Thursday, August 26, 2010

bullish sentiment is lowest since March 2009

Bullish sentiment fell 9.4 percentage points to 20.7% in the latest AAII Sentiment Survey. This is the lowest that expectations for stock prices to rise over the next six months have been since March 5, 2009. The historical average is 39%.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, rose 2.4 percentage points to 29.8%. The historical average is 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 7.0 percentage points to 49.5%. This is a seven-week high for pessimism. The historical average is 30%.

As stated above, bullish sentiment is at its lowest level since March 5, 2009, the approximate bottom of the last bear market. Short-term market bottoms also occurred when bullish sentiment fell to 22.2% on November 5, 2009, and 20.9% on July 8, 2010. However, bearish sentiment was above 55% on all three of those dates, versus its current reading of 49.5%.

[via libertarians_2000]

Monday, August 23, 2010

rising rates and the stock market

With core inflation in the U.S. at its lowest level in decades and concern over the economic impact of the credit crisis in Europe, the Federal Reserve may continue the holding pattern that has been in place since December 2008 into next year before raising interest rates.

Whether interest rates begin rising this year or next, many equity investors are already concerned that a shift toward higher rates from such exceptionally low levels might derail a market recovery.

Historically, periods of rising rates have been associated with poor equity performance. But this is not always the case, particularly when rates are just beginning to rise after recessions.

... It is not that unusual, however, for stocks to perform well at least in the early stages of rising rate cycles because “investors are more comforted by improving economic fundamentals and corporate earnings than they are worried about rates at that point,” says Brian Rogers, T. Rowe Price’s chairman and chief
investment officer.

“A rising rate environment tends to be negative for stocks later in the cycle when the Fed tries to slow the pace of economic growth to ease inflationary pressures. That’s probably an issue for 2012 or later.”

Also, the initial rate hikes will comein the wake of the worst financial crisis since the 1930s, so Mr. Rogers adds, “Investors will be relieved because it will signal improving economic conditions globally.”

Indeed, in the nine instances since 1954 when the Federal Reserve first raised the federal funds rate following a recession, the S&P 500 Index recorded an average gain of almost 14% in the subsequent 12 months, rising in all but one of these periods.

-- T. Rowe Price Report, Summer 2010

Friday, August 20, 2010

investing via satellite

As part of a growing trend among hedge funds and Wall Street firms, Cold War-style satellite surveillance is being used to gather market-moving information.

The surveillance pictures are often provided by private- sector companies like DigitalGlobe in Colorado and GeoEye in Virginia, which build and launch satellites and take pictures for US government intelligence agency clients and private-sector satellite analysis firms.

That means there are two links in the chain before the satellite data gets to Wall Street—a satellite firm takes the pictures and sells them to an analysis firm, which scrutinizes the images and sells the aggregated data to hedge funds and Wall Street analysts.

As an example of how Wall Street getting in on this techhology, the UBS Investment Research issued its earnings preview for Wal-Mart's second quarter, which publicly revealed that UBS had been using used satellite services of private-sector satellite companies to gather the comings and goings of the parking lots at Wal-Mart stores. “UBS proprietary satellite parking lot fill rate analysis points to an interesting cadence intra-quarter and potential upside to our view,” the report read.

UBS analyst Neil Currie had been looking at satellite data on Wal-Mart during each month of 2010, and he’d concluded that there was enough correlation between what he was seeing in the satellite pictures of Wal-Mart’s parking lots to the big-box chain’s quarterly earnings, that he was ready to incorporate that data into UBS’ report on Wal-Mart, which releases its earnings on Tuesday.

By counting the cars in Wal-Mart’s parking lots month in and month out, Remote Sensing Metrics analysts were able to get a fix on the company’s customer flow. From there, they worked up a mathematical regression to come up with a prediction of the company’s quarterly revenue each month.

And what the satellite analysts found surprised the UBS team, which was already well versed in the ins and outs of Wal-Mart’s business.

In the second quarter, the satellite analysts had spotted a surge in traffic to Wal-Mart stores during the month of June, which was 4 percent ahead of the same month a year ago. That, they speculated, was driven by an aggressive Wal-Mart price rollback marketing campaign that brought a lot more customers into the stores that month.

Because they could see that traffic showing up in the parking lots, the satellite analysts came up with a much different projection for the company’s quarterly earnings in the second quarter than the UBS team did using traditional methods.

