because the Treasury Secretary is underwriting them with the People’s money. It looks like Goldman Sachs has been in internal upheaval for several weeks (do you recall when I opined that something serious was going on at Goldman?). Only the Treasury Secretary knows how these deals will be crafted. He’s the deal-maker.
Consumer Finance -USA -- Interactive Weekly Data Charts
Consumer Finance -USA -- Interactive Daily Data Charts
Commodities Review
The $CRB dropped just -0.12% W/W to 359.58, but the action happened on Friday after the Treasury Secretary announced his $1.2 billion bail-out plan for the banks. The market then spoke, pushing $CRB up +2.44% in a day.
I stated this opinion a week ago, “The longer the nonsense goes on in Washington, the more that people will want to hold commodities. Smart traders, however, will likely wait for the $USD strength to play out before jumping back to commodities.”
The mid-week collapse in the commodity prices seems to be Interventionist-inspired. The Friday rally was caused by traders who recognize a devalued USD.
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) gained +$1.50/bbl (+1.48%) to 102.50. On Friday, the contracts soared +5.34%.
Yes, ultimately I do feel that Crude Oil will drop to the 80-85/bbl level, which is still a rather large pull-back if it happens; but I’m certainly not negative on the shares of the high quality Oil & Gas industry companies, which I believe will lead the commodity price turn-around – as they usually do.
For $WTIC, the 50d MA is now 116.80, and the 200d MA is 111.82.
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
$GOLD regained strength this week, going up +$13.11/bbl, but it dropped -3.60% on Friday to close at 864.70 in the spot market.
For $GOLD, the 50d MA is now 863.18, and the 200d MA is 893.18. This is a negative technical picture, but I have opined that too much Fed money will lead to higher gold prices.
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
$SILVER gained +15.56% to 12.48.
For $SILVER, the 50d MA is now 14.86, and the 200d MA is 16.57.
As I wrote in this space a week ago, “I think $SILVER will bottom here before $GOLD. The Silver Crazies sense things can change quickly. As tortured and depressed as they are, having failed to jump ship when I shouted SOS, they are still alive. In fact, if you read kaimu closely, there is no killing a Silver Crazy.”
No sooner said than done: $SILVER rocketed +15.6% W/W.
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 plunged -6.11% to 1137.60.
$PLAT rallied +4.72% on Friday, from a low of 150.44.
The 50-day MA for $PLAT is 1550.44 and the 200-day MA is 1812.28.
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 reversed the goldbug action. The contracts lost -6.11% W/W. The good news is that they were up +4.72% on Friday.
The 50-day MA is now 326.47 and the 200-day MA is 412.59.
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.
$COPPER contracts lost -0.55% to 317.65.
The 50-day MA for $COPPER is now 340.71 and the 200-day MA is 355.00.
Not having been trained in Zug, I still have no feel for the copper market.
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 |
The Goldminer stocks continue to surge. ETFs like GDX (+12.10%) and XGD.TO (+11.67%) were strangely well ahead of the $XAU Philly Goldminers index (+5.45%) except for Friday. On Friday, $XAU was up +9.67% on the day, while GDX and XGD.TO were up +2.92% and +4.95%.
The investment seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the AMEX Gold Miners index. The fund generally invests in all of the securities which comprise the AMEX Gold Miners index in proportion to their weighting in the index. Under various circumstances, it may purchase a sample of stocks in the index. The index is comprised of publicly traded companies involved primarily in mining for gold and silver. The fund is nondiversified.
iShares CDN S&P/TSX Global Gold Index Fund (iShares CDN Gold Sector Index Fund) seeks to provide long-term capital growth by replicating, to the extent possible, the performance of the S&P/TSX Global Gold Index (the Index) through investments in the constituent issuers of such Index. The Index consists of securities of global gold sector issuers selected by S&P using its industrial classifications and guidelines for evaluating issuer capitalization, liquidity and fundamentals, with the weight of any one company capped at 25% of the market capitalization of the Index.
The latter description would be true except for the overpaid and market-challenged brainiacs who run the Toronto Exchange decided to put non-TSX or is that non-TSE listed stocks into the index. The TSE vs TSX name is another stupidity. But the list is too long to mention in this 100+ page report.
