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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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  • THE ULTIMATE EBOLA TEST - By Charles Payne

    I spoke to the neighbor of the NYC Ebola doctor (turned patient) a couple of times, last night. Her fears are less about contracting the disease than having her family's names and photos splashed over the media, particularly those of her 16 year old daughter who is very talented, outgoing, and attends a high profile high school. The media has been unrelenting, but for the most part all promised not to mention her or her daughter's names.

    One network is struggling, and say even without permission, they'll display a blurred photo of her daughter with her name. In this day and age, it could lead to near-term disaster.

    There have been questionable actions on the part of authorities that have not gained the confidence of people in the building.

    On that note, I grew up two blocks from the building the Ebola patient lives in, and I've been in that building a lot, although not this year. Like most New Yorkers, the people there are used to toughing it out, especially those there before gentrification began over the past decade. In many ways, this is the moment of truth to speak that had to happen: Ebola comes to the big city. We've seen the movie, or television show script for years; it's supposed to spread like wildfire.

    The thing is the disease didn't spread like wildfire in Dallas, but this is a larger stage and the perfect moment of truth. I will say, if there is no spread of the disease, it will not be because the authorities did everything right - protocols still need to evolve just from mistakes made in the first few hours of the New York patient. New Yorkers are tough but not dumb, and when obvious mistakes are made, they get upset, not afraid.

    So, I can say the neighbor that shares the same common wall with the NYC Ebola patient is more afraid about her daughter potentially being mistreated at school than about contracting the disease. In the meantime, this patient was totally inconsiderate, which is shocking since helping people is the hallmark of Doctors Without Borders.

    On one hand, willing to risk their his own life to help people in impoverished nations is admirable, but to then come to NYC knowing he was high-risk and still meandering around town, riding the subway, going bowling and hanging out in general, is irresponsible and unethical.

    Markets & Emotions

    On a normal day, in America, people are mostly worried about paying rent, putting children through college or wondering if they'll ever get to stop working. So why is it that with the stock market, which is supposed to mirror society, things we aren't normally worried about day-to-day, can wreck or psyches and our fortunes?

    Consider this week, Ebola finally cracked the list of "most important problems facing the country" yesterday with 5% of the vote.

    For weeks, when ISIS was on the march, it captured the attention of the market sending it down quickly, but only 1% worried about these savages in August, 3% last month, and only 5% give it top ranking now. And Wednesday, what appeared to be an act of terror rattled the market, but when the opening bell rang terror, only 3% of Americans felt it was the most important problem facing the country."

    I've watched equity futures since the Ebola news broke in NYC and they've gotten better, but are still in the red. The financial media, which I called out last Thursday, is walking a tighter rope - the fear guys that hate the rally are chomping at the bit to derail this thing once and for all, but know the microscope is greater now, and their fiduciary responsibility as journalists and "experts" that can move markets will be scrutinized.

    Of course, this is a huge story and if the disease caused Americans to stay home, it would be a giant financial story. There are a lot of things people ask themselves that seem like common sense questions, however I'm not sure it's unusual for an Ebola patient to have their body temperature go to 103 from 99 overnight. This isn't the common cold or flu.

    We have to play this day by day, though like a bull market that runs into trouble, it's the only way to be sure that this is the moment of truth on the biggest stage in America. If it doesn't spread, then the disease is hard to contract and people that live in the Bronx, Queens, Staten Island, Pennsylvania and other parts of the nation don't need to stay home out of fear. It will be touch-and-go for a few days as we have a fresh 21-day clock, so there will be headline risks.

    The key for the market (and those that help investors in the market) is to let the headlines be actual news rather than another reason to hate the rally or gain television ratings.

    For now, pray not only for the safety of those that live near the doctor or might have come in contact with him in a dangerous way, but for their health and hope they can escape without the disease or some kind of label that actually hurts their lives more, even if the disease is contained.

    Today's Session

    The major indices are poised to open lower this morning. Globally, markets were under pressure overnight. In Europe, there are concerns that a majority of the banks that underwent stress tests failed. In China, increased property prices in 10 out of 70 cities (a month ago 48 cities saw prices rise). The smaller amount of cities exhibiting price increases may mean that there are less consumers investing in purchasing properties presumably due to low economic outlooks. Domestically, our futures are down due to concerns over the spread of Ebola here in NYC. However, Corporate America is painting a very nice picture of Q3-2014 and where our economy is headed. Below is a chart displaying the earnings results of many key companies that reported yesterday after the close and this morning.

    CompanyTickerEPS (Actual)EPS (Est)Rev (Actual $M)Rev (Est $M)
    Deckers OutdoorDECK1.171.03$430.30$457.22
    Edward LifesciencesEW0.800.72$607.40$546.10
    Hub GroupHUBG0.490.54$913.38$918.32
    Pandora MediaP0.090.08$239.60$238.58
    Swift TransportationSWFT0.390.35$1,070.00$1,099.78
    Ford MotorsF0.210.19$32,800.00$33,209.79
    Lifepoint Hospitals*LPNT0.750.73$1,166.00$1,085.54
    New Oriental EducationEDU0.730.88$394.00$417.15
    Procter & Gamble**PG1.071.08$20,792.00$20,786.92
    State StreetSTT1.261.21$2,678.00$2,637.67
    United Parcel Service*UPS1.321.28$14,290.00$14,199.17
    Wyndham WorldwideWYN1.671.63$1,514.00$1,529.17

    * = Open WSS Idea ** = Dow Component

    Oct 24 10:20 AM | Link | Comment!
  • WHAT IS "THE MARKET" ANYWAY? - By Charles Payne

    We always talk about "the market." What is "the market" to regular people?

