The Ticker
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A New Year's Gift From The VIX
Continue reading… 0 CommentsCooler heads are prevailing on the last trading day of the year.
Wall Street's "fear gauge," the VIX, looks like it might close below 40 for the first time in three months.
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The Shipping News
Continue reading… 0 CommentsShipping stocks have been absolutely beaten up during 2008, but will 2009 be the year of the rebound?
Sensitive to both the global economic slowdown and the drop in energy prices, shippers may still be suffering. But keep them in mind as an early play when the economy (hopefully) recovers sometime in the New Year.
The WSJ looks at a nice run by DryShips and Eagle Bulk Shipping.
Andrea Kramer at Schaeffer's Research eyes Euroseas.
Bill Luby at the VIX and More blog says watch the Baltic Dry Index in 2009 for confirmation that shipping (and trade) are returning to more robust health.
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2009 Prediction Roundup
Continue reading… 4 CommentsIt's prognostication week for market watchers as we limp toward the finish of a terrible year.
Predictions -- fun to read, but most often wrong -- are rarely as difficult to formulate as they are right now. Investors are struggling to assess a continually jarring mix of terrible economic data and the ongoing threat of undiscovered landmines placed throughout the financial sector during the last decade or so of easy credit. But that won't stop people from trying. Below, we take a quick look at what could be around the corner in 2009:
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Housing: Better Than Stocks In '08
Continue reading… 1 CommentDid house-flippers in economically depressed areas like Detroit or overheated markets like Tampa still make better investments than your average index fund holding equity investor last year, provided they kept their payments up and their properties out of foreclosure? Maybe.
Today's Case-Shiller home price index was dismal again for October, with prices in 20 major cities falling 18 percent year-over-year. Some lowlights:
- Phoenix down 32.7 percent
- Las Vegas down 31.7 percent
- San Francisco down 31 percent
- Miami down 29 percent
- Los Angeles down 27.9 percent
- San Diego down 26.7 percent
- Detroit down 20.4 percent
- Tampa down 19.8 percent
- Washington down 18.7 percent
- Minneapolis down 16.3 percent
- Chicago, down 10.8 percent
- Atlanta down 10.5 percent
- Seattle down 10.2 percent
- Portland, down 10.1 percent
- New York down 7.5 percent
- Cleveland down 6.2 percent
- Boston down 6 percent
- Denver down 5.2 percent
- Charlotte down 4.4 percent
- Dallas down 3 percent
Still, those returns actually look appealing compared to stocks during the same period:
- Dow Jones industrial average down almost 33 percent
- Nasdaq down 39 percent
- S&P 500 down 36 percent
And yes, I know it's comparing apples and oranges, but if your new house in Dallas lost 3 percent while your neighbor's portfolio of small caps or international stocks sank like a stone, who made the smarter move?
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2008: Worst Market Since Hoover
Continue reading… 0 CommentsWith just over two full trading days left, 2008 is on track to be the worst year for stocks since 1931 when Herbert Hoover was in office and the Great Depression raged.
The ongoing recession and global economic shock pummeled stocks this year, with the Dow Jones industrial average slumping 36.2 percent. That's the biggest drop since 1931 when the Great Depression sent stocks reeling 40.6 percent.
The AP also says the S&P 500 is headed for the biggest drop in the index's history and that paper losses in the broadest measure of U.S. stocks, the Dow Jones Wilshire 5000, totaled $7.3 trillion.
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A 2009 Prediction and a Telling IPO
Continue reading… 0 CommentsAllThingsD's Kara Swisher predicts "the socializtion of everything" will be one of the big stories of 2009 in the Tech Ticker video bleow (also, she's a "Gossip Girl" fan).
On a related theme the IPO market gets a new entrant this week: TechCrunch says FriendFinder Networks (formerly Penthouse Media Group), which bills itself as "the world’s largest sex & swinger personals community," is planning a $460 million IPO. Socialization indeed.
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Sina: $1 Bil For Focus Media Assets
Continue reading… 0 CommentsRemember Chinese Internet stocks? Think back on the heady days of 2007 when companies like Baidu were being heralded as the Google of the East...
Obviously, that was before the crash and even though Chinese shares suffered some of the worst damage of all during this global bear market, investors remain wary of that once-hot sector.
