Con Ed Lights Up Wall Street

What sort of rally is it that is led by Con Ed (ED) and its electric peers, and natural gas suppliers such as Southwest Gas (SWX) and WGL Holdings (WGL)? 

A strange one.  One that is playing catch-up with the massive decline in yields in Treasuries, munis and other debt instruments over the past months and even years.

If you suspect, as I do, that while said yields will bounce around including in an upward direction, but will stay "low" in general for some time, then you may also suspect as I do that while the ED's of the world look extended, they will trend higher in price simply as bond alternatives.

In other words, utilities of the local, regulated monopoly kind (as opposed to ones that emphasize competitive power situations or wind etc.) may be morphing into this year's mo-mo stocks. 

Very strange.

The Internet, after all, runs on electricity.  Batteries that power mobile devices are charged with electricity.  Who needs gasoline when you have the Internet at home or a short walk or bike ride away at a coffee shop?

There are other good things happening in the US of A investment-wise.  These fit with the theme I announced last summer or early fall after I tired of Europe and also saw TPTB in the US go for growth at the expense of fiscal prudence.  (Not that I necessarily "approve", but my view was not sought.)

MCD sales were weak in China but strong in the US, they revealed today; that's backward from what we were told to expect.  WMT is surging, and it's still largely a US company.  Small local bank stocks are strong, though they don't trade much.  And of course utilities are all US or almost all domestic.

Expect much angst over the upcoming "fiscal cliff".  If interest rates are low and the economy remains challenged, I would note there is an election coming.  If anyone would like to buy utility stocks and is afraid to because of the scheduled rise in tax rates on dividends for high earners, or would like to buy into munis but are afraid of the talk of taxing some portion of that income, I would simply point out that the markets don't appear to share your concerns.  IMHO they are usually right.  Not always, just usually.

I don't have a strong predictive sense here, but I'm just guessing that either the Federal deficit starts shrinking on its own due to an unexpected pick-up in tax receipts or else the economy stays subdued below official expectations; and that in either case, the response will be to defer the fiscal cliff for one year for either a re-elected lame duck President Obama or a President Romney with a "mandate" to take some "courageous" action.

The single main worry sign I see domestically is that ECRI's Weekly Leading Index has been moving down fairly sharply the past few weeks, and has a close correlation with stocks.  Perhaps it's bottoming, or is irrelevant; we shall see.  Here's a link to a 1, 3 or 5 year view of this indicator.  When at that screen click on the + WLIW button.  I suggest looking at the 3-year view.  This shows a series of post-GFC lower highs.  Will this year see a lower low?  If so, some stocks will probably take a hit as recession worries go mainstream.  If this is the bottom of this indicator, it could be a hot summer on the Street.

Current-ly, I'm all charged up for Fast Eddie to shoot out all the lights on the way to ? $70 and beyond.

Update on Yesterday's McDonald's Update

How the Street works.

Or doesn't.

Having mentioned relative bullishness on McDonald's (MCD) a week or so earlier, after the close of trading yesterday I posted a brief note on MCD titled McDonald's Update: Selling on the Bullish Commentary. I didn't like bullish comments about its routine report on August monthly sales.

Here's what happened. Per the corporate press release: McDonald's Posts Strong Global Comparable Sales - August Up 4.9%

But the Street spun it rather strangely, per Bloomberg.com: McDonald’s August Sales Rise 4.9%, Missing Estimates

How much was the "miss"?

Sept. 9 (Bloomberg) -- McDonald’s Corp., the world’s largest restaurant chain, said comparable-store sales climbed 4.9 percent last month from a year earlier, missing analyst estimates, as growth in demand came up short in Europe.

Analysts projected global sales would advance 5 percent, the median of three estimates compiled by Bloomberg.

The stock is down 3% (over $2) on this "miss" based on estimates of three analysts. Why three analysts, and which three? It appears as though a full 20 analysts have guesstimates for the September quarter earnings. Do the other 17 just not bother predicting monthly sales?

