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Denis Ouellet, CFA  

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  • Auto sales in China continued their ascent in March, rising 56% from a year earlier to a new monthly record of 1.74M vehicles. India auto sales jumped 25%.  [View news story]
    After 3 months, car sales total 4.62 million units, up 72% YoY, an annual pace of over 18 million even disregarding seasonality.
    Chinese officials have forecast car sales to rise 10-20% in 2010. That would put sales in the 15.0-16.4 million range. Needless to say, even the 20% figure will be easily shattered.
    Oil and steel demand are likely to remain pretty strong.
    See chart at www.news-to-use.com/20...
    Apr 9, 2010. 11:11 AM | Likes Like |Link to Comment
  • ICSC Retail Store Sales: +0.6% W/W, vs. 0.1% last week. +3.2% Y/Y, vs. 3.7% last week. Consumer spending helped release pent-up demand combined with early Easter contributing to strong March sales.  [View news story]
    US chain store sales rose 0.6% last week. The 4-week moving average has risen sharply since mid-February and March sales seem set to grow 3.0% MoM. Chain store sales are up 3.3% YoY using the 4-week m.a..
    See chart at www.news-to-use.com/20...
    Related post: IS THE US ECONOMY TAKING OFF? at www.news-to-use.com/20...
    Mar 30, 2010. 08:42 AM | Likes Like |Link to Comment
  • Valuations look stretched, based on trailing fundamentals and expected operating profits. Although strong stock performance has often followed periods where the yield curve was steep, as is the case today, these periods typically coincided with valuations far below current levels.  [View news story]
    Here is a positive spin on valuation: the more robust Rule of 20 approach says that fair PE is 18.0-18.5x assuming total-CPI inflation stays around 1.5-2.0%. On that basis, the S&P 500 Index remains 7-10% undervalued. Fair index levels under current inflation rates are 1260-1300.

    The most recent analysis is at www.news-to-use.com/20...

    and the complete review of the Rule of 20 is at www.news-to-use.com/20...
    Mar 22, 2010. 04:38 PM | Likes Like |Link to Comment
  • ICSC Retail Store Sales: -0.4% W/W, vs. +2.9% last week. +3.2% Y/Y, vs. +3.4% last week. An earlier Easter this year should help March sales.  [View news story]
    The 4-week moving average climbed further, reaching its best level since last summer, breaking the 7-month downward trend.

    See the chart at www.news-to-use.com/20...
    Mar 16, 2010. 08:12 AM | Likes Like |Link to Comment
  • ICSC Retail Store Sales: +2.9% W/W, vs. -0.8% last week. +3.4% Y/Y, vs. +0.7% last week. Warm weather helped boost sales of spring goods and gave retailers a breakaway start in March.  [View news story]
    The 4-week moving average has yet to break on the upside however. Trailing 4-week sales are 1.2% below their recent high (August 2009) and only 1.1% higher than last year’s depressed level.

    See my chart at www.news-to-use.com/20...
    Mar 9, 2010. 08:11 AM | Likes Like |Link to Comment
  • We're trained to believe that bad things happen to the stock market when the Fed begins tightening. Well, a look at history shows that it's not necessarily true, at least not when rates are low.  [View news story]
    See WHEN THE FED STOPS THE MUSIC (II) at www.news-to-use.com/20...
    Feb 19, 2010. 02:37 PM | Likes Like |Link to Comment
  • ICSC Retail Store Sales: -2.5% W/W, vs. +2% last week. +1.9% Y/Y, vs. 2.6% last week. The decline was due to seasonal fluctuations, and the effects of weather and inventory.  [View news story]
    Even though January is a low volume month, the trend is definitely worrying. Chain store sales are barely ahead of their deeply depressed levels of last year.
    Chart at www.news-to-use.com/20...
    Jan 26, 2010. 08:09 AM | Likes Like |Link to Comment
  • ICSC Retail Store Sales: +2% W/W, vs. -3% last week. +2.6% Y/Y, vs. +1.7% last week. Strength at discounters helped boost sales, but January is a low volume month that's easily affected by small swings in demand. Jan. sales overall expected to be flat to +1%.
     [View news story]
    Discretionary spending is very volatile these days, exacerbated by January being a low volume month and by weather fluctuations. The trend remains flat since September. Trailing 4-week sales are up 2.2% over the very depressed same period last year.
    See chart at www.news-to-use.com/20...
    Jan 20, 2010. 08:10 AM | Likes Like |Link to Comment
  • U.S. Equities Valuation Analysis - Duck, Happy Suckers [View article]
    Sorry for the delay.
    I find it more prudent to use factual trailing eps except when conditions are such that it does not make sense like today. Using next quarter's annualized eps is not as risky as using next 12 months where the margin of error is greater.
    The fact is, we are not looking for exact levels. The exercise is meant to evaluate the risk/reward ratio, the margin of safety.


    On Dec 17 06:40 PM TLassen wrote:

    > Correct me if I am wrong, but isn't the Rule of 20 supposed to be
    > used against forward estimated earnings? In other words, take next
    > quarter estimated earnings multiplied by 20 (less inflation rate)
    > to find the fair value of S&P 500 Index.
    >
    > "More importantly, the Rule of 20 P/E (see S&P 500 INDEX PE AT
    > TROUGHS: A DETAILED 80 YEARS ANALYSIS) , which gave a strong buy
    > signal at 16x last March, is currently high at nearly 28x when a
    > fair P/E should be 18-20x given current inflation rates"
    Dec 28, 2009. 03:49 PM | Likes Like |Link to Comment
  • U.S. Equities Valuation Analysis - Duck, Happy Suckers [View article]
    That's what low interest rates do, reduce the alternatives. If rates stay low long enough, the beast feeds on itself and bubbles appear.