They still can't get a break today.
This morning Sina, a popular Chinese search engine, bought a big chunk of Focus Media, which specializes in digital outdoor advertising. Its shares promptly slumped more than 18 percent.
Oppenheimer's Jason Helfstein had this to say in a morning note, where he likes the deal but questions the lack of a shareholder vote:
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Even Odds On a Christmas Stock Market Rally
Continue reading… 1 CommentInvestors wishing for a slightly less-awful portfolio for Christmas have just a fifty-fifty shot despite the fact that December is traditionally a good month in markets, according to Merrill Lynch strategist Mary Ann Bartels. She writes:
... S&P data shows that, despite the fact that December and January are historically the two strongest months, investors should not count on a Christmas rally. Using the index’s behavior from the Friday before Christmas to the Friday after New Years as a guide, there have only 13 holiday rallies over the past 25 years. In the last eight years (2000-2007) there have been four rallies.
What to watch for:
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Credit Thaw Watch: TED Spread Back To Normal
Continue reading… 2 CommentsBy one measure, it appears the Fed's whatever-it-takes policy towards backstopping the financial sector is inspiring some confidence among lenders. The TED spread has returned to levels not seen since the failure of Lehman Brothers.
The TED spread, a gauge of banks’ willingness to lend, slipped below 150 basis points for the first time since before the collapse of Lehman Brothers Holdings Inc. amid speculation U.S. borrowing costs near zero and promises of further government cash will help unfreeze credit.
Central banks are pumping money into the financial system to combat the worst economic slump since the Great Depression. Credit markets, which seized up after Lehman’s bankruptcy, remain locked amid almost $1 trillion in losses and writedowns tied to mortgage-related securities. The Federal Reserve cut its benchmark rate to as low as zero last week and said it will flood the economy with cash.
The TED spread may be better but it's still around 148 basis points, well above the 38-point spread it averaged in the year prior to the credit crisis' start in August 2007, Bloomberg notes. So it may not be exactly back to normal, but the improvement so far is welcome.
Related:
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Madoff's Red Flags
Continue reading… 4 CommentsIt's been all over the place today, but you've got to read the Harry Markopolos' letter.
He once worked for a Madoff rival, and called Madoff Securities "the world's largest Ponzi Scheme" in a letter to the SEC.
In 2005.
Link is here from the WSJ.
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U2: The Band Who Beat The Promoter
Continue reading… 1 CommentIs there any longer-standing music business tradition than promoters, record companies or crooked managers taking advantage the talent? From radio payola to Lou Pearlman, writers and musicians getting a raw deal is a timeless feature of the landscape. But are the tables starting to turn?
U2 appears to be holding all the cards in its agreement with concert promoter Live Nation, where the company is on the hook to pay the band $25 million in a sweetheart stock deal it made to sign the artists as part of a 12-year contract in back in March. (Live Nation pays hundreds of millions of dollars to superstars like U2, Madonna and Jay-Z in exchange for multi-year contracts for revenue from performance and other areas like digital and merchandise sales.)
U2 moved to sell its shares, which means Live Nation will be forced to pay out $19 million to make up a deficit created by its falling share price, according to SEC filings.
From the WSJ:
The company had held up the stock component of the U2 deal as evidence of the band's faith in Live Nation, as well as confidence in its new business model.
But that faith was shaken Wednesday when the band moved to sell the shares, forcing Live Nation to make up an estimated $19 million in losses.
Live Nation had guaranteed that U2 would receive $25 million for 1.6 million shares. But the current market value was just $6.1 million at the close of trading Wednesday. That leaves Live Nation on the hook for the balance, which the company said Wednesday in a SEC filing it would pay with cash on hand or borrowed money.
There could be more bad news coming from another of the company's marquee acts: Madonna. In April, Madonna is eligible to sell $25 million of stock under the terms of her contract, even though the stock's market value has plunged 83% since she struck her deal in October 2007.
The Live Nation business model has been questioned for some time, but the real significance of the U2 news is a shifting power dynamic between artists and the recording and promotion industry. Digital music is in the process of killing CD sales, and concert revenue and branding matter now more than ever. While music sales may be hurting in general, U2 and others are continually leveling the playing field between artist and distributor (of content, concerts, merchandise, etc.). Eventually, that will be good news for musicians and music lovers if not for Live Nation's shareholders.
