Get your Buzz goin!
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Todd Harrison (2:07:50pm)
The Fed Minutes hit the tape and the highlights are as follows:
- the target rate is too low for stable prices.
- core inflation is likely to be low and stable.
- there is inflation risk if the dollar, productivity fall further.
- 'careful attention' must be paid to labor costs and profts.
output may already be near potential.
- external imblances likely to stay elevated.
All in all, it was a bit more hawkish than I thought. Bonds have dipped into Red Dye although equities seem stuck in the headlights.
On the heels of this "big bad bogie," please watch the breadth and banks as tradable tea leaves. As it stands, neither have given the wink to Boo.
Greg Roberts (2:18:07pm)
Show me the Honey..
Prudential is out positive on Honeywell (HON) citing a fundamental turnaround that is building momemtum across its entire business line. Pru also cites the product enhancement programs along with a 'sharp' decline in non-operating negatives as positive catalysts.
In Pru's opinion, HON trades at a 15% discount to its peers and has accordingly taken up its estimates for cash EPS on '05 and '06 from $2.20 to $2.50 and from $2.60 to $2.75 respectively. Firm is looking for them to either make key acquisitions, increase its dividend or repurchase shares in a continuing effort to build value for shareholders.
Shares initially made an attempt at a move higher but have since settled back into its afternoon range. Pru has an overweight rating on the stock.
Greg Collins (2:27:30pm)
We're seeing a buyer of 2,000 SPX March 1185 puts
Todd Harrison (2:34:05pm)
Caught up in a whirlwind, can't catch my breath...
Elmer Ray Vaughan?
It feels that way as our fabled Fed chief is walkin' a tightrope. For a guy who once said that stock prices don't dictate Fed policy, the vernacular sure seems tailored. That, more than anything, is what has left the intermediate-term window open for Hoofy to dance between ambiguity and perception,
Sharpening our focus, the Nazz breadth has balanced which isn't a shocker given the semis slippage. Still, with SOX 420 nestled below, the banks holding steady and NYSE internals 2:1 positive (despite the bond give-back), I'm not seeing anything to shift my earlier vibe that Boo will have to chill his heels for now.
Scott Reamer (2:39:14pm)
"...there are so many home buyers in the market and the motivations for buying real estate have changed."
Yes, the motive has clearly transformed from shelter to greed.
David Miller (2:50:04pm)
Actually, the motive is that rising property prices and low interest rates have closed the gap between rent costs and mortgages so that people are willing to do a mortgage and build equity instead of paying a landlord.
The danger to the housing market is in the rental space as a large number of apartment complexes are vacant. Renting houses is also more difficult as the mortgage+ model there is not flying.
Todd Harrison (2:59:05pm)
Tricks of the trade
This morning, in a 9:38 am Buzz, we offered that Yahoo! (YHOO) opened red in a sea of green. That was a sign that supply was lurking (just as opening green in a sea of red is a sign of underlying demand).
With the net giant off 3%, I offer this real-time example of how to "see" opportunities nestled in the muck.
Scott Reamer (3:02:47pm)
David. The proximate motive might be rising property prices and low interest rates but one must ask the question what gave rise to those two trends: rising property prices and low interest rates. The causa remota as it were still boils down to that basest human emotion: greed (and, by extension, lack of fear).
Todd Harrison (3:11:04pm)
Hurry up and wait!
As the bulls bounce (S&P) and the bears pounce (Nazz), the post-minutes meld has a little something for everyone. To quote Minyan Steve "I'm gettin' ready for Crested Butte!" Shobin, "how is the market?" is a somewhat "superfluous" question. One only needs to look at the 300 basis point spread today between the trannies and semis to understand what we're talking about.
If I had to cast my vote on the broad market direction, I would offer that there is a bit more bounce before a hard bear trounce. Then, perhaps, we could see that cutesy (but powerful) upside dance (intermediate-term) before the wheels fall off the wagon. I'm getting ahead of myself, I know, but wanted to toss it out there before it drifts back into the cyberspace that is my A.D.D.
Greg Collins (3:13:17pm)
Notice that the pesky biotechs (BTK) are edging thru the 200 dma (511) +1%.
John Succo (3:14:03pm)
Despite substantially rising home prices, the average equity homeowners have has actually been declining. This reflects the ever increasing debt incurred at the same time homeowners turn around and take the cash generated by refinancing and spend it.
Jason Roney (3:15:17pm)
Although the SP held some early probes this morning, today's action may have presented a false sense of security. Yesterday the SP futures made a late intraday low and today have not traded lower on the day (after a higher open). In the past, failure to at least trade lower prices after a large decline has been bearish for the next day.
Query: SP futures close down 1%, make an intraday low inside the final 45 minutes of trade (late intraday low) and on the next day the SP futures gap higher and don't trade negative.
Result (lack of intraday data limited the query to 1990 and forward): There were just 14 occurrences but the SP futures finished the next day lower in 10 of them (last 3/15/2004). But here's the kicker. The 4 exceptions saw the SP open higher by more than 1% (which is unlikely for tomorrow) AND the next day's close was below the opening price in 13 of the 14. Past performance does not indicate future results - but something to consider.
If this is building equity I would rather rent. If home prices fall, homeowners with large mortgages are at risk.
Greg Collins (3:16:52pm)
Legg Mason removed InterActiveCorp (IACI) from its Select List though maintains its buy rating.
David Miller (3:18:18pm)
Scott -- I might agree that it reflects a lack of fear, which simply means they might not share certain negative outlooks you might have.
As I noted before, if you sell a security you think it will go down. By definition, you think the buyer is greedy because you believe you have extracted the maximum value from that instrument. Theories on psychological motivations of each party in the transaction are extraordinarily fascinating to me, which is why I loved your MIM-1 talk. Ascribing right or wrong to one party in that transaction ("greedy" buyer versus "smart" seller) is talking one's book -- which is perfectly fine as long as we all recognize that's what it is.
