Seeking Alpha

All American In...'s  Instablog

All American Investor
Send Message
Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 46 years of investment... More
My company:
Strategic Stock Investments
My blog:
Investing for Survival
  • The Morning Call & Subscriber Alert

    The Market

    Technical

    So much for falling volatility. The indices (DJIA 17387, S&P 2029) moved down big yesterday but remained within uptrends across all timeframes: short term (16464-19236, 1911-2892), intermediate term (16493-21648, 1737-2451) and long term (5369-18860, 783-2083).

    Volume jumped; breadth was lousy. The VIX climbed 11% finishing within a short term trading range, an intermediate term downtrend and back above its 50 day moving average.

    The long Treasury rose but not enough to re-capture the lower boundary of its very short term uptrend. Hence, the break of that trend is confirmed. It remained within its uptrends across all the remaining timeframes and above its 50 day moving average. While the violation of the very short term uptrend is a downer for the bond bulls, (1) that trend was very steep and ultimately not sustainable and (2) so far the 'consolidation' has been meager at best. So the TLT chart remains quite strong.

    GLD was up, ending within a very short term uptrend, above the upper boundary its short term uptrend, within an intermediate term trading range and above its 50 day moving average. The bounce suggests that like TLT the current consolidation will be relatively mild. At the open today, our Portfolios will Buy a 2% position in GLD.

    Bottom line: the good news in an otherwise poor day was that the Averages remained within all uptrends as well as above the mid December lows (17288, 1920). The bad news is that they have made two lower highs in the last month. With the post close euphoria levitating on the upbeat Yahoo and Apple news, today's pin action should be interesting.

    GLD's sell off didn't last long, so our Portfolios will nibble today. 'Nibble' is the operative word; they are not establishing a full position.

    Stock performance in February of pre-election year (short):

    http://blog.stocktradersalmanac.com/post/Down-January-Pressures-February-SPY-QQQ-DIA

    Fundamental

    Headlines

    Lots of US economic news yesterday; virtually all of it positive: the November Case Shiller home price index, the January flash services PMI, December new home sales, January consumer confidence and the January Richmond Fed manufacturing index were all ahead of expectations. However, all was not rosy; December durable goods orders really sucked. In sum though, the numbers were good and the strong new home sales were an offset to the durable goods orders.

    The principal focus of the day though was more poor earnings reports from leading companies in major industries---and clearly, investors weren't happy. I have been commenting on this developing negative trend since earnings season started but cautioned that it was too early to assume that profits for the entire season would be disappointing. Yesterday's pin action suggests that it may not be too early anymore.

    That said, after hours Yahoo announced that it was spinning off Alibaba and Apple reported great earnings. After pissing and moaning all day, the media turned on a dime, largely dismissing the 290+ point decline in the Dow and its potential causes, instead focusing on these two positive datapoints. Of course, they may correct in doing so. Today's tape will certainly provide some guidance on that point. However, irrespective of that, the momentum to date in profit reports has been on deteriorating earnings; and if that continues, the long term implications for both corporate profits and the economy in general will likely overwhelm any temporary respites provided by the occasional upbeat revenue and income statement.

    Overseas there was one stat reported: Chinese industrial earnings dropped 8% year over year. Not good but again largely ignored as investors and the media continue to struggle with the implications of the Greek elections. My bottom line is that I have no clue how this story ends but expect confusion to reign before it does. Here are some clarifying articles:

    This is a good explanation of the size of Greece's debt problem and possible solutions (medium):

    http://www.minyanville.com/trading-and-investing/fixed-income/articles/grexit-bonds-fixed-income-ecb-euro/1/27/2015/id/55947?refresh=1

    Greeks brace for a showdown (medium):

    http://www.telegraph.co.uk/finance/economics/11370960/Greek-coalition-braces-for-debt-showdown-as-Germany-rattles-sabre.html

    A brief look at the winning anti-austerity party's (Syriza) coalition partner (medium):

    http://www.theguardian.com/world/2015/jan/26/greece-elections-who-are-independent-greeks

    ***overnight, Syriza's first policy moves (medium):

    http://www.reuters.com/article/2015/01/28/us-greece-politics-idUSKBN0L10VP20150128

    ***overnight, China is expected to lower its 2015 growth target to 7% and Singapore joins the QE free for all.

    http://www.zerohedge.com/news/2015-01-27/singapore-enters-currency-wars-weakens-sgd-most-3-years

    Bottom line: yesterday's poor earnings reports and the ensuing sell off notwithstanding, stocks are still priced to reflect an outlook that incorporates an extremely positive assumption to every possible economic variable---to the point that even if that perfect scenario occurred, they would still be overpriced. Until one of the numerous risks facing the US manifests itself with sufficient force for investors to seriously question their faith that the global central banks' polices are not only correct and will provide an infinite Market put, stocks are likely to retain their current risk premium. When that faith is broken, which I believe will, I don't want to be caught wondering what I should Sell. Because it will be too late.