In any case, the Goldminers soared again this week. Well, the South African goldminers flew a little closer to the ground. But that’s to be expected from a country that cannot properly manage its electric utilities, coming up short the power needed to run the mines properly. AngloGold Ashanti (AU +2.5%) and Gold Fields (GFI +4.8%) were laggards. Meanwhile, Papua New Guinea’s LIHR (LIHR +52.1%), Peru’s Buenaventura (BVN +36.8%), Australia’s Harmony (HMY +22.3%), the KGB’s Kinross (KGC +20.0%), and Canada’s Barrick (ABX +18.7%), Agnico-Eagle (AEM +15.6%) and Goldcorp (GG +10.8%) were leaders. Actually, Kinross is Canadian, but its CEO Tye Burt just acts a lot like Chairman Putin, and they have mines in Russia.
Kinross is presently the butt of much sarcasm among traders, many of whom have written the Ontario Securities Commission and BC Securities Commission to investigate what appears to be a raw deal for the shareholders of Aurelian Resources (ARU).
A youtube video underscores the market’s disgust with Kinross, done brilliantly with tragicomedy.
Another depicts Hitler getting a margin call because of his gold investments. Too funny for words.
Last week in this space, I wrote:
After the close on Thursday, I felt that the Wall Street and Washington talks might reverse the Dollar:Gold hedge – at least for a couple days – so I wrote that it was time to buy Goldcorp (republished at Seeking Alpha). When I issued a SELL on Feb-28, GG was 44.71 and then it fell to under 25, so I thought I’d jump back in. People must have been listening because GG rocketed up +13.7% on Friday.
http://seekingalpha.com/article/95113-now-is-the-time-to-be-buying-goldcorp
I called a Buy on Goldcorp at US$26.42. GG now trades at $32.18, which is a gain of +21.8% just six days later. My enthusiasm for accurate and well-timed calls of late has led at least one member of this community to rightly call for fair coverage of the mistakes I make. I promised to be more sensitive to the losses traders have been taking.
There was a major sell-off of the South African goldminers on Friday, but I did not check out the reasons. Yes, the Fed has dictated higher margins are now required for futures trading, and that knocked the price of gold down, but the other miners mostly had a strong performance on Friday as there is a widespread belief that the Humungous Relief Programs of the Treasury Secretary are going to knock down the $USD and rally the commodities. Crude Oil has already made a significant move, and I for one believe that the price of gold and silver, despite being under control for now by the Fed, will soon soar further.
We’ll be watching closely. But, these are volatile markets, which require minute to minute monitoring, so they are not for the typical trader.
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
You cannot trade commodities that are priced in $USD without studying forex movement. The Forex market is a multi-trillion dollar marketplace every day, which dwarfs the size of the stock and bond markets. In this market, the Euro/USD is the highest volume trader. The $USD is a trade-weighted US Dollar index, we used to call the Morgan Dollar.
The current value of $USD is a mean value of rate fluctuations of six world currencies (Japanese yen, Euro, British pound, Canadian dollar, Swiss franc and Swedish krona) that each trade against the USD.
$USD=50.14348112 x (EUR)0.576 x (JPY)0.136 x (GBP)0.119 x (CAD)0.091 x (SEK)0.042 x (CHF)0.036
The Fed developed the $USD index based on a currency basket that coincides with free-floating (non-pegged) currencies of the countries that form the main US foreign trade turnover. The biggest part of US foreign trade falls to the Euro shares (57.6%), followed by Japan (13.6%), Great Britain (11.9%), Canada (9.1%), Sweden (4.2%) and Switzerland (3.6%). China and Hong Kong are excluded because the Yuan and HK Dollar are pegged to the USD.
In mathematical terms, the $USD index is calculated as the weighted geometrical mean fluctuation of these six currencies against the USD compared to 100.00, which is the price recorded in March 1973 when the floating rates system was introduced.
For example, today’s quotation of 77.67 means that USD value against the currency basket dropped by -22.33% compared to March 1973. During its history period, $USD reached the highest level of 165 and the lowest level of 70.70 in March of this year.
Following a July low of 71.31, the high this month has been 80.38, which shows the extreme volatility of the $USD.
Also, a strong economy leads to a healthy national balance sheet, which in turn leads to a strong currency. In relative terms, then, the US economy has been quite badly managed since 1973.