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What's Up With Stimulus Stocks?
Continue reading… 2 CommentsStocks are bouncing around today despite news the Obama Administration is considering an absolutely huge stimulus package that could be worth some $850 billion.
A bit of context from Bloomberg:
Barack Obama may ask Congress next year to approve a stimulus plan of around $850 billion, an amount that has grown as the U.S. economy sinks deeper into recession, an adviser to the president-elect said.
Obama’s transition team believes the amount, about 6 percent of the U.S.’s $14 trillion economy, is needed to reverse rising unemployment, said the adviser, who spoke on condition of anonymity. The sum would exceed initial estimates by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, as well as surpassing what some economists and the International Monetary Fund say is required.
Pelosi and Reid were kicking around spending plans worth between $400 billion and $600 billion, and that gave investors a buy sign back in early December. So, if we now expect stimulus to be substantially higher (and still have no concrete evidence of where exactly that money will go other than vague discussion of roads, healthcare, renewable energy, etc.), shouldn't we be seeing more of a rally in stimulus-related stocks?
A few possibilities: First, the market may have already priced in the stimulus bump. Oft-touted infrastructure plays like smart-meter maker Itron (ITRI) are up more than 40 percent in the last month. Heavy engineering and construction firms like Jacobs Engineering (JEC) and Fluor (FLR) are up 62 percent and 48 percent respectively. Second, while the stimulus payout may be growing, the economy is getting worse. Picking stocks based on government spending alone can't be done without considering how the economic woes that caused such massive intervention in the first place will translate to lower profits overall, even for companies who reap the stimulus benefits.
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5 Things RIM's Earnings Tell Us About The Economy
Continue reading… 0 CommentsOn Thursday, Research In Motion (RIMM) reports earnings amid a huge amount of uncertainty. That's because during the same quarter the company launched its high-end touch screen BlackBerry Storm to great fanfare, RIM also issued a rare earnings warning.
From the Dec. 2 press release:
"Initial sales of new products have been very positive and we believe we have the strongest smartphone portfolio in the industry by far, however product launch timing, general economic conditions and foreign exchange volatility have tempered our results in the third quarter," said co-CEO Jim Balsillie, who cut earnings and revenue forecasts. Now, RIM sees revenue between $2.75 billion and $2.78 billion, well below earlier forecasts $2.95-$3.10 billion for the quarter ending Nov. 29. Earnings forecasts were slashed from 89-97 cents to 81-83 cents.
RIM's struggle is emblematic of the difficult dynamic in the market right now. Basically, the question is: Can good companies with new products in growing markets manage to fend off the ongoing recession?
Analysts are scrambling to figure out an answer. What they're saying ahead of the earnings call is instructive on how the company and the rest of the economy is actually faring.
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Apple: Downgraded On 'One Scare Too Many"
Continue reading… 1 CommentSteve Jobs won't give his keynote address at the Macworld conference and Oppenheimer's Yair Reiner
draws a line in the sand:We don't know why Steve Jobs has pulled out of his annual address at Macworld on January 6. Maybe he's not feeling well, or maybe he just has nothing new to say. Whatever the reason, the unexpected announcement has underscored the greatest risk to Apple's long-term success-its dependence on Jobs' health and its apparent lack of a succession plan.
Six months have passed since Jobs appeared at the Apple Developer Conference, looking drawn and unwell. It's past time for Apple to either disclose the state of his health or elaborate a viable plan for eventually transferring power. Until such time, we can no longer continue to recommend Apple as a long-term investment. Downgrading to Perform; and removing our $145 PT.
Apple's shares are below $89 today, off about 6.8 percent. Barron's Eric Savitz has more analyst reactions here. Boomtown's Kara Swisher decodes the press release here.
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Barclays to Investors: Stay Liquid
Continue reading… 0 CommentsBarclays stays cautious in its global outlook for December:
We are in the midst of the most severe global recession since at least the early 1980s, if not the Great Depression. It is difficult to find an economy anywhere in the world that is not being hit hard, and the downward momentum underway virtually ensures that activity will continue to fall significantly through Q1.
