FOMC August 5 Minutes Review: Inflation Debate Rages
August 26, 2008
The LFB submits:
Release Explanation: The Federal Open Market Committee (FOMC) is made up of members of the Federal Reserve led by Mr. Bernanke. Each of the 12 regions discuss their current economic situation and from there a decision is made. An increase in Interest Rate will have the effect of slowing economic growth. A decrease in Interest Rate is used by a Central Bank to stimulate economic growth. Economic strength can create Inflation, and raising Interest Rates is one of the easiest way to contain Inflation. This is the consequence of the economic releases that have preceded the Interest Rate decision.
The Minutes of the meeting are released 2 weeks after the announcement, revealing the discussions held by FOMC members. Future CPI numbers will reflect the overnight Interest Rates. If Rates go up then CPI goes down and vice versa. The direction of the path for interest rates is the single most important reason why currencies are bought and sold. A strong Interest Rate and robust business cycle will attract foreign investment. A weak Interest Rate will normally lead to a weak Currency as investors swap the higher yielding Currency for a profit.
FOMC August 5 Minutes Review: Inflation Debate Rages
Hedge Fund Manager’s Notebook: The Power of Dividends
August 26, 2008
1) Crude pops $6 and natural gas leaps 42 cents to $8.25 as hurricane Gustav turns towards the oil and gas producing facilities in the Gulf of Mexico. One mathematical model has a category four hurricane hitting New Orleans in 3-4 days.
2) The S&P case-Shiller home price index for June fell 15.4% in June YOY. San Francisco came in at -23.7% YOY. Even though homebuilders have cut back construction dramatically, foreclosures keep dumping more properties on the market, driving prices down.
Hedge Fund Manager’s Notebook: The Power of Dividends
Credit Spreads Continue to Get Worse
August 26, 2008
Hickey and Walters (Bespoke) submit:
FDIC Chairman Sheila Bair commented in a press conference this afternoon that she expects the credit markets to continue to worsen, and judging by the recent action in credit spreads, the market seems to agree. According to Merrill Lynch data, interest rates on investment grade corporate bonds are currently not only at higher levels than they were at the Bear Stearns low, but they are also at their highest levels ever. As of yesterday’s close, investment grade corporate bonds were yielding 312 basis points more than Treasuries, which is a 118% increase over year ago levels.
click to enlarge
Credit Spreads Continue to Get Worse
High Growth Expectations for the S&P 500?
August 26, 2008
Hickey and Walters (Bespoke) submit:
Year over year earnings for the S&P 500 declined by a little more than 23% in Q2 ‘08 versus Q2 ‘07. Expectations at the start of earnings season based on cumulative analyst estimates were -11%, so actual numbers were more than twice as bad.
This brings us to earnings expectations for the next few quarters. Currently, bottoms up estimates are looking for S&P 500 earnings to decline by 0.2% from Q3 ‘07 to Q3 ‘08. Q4 ‘08 estimates are looking for growth of 43.6%, and Q1 ‘09 estimates are at 28.1%. These high numbers are due to the extremely weak readings we got in Q4 ‘07 and Q1 of this year. Only time will tell if these estimates are too lofty, but based on the last few quarters, they most likely are.
High Growth Expectations for the S&P 500?
Largest Companies in the World
August 26, 2008
Hickey and Walters (Bespoke) submit:
Below we highlight the 30 largest companies in the World by market cap ($). As shown, Exxon Mobil (XOM) is the top dog by about $70 billion. Exxon is trailed by another energy company, Petrochina (PTR), then General Electric (GE) and Microsoft (MSFT).
Eleven of the top 30 are based in the United States. The Energy sector has the largest representation at 8, followed by Technology at 5. Only 3 companies in the top 30 are up in 2008 — Wal-Mart (WMT), IBM (IBM) and Johnson & Johnson (JNJ). And Apple (AAPL) and Google (GOOG) followers will be happy to see them ranked 25th and 26th in the world.
Largest Companies in the World
Strategist Price Targets Down the Home Stretch
August 26, 2008
Hickey and Walters (Bespoke) submit:
Below we have updated S&P 500 year-end price targets for strategists surveyed by Bloomberg. For each strategist, we provide their 2008 price target at the start of the year as well. As shown, for various reasons, four strategists are no longer giving price targets.
Currently, Deutsche Bank is the only firm that has not lowered its price target this year, and it is also the highest at 1,650. For their target to be on the mark, the S&P 500 will need to rise 30% from now to the end of the year.
Strategist Price Targets Down the Home Stretch
Forced Selling Prolongs Underperforming Value Investing
August 26, 2008
Larry MacDonald submits:
Hedge fund manager Goodwood Inc., an activist value investor, confirms forced selling in the stock market. “We believe there has been a significant amount of selling recently in some of our core names by other institutions that have been experiencing redemptions,” they note in their latest Monthly Commentary.
Forced Selling Prolongs Underperforming Value Investing
26 Aug 2008 16:00:00 - Top 5 Stocks up on Unusual Volume
August 26, 2008
| Intraday Unusual Volume - Top 5 Up |
| Symbol | Volume % Change |
Price % Change |
News | |
| SRVY | 414% |  17.24% |
news | |
| CLNE | 307% | 15.65% |
news | |
| SMCI | 174% | 10.66% |
news | |
| GSIC | 157% | 16.33% |
news | |
| ONAV | 128% | 14.83% |
news | |
|
||||
26 Aug 2008 16:00:00 - Top 5 Stocks up on Unusual Volume
Do Internet Search Metrics Have Predictive Value?
August 26, 2008
Devin Hobbes submits:
Vlada at StockWeb has posted an interesting article on which keywords attract blog visitors from search engines at different times, according to how the market is doing. I’ve noticed the same trend at my own blog.
It seems to me that visitor trends may have some predictive value. It’s sort of conventional wisdom that retail investors try to get in on a trend just as that trend has run its course. (And in hindsight, symptoms of trend reversals are easy to spot. For example, a number of companies funded share buybacks and dividends by borrowing money in 2006/2007. That was a great time to short the market.)
Do Internet Search Metrics Have Predictive Value?
Monthly Home Price Decline May Be Slowing
August 26, 2008
The LFB submits:
Release Explanation: Released by the Census Bureau, the report covers the change in the number of new home sales in the month reported on an annualized basis. This report is important, since the housing market is included in most economic forecasts and because the present economic problems are due in part to the decline in housing prices since 2006. A happy householder will usually lead to a strong economic outlook. A miss here, either way, and the Markets gets to see the real confidence of the US consumer. There is a very strong impact on the sentiment towards the US Dollar from this report.
Trade Desk Thoughts: There was a 2.4% increase in the number of new homes sold during July, as the supply declined 5.2%, the most since November 1963, to 416,000. The median price of a new home decreased 6.3% to $230,700, from $246,200 a year earlier. Also reported was the Conference Board’s index of Consumer Confidence for August, which showed a gain to 56.9 after a decline in gasoline prices.
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