This week the $USD closed -1.65% lower at $0.7767 or if you are looking at the futures market at 77.67. Including the previous Friday, the $USD plunged -3.20% in six sessions, which is a huge drop, but consistent with traders’ beliefs that the Treasury Secretary has embarked on a program of reflation.
Reflation is different from inflation, which refers to the increased cost of goods and services. Reflation is money printing.
The 50-day MA for the $USD is 75.76 and the 200-day MA is 74.45.
My opinion is that the $USD has been rallying since the beginning of July because traders became cognizant of the economic slowdowns in Europe, Canada and Japan that were even worse than the US. In fact, recently the OECD increased its GDP forecast for the US and lowered it for the other countries, which then spiked the $USD. Now, however, the US reflation has been weakening the $USD, and I think it is headed for a test of the all-time low of 70.70, and may dip below that. The charts at StockCharts (links below) reflect that opinion.
If so, precious metal prices will continue to soar. This recent reversal in the price of gold is shown in these charts.
It’s only by looking at the capital marketplace as a continuum of prices, constantly studying price dynamics, will people ever have an understanding of trading.
The forex market is so much larger than the gold market that with these recent changes, I believe that traders will soon overwhelm the US Fed control over gold that exists presently as part of the newest reflation program of the US monetary authorities (Fed and Treasury). In other words, the US Treasury Secretary can no longer think the world doesn’t understand what he’s up to, and the implications of his decisions. We are just railing at the extent of his intervention into our markets, and the control he has managed to gain through the legislative process. I find it stunning that the same people who caused these problems are no anointed to save the world from the fall-out. It is insane. For Congress to allow it is mind boggling.
This goes to show that sometimes there is no wisdom in crowds.
Interactive Chart of Weekly U.S. Dollar Index:
Interactive Chart of Daily U.S. U.S. Dollar Index:
The Euro ($XEU) lifted +1.79% this week to close at 1.4484. With the previous Friday’s gain of +1.85%, the Euro has now lifted +3.64% in six sessions, which is truly an awesome move.
The Euro 50day MA is 1.5004 and the 200day MA is 1.5189.
A week ago, I wrote, “Europe is still saddled with a shockingly bad economy relative to the US, so I think the Euro has more downside. It was up Friday, but that was hot money at work. A couple days of rally maybe, but I wouldn’t count on more. Maybe this intervention from Washington and NYC will alter the landscape, but that too will likely pass.” Now, with the stunning $2 trillion reflation package, I have changed my mind. I now think the Euro will soar and the $USD fall.
Interactive Chart of Weekly Euro Dollar Index, priced in USD:
Interactive Chart of Daily Euro Dollar Index, priced in USD:
The Pound gained +2.18% W/W, closing at 1.8335. With the prior week’s gain, that’s a two-week gain of +3.92%, which is spectacular, particularly in light of the fact that the UK economy is presently in dire straits.
The 50-day MA and 200-day MA are at 1.8897 and 1.9573.
A week ago I wrote in this space, “A week ago I wrote in this space, I have to think that once the stories come out re the Fannie/Freddie bail-out and then the unreported (but soon to be reported) losses of HB&B US, the $USD will sink a bit and the Pound and Euro will rally a bit off its presently over-sold condition. I had it sized up right.” Yes, each week I have had it right.
This week’s move was so much more than anybody could have imagined. The prior week was caused by the $200 billion bail-out of Fannie and Freddie, plus some $135 billion post-bankruptcy funny stuff going down between the Fed, Lehman and JP Morgan, which I pointed out was totally conflicted in that JPMorgan head Jamie Dimon and Lehman head (headless or ex-head) Richard (“Gorilla”) Fuld are two of the six key Fed of NY directors.
But the Pound had been plummeting for three solid weeks before the rally, and so the momentum of the rally was not unexpected. It is akin to bouncing a ball off the ground; the harder you throw it into the ground, the faster it moves in reverse.
But, the move has been strong and far, and the UK economy is what some economists and politicians are calling “sick”, so don’t expect the Pound to soar too high right away.
Weekly British Pound Index:
Daily British Pound Index:
Weekly Japanese Yen Index:
The Japanese Yen ($XJY) gained +0.52% this week, closing at 93.15.
