According to The Ultimate Guide to Trading ETFs (Dion, 2011): When "odd number of shares" begin to trade more frequently, it's a sign that more retail (individual) investors are buying a stock and has been correlated with marking the top in a stock.
Ned Davis Research indicates that rate of change in gas prices is a critical factor stock investors's outlook: when prices at the pump rise more than 30% within a year stocks often slide. Conversely, when gas prices have decreased over a 12 month period, the S.& P. 500 has averaged an increase of about 13%. Interestingly, in early May 2011 a gas averaged $3.96, which was about 35% percent higher than May 2010. In 2012, gas has averaged $3.83 per gallon which is less expensive than a year ago. Hence, one might conclude that stocks might avoid the "sell in May" condition. Source(s): Ned Davis Research, NYT In 2005, U.S. individual investors had 87.2 percent of their equity allocation in domestic stocks despite the fact that the US constitues just 43% of the global equity market. Source: Behavioral Finance: Investors, Corporations and Markets, NY Times (May 2012) The Treasury yield curve widened to a record, 2.81% amid signs the U.S. economy is strengthening. Source(s): WSJ, iStockAnalyst.com Data according to today’s Wall St. Journal survey of various Treasury primary dealers: § Forecast for 2-year yield to rise to 1.825% by the end of 2010; current = 0.799% § Forecast for 10-year note will yield 4.125%; current = 3.548%. § In June 2007, before the credit crunch, the 10-year yield traded above 5.3%. § However, the forecast 10-year note’s yield is near past 5-year average (4.1%) § YTD, Treasury’s have lost 2% § High-yield, high-risk corporate bonds are 2009’s best performing fixed income asset with a return of 57% YTD Why will bond yields rise? § Better economic outlook § Fed expected to raise federal funds rate since holding them near zero since December 2008. § Large debt issuance by the Treasury, which is forecast to raise $1.4 trillion in the current fiscal year that started in October after selling $1.786 trillion in fiscal 2009 § The dollar is looking better on a relative basis – see the US Dollar Index (USDX) § Euro is declining as “PIIGs” component of euro is experiencing credit perception issues (Portugual, Ireland, Italy and Greece) § 60%: Euro is about 60% of USDX § US Dollar Outlook: Its technical features appear strong although long term its fundamental are weak due to the US deficit picture Bottom Line: Consider an investment in UUP, an ETF that is dollar bullish via futures contracts. Toys “R” Us data: § Wal-Mart replaced Toys “R” Us as the largest US toy seller more than a decade ago § Toys “R” Us’ strategy is not to compete on price but to compete on service and selection, including high-end toy products (via it’s F.A.O Schwarz acquisition) § 849: U.S. Toys “R” Us and Babies “R” Us § 700: International stores Strategic Brilliance or Blunder: Brilliance § Introduced to Zhu Zhu Pets (fake hamsters) at the Hong Kong Toys and Games Fair in 2008 § Key competitive move #1: Determined market response § Key competitive move #2: Determined how to make the Zhu Zhu the 09 Christmas story § Key competitive move #3: In August 2009, placed large order with Zhu Zhu Pets maker (Cepia, an Australian firm) in preparation for Christmas 2009 shopping season Source(s): NYT S&P 500 has recorded one of the most powerful stock rallies ever since 3/9/09: § 676.5: S&P low recorded on March 9, 2009 § 1102.47: S&P price as of December 18, 2009 § 62.9%: S&P 500 return since March 9, 2009 low which is one of the most powerful rallies on record § 22%: YTD S&P 500 stock market return Other trends according to Barron’s: § 15 million job seekers § 5 million vacant apartments § Economy running at 71% capacity, versus a four-decade average of 81%, will hold wages and prices down. § GDP declined 6.4% in 1Q09 but increased 2.8% in 3Q09 - a 9.2% swing § Anticipated 2009 S&P 500 Operating Earnings: $61.33 § Forecasted 2009 S&P 500 EPS = $76 (24% increase) Where do we go from here? Investment professionals have varied views: § According to Barron’s, "forecasts for gross-domestic-product growth lie between 2.3% and 4%, well below the average 6% rate of economic expansion historically seen in the year following a recession." § 20% return: some investment professional forecast a target for the S.