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Mid-Week Update 03-03-10

Qualcomm (QCOM), the newest addition to the Growth Portfolio and a part of our FundFinds Portfolio, is a tech franchise whose business revolves around wireless technology, in particular, CDMA, the heart of the new generation of cell phones. After posting disappointing earnings guidance in January, the company had some goods news this week.
 
The semiconductor company announced that its board authorized the new buyback worth $3 billion. This replaces the $2-billion buyback plan, $1.7 billion worth of shares from which have already been repurchased by the company. In addition, Qualcomm will increase its quarterly dividend by 12 percent to $0.19. Investors, as a result, will be receiving $134.4 million more per year from the company.
 
Moreover, the company provided a more optimistic business outlook. While back in January, Qualcomm’s CEO, Paul Jacobs, offered a fairly pessimistic view of the company’s prospects for the year, it seems conditions may be improving. Now, the company expects both the revenues and profit for the second quarter to approach the higher end of the earlier forecasts.
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Market Update 03-02-10

The bifurcated economy continues to plod along. The manufacturing segment is doing fairly well thanks in large part to strong export demand, which has risen for seven consecutive months. The service sector, however, continues to struggle.Read more...

Market Update 02-02-10

 Stocks are rallying this week after several weeks of selling. But we wouldn’t be in any hurry to pronounce the correction over. Our work suggests that equities are likely to remain under pressure in the weeks ahead. Read more...

Market Update 01-25-10

 
Short-Term Key: Negative
Long-Term Key -90 (Negative to Neutral)
 
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Inside this week's update...
 
***** 4 high-potential Chinese stocks.
***** Real estate bubble or joint venture financing?
***** Top funds geared to China's growth.
***** Move over Wal-Mart, make room for Wumart.
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Speculation continues to run high on the issue of whether China is experiencing a bubble that threatens investors. Chinese real estate looks hugely overpriced and manufacturing capacity (according to some) has run far in excess of potential demand.
On the political front, an argument has erupted between the Chinese government and Google. Google claims China hacked the email accounts of some of its customers, who coincidentally were human rights crusaders.
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Market Update 10-06-09

For every piece of data that comes out offering a glimmer of hope for the expansion, such as yesterday’s ISM non-manufacturing index, investors are being bombarded with a slew of data of late that points to the recovery being quite weak. The latest piece to fit this bill was the employment report out last Friday, which not only was worse than expected, the numbers were worse than the previous month’s figures.
 
While unemployment is often viewed as a lagging indictor (which is perhaps why the stock market shrugged off the latest reading), in the case of credit driven contractions such as we’ve experienced) it’s much more of a leading indicator. And the numbers behind the headline 9.8 percent jobless rate suggest we’re in for more pain in the months ahead.
 
As of last count, 5.4 million people have officially been out of work for more than half a year now. We say officially because if you include those who have simply given up looking for work, the unemployment rate would stand at 10.3 percent. The official rate is also skewed by the Bureau of Labor Statistics birth/death adjustment, which is essentially just a wild guess (not actual survey data) of the number of people who have joined newly formed businesses. Excluding this guess the unemployment rate jumps to 10.5 percent.
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Mid-Week Update 09-30-09

The market dropped precipitously this morning after the Institute for Supply Management – Chicago announced an unexpected drop in its business barometer. The Chicago Purchasing Managers’ Index fell to 46.1 in September, down from a reading of 50.0 in August (readings below 50 signal contraction). The reading was far below economists’ expectations, the lowest of which was a reading of 49.5, and shows the still dire straights of the economy – especially that of manufacturing which has relied on government stimulus to keep factories humming. With government programs, like Cash-for-clunkers, coming to a close, the weak underlying economic conditions are once again exposed.
 
The US reading comes in sharp contrast to the re-emerging growth of the developing world. The HSBC China Manufacturing Purchasing Index, also released this morning, fell slightly in September to 55.0 (from 55.1 in August), but still represented the sixth consecutive month of manufacturing expansion in the country. The Chinese economy is on solid footing, and continues to benefit from investments in infrastructure as well as programs designed to help initiate more internal consumption (rather than a reliance on exports to the US and other developed economies).
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Market Update 09-22-09

The Federal Reserve’s Open Market Committee is meeting this week to decide what to do next with respect to its interest rate policy and to possibly formulate an exit strategy from its current easy money policy. Despite calls that the recession is now over, including from Fed Chair Bernanke, the central bank is expected to keep its target rate for fed funds unchanged at between zero and 25 basis points. And we don’t see that changing anytime soon.
 
The central bank is close to wrapping up buying $300 billion of Treasurys under a program it instituted last March. But it still has room to buy back mortgage-backed securities under the same program. The idea behind buying back the mortgage securities is to keep rates lows and the market liquid and so as to encourage borrowing as well as bank lending. Bank lending has remained tepid, however, although the program has also proven to be a convenient way for foreign central banks to swap out of the riskier agency paper in favor of U.S. Treasurys.
 
Stocks climbed to 11-month highs late last week. At times it has been difficult to resist the temptation to jump in whole hog on the long side to ride share prices higher. But all of our work continues to point to this being a highly irrational market. The buying that is occurring is happening with little or no discrimination taking place between industry groups.
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Market Update 09-15-09

One year ago, Lehman Brothers became the largest bankruptcy in history, tipping the financial system into crisis mode. The market crashed, credit froze, and the economy sunk into the deepest recession since the Great Depression. Today, the financial system has stabilized, but the number of banks continuing to fail—92 so far this year at last count and more than 400 sitting on the FDIC’s trouble banks list—reminds us that it’s not over. And the hundreds of billions worth of toxic assets, which have seemed to disappear from headlines, still pollute banks’ balance sheets. Read more...

Market Update 09-08-09

Short-Term Key: Negative Long-Term Key: +35
 
The big question remains: will we experience inflation or deflation in the months ahead? The good news for investors in gold is that it doesn't really matter. Precious metals will do well in either scenario.
 
True, we have seen gold move more or less in step with the market of late. But the yellow metal has taken bigger strides. Despite the recent rally, the 12-month return for the overall stock market is negative 17%. Whereas, shares in gold miners - as measured by the Philadelphia Gold & Silver Index (XAU) – have gained 35%. That's a 52% outperformance for gold stocks.
 
Today, gold broke through the psychologically significant $1,000 mark for the first time since February. We're not surprised by this move. And while gold may pull back a little in the near term, we have little doubt the metal of kings will seek much higher heights before too long. In fact, we have far more faith in gold today than we do in the stock market or the economy.
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Market Update 09-01-09

The market was greeted by good news this morning as the manufacturing index, as measured by the Institute of Supply Management, showed that manufacturing expanded. The index rose to 52.9 in August, a better than expected reading (anything above 50 represents expansion), marking the first time in 19 months that the U.S. manufacturing activity has expanded.
 
The reading for new orders spiked to 64.9, the highest since December 2004. The Fed’s easing and other policy measures, as well as the Federal government’s stimulus programs (including the “cash-for-clunkers” program and tax credits for first time homeowners) are being credited with having a big part in the improvement in demand. Companies’ need to restock after inventories fell at a record $159 billion annualized rate in the second quarter also contributed to the improvement.
 
So why did the market decline? Today’s report is no doubt encouraging, but after inventories are restocked, there’s no guarantee that there’ll be sufficient consumer demand to continue growth. And the government’s spending has its limits too.
 
In addition, as we mentioned before, at today’s valuations the market prices in a lot of good news. Any slowdown in news flow – or a small disappointment reported – is bound to dampen the market’s expectations.
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