A week ago I wrote in this space, “A week ago I wrote in this space, The Yen started down against the USD after July 15, but has now rallied back for two weeks. The Euro and Pound have not. So, it’s either the Yen track back against the others or the others reverse their fall and have a bit of a rally here. I think the latter, but remember; I’m not Bernanke, who knows these things. I think I was right there too.”
So this week, the Yen gained +0.52% and the Pound and Euro were up +2.18% and +1.79% respectively. I could say respectfully, but that would be a bad joke.
With the weakness ahead for the $USD next month, I think the Yen will continue to rally. A stronger Yen and weaker USD hurts the Japanese exporters, like Toyota, Honda, Nissan. Same for Mercedes and BMW in Germany. So, I am certain that watching Treasury Secretary Paulson do his thing this week, the boardrooms in these auto manufacturers were pretty much depressed.
The Yen’s 50-day MA is 92.63 and the 200-day MA is 94.04.
Daily Japanese Yen Index:
The Loonie (Cdn Dollar) gained +1.29% to 95.45. With the move on the previous Friday, the six-session gain in the Loonie has been +2.84%, which, again, is stunning. This hurts tourism and exporters in Canada, but brings in more money to the miners and oilers, and speaking of oilers, to the NHL teams in Canada.
The 50-day MA and 200-day MA is at 95.77 and 98.45 respectively.
Weekly Canadian Dollar Index:
Daily Canadian Dollar Index:
Here is the China Yuan (CNY) chart.
International Equity Markets Review
There were softer prices this week in the global equity markets. Most of these markets are sitting right on crucial technical support levels, appearing ready to tumble once more. In fact, had there not been a remarkable turnabout on Thursday afternoon at DJIA=10462 that was extended through the close on Friday at 11388.44, I would definitely be writing today about the last stumble in this 2007-2008 Bear market.
UK FTSE moved down from 5416.7 to 5311.3 German DAX moved down from 6234.9 to 6189.5 Aussie All-Ords moved down from 4957.1 to 4840.7 Shanghai Composite moved down from 2079.7 to 2075.1 HK Hang Seng moved down from 19352.9 to 19327.7 India’s BSE 30 moved down from 14000.8 to 19327.7 Japan’s Nikkei 225 moved down from 12214.8 to 11920.9
Traders can look at the glass as half full or half empty. That’s why there is a buyer and a seller. Presently, there is an overwhelming sense of emptiness, but at mid-day Thursday, I switched to the Bull camp. But it won’t take long to see if the traders in these international markets agree with me.
As you know, I don’t mind flying my own plane if that’s what I feel is necessary. Call it intuition plus a healthy respect for the endless intervention that central banks and a banker-cum-Treasury Secretary can impact on capital markets. The expression used to be ‘Don’t fight the Fed’, but now it’s ‘Don’t fight the Fed-Treasury tag team’. I think these people have told the President that the $USD is going to fall from 80 to 70 because of this rescue package, but that McCain can ‘Blame it on Obama’. A 70-cent Dollar will boom the equity markets. Watch Russia. Watch Brazil. Watch India. Watch Australia. Watch Canada. Watch Gold. Watch Oil (should make George happy). Watch XLE. Watch XLB. Watch XLI. Watch XLK.
But, if you plan on watching XLF Financials, don’t expect too much. Their problems cannot be fixed with $2 trillion unless Congress expects to write that check monthly. The mind boggles. And don’t expect that by merging two technically bankrupt banks that one healthy bank will result. That kind of magic only works on a Las Vegas stage.
And, please don’t ask me to justify the Bull on the basis of economics or corporate fundamentals. Markets are prices, and sometimes prices don’t operate the way one might expect. In 1974, only two people in a hall full of technical analysts called the bottom of the 1973-74 Bear – it was an awesome Bear. Those people were Ian Notley and Joe Granville. Sadly my friend Ian passed a few months ago. But there was Joe popping up on Financial Entertainment TV with his call that a new Bull market had started in mid-July. Joe, I believe, was impressed at the action of the US monetary authorities in paying for the JPMorgan-Bear Stearns merger. That action, however, was a pimple on the head of an elephant that Treasury Secretary Paulson laid on us this week, which was combined with a series of strikes by the Fed and the SEC. What is happening at this point, particularly Friday (announcement day) and mid-day Thursday (point of agreement within the White House, whereupon everybody involved ran for the phones to call their broker), is stupendous. Frankly there are no words to describe it. This is history. And my point is that, having been in the trenches I know the mind-set: In for a dime; in for a dollar. Paulson cannot afford to fail. The $USD is cooked, unfortunately. The new Bull has started.