Well, Big Finance got its commissions out of me. I sold all my MCD Tuesday and Wednesday on the price strength, sold covered calls on the rest, and then bought some back today.

These sorts of shenanigans remind anyone paying attention that everything that emanates from the financial community is for its perceived benefit. What benefits it may or may not benefit you.

Copyright (C) Long Lake LLC 2010

McDonald's Update: Selling on the Bullish Commentary

A brief note on MCD. Two weekends ago I did a post titled Chubb and McDonald's Suggest Leadership for Next Bull Move in Stocks two companies as among a group of strong multinationals that could lead the way in a new bull market, or a bull move in what I believe to be at best a chronic stagnant stock market. Both stocks have moved up both through the August downturn and again in the up-move after the late August bottom, and are now moderately extended versus each stock's own moving averages. Thus they are at least in a mini-way momentum stocks. In that context, I did not like the headline today about MCD found on Yahoo!'s Finance section:

Analysts: high hopes for McDonald's sales figure
Analysts: McDonald's sales figure to rise faster than industry

THE OPINION: UBS analyst David Palmer expects August revenue at McDonald's restaurants open at least a year to rise higher than the 4.5 percent analysts expect on average. Industrywide, the figure rose 1.5 percent to 2 percent last month, he told clients in a note Wednesday.

Having earlier in the day sold covered calls on some of my MCD shares, I sold the rest outright on that headline given the recent superior outperformance of the stock, general distaste for the stock market overall, and the premium valuation of MCD vs. other high quality stocks. (I also sold some MCD yesterday to buy Chubb on CB's price weakness.) Bullish headlines "reporting" bullish opinions before the fact smack of takedowns unless the news is outstanding. True long-term investors can ignore this sort of stuff. Let's see what happens tomorrow.

Of course, none of this commentary is other than commentary and is not investment advice of any sort.

Copyright (C) Long Lake LLC 2010

Chubb and McDonald's Suggest Leadership for Next Bull Move in Stocks

On a week in which both gold and silver had strong price move, one might think that stock leadership might come from miners. Not so. While intermediate to long term Treasuries continued their price surge (lower yields) the first four trading days of the week, one of the only two Dow 30 stocks to rise in price during 2008 set yet another all-time price high today. That is McDonald's. It is the only Dow 30 stock to have hit an all-time high since the bear market officially began early in 2008. If one believes as I do that central banks and governments will pull out all the anti-deflation stops and err in policy to be soft on inflation, just as the Bank of England is currently doing (0.5% policy rate with 3+% inflation rates) and Ben Bernanke did in 2006-8 (and I believe is doing again), then one wants exposure to nominal growth as well as organic growth.

Well, Mickey D can benefit from price decreases and it is gaining market share globally. Business is good for MCD.

While I have not done a formal statistical analysis, I have been watching MCD for well over a year in relation to the 10-year Treasury yield. The two have tended to track each other. Thus when stocks were rally sharply in 2009 and Treasury yields were surging upwards, MCD dropped or at best stagnated in price when the whole market was rallying. So here are my thoughts on this stock at its current price around the all-time high set yesterday of $74.

Dividends are expected to be $2.45/share in 2011. (The board may announce a dividend increase soon.) At today's price, that would give shareholders about a 3.3% yield. The 10-year is around 2.60. Let us say that the 10-year yield backs up to 3.0% on average for all of 2011. If MCD trades at a yield equal to the 10 year as has been the case a number of times in 2009 and 2010, that would allow about a 9% price appreciation in addition to the dividend. If at any time in 2011 MCD trades at a 2.6% yield, one is looking at about a 30% total return.

What is the downside?

Of course, it is unlimited. But on a 15-year basis, I think it is reasonable to expect that MCD raises its dividend at least 5% annually. This would mean a doubling of dividends from 3% to a terminal dividend of 6% if the stock price is unchanged. Let us say that the average dividend yield would then be 4.5% at year 7/8 of this 15-year horizon. One can go out 7 years on the Treasury yield curve and get 2% back on one's money yearly.