    I can't emphasize strongly enough that I believe that the key investment strategy today is to take advantage of the current high prices to sell any stock that has been a disappointment or no longer fits your investment criteria and to trim the holding of any stock that has doubled or more in price.

    Bear in mind, this is not a recommendation to run for the hills. Our Portfolios are still 55-60% invested and their cash position is a function of individual stocks either hitting their Sell Half Prices or their underlying company failing to meet the requisite minimum financial criteria needed for inclusion in our Universe.

    The latest from John Hussman (medium):

    http://www.hussmanfunds.com/wmc/wmc150126.htm

    The latest from Odey Asset Management (medium):

    http://www.zerohedge.com/news/2015-01-27/equities-will-be-devastated-crispin-odey-warns-looming-recession-will-be-remembered-

    Subscriber Alert

    In our annual review of Rockwell Collins (NYSE:COL), the company failed to meet the minimum quality standards for inclusion in the Aggressive Growth Universe. Therefore, at the Market open, the Aggressive Growth Portfolio will Sell COL and the stock is being Removed from the Aggressive Growth Universe.

    Investing for Survival

    IL's Annual Global Retirement Index 2014: The Categories and Scores

    Accurately scoring the world's top retirement locations is a complex process. So, we've broken down each of our categories to give you a "behind the curtain" look at how we put the Index together.

    Real Estate: Countries where real estate prices are low and the purchase of real estate is relatively easy received good scores. For 2014, we have also taken the average purchase price and rental price per square meter into consideration. And we've added a "value factor," based on reports from our contributing editors and from real estate contacts around the world on how much bang for your buck you get when buying real estate in each country.

    Special Benefits: This category considers government provisions that make moving to and living in each country easier and more affordable for foreign retirees. Taken into account are discounts on health care, public transport, airfares, entertainment, utilities, whether you can import goods duty free, property rights for foreign residents, and property tax rates.

    Cost of Living: This score is based on the first-hand information collected by our editors and contributors. We look at the daily costs a couple encounter in a destination, utilities, groceries, transport…we ask how much a good meal costs, and if the price of a movie ticket or a day trip out of the city is low…

    Ease of Integration: In order to score countries in this category, we looked at things like the degree to which English is spoken, the friendliness of the locals, the size of the existing expat community and the availability of home comforts.

    Entertainment and Amenities: Here, we looked at the range of activities open to expats. We rated the quality and availability of restaurants, movie theaters, outdoor activities and local music and art. We also ask our in-country contacts to rate the variety of activities on a scale to see how much excitement you can find in a destination.

    Health Care: Considered in this category are the cost of health care and the quality. How much a typical visit to a general practitioner tells you a lot, as does cost and the coverage particulars of health insurance. Also considered are the number of people per doctor, the number of hospital beds per 1,000 people, the percentage of the population with access to safe water, the infant mortality rate, life expectancy, and public health expenditure as a percentage of a country's GDP.

    Retirement Infrastructure: We look at the quality of the roads, the availability of good public transport, the number of cell phones, and Internet penetration, and how easy it is to get to and from the U.S. and Canada by plane.

    Climate: Countries with temperate weather throughout the year, moderate rainfall and little risk of natural disaster come out on top in this category. This year, we also took the comfort factor into consideration for the first time. We use data representing each country as a whole instead of favoring one region over another.

    The Final Scores

    News on Stocks in Our Portfolios

    Boeing beats by $0.20, beats on revenue

    o Boeing (NYSE:BA): Q4 EPS of $2.31 beats by $0.20.

    o Revenue of $24.47B (+2.9% Y/Y) beats by $540M.

    |7:31 AM

    ·

    T. Rowe Price beats by $0.04, misses on revenue

    o T. Rowe Price (NASDAQ:TROW): Q4 EPS of $1.18 beats by $0.04.

    o Revenue of $1B (+7.6% Y/Y) misses by $20M.

    ·

    General Dynamics' profit rises, beats expectations

    o Earnings from continuing operations of $737M, or $2.19 per diluted share, vs. $624M, or $1.76 per diluted share in the same quarter a year ago.

    o Operating margins were 12.8% for Q4, 130 bps higher than fourth-quarter 2013 margins.

    o Free cash flow from operations of $3.2B for the year.

    o Total backlog at the end of the quarter was up 58% Y/Y to $72.4B.