We won’t have much of a Bull without the Financials and the Consumer Discretionaries, but like the end of the Bears in 1974 and 1978, which the last time the market encountered stagflation, we’ll muddle through it, probably hitting DJIA=15000 sometime in 2011.
The biggest winners will be BRIC – Brazil, Russia, India and China, I think. So, watch the Cara 100 companies that are non-Financial and non-oil related Consumer Discretionary in those markets.
Some of you will disregard my advice because you will hear from others that the rally that started mid-day Thursday was merely short-covering. Yes, there was short covering, but I totally disagree that's all the market is about at this point. Short covering did not send these international markets on moon-shots. In fact, looking at a list of some of the best performers in NY, many had negligible shorts to cover.
Anyway, you have my view. People didn't like it when I was bearish; now I am sure to be criticized because I turned bullish. Remember, bullish or bearish is only a state of mind. If you get it right, your strategies and tactics are easier to employ. In a Bull, you hold longer. You expect to see a pattern of higher highs and higher lows. But, in any case, you stay vigilant.
There are 16 country index charts from StockCharts.com (with their formal approval btw) 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. This will come after we switch to the Drupal platform this month.
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 |
A week ago, the BRIC country market ETFs were smashed. Brazil (EWZ -1.02%), Russia (RSX -4.53%) India (IFN -2.69%), and China (GXC -6.2%) got hit. But this week, things changed: EWZ was down -0.7% W/W, but rocketed up +15.1% on Friday; RSX was up just +0.1% W/W, but rocketed even higher (+17.0%) on Friday; IFN lost -2.0% W/W and gained +1.9% on Friday; while GXC gained +5.9% W/W including a gain of +10.8% on Friday. It will be interesting to see if India follows suit this week.
On the previous Friday, Russia (RSX) bounced back +8.74%, which is the reason that prices were down until this Friday.
A week ago and the week before that I wrote in this space, “Most of the others did rather well. But I still believe that the equity markets will return to good health only if, as and when the crapola on the books masquerading as investment paper is written off, and HB&B is restructured or fails and is replaced by stronger, prudently managed banks… What is going on today is a real tragedy; Wall Street insiders – the ones who created the problems – are being saved by their friend Henry Paulson. Taxpayers should revolt.”
Now Paulson has shifted the crapola directly to the taxpayer, so they are infuriated. However, in return he will give them a Bull market, and nothing shuts up people faster than the wealth effect, as these Bull markets are referred to.
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 (-0.30%), S&P 500 (+0.27%), NASDAQ Composite (+0.56%), and Russell 2000 small cap index (+4.65%) were stronger. But the rally on Friday lifted these indexes by +3.34%, +4.03%, +3.40% and +4.15% respectively.
The big movers in the DJIA this week were: C +15.0% (+24.0% on Friday); JPM +14.3% (+16.8% on Friday); BAC +11.1% (+22.6% on Friday). Do you get the picture here?
The losers were: AIG (-68.3% W/W but up +43.1% on Friday); MSFT -8.9%, but also down -0.4% on Friday; and AA -6.6%, but up +3.6% on Friday.
AIG, now at $3.85 even with the +43% boost on Friday, is a penny stock that the was removed from the DJIA index on Friday at the close.
Kraft Foods (KFT) has replaced it, starting Monday morning.
Kraft Food [GICS 30, Dow 30]
(KFT: Google Finance file)
(KFT: Yahoo Finance file)
(KFT: StockChart chart)
(KFT: Billcara2 chart)
(KFT: ADVFN Financial Data)
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 AXP BA BAC C CAT CVX DD DIS GE GM HD HPQ IBM INTC JNJ JPM KFT KO MCD MMM 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 one DJIA component, Boeing (BA), which is a Cara 100 company.
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Sep. 19: next one is due Dec. 19)
Value Line concluded, “These shares are down about 15% since our June report, and, in fact, are over 40% lower than the high set in mid-2007. We trace this weakness to concern that the global financial sluggishness is likely to end the commercial cycle. Even so, patient investors may well be interested in the wide appreciation we project, based on likely solid profit growth.”
