Don't get too invested in which way you think that this market is going to break
Steve Cook on Disciplined Investing

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Economics

   This Week’s Data

    The International Council of Shopping Centers reported weekly sales of major retailers fell .7% versus the prior week and 1.7% on a year over year basis; Redbook Research, on the other hand, reported month to date retail chain store sales up .7% versus the similar period a year ago.

    The Conference Board reported its April index of consumer confidence rose to 39.2 versus expectations of 29.0 and 26.0 recorded in March.
    http://econompicdata.blogspot.com/2009/04/good-news-alert-consumer-expectations.html

    First quarter preliminary GDP report came in a -6.1% versus estimates of -4.6%; the personal consumption expenditure index was reported at +2.9% versus forecasts of +1.5%.
    http://econompicdata.blogspot.com/2009/04/q1-gdp-down-61.html

   Other

    Good news from the Richmond Fed:
    http://mjperry.blogspot.com/2009/04/strongest-two-month-gain-in-history-for.html

    More good news on housing from two of the worst hit states:
    http://mjperry.blogspot.com/2009/04/california-home-prices-show-first.html
    http://mjperry.blogspot.com/2009/04/florida-home-sales-increase-for-7th.html

Politics

  Domestic

  International War Against Radical Islam

The Market
    
    Technical

    Nothing has changed.  I could copy this section from yesterday’s Morning Call going through all the price levels and I would except you probably know them by heart now.  This Market is boring; but after what we have been through the last year, most of us would agree that boring is good.

    I will make two observations:

(1)    I mentioned yesterday that the volatility index has remained at an elevated level despite the Market meandering in a very narrow range.  That suggests that there is more risk in this Market than is obvious from the its recent price performance. 

(2)    as you know, I look at the charts of all the stocks in our Universes every evening, looking for patterns that could help us anticipate price movements.  In the last week, I have noticed an increasing number of stocks that had fallen below their short term up trends off their March lows (a trend that I have been noting when applicable in the new technical discussion section of each stock I review) and then reversed back to the upside, making new highs (which has the affect of re-setting the up trend line).  In other words, an increasing number of stocks are starting to act better than the Averages.  This suggests that stocks in general could be setting up for a break to the upside.  I am not about to bet any money on this proposition; but it makes me more open to the possibility that the next move is up.  Don’t get too negative.

I recognize that these comments have contradictory implications. But the point is that a price break in one direction (whatever your opinion is) is not a forgone conclusion.  Today besides patience, eliminating preconceived notions of Market direction is also important.
            http://tradermike.net/

    The 1918 Spanish flu and the Market:
    http://bespokeinvest.typepad.com/bespoke/2009/04/1918-spanish-flu-and-the-market.html

    Stock price recovery after the 1929 Crash:
    http://econompicdata.blogspot.com/2009/04/depression-equity-returns-not-so-bad.html

   Fundamental
   
    Yesterday’s headlines:

(1)    the ‘news’ that the ‘stress test’ reportedly indicated that Bank of America and Citigroup need to raise equity.  Since we won’t have the official results till May 4,  ‘reportedly’ becomes the operative word; although no one is going to know what this means till we know what the government’s agenda is.  Speaking of which, consider this from Bob McTeer, former head of the Dallas Fed: the banks may not need capital; but if the government says they need capital, then they need it; and once the government says they need it, they can’t get it from anyone except the government.

I quote from last week’s Closing Bell: ‘On the other hand, if the test was to justify the government cramming more money into the banks and to assume even more control than it has already commandeered....well, then Houston, we have a problem.’
http://www.ritholtz.com/blog/2009/04/6-banks-need-mo-money/

(2)    PA. Senator Arlen Spector announced that he is leaving the Republican Party and becoming a Democrat.  Ordinarily, this would hardly be material for this narrative; but with the balance of power in Senate razor thin, it could have significant implications for the passage of Obama’s agenda (deficit spending, universal healthcare, cap and trade, card check).  I note as I have in the past that one may be in favor of all these as worthy social/political objectives but they are poor economics and a negative for Your Money.

Of course, Spector is who he is.  So to me the real question is, will he change his vote on a critical issue because he changed parties?  The only answer I have to that is that it may depend on how much more susceptible he is to pressure to vote for the Democratic agenda as a Democrat versus as a Republican.  That, only time will tell.





Posted 04-29-2009 8:22 AM by Steve Cook