Buzz Bits: Dow, Nasdaq Fight Back
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Earnings Report - MV News
- Tenaris (TS) reports 4Q EPS of $0.91 vs. $0.89 on revs of $2.46 bln vs. $2.50 bln cons.
- Dress Barn (DBRN) reports 3Q EPS in-line of $0.24 on revs of $340.3 mln vs. $336.17 mln cons.
- PetSmart (PETM) reports 4Q EPS of $0.54 vs. $0.56 cons on revs in-line of $1.17 bln.
- Limited (LTD) reports 4Q EPS of $1.09 vs. $1.09 cons on revs of $4.02 bln vs. $3.98 bln cons
Where is the Low? - Woody Dorsey - 1:17 PM
Financial Television is telling everyone about the market. As usual, they provide us with lots of ready answers. Do they really understand the market? Does anyone? The news says that there was some errant trading yesterday. It says there were some trading errors. The media is looking for the low…pretty soon. They say that we should be making up our list of stocks to buy and checking it twice. Gee, didn't the correction just start? Why look for the low right now?
The decline was an error, they say…even a welcome error. But could it be that the obsessive persistent bidding was the real error? It was a bubble but humans like to believe in bubbles. Investors are still hypnotized by the most recent past. They are addicted to upside ideas. Well, I hope that the punditry is right. Let them bounce it so that more shorts can be set. The bubble is burst. But, expect the majority to deny the change in the market. For the moment, the correction is being framed as healthy. It has corrected the complacency. Still, the market lacks conceptual conviction typical of a viral trending function or the sort of psychological state typical of any durable low.
Treasuries are enjoying their expected recovery rally. Still, their upside is limited. The most interesting tell will be how Gold and Oil will behave. They showed yesterday, at times, some steely resilience. This is likely a foreshadowing of the eventual recognition that hard assets can rally on their own terms. Commodities remain in the greatest rally in generations. When is the low in stocks? Pretty soon…according to the Pat Media Punditry. My firm would prefer to buy when no one is expecting a low…say in 2011?
Between the 20's - Ryan Krueger - 12:12 PM
Bennet's comments about "re-pricing" are spot on, in my book. In our shop we work on supply and demand for shares of stock more than supply and demand for a company's products. Liquidity (not earnings or valuations in my experience) is what moves the ball down the field or can stop a great drive cold in its tracks, regardless of fundamentals. While they don't let me in clubs like Bennet's, I also will second his notion that there is a casual reaction to yesterday.
The only possible slight difference in my view, is that those complacent duffers could still hold the wheel longer than many may think. I have a sneaky suspicion that what would surprise the most number of people right now is if we don't proceed into the orderly correction now agreed upon or at least prepared for by everybody I talk to. Lol, except Macke who's "Boing?" I just now saw and I echo.
Admittedly I am not aggressively following this line of thinking but my gut tells me the bet with the best price on the board for just a little bit of risk (if you wanted to take a stab right here) would be that a strong market stays strong for longer than most of us can imagine. I don't make those bets because I'd rather try to make money than be right. As a wise man once told me about football and trading, "you can move the ball a lot easier between the 20's for a reason." Let the heroes try to guess. For my money I like open spaces. We are no longer between the 20's for bulls.
See Ya homie! - Fil Zucchi - 10:42 AM
Yesterday existing home sales were much higher than anticipated, but the inventory exploded and, predictably, prices plunged. Months' supply was unchanged despite the much brisker pace of sales. Today New Home sales showed your basic "off the cliff" plunge, as months' supply soared a full month.
These figures are pretty much in line with the thinking I outlined on Monday. As buyers rush in to find bargains, trapped sellers will give the store away to unload the albatross around their neck. Once the spring surge in buyers abates, and/or lending tightens, it is unlikely that the sellers can hang on to the remaining supply until the next selling season, and prices will start a real death spiral fueled by an onslaught of foreclosures.
Pretty doom-and-gloom I know, but that was no ordinary mania either.
China: Does It Really Matter? - Vitaliy Katsenelson - 10:05 AM
The market has risen dramatically without looking back, ignoring every possible piece of negative domestic news (e.g. lower home sales, bankruptcies of subprime lenders). The reaction to the possibility of a slowdown in the Chinese economy was an excuse for a correction. This correction has caught many with their pants down due to the euphoria of the cyclical bull market. Most portfolios have been assembled for 'return,' while paying little attention to risk.
Let's get the facts straight. We don't know if the Chinese economy will actually slow down, but even if it does, despite its populace, its GDP is still smaller than (or close to) France's. I don't remember seeing a selloff in the US markets because of some incident in the French economy.
A slowdown in the Chinese economy would have a significant impact on commodities and companies that produce them, as Chinese demand was the recent driver of commodity prices. However, a market selloff was telling investors that 'as goes China, goes the US' – that is not the case. The inverse is more likely to be true. That was not why the market was down. Slower growth of the Chinese economy or even a dramatic slowdown is likely to shave off small bits of US domestic GDP growth – the US sells a lot less to them, then they sell to the US. In fact, the Japanese economy, which is three times the size of the Chinese economy, was in a dramatic recession for the past 15 years. However, the US economy enjoyed some of its best years of prosperity during this period.
Investors should check their portfolios for exposure to the health of the Chinese economy, but that is something they should do regularly anyway. They should look at how much of their companies' sales come from China. You don't want to have a portfolio full of companies that sell only to the Chinese. Also, they should make sure that they don't have a portfolio full of commodity stocks, as they'll be on the front lines of the casualty list if the Chinese economy weakens dramatically. This drop in the market has created buying opportunities. Many US companies that declined in price are not greatly impacted by what happens in China, or even by a slower growth rate of the US economy.
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