    Praxair EPS in-line, misses on revenue

    · Praxair (NYSE:PX): Q4 EPS of $1.57 in-line.

    · Revenue of $2.99B (-0.7% Y/Y) misses by $70M.

    Canadian National Railway beats by C$0.06, beats on revenue

      • Canadian National Railway (NYSE:CNI): Q4 EPS of C$1.03 beats by C$0.06.
      • Revenue of C$3.21B (+17.2% Y/Y) beats by C$90M.

    AT&T sees "continued" revenue growth and expanding margins

    · AT&T (NYSE:T) expects a 2015 of "continued consolidated revenue growth" and adjusted EPS growth "in the low single-digit range" while improving free cash flow and dividend coverage.

    · The company noted revenue gains of 4.5% after adjusting for Connecticut wireline property sale, highlighted by total wireless revenues that grew 7.7% to $19.9B. Wireline revenues gained 0.4% to $14.6B.

    · Wireless service revenues were down again, -3.7% to $15.1B, on "continued customer growth of Mobile Share Value plans." Wireless operating income -18.1% to $3.2B; Phone-only postpaid ARPU dropped 10.7% Y/Y.

    · For the full year, revenues of $132.4B were up 2.8% from 2013 (3.1% when excluding Connecticut wireline divestments) and EPS was up fractionally to $2.51 from $2.50. Full-year cash from operations was $31.3B; capex of $21.4B.

    Apple beats estimates, guides in-line

    · Apple (NASDAQ:AAPL): FQ1 EPS of $3.06 beats by $0.46.

    · Revenue of $74.6B (+29.5% Y/Y) beats by $6.91B.

    · 74.5M iPhones (above expectations), 21.4M iPads (near expectations), 5.5M Macs (near expectations).

    · Expects FQ2 revenue of $52B-$55B vs. a $53.79B consensus.

    Economics

    This Week's Data

    The November Case Shiller home price index came in at +0.7% versus consensus of +0.6%.

    http://www.calculatedriskblog.com/2015/01/case-shiller-national-house-price-index.html

    The January flash services PMI was reported at 54.0 versus expectations of 53.8.

    December new home sales rose 11.6% versus estimates of up 3.1%.

    http://www.calculatedriskblog.com/2015/01/new-home-sales-at-481000-annual-rate-in.html

    January consumer confidence came in at 102.9 versus forecasts of 96.0.

    The January Richmond Fed manufacturing index was reported at 6.0 versus an anticipated 5.5.

    Weekly mortgage applications fell 3.2% while purchase applications were off 0.1%.

    Other

    The impact of congress' 2013 decision not to re-authorize the extension of unemployment benefits (short):

    http://gregmankiw.blogspot.com/2015/01/the-2014-employment-boom.html

    Fear and dread of deflation (medium and a must read):

    http://www.zerohedge.com/news/2015-01-27/fear-and-dread-deflation-keynesian-big-lie-work

    Politics

    Domestic

    International War Against Radical Islam

    Obama's Iran nonsense (short):

    http://www.powerlineblog.com/archives/2015/01/iran-nonsense.php

    Ponder this (short):

    http://www.coyoteblog.com/coyote_blog/2015/01/christians-vs-muslims.html

    Disclosure: The author is long GLD, GD, TROW, PX, BA, CNI, T, AAPL.

    Jan 28 9:06 AM | Link | Comment!
  • The Morning Call--More Lousy Earnings Reports

    The Market

    Technical

    Finally, a relative calm day---and this following the Greek elections. The indices (DJIA 17678, S&P 2057) closed within uptrends across all timeframes: short term (16457-19229, 1911-2892), intermediate term (16493-21648, 1737-2451) and long term (5369-18860, 783-2083).

    Volume was fell; breadth improved. The VIX declined 7%, finishing within a short term trading range, an intermediate term downtrend and below its 50 day moving average.

    The long Treasury dropped, closing back below the lower boundary of its very short term uptrend (a finish below this boundary today will confirm the break), above the upper boundary of its short term uptrend, within its intermediate term uptrend and above its 50 day moving average.

    GLD was lower, but is still in a very short term uptrend, above the upper boundary its short term uptrend, within an intermediate term trading range and above its 50 day moving average. It appears GLD is now in a consolidation. I am watching where it finds support.