Between the two choices, I'll take McDonald's for long-term capital I can afford to lose. And given operational trends and price increases that are galloping along in fast-growing countries such as Brazil, where MCD is doing very well; India; and China. McDonald's is financially flexible in a way Uncle Sam isn't, having just received some accolades for a yuan-denominated bond issue.

Now, I am not a professional stock analyst. I haven't eaten at a McDonald's in decades. I tried their espresso drinks last year and hated them (as did two other people who taste-tested them with me). I'm a vegetarian cardiologist who thinks America would have been better off from a public health standpoint without than with McDonald's. But I also think America would be better off without trillion-plus dollar federal deficits or Americans and "allies" chasing Afghans around their own country. But I have to live in the real world, and at least MCD has added some sops to health, and the head of McDonald's India is also a vegetarian.

But I have digressed. I am going with technical chart strength, strong operational results, steady dividend growth, global presence, and the like. If the 10-year returns to 4%, I expect MCD stock price to drop, but that would likely be in association with price increases/economic growth, so faster dividend growth and stronger earnings may await.

If you doubt that it is a market of stocks vs. a stock market, look at the charts of MCD vs. JPM (strong bank) and BAC or C (weak banks). Rising earnings/rising dividends and all-time high stock prices for MCD. Sliced dividends and variable earnings of uncertain quality for the financials = failing stock charts.

However, not all financials are created equal. The boring insurer Chubb (CB) also set a 12-month high yesterday. Its stock chart over the past 2 years is gently upsloping. It retires substantial amounts of stock, sells only slightly above tangible book value (which may be understated due to the bull market in its assets, which are almost entirely bonds), raises the dividend regularly, and has rising earnings estimates, and has stellar financial strength ratings from S&P. The stock is near its May 2007 high (I ignore the bizarre up-move into the $60s during the meltdown in fall 2008 as it might have been due to takeover speculation) and the various moving averages show that it is picking up strength on an accelerated basis.

Thus, even someone such as myself who believes that the general stock market remains overpriced, I am able to find specific boring companies such as the two listed above that meet my criteria for sleep-well-at-night on price declines plus reasonable valuation, strong chart action, no hype by the Street, and rising dividends.

If things break properly, these two stocks could provide 10% total returns year after year even if the general stock averages fail to keep up with consumer price increases (0r less likely decreases).

Lest one think I am bubbling over with enthusiasm for these assets, there is a more mature and safer asset that has no operational issues, cannot disappoint the Street with insufficient earnings gains or a smaller-than-expected dividend increase, and that remains out-of-favor with the mainstream media yet has a picture-perfect bull market chart that looks like a bull market that just might turn into a bubble that could expand for a while before it bursts. That asset is gold. Its compound annual return over long periods of time proves that compared to other financial assets, it is in no bubble. It remains my favorite asset on risk-reward considerations, but it is good to see that as discussed above, stock buyers are quietly rewarding well-run diverse companies.

If only the authorities in Washington were paying heed.

Copyright (C) Long Lake LLC 2010

Trading Uncle Sam's Debt for Burgers and Fries

The long Treasury bond has defied the obvious tendency that when a lot more of something is produced, the price tends to drop. Instead, there has been a buying surge in Treasuries. Thus, based on such reasons as weakening forward-looking economic statistics, general disdain for the way in which the economy has been run (including disapproval that it is being "run" at all rather than functioning freely), and the technical picture just a few weeks ago, I turned tactically bullish on bond prices just a few weeks ago, as discussed in various blog posts.

The Treasury markets have moved massively in a very short time, with relatively little fundamental support for such a large repricing. The 10-year (not shown here) has collapsed from high to low in 4 1/2 months over 35% in yield (4.0% to below 2.6% briefly). The 30-year (click on image to enlarge) shown here has moved less, and I favor it over the 10-year as the yield spread between the 10 and the 30 hit over 120 basis points and compressed today to a very wide level of 110 bps.