UBS predicts that Wal-Mart’s second quarter sales will be up from the first quarter, but down a percent against the same period a year ago. But the satellite analysts figure that the number will come in 0.7 percent higher—not lower—based on the traffic surge they saw in the parking lots.

[via Value Man @chucks@angels]

weath inequality in America

15 Mind-Blowing Facts About Wealth And Inequality In America

The rich are getting richer and the poor are getting poorer. Cliché, sure, but it's also more true than at any time since the Gilded Age.

While politicians gloat about our "recovery," our poor are getting poorer, our average wages are still falling behind inflation, and social mobility is at an all-time low.

But, yes, if you're in that top 1%, life in America is grand.

1. The gap between the top 0.01% and everyone else hasn't been this bad since the Roaring Twenties

2. Half of America owns only 2.5% of country's wealth. The top 1% owns a third of it.

3. Half of America has only 0.5% of America's stocks and bonds. The top 1% owns more than 50%!

And so on..

[via pbo @chucks_angels]

(see also the rich get richer)

*** 8/31/12

Though the correlation isn't perfect, it's clear that -- by these measures -- as disparity between people grows, social health deteriorates.

To prove his point, Wilkinson also introduced a graphic that American residents could better relate to. Using the same measure of income disparity, he plotted how trust deteriorates in individual states when income disparity is high.

[if you think about, it makes sense]

*** 9/12/12


The wealth gap between the richest Americans and the typical family more than doubled over the past 50 years.

In 1962, the top 1% had 125 times the net worth of the median household. That shot up to 288 times by 2010, according to a new report by the left-leaning Economic Policy Institute.


That trend is happening for two reasons: Not only are the rich getting richer, but the middle class is also getting poorer.

Most Americans below the upper echelon have suffered a decline in wealth in recent decades. The median household saw its net worth drop to $57,000 in 2010, down from $73,000 in 1983. It would have been $119,000 had wealth grown equally across households.

The top 1%, on the other hand, saw their average wealth grow to $16.4 million, up from $9.6 million in 1983. This is due in large part to the growing income inequality divide, as well as the sharp rise in value of stocks over the period.

[so much for trickle down]

Thursday, August 19, 2010

I don't trust marketocracy

I was sitting on a big gain on AIPC as it got bought out by Ralcorp. I had 3000 shares which I hadn't sold yet, priced at 54 which was the buying price of Ralcorp.

Suddenly on July 23, the AIPC shares disappeared. But no sign of the money! I figure marketocracy owes me $162,000!

(Good thing this isn't real money :)

Stay tuned to see if the money ever shows up.

Monday, August 09, 2010

The Fiscal Illusion Effect

As the debate rages over letting some of the Bush tax cuts expire, Republicans have raised their starve-the-beast theory from its coffin. They insist that government (the "beast") can be shrunk by cutting taxes: The less money government has, the less government there can be.

Time has not been kind to this theory. The beast never did better than when tax-cutting Republicans were in charge.

The fiscal grown-ups who used to run the Republican Party didn't cotton to reducing taxes before spending in normal times. But Ronald Reagan offered the far more pleasurable doctrine of just cutting taxes.

"Well, if you've got a kid that's extravagant, you can lecture him all you want to about his extravagance," Reagan said in his 1980 campaign. "Or you can cut his allowance and achieve the same end much quicker."

No one turned the starving-beast theory into baloney faster than Reagan, who followed his tax cuts with a spending binge fueled by massive borrowing. What he did, in effect, was cut the extravagant kid's allowance and then hand him 10 credit cards.

The national debt doubled under Reagan. It doubled again under George W. Bush, who followed the same reckless path. (At least Reagan subsequently raised taxes in the face of soaring deficits.)

Frustrated fiscal conservatives - a group that includes Democrats, Republicans and, above all, independents - are assessing another tool for imposing budgetary discipline: the "Fiscal Illusion" effect. Totally contrary to starve-the-beast, it promotes raising taxes as the better way to contain government.

Friday, August 06, 2010

$1.47 trillion

New estimates from the White House on Friday predict the budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends.

That's actually a little better than the administration predicted in February.

The new estimates paint a grim unemployment picture as the economy experiences a relatively jobless recovery. The unemployment rate, presently averaging 9.5 percent, would average 9 percent next year under the new estimates.