    Bottom line: there was enough bad news (see below) to push stocks down yesterday, but they managed to advance. And they did so with considerably less volatility than we have become accustomed to of late. I would score that a positive. On the other hand, the Averages have still made two lower highs and that is not so good. My focus is on the uptrends as well as the most recent discernable support (the mid December lows) and resistance (the former all-time closing highs) levels.

    GLD is now in the consolidation that I have been awaiting. If it holds trend, then our Portfolios will likely start to nibble.

    Seventh and pre-election year seasonal charts (short):

    http://blog.stocktradersalmanac.com/post/Seventh-and-Pre-Election-Year-Seasonal-Charts-DIA-SPY

    Fundamental

    Headlines

    One datapoint was reported yesterday: the January Dallas Fed manufacturing index was negative versus an anticipated increase. Not good; but this is a secondary indicator. So nothing upsetting.

    The disappointing trend in earnings reports/guidance continues with MCD and UTX coming up short of investor expectations.

    ***overnight, there was a bevy of poor reports (see below).

    Overseas, S&P lowered Russia's credit rating to junk and the fighting continued in Ukraine. The latter we already knew and the former was not a particular surprise. However, as I am sure you know, the focus was on the Greek election results and the somewhat larger block of seats gained by the anti-austerity party. The rhetoric immediately following was surprisingly calm both from the leadership of the new government and the powers that be in the EU. I am sure that had a settling effect on investor emotion. To be sure, there is a considerable distance between the stated positions of the two parties and that is not likely to be closed absent a game of high stakes poker. On the other hand, the EU politicians always seem to come up with a 'muddle through' solution. I will continue to plead ignorance on how this situation resolves itself; but until we know who blinks and what the consequences are, there remains the risk of significant disruptions in the financial markets.

    How much success will Greece have in ending austerity? (medium):

    http://www.nakedcapitalism.com/2015/01/much-success-syriza-likely-ending-austerity.html

    Or is it a disaster? (medium)

    http://www.zerohedge.com/news/2015-01-26/saxo-bank-syriza-victory-disaster-europe

    ***overnight, Chinese industrial profits fell 8% year over year.

    Bottom line: between the residual giddiness over the new ECB (Canadian, Danish and Turkish) QE and the fact that the winning party in the Greek elections didn't start out with guns a'blazing, investors seemed relatively sanguine yesterday. Nevertheless, the list of potential risks to US economic progress and by extension the growth in corporate profits is extensive. And the ongoing trend in earnings/guidance disappointments speaks directly to that risk. So if the upbeat scenario that is seemingly priced into stocks are current levels were to begin to unravel, the risk on the downside to prices is significant if our Valuation Model is even remotely close to being accurate.

    I can't emphasize strongly enough that I believe that the key investment strategy today is to take advantage of the current high prices to sell any stock that has been a disappointment or no longer fits your investment criteria and to trim the holding of any stock that has doubled or more in price.

    Bear in mind, this is not a recommendation to run for the hills. Our Portfolios are still 55-60% invested and their cash position is a function of individual stocks either hitting their Sell Half Prices or their underlying company failing to meet the requisite minimum financial criteria needed for inclusion in our Universe.

    Stephen Roach on ECB QE (medium):

    https://www.project-syndicate.org/commentary/ecb-quantitative-easing-experiment-by-stephen-s--roach-2015-01

    Investing for Survival

    Ease into retirement (short):

    http://www.usatoday.com/story/money/2015/01/18/easing-transition-retirement/21815141/

    ETF Highlight

    Van Kampen Municipal Opportunity Trust is a closed-end management investment company. Its investment objective is to provide a high level of current income exempt from federal income tax, consistent with the preservation of capital.

    The fund invests approximately 98% of its assets in bonds and may be considered for investors seeking a Municipal - National strategy. The Invesco Municipal Opportunity has returned an annual rate of 6.26% since inception. More recently, the fund has generated a total return of 5.69% in the last five years, 2.40% in the last three years, and 17.79% in the last year. On a year to date basis, VMO has returned 13.54%. Downside risk has been below average, has a three year standard deviation of 11.8% and fund has had moderate volatility in its monthly performance over the last 36 months. As VMO is a closed end fund, it has no front end or back end load. The ETF Portfolio owns a full position in VMO.

    (click to enlarge)

    News on Stocks in Our Portfolios

    Note the increasing amount of red in these reports

    Illinois Tool Works beats by $0.05, misses on revenue

    · Illinois Tool Works (NYSE:ITW): Q4 EPS of $1.18 beats by $0.05.

    · Revenue of $3.5B (-1.4% Y/Y) misses by $90M.

