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Charles Payne
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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • Austerity And Buy Signals - By Charles Payne

    Austerity American-style; is it too early to change the course? Obama wants to ditch sequestration, and he will use the typical talking points. On the White House website, sequestration is being blamed for cuts in after-school programs that will affect 1.2 million kids, along with the elimination of 30,000 teaching jobs, meals for more than four million homebound seniors, and less funding for first responders in local communities.

    Of course, the administration does not like to talk about any cuts to spending - spending that includes attempts to make emergency unemployment insurance a permanent fixture. The left-leaning Economic Policy Institute correlated the expiration of such long-term benefits with a drop in fewer people who were lifted out of poverty.

    Yet… we learned this week that of the three million jobs created last year, 1.8 million of those jobs were directly linked to people getting back into the job market and pounding the bricks after exhausting unemployment benefits.

    1,800,000

    Of

    3,000,000

    Jobs Created from Expired Unemployment Benefits

    nber

    In addition, President Obama has taken a lot of victory laps about the deficit being cut in half. Obviously, it is back to where it had been when he had first taken office; down from the trillion dollar levels that have hit it four years in a row.

    Obama

    Deficit Balloon

    Amount

    %

    GDP

    2009

    $1.4 trillion

    9.8%

    2010

    $1.3 trillion

    8.8%

    2011

    $1.3 trillion

    8.4%

    2012

    $1.1 trillion

    6.8%

    2013

    $679 billion

    4.1%

    2014

    $486 billion

    2.8%

    President Obama calls his economic policies that limit the amount the rich can earn, "middle-class economics", but do people in the middle-class want there to be limits on how much they can earn - wouldn't that be the destruction of the American Dream? I believe if they lower taxes, then that could spark a real economic revival far greater than cheap gas, because the actual paycheck would be larger. The truth is that our austerity program should be even more robust. This is a start, so let's not blink.

    Technical Victory

    However, the way it happened is what's really impressive - an intra-day reversal from what could have been a disaster. That's the first part of what constitutes one of my favorite buy signals - especially for a trade. You can see the index is still in short-term down trade, so we need to clear that and take out yesterday's high.

    Over the last couple of weeks, lots of investors have been burned selling stocks on earnings. In many cases, the earnings were good-beating on top and bottom. That was the case with CARBO Ceramics (NYSE:CRR), which posted earnings that beat the Street convincingly, and yet the stock was hammered with another dip in oil.

    It's clear to me that there was panic selling, mostly among individual investors who were exhausted, while smart investors stepped in.

    CRR

    Sometimes noise is louder than facts and stocks react to that. As an investor, you must be zeroed in on the latter - also known as fundamentals. I love when ideas I recommended stage remarkable rebounds like Harman International Industries (NYSE:HAR) yesterday, and The Boeing Company (NYSE:BA), the day before. However, I get very depressed, because some subscribers always sell, even as I plead for them to hold.

    The oldest axiom is to buy low, sell high, and look for reverses to be a guide.

    Today's Session

    The final US gross domestic product (NYSE:GDP) reading for Q4-2014 has been released. Real GDP grew 2.6% in the quarter, significantly lower than analyst expectations for a 3.2% growth and quite a deceleration from the 5% growth in Q3-2014. The deceleration occurred due to the combination of the federal government decreasing its spending, higher imports, and lower nonresidential fixed investment spending. The only bright spot, so far, is that consumer expenditures are up. At first glance, this GDP report is disappointing, however, we're combing through the numbers to see if there is a silver lining.

    Jan 30 10:04 AM | Link | Comment!
  • Crude Awakening - By Charles Payne

    Yesterday was another difficult session, although it did not start out that way; stocks galloped out the gate on the coattails of Apple and industrials, Boeing and U.S. Steel. However, the rally tripped over a sizeable speed bump that might actually represent a speed bump for the entire nation. Commercial crude oil inventory surged, coming in at almost 9 million barrels or 100% higher than anticipated. How much longer can we call this a story of supply, and not a hint at a flagging demand from a flaccid economy?

    +8.9 million

    406,700,000
    Barrels

    After the Federal Reserve finished its Federal Open Market Committee (FOMC) gathering and issued its typical release, stocks slowly began to slide. That slide mirrored the proverbial snow-into-boulder scenario as selling intensified and beget even more selling. Buyers made a stand at the plus/minus line a couple of times before giving up the ghost. The result was a serious two-day drubbing.

    The reason for the slide was bond yields, which tripped hard and in many respects, inexplicably. The bond rally has been defiant and it continues to confound the experts. I must admit that I am surprised. On the one hand, yields are down; on the other hand, it is not unusual for selling to trigger selling. However, once key technical marks are eclipsed, a certain bias is established- in this case, due south.

    Between that horrible durable goods report, the cascade of corporate warnings, and the mounting crude inventories, it is hard to be convinced that this is a robust recovery.

    Thus, I think in general that stocks got ahead of them on a short-term basis, so this cleaning process serves a purpose. Remember, you are investing in individual stocks, so an oversold market can only act as an anchor for so long.

    Moreover, there are unresolved questions about the economy and the market. I have never allowed the hours after the FOMC announcement to factor into my decision-making; the day after is the one that counts.