The Office of Management and Budget report has ominous news for President Barack Obama should he seek re-election in 2012 — a still-high unemployment rate of 8.1 percent. That would be well above normal, which is closer to a rate of 5.5 percent to 6 percent. Private economists don't think the unemployment rate will drop to those levels until well into this decade.

Thursday, August 05, 2010

The Giving Pledge

MORE than three dozen billionaires, including well-known philanthropists such as David Rockefeller and New York City mayor Michael Bloomberg and less familiar big donors such as Lorry Lokey, founder of Business Wire, have promised at least half of their fortunes to charity, joining a program that Bill and Melinda Gates and Warren Buffett started in June to encourage other wealthy people to give.

The pledge has been a matter of debate in philanthropic circles, with experts dismissing it as a publicity stunt and others predicting that it would produce a flood of new money to support non-profit groups.

The program has predicted that it will draw $600 billion into philanthropy - or about twice the estimated total amount given by Americans last year - although Buffett acknowledged that some of the money would have been donated anyway: ''It's not like all or half of the money represented is added money - but some of it is added.''

He said he thought the real value of the pledge was found in the example that it set and in the sentiments expressed in the letters posted on the website.

Perhaps the biggest surprise on the list was Larry Ellison, the founder of Oracle, who became the bad boy of philanthropy after he withdrew a $115 million gift from Harvard in protest over the resignation of Lawrence H. Summers as president.

In a brief note addressed ''To Whom It May Concern'', Ellison disclosed that he had assigned 95 per cent of his wealth to a trust and noted that he had given hundreds of millions of dollars away for medical research and education. ''Until now, I have done this giving quietly - because I have long believed that charitable giving is a personal and private matter,'' Ellison wrote. ''So why am I going public now? Warren Buffett personally asked me to write this letter because he said I would be 'setting an example' and 'influencing others' to give. I hope he's right.''

Buffett said the number of people who had agreed to sign on was at the high end of his expectations. He said some people who did not agree to sign the pledge were planning to give away most of their wealth but did not want to draw attention to those plans.

Some went on ''a tirade'' about the government and rising taxes, Buffett said - declining, of course, to name them.

''A few got into that, and there are some that have a dynastic attitude toward wealth,'' he said.

''That tends to be the case where they themselves inherited this money and maybe feel some sort of intergenerational compact about it.''

The rich list

Paul Allen; Laura and John Arnold, Michael Bloomberg, Eli and Edythe Broad, Warren Buffett, Michele Chan and Patrick Soon-Shiong, Barry Diller and Diane von Furstenberg, Ann and John Doerr, Larry Ellison, Bill and Melinda Gates, Barron Hilton, Jon and Karen Huntsman, Joan and Irwin Jacobs, George Kaiser, Elaine and Ken Langone, Gerry and Marguerite Lenfest, Lorry Lokey, George Lucas, Alfred Mann, Bernie and Billi Marcus, Thomas Monaghan, Tashia and John Morgridge, Pierre and Pam Omidyar, Bernard and Barbro Osher, Ronald Perelman, Peter Peterson, T. Boone Pickens, Julian Robertson jnr, David Rockefeller, David Rubenstein, Herb and Marion Sandler, Vicki and Roger Sant, Walter Scott, Jim and Marilyn Simons, Jeff Skoll, Tom Steyer and Kat Taylor, Jim and Virginia Stowers, Ted Turner, Sanford and Joan Weill and Shelby White.

NEW YORK TIMES

***

Right-wingers respond.

How Peter Lynch destroyed the market

Peter Lynch didn't just beat the Street ... he absolutely destroyed it.

Reflect on his record for a second. Lynch ran Fidelity's Magellan Fund from 1977 to 1990, beating the S&P 500 in all but two of those years. He averaged annual returns of 29%. That's a mind-blowing figure. It means that $1 grew to more than $27; if you invested as little as $37,000 with him in 1977, you were a millionaire in 1990.

Fortunately for us, he's willing to share his secrets. To achieve his stunning track record, he clung to eight simple principles.

[via How Warren Buffett destroyed the market via How Warren Buffett destroyed the market via WBIFC]

Tuesday, August 03, 2010

Dow 14000 in 2011?

The Cabot Market Letter says that "from the market's low point in the year of the midterm elections (like 2010) to its high the following year (2011), the major averages have averaged a gain of nearly 50%."

The letter concludes that "with a Dow low of 9,687, a rally into 2011 could carry the index well above 13,000 and even to 14,000. It might sound crazy, but history suggests it's not just possible but likely!"