With banks being re-liquified by the world’s central bankers, I think Boeing will miss most of the problems. I like the stock at these levels. My simple little system gave it a Buy at the close on Friday ($59.76). The low earlier this week was 54.20 and there were traders writing puts, and buying calls at that extreme. But I think most would have bought in at an average price of 58. With put writes, the basis would have been in the low 50’s.
How good is that 59.76 Buy Alert price? Boeing’s 2008 earnings are forecast by Value Line at $5.75, with 2009 at $6.75, and probably about $7.50 for 2010. The dividend has grown each year from $0.77 in 2004, $1.00 (2005), $1.20 (2006), $1.40 (2007), $1.60 (2008), and likely $1.80 (2009) and $2.00 (2010). In a Bull market, I think you can get a PE of 20x for BA, which would project a $150 price in 2010.
I like this company’s growth rate for revenues, cash flow, earnings and dividends. I like the dividend yield. The company is financially strong with an A++ rating by Value Line, which I like. I like the huge Returns On Shareholder Equity, the share buy-backs, and the much higher operating margins earned under management that I like. James McNerney is one of my favorite CEOs. I dropped MMM from the Cara 100 after McNerney departed for Boeing. MMM’s financial performance has not been the same since, and Boeing’s has improved. Really, there are few metrics I don’t like.
There are issues, however. Nothing is a safe bet. There is a labor problem and there are numerous delays in getting component delivery for the hugely successful Dreamliner program. It is not being produced on time or within the original cost budget.
This week, however, I’m not going quibble. I think Boeing (BA) should be a prime candidate for your 2008-2012 Bull market. I think your returns will exceed +30% per year for the next three years.
The Dow 30 Company links in chronological order of next reports. I added the Google Finance links, which are superb.
AT&T [GICS 50, Dow 30]
(T: Google Finance file)
(T: Yahoo Finance file)
(T: StockChart chart)
(T: Billcara2 chart)
(T: ADVFN Financial Data)
(T: Value Line Report Jun. 27: next one is due Sep. 26)
Verizon [GICS 50, Dow 30]
(VZ: Google Finance file)
(VZ: Yahoo Finance file)
(VZ: StockChart chart)
(VZ: Billcara2 chart)
(VZ: ADVFN Financial Data)
(VZ: Value Line Report Jun. 27: next one is due Sep. 26)
Procter & Gamble Co. [GICS 30, Dow 30, Cara 100]
(PG: Google Finance file)
(PG: Yahoo Finance file)
(PG: StockChart chart)
(PG: Billcara2 chart)
(PG: ADVFN Financial Data)
(PG: Value Line Report Jul. 4: next one is due Oct. 3)
Home Depot [GICS 25, Dow 30]
(HD: Google Finance file)
(HD: Yahoo Finance file)
(HD: StockChart chart)
(HD: Billcara2 chart)
(HD: ADVFN Financial Data)
(HD: Value Line Report Jul. 4: next one is due Oct. 3)
General Electric [GICS 20, Dow 30, Cara 100]
(GE: Google Finance file)
(GE: Yahoo Finance file)
(GE: StockChart chart)
(GE: Billcara2 chart)
(GE: ADVFN Financial Data)
(GE: Value Line Report Jul. 11: next one is due Oct. 10)
Hewlett-Packard [GICS 45, Dow 30]
(HPQ: Google Finance file)
(HPQ: Yahoo Finance file)
(HPQ: StockChart chart)
(HPQ: Billcara2 chart)
(HPQ: ADVFN Financial Data)
(HPQ: Value Line Report Jul. 11: next one is due Oct. 10)
IBM [GICS 45, Dow 30]
(IBM: Google Finance file)
(IBM: Yahoo Finance file)
(IBM: StockChart chart)
(IBM: Billcara2 chart)
(IBM: ADVFN Financial Data)
(IBM: Value Line Report Jul. 11: next one is due Oct. 10)
Intel [GICS 45, Dow 30, Cara 100]