If fiscal stimulus plans and market supports do their job, Barclays says this contraction could bottom around mid-2009 but warns:
Plenty of nasty surprises lie ahead, as economic performance in the fourth and first quarters is set to be considerably worse than anything in the current cycle thus far. This will take its toll on income statements, balance sheets, and liquidity around the globe. We thus suggest keeping relatively sizeable portions of portfolios in liquid instruments to allow investors to take advantage of opportunities as they arise.
We could get an early 2009 rally off recent lows, but the rest of the year remains largely uncertain. So what to buy? Barclays recommends the following (bold is mine):
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Fear Calms a Bit Among Fund Managers
Continue reading… 0 CommentsIn its monthly survey of fund managers, Merrill Lynch says fear among fund managers has pulled back from the brink. From the report:
Ingredients for a rally in place; fiscal policy is the trigger
After the extreme pessimism of the past two months there is evidence of investors pulling back from the brink in December’s survey. Fund managers see the rate of deterioration in the global economy as slowing. With risk aversion showing signs of moderating (from very extreme levels), cash levels at the highest since 2001, and some belief that monetary policy is starting to have an impact, running textbook defensive asset allocations going into New Year may start to carry greater risk. Possible news flow on fiscal stimuli could trigger a sharp rally.
Investors hunker down for “below-trend” 2009
As investors start to look into 2009, 88% of respondents are hunkering down for a year of ‘below-trend’ growth and ‘below-trend’ inflation. Against such a backdrop there are only four global sectors that they wish to overweight: healthcare, telecoms, utilities, and consumer staples (a sector that many regard as overvalued). For the third month running a majority of fund managers believe that equities are undervalued. But they are still worried that it is a value-trap – and when it comes to asset allocation they still prefer bonds to stocks. Maybe this is because a net 87% of managers believe that consensus earnings estimates for 2009 are still ‘too high’.
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Fed Reaction Roundup
Continue reading… 0 CommentsThe Fed's decision to cut the benchmark fed funds rate to between zero and one-quarter of a percent is being met with some mixed reactions around the Web:
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Fed Slashes Rates!
Continue reading… 1 CommentWall Street was expecting an unspectacular announcement from the Federal Reserve today. Instead, Ben Bernanke & Co. decided to pull out all the stops with a full three-quarter point rate cut and an unusually specific commitment from the central bank to keep interest rates low "for some time" as part of continually expanding efforts to help fix an ailing economy.
The Fed cut the benchmark federal funds rate to a quarter of a point from one percent and central bankers said they'll continue to keep rates in a "target range" between zero and a quarter point as the Fed now "anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time."
The statement reads like the central bank is preparing to hunker down for a long fight:
The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.
Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.
Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.
The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.
Analysts react (bold is mine):
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Zero is the New 'Buy'
Continue reading… 0 CommentsBusinessWeek's Aaron Pressman sees a trend among Wall Street analysts (who in past downturns were curiously unwilling to slap "sell" ratings on failing stocks) towards the big goose egg. Predicting a stock is going to zero, which he says may have started with the collapse of IndyMac (current price: about 2 cents), is taking off:
Now "zero" ratings are proliferating. RBC Capital Markets analyst Mark Sue slapped a target price of zero on telecommunications-equipment maker Nortel Networks; Deutsche Bank analyst Rod Lache says General Motors shareholders will have worthless stock certificates within 12 months; and Henry Blodgett (sic) thinks satellite radio provider Sirius XM is headed for bankruptcy. Analysts at Morningstar say the shares of 32 of the 2,000 companies they cover are likely to become worthless.
Analyst estimates are notoriously unreliable, of course, so don't expect every stock with a target price of zero to go out of business. But many recent zero-rating recipients are indeed in dire straits.
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Bill Fleckenstein: Done Shorting For Now
Continue reading… 1 CommentBill Fleckenstein, a hedge fund manager and long-time Federal Reserve critic, is closing his short-only fund after 12 years.
He writes at MSN:
Though I think the stock market still has unfinished business on the downside, I believe that 2009 is the year to prepare for a return to managing money in a more balanced fashion, with longs (and some shorts), as there are plenty of interesting ideas that appear to offer a margin of safety.
Still, he says we're in just the third inning of a brutal recession, so while stocks may get an Obama-induced bump early in the year, the good times may not last.
