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dancing diva

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  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #18 [View instapost]
    Tack, Macro, others:

    I'll add my two cents to the QE impact on stock prices.

    While I don't agree with the Eric Parnell article that says the end of QE will precipitate the end of the bull market, I do believe the last round of QE was so massive it did have an important psychological impact (the Fed has my back, don't fight the Fed), giving some market participants the courage to foray into stocks, ie, it increased the demand for stocks. From the time QE3 was announced to the present time the forward p/e of the S&P went from a below average p/e of about 12.5 to the current level of 15.2 - roughly 10% above the ten year average. And since no one knows the impact what the cessation of Fed buying will do, it should have a negative psychological impact, making buyers less aggressive to buy minor price declines.

    As long as the economy is growing, earnings will as well, and that will keep people in stocks and the market firm. However, the multiple may take a bit of a hit - to perhaps the 10 year average - on the idea the Fed isn't providing as much liquidity and the end of the super low rates is closer. And the market could spend quite a bit of time range bound.

    As the US economy now looks, I don't think it can handle a 4% 10 year rate, so it probably won't happen anytime soon. Already with the pop in home prices and the increase in mortgage rates there has been a noticeable slowdown in home sales growth. So dividend stocks should be well supported.

    What I'll be looking for to potentially begin a bear market is the escalation of food and energy prices globally. In the past this has precipitated recessions. Higher energy prices could come in the form of a geopolitical event or even a slowdown in fracking (potentially we could hear news of groundwater contamination or more earthquakes as time passes - let's face it hydraulic fracturing is too new to say it's completely safe in massive amounts); food prices on adverse weather. I have no idea when this may occur.

    By the way, the reason I consider the 10 year average p/e to be more important than a longer time frame is that was the last time a major tax code change occurred. In 2003 Congress brought the dividend tax rate down to 15% from the level of your marginal tax rate from 1985 to 2002). This should have elevated the demand of defensive dividend paying stocks versus bonds since bond income (from all except municipal bonds) is taxed at ordinary income rates and dividends at a much lower rate for those in middle and upper income brackets. Note for the top bracket this was just increased to 20%, but it still beats the hell out of the top marginal rate on ordinary income of close to 40%.
    Apr 20 07:22 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Springtime Optimism? [View article]
    Jeff : some questions. Do you know why the FactSet historical earnings data doesn't agree with the Standard and Poors kept by Howard Silverblatt for the S&P 500? And which one is more accurate? I find it odd that both are based on "bottoms up operating earnings" figures, yet there seems to be a considerable discrepancy by quarter. I also notice that FactSet actual earnings are consistently higher each quarter than that of S&P, sometimes considerably so (Q3 & 4 2012). Which set of data is more heavily used by the market?

    FactSet has been making a big deal out of the drop in the year/year estimated Q1 2014 earnings in their weekly report, but it's the only quarter in at least two years their figure is less than that of S&P. And the y/y decline is due to the fact their Q1 2013 figure is so much higher than S&P's - Silverblatt has an 5.7% increase. A few cents of the Q1 estimated difference could be due to the Silverblatt latest report is dated April 10th and the FactSet a few days later including more actual earnings, but that doesn't explain the historical stuff. In the bigger scheme of things this is probably meaningless but my inquiring mind wants to know. Thanks for any clarity you can bring to this topic.

    ...................... FactSet S&P
    est. Q1/2014. - $26.59 27.25
    actual Q4 2013 - 28.91 28.25
    actual Q3 2013 - 27.41 26.92
    actual Q2 2013 - 27.30 26.36
    actual Q1 2013 - 26.94 25.77
    actual Q4 2012 - 26.21 23.15
    actual Q3 2012 - 25.87 24.0
    actual Q2 2012 - 25.98 25.43
    actual Q1 2012 - 25.39 24.24
    Apr 20 10:51 AM | Likes Like |Link to Comment
  • Home Depot gets bullish Barron's treatment [View news story]
    Implied vol is very low; you won't get much for selling downside puts. HD reports May 20th, after the monthly expires. Better to buy a very small stock position now and wait, and if HD doesn't rally further (after the probable Barron's pop), you can buy the weekly calls that expires May 23 or 30 on weakness closer to earnings. Earnings expectations are high, but I don't know whether they are too high.
    Apr 19 07:19 PM | 1 Like Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #18 [View instapost]
    I didn't say they were dissimilar, just that your comment to Macro regarding vale vs tck just mentioned the dividend yield being "far less".

    Note if you're simply bullish iron ore in the short term vale is the better play. Over the course of the next few years tck is making substantial investments (owned jointly with suncor) in the energy space in order to get more diversification. So if iron ore prices reverse soon (not likely, but possible) vale would be more inclined to increase their divy substantially than would tck.
    Apr 19 05:48 PM | Likes Like |Link to Comment
  • Sharing Productivity Gains With Joe Sixpack [View article]
    alf- you beat me to it. When I looked at the history of the cost of medical insurance escalation in the US it seemed clear that wage compensation alone is not an accurate measure of how much business is sharing with households.

    The summary from the linked study - with the last two sentences are especially important.