Greg Collins (3:24:58pm)
Intel's (INTC) CFO Andy Bryant spoke at the Goldman Bros conference about mobility and communications in the market, the global emerging market and silicon technology's ability to change standards.
Bryant does not feel that emerging markets are limited to China, and noted growth in India, Russia and Thailand. He also said that as long as business remains healthy that INTC will return cash to shareholders and that the company would like to gradually raise the dividend and reduce the share repurchases over time in terms of preference for returning cash.
He also said the company would think long and hard before taking on a large scale acquisition.
Todd Harrison (3:27:43pm)
Red and white, blue suede shoes, I'm Uncle Sam, how do you do?
As a few Minyans asked what I meant when I offered that the U.S. dollar is a "proxy for isolationism," I thought I would Buzz the response. I offer these thoughts with the understanding that there is a difference between patriotism and bullishness. I love my country but that has little to do with a proper assimilation of the financial metrics.
My sense--and this is one man's opinion--is that a lot has changed since the election. Whereas many foreigners disliked our administration after we invaded Iraq, many now seem to dislike America (since we voted Dubya back into office). Again, please don't shoot the messenger--I'm only sharing an honest vibe.
Why does this matter? I think we saw a taste of it yesterday with the Bank of Korea's annoucement that they plan to diversify their holdings to non-dollar denominated assets. My fear is that there are plenty of nations who will pull a similar trigger if they believe they won't get burried in the dominoes that are sure to follow. Is that possible? Not sure--the global financial mechanism is intricate and involved.
There are no such things as "red state" of "blue state" Minyans--we're all in this together and we need to figure it out. My hope is that by discussing this dynamic, we'll be better prepared should it arrive.
Todd Harrison (3:36:34pm)
"Good point Toddo but you know John Snow was on the phone with South Korea so fast..."Have you ever heard of Kim Jong-il?? We CAN pull our soldiers out." Minyan David "I can't believe I've been banned from trivia" Fine"
Yes, I saw that...but note the subtle difference between "reducing" dollar denominated assets and the diversification of future holdings. Two separate conversations?
Scott Reamer (3:40:06pm)
John's point about rising home prices masking the fact that actual ownership (as measured by equity) has declined reminds me of an excellent speech given by Sean Corrigan at a Mises institute gathering a while back. His speech was entitled "How recessions become depressions" and he was describing the boom and bust phases that are generated in economies with aggressive central bank manipulation of credit markets. I quote the part below in which he was describing the start of the bust phase which may hold lessons for the housing market since it has been such a massive beneficiary of said Federal Reserve activity. The final sentence is key.
"Capital investment dries up, unemployment rises, general business expenditures are reduced, intensifying the squeeze on the sub-marginal and the overstretched as well as revealing many of the deceits and defalcations which have been hidden during the boom suspension of critical faculties and which have been cultivated amid that erosion of morality and professional integrity which always accompanies the fever of the seemingly instant prosperity of inflation. At this point the clamor goes up for a cure. A cry all the more plaintive because so many have been rudely disabused of the mirage to which they have succumbed. Fearing for their jobs, seeing their pensions and their college funds slashed in value, as inflated asset prices come into closer coincidence to the much lesser real wealth to which these ultimately lay claim, feeling at first rueful and then vengeful that they have been gullible enough to participate in the madness, people everywhere awaken to the shocking truth, even if they do not consciously articulate it this way: the boom has not enriched them, it has impoverished them instead."
Jeff Macke (3:45:43pm)
".... Oh so pretty..."
Some quick thoughts as a caper off to prepare for CNBC (where I'll be looking for fresh meat on Martha (MSO... sell the release), Apple (AAPL... see below), Acredo (ACDO... good buy but not so much "accrediv-o" and Toll Brothers (TOLL... eat the cookies, run shrieking from the stock).
Keep an eye on Wal-Mart (WMT) as we creep towards the close. If the stock goes out below $52 the chart heads will be getting restless.
Jason Goepfert (3:49:32pm)
Now that's an odd lot!
As a break from the heady home price discussion, I'd like to interject that odd lot short sales set another all-time record yesterday - by 16% more than the previous record (set last month). Also, total sales reached the highest level since February 2003.
Along with the volume in SPY I mentioned earlier, this is a good sign that those who tend to be wrong at the extremes are starting to bail en masse at every whiff of a decline.
Todd Harrison (3:51:16pm)
- If you're long the semis, today's rebound is as "sharp as a marble."
- Note the VXO has coughed up a quick 6%.
- The S&P has banged its keppe at 1193ish (mid-February lows).
- The only difference between being wrong and being early is whether you're still there when the trade "hits."
- March will be a big month for Mother Minyan. We'll have a string of corporate announcements, new professors joining the fold, updates on Minyans in the Mountains (part deux) and a timeline on the all-star guitar auction.
- Fare ye well into the bell and have a peaceful night.
Scott Reamer (3:53:17pm)
You are misreading me. No where did I (nor do I) make a value judgment on what is right or wrong. Buying or selling anything - a stock, a home, whatever - is neither right nor wrong. It reflects, as you partly suggested, an individual risk/reward decision. My particular interest is in understanding how and why people come to their individual risk/reward decisions and how those individual decisions manifest in collective behaviors. As I have tried to make clear, by highlighting the behavioral research I have, is that those risk/reward decisions are largely irrational - a point made by 2002 Nobel Prize in economics winner Daniel Kahneman. Psychologists use the terms greed, fear, elation, etc. to describe states of behavior; neither they nor I are engaged in passing judgment by using these terms.
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