    • Wall Street is not the stock market, it is the physical location of the NYSE, and major brokerage firms where they manage transactions, and should not be confused with long-term investing.
    • The stock market does not always reflect the economy. Markets move on fear, manipulation, and other non-fundamental factors, typically for short periods of time, but also for longer-term periods as well.
    • The major indices are not effective proxies of Main Street; everything can look great or everything can look awful, which only angers the public that knows better.

    The "Dow" or "S&P" are indexes that are supposed to reflect the entire spectrum of business. The problem is they are older names and might not reflect the hot or exciting parts of the economy. Consider the Dow components that reported this week.

    Misses from food, beverage, and technology companies underscore how hard it is to reinvent yourself over and over, while beats in military hardware and insurance show how tough it is for innovation to change those industries.

    CompanyYear FoundedYear on DJIA

    I am not sure how to communicate "the market." However, I think it is a major stumbling block for those who invest in the stock market and for those who own companies. I will admit there are all kinds of shenanigans that distort value. Fed action is designed to make stocks more attractive, although this time around I disagree; high-frequency trading distorts minute by minute.

    Corporate buybacks distorts the intermediate-term health of companies. It is important to read the entire income statement, the cash flow statement, and balance sheet, instead of focusing on the bottom line.

    One thing to remember, however, in the longer-term, great companies will have great stocks.

    Taking Risks

    When the market is all over the place, it is easier for those older Americans who remember the Harold Lloyd classic "Safety First." Nevertheless, when it comes to investing, older folks are more reckless or more confident than the younger generation.

    30% of 60-65 have all their investment money 100% in stocks. 52% of 60-65 have 70% of all their investment money in stocks. On the other hand, 39% of Millennials assets are largely in cash, while 13% are heavily invested in stocks.

    This chart of the Dow might give us a few clues why this is happening…

    If you are sixty-five, the Dow began that year at 1692; now up to 869%, but it has not been a smooth ride. In fact, you would have turned 17 when the Dow peaked at 7000, and drifted for 16- years, losing 73%.

    Compare the difference to that of the Millennials; since 1982, the market has been up 670%. However, this age group has experienced two stock market crashes since turning 17, and now has serious trust issues.

    I understand that young household wealth is substantially lower than it was twenty to thirty-odd years ago, but delaying investments and the accumulation of assets means retiring a lot later than previous generations.

    Average Retirement Age

    Oct 22 10:43 AM | Link | Comment!

    The midterms are two weeks from now, and either it's going to be the most boring midterm election in history, or the mainstream media isn't going to be happy about the polls, but investors might be, and of course, with so much despair out there, everyone is interested in where we go from here.

    Take a look at the messages both parties are spending money on for Senate seats:

    Matching Messages with Concerns and (Really) Winning

    Republicans seem to be on the right track, except for maybe spending too much time and money on Obama-care. Take a look at the table below and see what I'm talking about... the GOP polls higher on the top three issues this year.... economy, federal deficit, and taxes. The Affordable Care Act ranks third and the Dems are actually polling better there. Of course, the Dems have spent a ton of money on social issues that are barely on the radar.

    The bottom line is winning in November because the electorate is fed up with Democrats. President Obama isn't an overwhelming vote for GOP policies, which have to be proven to be better for America, but first must be concise and unified. Winning in two weeks and losing in two years is winning a battle, but losing the war. The economy should get a natural boost in the form of a sigh of relief in a couple of weeks if polls prove to be correct. The economy would get a bigger long-term win if the GOP stays on top of the topics most important to Americans right now.

    Hint: It's not gay marriage or bragging about not pandering.

    If Democrats retain control of the Senate, it would be a major blow, although it would underscore the point I'm trying to make. It would be unnerving that people would vote on issues they aren't truly concerned about like global warming simply because there was no cohesive counter-argument.

    Earnings Message

    It's been an uneven round of earnings since the closing bell yesterday. Apple simply blew away the Street and if it were any other company, the stock would be up 20%, but instead, it's up a couple of dollars, but it should still open at a new all-time high.

    Interestingly, the biggest losers are big time Dow components which are weighing on the index which was poised to be up 100 points. It might speak to the need to freshen up the index. Sure, many of these components haven't been in the index as long as it seems, but they're older companies that have to reinvent themselves again. Of course things haven't changed so much in insurance and aircraft that United Technologies and Travelers are in the same predicament as McDonald's, Coke and IBM.

    CompanyYear FoundedYear on DJIA

    CompanyTickerEPS (Actual)EPS (Est)Rev (Actual $M)Rev (Est $M)
    Chipotle Mexican GrillCMG4.153.84$1,084.10$1,059.77
    Steel DynamicsSTLD0.470.44$2,339.02$2,143.61
    Texas InstrumentsTXN0.760.71$3,501.00$3,452.72
    Werner EnterprisesWERN0.360.36$551.96$542.47
    Canadian PacificCP2.312.38$1,670.00$1,689.37
    Lockheed MartinLMT2.762.71$11,114.00$11,272.77
    United Technologies**UTX1.851.81$16,168.00$16,164.42

    * = Open WSS Idea ** = Dow Component

    Yesterday, the Dow climbed off the canvass despite IBM's big miss. On one hand, it wasn't a real "surprise" and one wonders what the analysts covering these names are thinking with models that aren't catching what non-analysts could tell them from anecdotal observation.

    Oct 21 2:28 PM | Link | Comment!
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