(INTC: Google Finance file)
(INTC: Yahoo Finance file)
(INTC: StockChart chart)
(INTC: Billcara2 chart)
(INTC: ADVFN Financial Data)
(INTC: Value Line Report Jul. 11: next one is due Oct. 10)
Alcoa [GICS 15, Dow 30]
(AA: Google Finance file)
(AA: Yahoo Finance file)
(AA: StockChart chart)
(AA: Billcara2 chart)
(AA: ADVFN Financial Data)
(AA: Value Line Report Jul. 18: next one is due Oct. 17)
Dupont [GICS 15, Dow 30]
(DD: Google Finance file)
(DD: Yahoo Finance file)
(DD: StockChart chart)
(DD: Billcara2 chart)
(DD: ADVFN Financial Data)
(DD: Value Line Report Jul. 18: next one is due Oct. 17)
Merck [GICS 35, Dow 30]
(MRK: Google Finance file)
(MRK: Yahoo Finance file)
(MRK: StockChart chart)
(MRK: Billcara2 chart)
(MRK: ADVFN Financial Data)
(MRK: Value Line Report Jul. 18: next one is due Oct. 17)
Pfizer [GICS 35, Dow 30]
(PFE: Google Finance file)
(PFE: Yahoo Finance file)
(PFE: StockChart chart)
(PFE: Billcara2 chart)
(PFE: ADVFN Financial Data)
(PFE: Value Line Report Jul. 18: next one is due Oct. 17)
United Technologies [GICS 20, Dow 30, Cara 100]
(UTX: Google Finance file)
(UTX: Yahoo Finance file)
(UTX: StockChart chart)
(UTX: Billcara2 chart)
(UTX: ADVFN Financial Data)
(UTX: Value Line Report Jul. 25: next one is due Oct. 24)
Caterpillar [GICS 20, Dow 30]
(CAT: Google Finance file)
(CAT: Yahoo Finance file)
(CAT: StockChart chart)
(CAT: Billcara2 chart)
(CAT: ADVFN Financial Data)
(CAT: Value Line Report Jul. 25: next one is due Oct. 24)
Coca Cola [GICS 30, Dow 30]
(KO: Google Finance file)
(KO: Yahoo Finance file)
(KO: StockChart chart)
(KO: Billcara2 chart)
(KO: ADVFN Financial Data)
(KO: Value Line Report Aug 1: next one is due Oct. 31)
Wal-Mart [GICS 30, Dow 30, Cara 100]
(WMT: Google Finance file)
(WMT: Yahoo Finance file)
(WMT: StockChart chart)
(WMT: Billcara2 chart)
(WMT: ADVFN Financial Data)
(WMT: Value Line Report Aug. 8: next one is due Nov. 7)
Disney [GICS 25, Dow 30, Cara 100]
(DIS: Google Finance file)
(DIS: Yahoo Finance file)
(DIS: StockChart chart)
(DIS: Billcara2 chart)
(DIS: ADVFN Financial Data)
(DIS: Value Line Report Aug. 15: next one is due Nov. 14)
3M Company [GICS 20, Dow 30, Cara US 100 June 25-06]
(MMM: Google Finance file)
(MMM: Yahoo Finance file)
(MMM: StockChart chart)
(MMM: Billcara2 chart)
(MMM: ADVFN Financial Data)
(MMM: Value Line Report Aug. 15: next one is due Nov. 14)
American International Group [GICS 40, Dow 30]
(AIG: Google Finance file)
(AIG: Yahoo Finance file)
(AIG: StockChart chart)
(AIG: Billcara2 chart)
(AIG: ADVFN Financial Data)
(AIG: Value Line Report Aug. 22: next one is due Nov. 21)
American Express [GICS 40, Dow 30]
(AXP: Google Finance file)
(AXP: Yahoo Finance file)
(AXP: StockChart chart)
(AXP: Billcara2 chart)
(AXP: ADVFN Financial Data)
(AXP: Value Line Report Aug. 22: next one is due Nov. 21)
Bank of America [GICS 40, Dow 30]
(BAC: Google Finance file)
(BAC: Yahoo Finance file)
(BAC: StockChart chart)
(BAC: Billcara2 chart)
(BAC: ADVFN Financial Data)
(BAC: Value Line Report Aug. 22: next one is due Nov. 21)
Citigroup [GICS 40, Dow 30]
(C: Google Finance file)
(C: Yahoo Finance file)
(C: StockChart chart)
(C: Billcara2 chart)
(C: ADVFN Financial Data)
(C: Value Line Report Aug. 22: next one is due Nov. 21)
JP Morgan [GICS 40, Dow 30]
(JPM: Google Finance file)
(JPM: Yahoo Finance file)
(JPM: StockChart chart)
(JPM: Billcara2 chart)
(JPM: ADVFN Financial Data)
(JPM: Value Line Report Aug. 22: next one is due Nov. 21)
Microsoft [GICS 45, Dow 30]
(MSFT: Google Finance file)