    Actually, there is juice left since fair value is currently 1200 and with near zero ST rates, overvaluation is clearly possible.

    Ducking can be done quickly or gradually depending on risk aversion. My main concern in the shorter term is that profit expectations may be too high as analysts and investors extrapolate the recent past.
    On the other hand, if economic activity keeps improving, expectations for higher rates will rise and/or inflation will pick up. Strong headwinds unless profits really surprise on the upside.
    How lucky do you feel?


    On Dec 16 12:19 PM chap08 wrote:

    > As a happy sucker I'd like to say thank you for the article and interesting
    > link. I know I'll need to duck at some stage, maybe soon, but is
    > this really the evidence to do it on? I'm interested in your valuation
    > work and recognize the issues it presents. But, I've done the analysis
    > in the past and valuations only have any significance over a long
    > time frame i.e. 10 years or more. Over 1 year or less, they are largely
    > meaningless. That's just the sad truth.So even if there is no short
    > term significance, should I take my long term money out of stocks
    > because long term returns will be small? I could, but where would
    > I put it? Bonds? You're joking right. More gold now? Cash? I think
    > the only thing I'm ready to duck, is the decision.
    Dec 16, 2009. 02:16 PM | 2 Likes Like |Link to Comment
  • On Equity 'Cushions' and Negative Equity [View article]
    How deeply in the hole are these negative equity homeowners?

    The average value for all properties in negative equity is $210,300. The average mortgage debt for properties in negative in equity was $280,000 and borrowers that were in a negative equity position were upside down by an average of nearly $70,000.

    House prices must therefore rise 33% before break-even is reached! It is highly unlikely that we would even come close to this for many years to come given the current huge demand/supply imbalance and the fact that this would bring the Case Shiller House Price Index nearly at its recent peak when affordability was at its worst in 2 decades.

    Housing is where it all started. But it ain’t finished yet.
    US HOUSING: ECONOMIC MAGIC OR ILLUSION? www.news-to-use.com/20...)
    Dec 10, 2009. 01:18 PM | Likes Like |Link to Comment
  • ICSC Retail Store Sales: -1.3% W/W and +2.6% Y/Y, down from -0.1% and +3.1% last week. ICSC warns of (hopes for?) a last-minute shopping rush, but maybe people really are just giving cash.  [View news story]
    Weekly chain store sales dropped 1.3% last week! This came after weak Thanksgiving sales, continuing the downtrend since the recent peak last summer. The seasonally-adjusted weekly sales dropped to their lowest level since February.
    Check out the chart at
    www.news-to-use.com/20...

    Related post: THE US CONSUMER: WHAT, ME WORRY? (www.news-to-use.com/20...)
    Dec 8, 2009. 08:08 AM | 1 Like Like |Link to Comment
  • Retailers' same-store sales fell for the 12th straight month (I, II, III, IV, V), but results at Target (TGT +1.4%), Kohl's (KSS +1.5%) and Gap (GPS +5%) topped analyst expectations. Weak spots included Abercrombie & Fitch (ANF -3.8%) and Family Dollar Stores (FDO -8.4%). Still, the decline was smaller than July's. SPDR S&P Retail ETF (XRT) is +0.5% to $31.36.  [View news story]
    Your post is a bit misleading mixing same-store-sales numbers with total sales numbers. For an accurate and graphical illustration of SSS see www.news-to-use.com/20...
    Sep 3, 2009. 10:31 AM | Likes Like |Link to Comment
  • Retailers' same-store sales fell for the 12th straight month (I, II, III, IV, V), but results at Target (TGT +1.4%), Kohl's (KSS +1.5%) and Gap (GPS +5%) topped analyst expectations. Weak spots included Abercrombie & Fitch (ANF -3.8%) and Family Dollar Stores (FDO -8.4%). Still, the decline was smaller than July's. SPDR S&P Retail ETF (XRT) is +0.5% to $31.36.  [View news story]
    For the record, personal income is -2.4% yoy as of July. For complete and accurate numbers see www.news-to-use.com/20... at www.news-to-use.com/


    On Sep 03 10:16 AM ETFdesk.com wrote:

    > Retailers look enourmously overvalued. Personal income is down 5%
    > or so from this time last year and the only modicum of growth in
    > spending has come on the heals of huge gov. incentive programs ie
    > clunkers and the 1st time home buyers credit. They are enough to
    > provide some slight up turns in housing figures and maybe positive
    > print in Q3, beyond that it looks like the only thing that can only
    > be done by that huge 70% chunk of GDP which is consumer spending.
    > And that doesnt seem very plausible. If you need more reading on
    > the subject see a number of great articles on deflationary environment
    > ....
    >
    > Cut my pay ... please! ; www.etfdesk.com/headli...
    >
    > Unemployment: The Harder You Look, The Uglier It Appears From Naked
    > Capitalism ; www.etfdesk.com/headli...
    > First Time Home Buyer NAR Numbers : www.etfdesk.com/headli...
    Sep 3, 2009. 10:28 AM | Likes Like |Link to Comment
  • Meanwhile, out in the real economy ... Rail traffic is still down 17.9% from a year ago, and the Pragmatic Capitalist says any better-than-expected verdicts are due to overly pessimistic analysts.  [View news story]
    I look at the weekly trends and they are looking up. Total weekly carloads and the 4-week moving average rose to their highest levels since March and, significantly, weekly intermodal traffic reached its highest level since January.
    See my chart at www.news-to-use.com/20...
    Jul 30, 2009. 03:33 PM | Likes Like |Link to Comment
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