    "The increasing cost of employer contributions for employee health insurance reduces the share of compensation subject to the Social Security payroll tax. Rising insurance contributions can also have a more subtle effect on the Social Security tax base because they influence the distribution of money wages above and below the taxable maximum amount. This article uses the Medical Expenditure Panel Survey to analyze trends in employer health insurance contributions and the distribution of those costs up and down the wage distribution. Our analysis shows that employer health insurance contributions increased faster than overall compensation during 1996–2008, but such contributions grew only slightly faster among workers earning less than the taxable maximum than they did among those earning more. Because employer health insurance contributions represent a much higher percentage of compensation below the taxable maximum, health insurance cost trends exerted a disproportionate downward pressure on money wages below the taxable maximum."
    Apr 19 05:18 PM | Likes Like |Link to Comment
  • Why Stocks Won't Crash (For Now) [View article]
    BBRO - Unfortunately the Fed Funds rate wasn't established until July 1954 at 0.8% - but had it been a couple years early when the Fed was also repressing rates - just not having a FF rate level - you would have seen that didn't stop the 1953-54 recession from occurring.

    I'm not arguing for a recession, just that's a lousy metric.
    Apr 19 02:59 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #18 [View instapost]
    Tack - Vale has reduced its dividend every year since 2011; tck has increased its dividend every year since 2010 - so far. Tck reports reports Tues morning, April 22 and should report FH dividend (it issues twice a year) at the same time.
    Apr 18 05:51 PM | Likes Like |Link to Comment
  • 2 Measures Of Inflation: CPI And The PCE Price Index And Fed Policy [View article]
    I understand why the Fed would want to use "core" data - but at some point they should acknowledge the widening spread between core pce and the cpi as that places an even greater burden on the lesser income in this country. I found the chart comparing the two since 1960 disturbing.
    Apr 18 08:51 AM | Likes Like |Link to Comment
  • Best S&P week since July, Nasdaq up for fourth straight day [View news story]
    Best S&P week since July, but it closed exactly where it was Friday of two weeks ago. It's moving, but not going anywhere - at least recently.
    Apr 17 04:27 PM | 1 Like Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #17 [View instapost]
    A good part of today's strength - and certainly the move to new highs for the day - was due to less worries about Ukraine on reports the situation was agreed to be monitored. RSX - the Russian etf is up 4%. My guess is spy will trade higher and settle today around the 187 strike.

    If the S&P 500 can move above the 1872.5 area, last weeks highs, more buying will come it. That level coincides roughly with 187.20 spy.
    Apr 17 01:42 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #17 [View instapost]
    On the "dip" ahead of earnings you should have bought some call options; I made that suggestion and it has worked out well for me so far.

    Be patient. There's nothing yet to suggest 2014 earnings will be above expectations for the year. My guess is we really won't know that until the Q2 figures are issued. So far I see mostly in line earnings - perhaps a penny or so beat - but not much in terms of raising guidance. And there's also nothing to suggest the economy will be better than assumed.
    Apr 17 11:57 AM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #17 [View instapost]
    F&G - I hope you looked at how the numbers were "beat". If because of one time charges or a reduced tax rate the number isn't as good as it looks.

    I woke up late this morning - 5:30am my time - early by most standards but not early enough to get a really good look at the earnings reports. I plan to spend a long time on them and the conference calls this weekend.
    Apr 17 11:49 AM | 1 Like Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #17 [View instapost]
    CW - This time of the year it's a weather market - and that will last for the next several months. Grains always carry a premium for adverse weather every spring; this year is no different. It's very early in the planting season and anything can happen, but it's better to bet on weather being good than bad, which it is about seven years out of ten - so odds are the jjg will fall. Trouble is in those three years the upside is much greater than the downside in the 7 years so the market lives and dies by the forecasts and sometimes gets very erratic.

    Many in the ag trade refer to the April-June period as the silly season since the market reacts to weather, but unless you can't get the crops planted, it really has not much impact on final yields which are largely determined in July and August. I've seen great planting weather turn into miserably hot July and Augusts and late planted crops do well when the weather is cooperative in the summer. I always tell people that they should leave the ag futures market alone; most lose money.

    Even though I was very successful (able to retire at 41) I never played the weather - that's a good way to lose money. You have no advantage in a weather market, everyone gets the same forecast at the same time. Or more often than not, find out the weather forecast was wrong at the same time. Mostly I traded spreads, either inter or intra market with only my final couple years trading outright since the fundamentals were so compelling. Believe me, that rarely happens - and certainly can never happen to a casual observer.

    Regarding the jjg - I'd leave it alone. I just looked at the fact sheet and the sponsor isn't transparent how the jjg is made up. And the individual etf's, ie, corn or soyb is made up of both old and new crop with months changing - don't like that either.

    If you feel like you have to do something I suggest looking at buying put options in the jjg - the midpoint of the bid/ask has a low implied volatility. I'd prefer an August or September contract - perhaps August will start trading once April comes off the board. If you can buy something like the Aug 48 put for a reasonable sum, less than $1, it offers a decent risk/reward, but be warned, those options are illiquid.
    Apr 16 07:53 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #17 [View instapost]
    My account made a new high today. Why don't I feel better about it? Perhaps because I know it could go away tomorrow? Lately it's been two steps forward and one step back. I guess that's better than the other way around.
    Well, at least I'm not long goog or ibm - then I'd know it was down again.

    Tomorrow is another big day in terms of earnings. In the morning some of the majors include ge, hon, dhr, unp, slb, pep, pm, cmg, ms and gs.

    Good luck all.
    Apr 16 04:30 PM | Likes Like |Link to Comment
  • A Long-Term Look At Inflation [View article]
    The big problem I have with the CPI stats is in general, items needed for a good life and to get ahead, like healthcare and a college education, have gone up much faster than the CPI or wages over the past decade or so. As such it places a greater burden on the less wealthy in this country and the ability to move up.
    Apr 16 02:27 PM | 5 Likes Like |Link to Comment