    Caterpillar misses by $0.20, beats on revenue

    · Caterpillar (NYSE:CAT): Q4 EPS of $1.35 misses by $0.20.

    · Revenue of $14.24B (-1.1% Y/Y) beats by $60M.

    3M beats by $0.01, misses on revenue

    · 3M (NYSE:MMM): Q4 EPS of $1.81 beats by $0.01.

    · Revenue of $7.72B (+2.0% Y/Y) misses by $50M.

    Procter & Gamble misses by $0.07, misses on revenue

    · Procter & Gamble (NYSE:PG): FQ2 EPS of $1.06 misses by $0.07.

    · Revenue of $20.16B (-4.4% Y/Y) misses by $460M.

    Microsoft EPS in-line, beats on revenue

    · Microsoft (NASDAQ:MSFT): FQ2 EPS of $0.71 in-line.

    · Revenue of $26.47B (+8.0% Y/Y) beats by $140M.

    United Technologies EPS in-line, misses on revenue

    · United Technologies (NYSE:UTX): Q4 EPS of $1.62 in-line.

    · Revenue of $17B (+1.4% Y/Y) misses by $140M.

    Economics

    This Week's Data

    The January Dallas Fed manufacturing index fell to -4.4 versus expectations of +4.0.

    http://www.calculatedriskblog.com/2015/01/dallas-fed-texas-manufacturing-activity.html

    December durable goods orders fell 3.4% versus estimates of +0.7%; ex transportation, they dropped 0.8% versus forecasts of an increase of 0.8%.

    Other

    Real median household income rose in December (short):

    http://www.advisorperspectives.com/dshort/updates/Median-Household-Income-Update.php

    Politics

    Domestic

    Quote of the day (short):

    http://cafehayek.com/2015/01/quotation-of-the-day-1249.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

    International War Against Radical Islam

    Disclosure: The author is long ITW, CAT, MMM, PG, MSFT, UTX.

    Jan 27 8:57 AM | Link | Comment!
  • Monday Morning Chartology---Greek Anti Austerity Party Wins

    The Market

    Monday Morning Chartology

    Using a longer term chart smooths out the volatility. What we see from the 10,000 foot perspective is the S&P in uptrends across all timeframe, but unable to get back to its former high. On a very short term basis, it is in a trading range.

    (click to enlarge)

    Friday, TLT bounced back above the lower boundary of its very short term uptrend, negating Thursday's break. It remains solidly within uptrends across all the other timeframes and above the 50 day moving average.

    (click to enlarge)

    GLD was very busy last week technically speaking. It re-set its short term trend from a trading range to an uptrend and its intermediate term trend from down to a trading range. In addition, it is in a very short term uptrend, has pushed through the upper boundary of its short term uptrend and is firmly above its 50 day moving average. As you can see, GLD started to consolidate on Friday. If it bounces anywhere short of the lower boundary of its short term uptrend, our Portfolios will nibble on the recovery.

    (click to enlarge)

    The VIX moved down last week's as stocks made some progress. It finished the week bouncing off its 50 day moving average (eliminating a potential break) and remaining within its short term trading range and intermediate term downtrend.

    (click to enlarge)

    Fundamental

    The latest from Van Hoisington (medium and a must read):

    http://www.advisorperspectives.com/commentaries/hoisington_012315.php

    ***overnight, the radical left anti austerity party in Greece won a near majority in the Greek parliament. Now the fun starts.

    http://www.zerohedge.com/news/2015-01-26/syriza-forms-coalition-government-anti-bailout-independent-greeks-what-happens-next

    And this 5 minute interview with the new finance minister:

    http://www.zerohedge.com/news/2015-01-25/greeces-new-finmin-warns-we-are-going-destroy-greek-oligarchy-system

    Investing for Survival

    The problem with the lack of diversification (medium):

    http://www.etf.com/sections/index-investor-corner/swedroe-why-buy-individual-stocks/

    News on Stocks in Our Portfolios

    W.W. Grainger misses by $0.03, beats on revenue

    · W.W. Grainger (NYSE:GWW): Q4 EPS of $2.80 misses by $0.03.

    · Revenue of $2.51B (+5.5% Y/Y) beats by $10M.

    Economics

    This Week's Data

    Other

    The dollar comeback (short):

    http://scottgrannis.blogspot.com/2015/01/king-dollar-comeback.html

    Politics

    Domestic

    International

    US boots on the ground in Ukraine? (short):

    http://www.zerohedge.com/news/2015-01-25/out-my-face-please-why-are-us-soldiers-mariupol

    Disclosure: The author is long GWW.

    Jan 26 9:02 AM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.