(MSFT: Yahoo Finance file)
(MSFT: StockChart chart)
(MSFT: Billcara2 chart)
(MSFT: ADVFN Financial Data)
(MSFT: Value Line Report Aug. 22: next one is due Nov. 21)
General Motors [GICS 25, Dow 30]
(GM: Google Finance file)
(GM: Yahoo Finance file)
(GM: StockChart chart)
(GM: Billcara2 chart)
(GM: ADVFN Financial Data)
(GM: Value Line Report Aug. 29: next one is due Nov. 28)
Johnson & Johnson [GICS 35, Dow 30, Cara 100]
(JNJ: Google Finance file)
(JNJ: Yahoo Finance fle)
(JNJ: StockChart chart)
(JNJ: Billcara2 chart)
(JNJ: ADVFN Financial Data)
(JNJ: Value Line Report Aug. 29: next one is due Nov. 28)
McDonalds [GICS 30, Dow 30, Cara 100]
(MCD: Google Finance file)
(MCD: Yahoo Finance file)
(MCD: StockChart chart)
(MCD: Billcara2 chart)
(MCD: ADVFN Financial Data)
(MCD: Value Line Report Sept. 5: next one is due Dec. 5)
Chevron Corp [GICS 10, Dow 30]
(CVX: Google Finance file)
(CVX: Yahoo Finance file)
(CVX: StockChart chart)
(CVX: Billcara2 chart)
(CVX: ADVFN Financial Data)
(CVX: Value Line Report Sep. 13: next one is due Dec. 12)
ExxonMobil [GICS 10, Dow 30, Cara 100]
(XOM: Google Finance file)
(XOM: Yahoo Finance file)
(XOM: StockChart chart)
(XOM: Billcara2 chart)
(XOM: ADVFN Financial Data)
(XOM: Value Line Report Sep. 13: next one is due Dec. 12)
Boeing Co [GICS 20, Dow 30. Cara 100]
(BA: Google Finance file)
(BA: Yahoo Finance file)
(BA: StockChart chart)
(BA: Billcara2 chart)
(BA: ADVFN Financial Data)
(BA: Value Line Report Sep. 19: next one is due Dec. 19)
Wrap-up:
Today was a tough day. The weather was beautiful and I had to work. I just moved to the beach adjacent to the Sandals resort. I have an ocean-front. Then my neighbor announced he was having a 30th birthday party and had invited 165 people.
At least 200 showed up. Boats passing by dropped in; I’m sure he had over 200. This is 60 steps in front of my work station (I counted the steps). Huge amps on the beach, open bar, prime beef BBQ, even a massage tent with free professional massages on the beach – just like Sandals next door.
Saturday afternoon and evening, I would run out and meet some neighbors, have another rum drink, run back and type some more, and then back to the party, and back and back. This routine went on for eight or nine hours. At one point last evening – true story – it took me almost 30 seconds to find the quotation-mark key on my keyboard. So, I decided to go to bed and finish in the morning.
I had to get this WIR done if I am to go deep-sea fishing with my friends now, and you know I never miss an obligation.
Life is tough.
You know, at this party I met people from every part of the world, in all kinds of jobs or non-jobs as the case may be. All of them were talking about the market crash. That’s why I think the crisis is over for prices. What happens behind the scenes from this point will be “out of sight, out of mind”.
Many of my colleagues in the market will disagree, but you know, I’ll bet none of them had as much fun in the past 18 hours as I have, or worked as hard as I have either.
Btw, one of you dropped in. Called from Atlantis to say he was here for a week, and wanted to meet. He’s a pro trader with a 50-person prop desk in NYC. Says he’s making money now, and that my blog helps him a lot. Hopefully, he’ll tell you about our meeting on Friday from 6 to 11 at the British Colonial Hilton. I’m sure he has lots to say.
Enjoy your day. I know I will.
Posted by Posted by Bill Cara on September 21, 2008 08:53:34 AM | Category: Cara Week in Review