& P. 500 in the range of 1300 to 1350 by the end of 2010, or about 20 percent from Friday’s close § 10% decline: many investment professionals predict a short term market decline of more than 10 percent § 25% decline: some predict a decline in the range of 20 or 25 percent § Up and then down Market: S&P 500 increasing to 1300 before it slides to 1250 § Interest Rates increase: many believe that the central banks, fearing inflation will raise rates in the Spring of 2010, which will negatively impact stocks § Avoid Treasuries: since interests will rise, bond prices will fall. Thus, many forecasters are avoiding the Treasury market § Market leaders: consumer staples, health care, technology and industrial shares should take leadership (from financial stocks) in 2010 § Stock Picker’s Market in 2010: big gains won’t be seen in ETFs and Mutual funds as many investors are leveraging these as opposed to individual stocks. Industry leaders should do well: Apple, Goldman, Oshkosh, Green Mountain § International Markets Lead the Way in 2010: foreign markets valuations are much lower than the US § Treasury yields are poised to climb higher in 2010, with the median forecast calling for the 10-year note to touch 4.125%. § Contrarian View: The pessimistic case is an easier one to digest as it’s focused on our current situation. However, the market looks forward. The Bottom Line(s): § Dollar-cost average into State Street Global Advisors’ S&P500 (SPY) § Protect against the downside with S&P Index ETF with options (SH) § “Double Short” the market with a leveraged Index ETF (SDS) § Avoid Treasuries § Short Treasures (TBF) § Invest in market leaders such as Apple § Invest in foreign markets ETF (ishares = EFA) or mutual fund (Vanguard’s VGTSX) Source(s): NYT, Birinyi Associates, ETF Trend Playing Handbook, Barron's.com, Google.com  S&P 500 12 18 2009 Interesting December 2009 data re: Goggle’s primary SaaS: Google Apps below. § 3: Google’s Apps business is 3 years old § $750M: Google’s App business 2009 revenue § 2M: # of businesses using Google Apps § $19B: Microsoft’s 2009 office suite revenue § $22B: Google’s 2009 revenue § 60%: Google’s share of online advertising market § 1k: # of Google employees working on enterprise products, largely Apps. § $19B: Microsoft’s 2009 office suite revenue § 4/1/04: Gmail released to the world Source(s): Forbes, WSJ, Google.com § 2.8%: GDP expanded 2.8% in 3Q09 vs. contracting 6.4% in 1Q09 § 7.2M: U.S. economy has lost 7.2 million jobs § 10%: November 2009 unemployment # § 17: Following the previous recession which concluded in November 2001, companies continued to slash payrolls for 17 of the next 21 months § 11k: # of payroll jobs lost in November which was the smallest decline since late 2007 § 474k: first-time unemployment 4 week moving average § 86%: business services’ share of job market (vs. manufacturing jobs) § $237.6B: the amount (30%) of rescue package money ($787B) invested in the economy since February 2009 Labor-market recovery cycle: 1. Less people are terminated as businesses find solid footing. What is the latest “first-time unemployment” number? 2. When demand increases, business productivity increases. What is the latest productivity number? 3. When new growth is evident, more part-time workers are hired. What is the latest temporary job number? 4. In a growing economy, full-time positions are plentiful. What is the unemployment rate? Forecasts are typically incorrect: Often too optimistic at the top, forecasts (and investors) are also frequently too pessimistic at the bottom. § In July 2007 forecasters said that housing prices wouldn’t decline. § In May 2009 forecasters said the economy would grow at about a 1 percent rate in the second half of 2009. That’s likely to be off by a factor of three. Source(s): Newsweek, Bureau of Labor Statistics, Business Roundtable | Author@RayBordogna opines about economics, finance and business trends. Archives |
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