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Buzz Bits: Boo Makes an End-of-Day Cameo

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An evening taste of the daily buzz...

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It's beginning to feel a lot like . . .last year - Fil Zucchi - 2:21 PM

  • If the best trades are the hardest trades, just "not-selling" some of the "precious ones" must be the Mother Of All Trades. Anglo-Ashanti (AU) has been sticking out for its relative strength while the XAU (XAU) was napping.
  • Mother Morgan (MWD) says that for 2006 Hoofy has his sights set on Insurance, Comm. Services and Supplies, and Real Estate, while Boo is going to try to wreck the party in the Energy group, Materials, and Transportation. Some of their favorite names are Prudential (PRU), Nike (NKE), Boeing (BA), Aetna (AET), Lowe's (LOW), and Paychex (PAYX). I am going to use this paragraph to categorically refute that I always talk about my book.
  • Wanna give the gift of financial schizophrenia for the Holidays? How about this book and this book together, recommended by John Mauldin's InverstorsInsight excellent e-letter.
  • I am exhausted from the effort to refrain from trading. Everyone knows the market is going up in a straight line until the end of the year, but I am hell-bent over fighting-off this no-brainer of an opportunity.

Positions in LOW, AU, XAU, MWD

It's Holiday Season...Again - Jason Roney - 2:18 PM

The SP500 had virtually no drawdown in the month of November. And so far, it has started off strong for the month of December.

Since 1970, there were 6 years in which the lowest low from November was not lower than -.5% from the Oct close (I am considering that a "no drawdown month"). In those years, December finished higher 5 of 6.

Year SP500 % Return
for December

1972 1.18
1980 (3.39)
1985 4.51
1995 1.74
1998 5.64
2004 3.25

But only 2 of the 6 were "no drawdown months" for December as well. So downside risk remains for the current month. Those years were 1995 and 2004 and it's worth noting that in both cases, the January low was less than the December low.

A little forward looking / presumptive, but thought interesting. Make sense?

Flashback! - Bill Meehan - 1:59 PM

This day in market history...

  • Closing levels 11 years ago:
    • DJIA: 3,745.95
    • S&P500: 453.11
    • Naz: 741.23
    • Crude: 16.93
    • Gold: 375.75
  • In 1994 Orange County, known as "The OC" now, went bankrupt due to high risk investments, becoming the biggest filing by a municipality

This day in Minyanville history...

In other news...

  • In 1947, Everglades National Park was dedicated by President Truman. Hey, Mr. Tuttle, when do I get to come gator huntin'?

Pulse of the Planet - Jonathan Schwartz - 1:50 PM

News, laughs and ideas beyond borders...

Middle East/Africa

Asia

Europe

Kiwi fruit - Kevin Depew - 1:46 PM

Chatting on IM a bit ago, Prof. Roney directed me to the New Zealand stock market, which since May has been a world leader among global equity indices.

This weekly chart, courtesy of Thomson Financial Advanced Charting, shows the track of the New Zealand 50 Index (yellow) with the S&P 500 (white) going back to 2003. The NZX is currently testing weekly trendline support while the SPX is moving to new highs.

Meanwhile, the daily chart, also courtesy Thomson Financial, shows the recent break as the NZX becomes the first market to "fail" below a pervious high.

Also worth noting, New Zealand's yield curve has been inverted for quite some time.

Oil vs. Stocks Update - Scott Reamer - 1:20 PM

It's been a while since I last updated Minyans about the old oil vs. stocks canard (you know...that stocks go up when oil prices go down and vice versa).

The updated correlation between the SPX and oil futures over the previous two years is....positive 0.719.

Yes...positive. When stocks go up, oil goes up. Let's see how strategists explain this particular statistic away.

Mini-Minyan Mailbag - Todd Harrison - 12:26 PM

"Toddo- I know the day is still young but I find it interesting that Google (GOOG) is $4 off of its daily high and $19 off of all time highs, and yet the COMPX, NDX and S&P are making multi yr highs.....mean something?? I guess we'll see... Minyan G Van"

MG-

It might, as this was the primary performance anxiety vehicle that started the group hug back in October. And there is company specific news out as well, which further clouds the trading "tell."

I will offer that Boo would feel much better about the "non-confirmation" if the other "master beta"--the semis--weren't so snazzy.

Either way, from a metaphorical standpoint, we're inching closer to the tailor. There will be no rationalization if and when, as one of our key motivators was the uber-defined risk of the try (we suited up into Thursday's close near S&P 1266).

R.P.

Let's make a deal, Indian financial services style - Sanjay Somaney - 11:16 AM

The Indian markets basically flat-lined today with the Sensex closing lower by 8 points. The rupee continued its downward spiral against the dollar, which led to a surge in IT stocks. All major IT/BPO names closed higher on the day as a falling rupee increases the profits of these companies and also makes outsourcing cheaper for foreign firms. The dollar is trading at a 15 month high against the rupee, $1=INR 46.37.