    Today's Session

    For the week ended January 24th, initial jobless claims made a nice turn around, coming in at 265,000. This is significantly lower than the consensus estimate for 300,000 and the upwardly revised 308,000 (from 307,000) that incurred in the prior week… proof that unemployment claims can be volatile as well, especially after the Martin Luther King holiday. Continuing claims for the week ended January 17th are also lower as they fell by 71,000 to 2.385 million. 265,000 initial claims is the lowest reading since April 2000 and although the reading is impressive, the real question is, will it hold the market up today?

    Below are some of the major companies that reported earnings yesterday afternoon and this morning.

    Company

    EPS

    Consensus

    Revenue ($M)

    EPS Guidance

    EPS Consensus

    ATK*

    3.02

    2.89

    $1,251

    -

    FY15 11.50

    FB*

    0.54

    0.48

    $3,851

    -

    FY15 1.92

    LVS

    0.92

    0.78

    $3,416

    -

    FY15 3.40

    QCOM

    1.34

    1.25

    $7,100

    FY15 4.75-5.05

    FY15 5.20

    SWFT

    0.55

    0.48

    $1,140

    FY15 1.64-1.74

    FY15 1.70

    BABA

    0.81

    0.76

    $4,219

    -

    FY15 2.17

    COH

    0.72

    0.66

    $1,219

    -

    FY15 1.87

    CL

    0.76

    0.74

    $4,221

    -

    FY15 3.06

    DOW

    0.85

    0.69

    $14,384

    -

    FY15 3.08

    F

    0.26

    0.23

    $33,800

    -

    FY15 1.61

    HOG*

    0.35

    0.33

    $1,031

    -

    FY15 4.38

    HSY

    1.04

    1.06

    $2,010

    FY15 4.30-4.38

    FY15 4.46

    JBLU

    0.26

    0.24

    $1,446

    -

    FY15 1.45

    POT*

    0.49

    0.47

    $1,902

    FY15 0.45-0.55

    FY15 2.12

    RTN

    1.71

    1.81

    $6,143

    FY15 5.54-5.64

    FY15 6.69

    SWK

    1.56

    1.51

    $2,983

    FY15 5.65-5.85

    FY15 6.01

    TWC

    2.03

    2.08

    $5,790

    -

    FY15 8.16

    *Open WSS Ideas

    Jan 29 10:16 AM | Link | Comment!
  • Consumers To The Rescue? - By Charles Payne

    Let's discuss the following three charts that matter for investors, both in the near-term and the long-term. Yesterday, the Conference Board posted consumer confidence numbers that were at the highest level since August 2007. The headline number was impressive, and the selloff even paused for a couple of minutes, but the Expectations Component, up for the first time in four months, was the bright spot.

    However, with industrial companies in a prevent-defense mode looking to protect share prices rather than invest in their businesses, it is up to the consumer to save the day.

    Lost in this rollicking week are signs that maybe Main Street will step up to the plate. Gas prices had their first up day in months, but it served as a reminder of how far they have fallen. At some point, cheap gas has to have a positive impact on the economy.

    Obviously, it is having an amazing impact on consumer confidence.

    Now, there are signs the needle on household income is finally moving in the right direction. Sentier Research published its employment analysis showing December wages up 3.3% from a year ago, and 1.4% from November. It is the best one-month jump since October 2006.

    However, we should note the $54,417 household income is well below the $56,237 household income in December 2007.

    New home sales came in well above consensus, even as prices climbed to $298,000 from $275,000 one year earlier. Perhaps, driving this phenomenon of price is the demand and supply ratio; there is not a lot of supply. Still, in the end, homebuilders could not jack up prices if buyers are not paying.

    Moreover, it would be something if consumers saved the day; maybe they will. The idea is fraught with risk of more leverage, borrowing and spending above their means- but it just might happen.

    Today's Session

    The major equity indices indicated higher this morning after closing yesterday's session in the red. Today will be a light day in terms of domestic economic data releases with the Mortgage Bankers' Association's (MBA) purchase applications report out (it's quite a volatile report, more in the afternoon note) and the Energy Information Administration (NYSEMKT:EIA) preparing to release its petroleum report. In the afternoon, market observers will get word from the Fed what the next course of action is.

    Below are some of the major companies that reported yesterday afternoon and this morning.

    Company

    EPS

    Consensus

    Revenue ($M)

    EPS Guidance

    EPS Consensus

    AMGN*

    2.16

    2.05

    $5,331

    -

    FY15 9.27

    AAPL*

    3.06

    2.60

    $74,600

    -

    FY15 7.86

    T

    0.55

    0.55

    $34,439

    -

    FY15 2.55

    CNI

    1.03

    0.97

    $3,207

    -

    FY15 4.23

    X*

    1.82

    0.80

    $4,072

    -

    FY15 2.92

    YHOO

    0.30

    0.29

    $1,179

    -

    FY15 1.10

    ACAT*

    0.68

    0.48

    $194

    FY15 1.24-1.32

    FY15 1.97

    BA*

    2.30

    2.10

    $24,468

    FY15 8.20-8.40

    FY15 8.65

    GD

    2.19

    2.13

    $8,362

    -

    FY15 8.38

    IP

    0.53

    0.48

    $5,943

    -

    FY15 3.96

    STJ

    1.03

    1.03

    $1,439

    FY15 3.95-4.00

    FY15 4.12

    TXT

    0.76

    0.77

    $4,096

    FY15 2.30-2.50

    FY15 2.57

    * Open WSS Position

    Jan 28 10:41 AM | Link | 1 Comment
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