On the other hand, gold traded to a 23 year high hitting INR 7,575.52/10 grams as worries about inflation and the traditional view by Indians of gold as an attractive investment fueled strong buying across the board. My sources are also telling me that a lot of folks are taking gains in the stock market after the huge run-up over the last couple of years and re-investing those gains in gold.

In other important news (I touched upon this last week) Merrill Lynch (MER) is rumored to be buying a majority stake in its Indian joint venture DSP Merrill Lynch. Mother Merrill currently owns about 40% of the JV and is negotiating with the founder to buy an additional 30%.

I had talked about a rush by foreign financial services firms into India as the government has loosened the rules and regulations for foreign firms controlling local financial and insurance companies. I continue to believe that the insurance and finance industries will be the next "land-grab" areas. Look for a lot more deals in this space over the next six months.

Don't Stare Directly At It - David Miller - 10:35 AM

Cell Therapeutics' (CTIC) re-announcement this morning they are going to launch a Phase III trial for Xyotax in women with lung cancer renews the grating on my nerves. For those inclined to listen to them, let me proffer the following:

  • If there is no SPA, run away
  • Xyotax is paclitaxel repackaged. There is no scientific evidence the packaging beneficially helps women over men.
  • Unless they offer peer-reviewed science their repackaging somehow interacts with estrogen, they are chasing a statistical ghost.
  • The right trial to run is a non-inferiority trial against paclitaxel, but management is too arrogant (or something) to do that after years of selling shareholders on superiority.
  • When presented with this strategic development plan, nearly half of their Board resigned.

A 24-Carat Comeback? - William Fleckenstein - 9:52 AM

To state the obvious: Either the metal stocks are telling us that gold is about to be hammered, or one of these days they will shake off their lethargy and play catch-up. I've voted for the latter outcome, though mindful that the former could come true. Which, if it did, would just be a temporary hiccup, I believe.

In the case of Newmont (NEM), I think that its present quarter is probably going quite well, and at some point, folks who like to play beat-the-number might get excited about the stock. It is 10% lower than where it was when gold initially touched $450.00.

Now I'm always the first one to say that where a stock traded once has no real relevance on where it ought to trade. And, mining costs have turned out to be higher than what we thought. However, I do think that the action in the gold stocks shows you that there is very little enthusiasm for them.

If gold doesn't take a plunge, as the stocks seem to fear, then catch-up will indeed be the order of the day, and it could be kind of explosive.

position in nem

MV Respect - 9:25 AM

Good morning. We do not expect the sharp rally in the CRB to last beyond the short-term. Sugar, copper, and precious metals prices are overextended and soon will be poised for a pullback, and the bounce in energy prices may be short-lived.

In the utility sector, we think the next test of the 200-day moving average may fail for the UTY. There is no real binding theme among foreign utility ADRs.

Katie Townshend, Chief Market Technician at MKM Partners

Mini-Minyan Mailbag - Bennet Sedacca - 8:59 AM

Bennet -

I read your Buzz yesterday on dividends. Don't you think the current federal tax treatment vs. interest has affected the yields? It seems that is a factor that is specific to the current time vs. ratios in the past.

Minyan Lee

ML-

Excellent question. If one grosses up the dividend yield using the current 15% tax treatment, they are worth more than at past tax levels. I am not trying to call a market top, just trying to help identify when we are in a 'high risk' period vs. a 'low-risk' period of stocks versus bonds.

If Fed Futures are correct and we head to 4.75% or 5% and we stay at a 1.77% yield on the S&P 500, then the question is most likely moot. Even at a 15% tax rate, we would then be in ultra-high risk territory for stocks versus short-term bonds at that point.

Incidentally, that plays well with the concept of the 4-year Presidential cycle, where we usually experience tight monetary policy during the first two years of the cycle and easy policy (both monetary and fiscal) in the last two years. And as Todd mentioned the other day, it may explain why the Fed funds futures market is pricing in a slight chance of Fed easing in late 2006. Good luck Boom Boom.

Say what? - Kevin Depew - 8:33 AM

A look at commentary, opinion and analysis from around the world:

  • Shunning its traditional role of the swing producer, Saudi Arabia is now aiming for precision, not surplus, in meeting global oil needs, writes Jad Mouawad in the New York Times.
  • Bloomberg's John Berry says the Fed's end to rate hikes will likely occur in the spring of 2006, noting that in past cycles the Fed has often gone a step or two too far.
  • Finally, for those of you driving the sporty Lexus IS model, here's a handy cheat code for your car (seriously) that enables you to perform a massive peel out.
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