Nonetheless, the absolute yield level of the 30 year bond at about 3.7% is at or below the lowest level its 200 day smooth moving average hit during the entire 2008-9 stock bear market and amazing Treasury bull market. Thus I'm thinking there's some combination of fundamental and technical overvaluation here in both the 10 and 30 year bonds, with greater risk in the former (and less reward).

Who knows, but it's looking more and more to me that a base case is for the 10-year to correct upward in yield even if the longer-term picture is for a 2% yield and a 30-year yielding in the 2.5-3.5% range. Thus the long bond, which day-to-day tends to trade directionally with the 10-year, is in my view a difficult hold from a trading perspective, and I have taken some nice profits for a 1-2 week trade. A completely unscientific rule of thumb I have developed is that if I can "make" one year's worth of interest income from a quick bond trade, I strongly consider taking it. If I get two year's worth of interest income, I grab it.

Thus I've reversed most of my bond purchases put on in the last few weeks.

Meanwhile, one of the many correlations I have found useful in the post-Great/Global Financial Crisis world is that MCD (McDonald's; Mickey D) has for over a year traded in line with the 10-year. MCD recently joined gold in making a new all-time high in 2010; I believe MCD is the only Dow 30 Industrial to do so. And this is MCD's 2nd surge this year to a new high, if memory serves me well. Meanwhile, with the amazing fall in the 10-year yield to well under 2.70, MCD yields 3.00% now and thus can easily appreciate 10% in price and still be fairly valued under this relationship.

In addition, should the rest of this year not have a re-run of 2008 or worse, MCD's board will increase its dividend late this year for 2011. My guess is about a 9% increase. Thus I reason that if the 10-year yield is at 3.0% sometime next year, MCD stock could easily trade at that same 3.% dividend yield it now enjoys and thus stockholders could see a price increase of about 9% to keep the new (projected) yield at 3.0%, plus the current yield of 3.0%, and thus get a total return of 12%.

If over the next 10 years MCD's dividend rises at a compound annual rate of 7%, it will have a terminal dividend yield of 6%. Thus for every $100 invested in the stock at today's price, about $45 would come back to shareholders; this is vs. about $26 back to buyers of the 10-year bond at this week's price/yield. All other things being equal, MCD's stock price could thus drop 19% (45-26) ten years from now and be about an equally good investment as the 10 year bond.

This August 18, with so much of the public convinced that the "Great Recession" never ended and thus pinching pennies, and with MCD's sales and profits growing in the U. S. and abroad at a pretty good clip, a good part of my personal trading money has abruptly shifted to MCD on the early breakout to new highs and sold the extended Treasury move. If MCD stock price falls without a change in the fundamentals and without a massive breakdown in Treasury prices, I plan to buy more.

Less than 10 years ago, the stock market recognized McDonald's as a poorly run behemoth. It cleaned up its act. Will the U. S. government, another poorly run behemoth than unlike McDonald's is a monopolist extraordinaire, do the same?

Copyright (C) Long Lake LLC 2010

The Fed and the Stock Market: Weak Economy Continues to Propel Stock Price Inflation

Every pro and many amateurs are aware of the correlation with the Fed funds rate and low volatility, and between that of low volatility and rising stock prices. Thus it is no surprise that the Fed's unsurprising reiteration of its prior policy track was followed by yet another late afternoon increase in stock prices. Gold was up all day, up a bit more later in the day, and is up a bit more overnight. The joys of cheap money!

Meanwhile, probably the best portent for job growth is yesterday's downbeat job projections out of the White House. They won't be caught on the overoptimistic side of predicting the economy if they can help it ever again.

Unfortunately, the health care "reform" fiasco is looking the end of Terminator. You can't kill it, but it keeps getting uglier. This plus the recent Nancy Pelosi pledge that Federalization of health care is just the start is definitely not helping the mood amongst small businessmen. One wonders if by some chance the majority party can't beg/borrow/steal just a few more votes from its own party members in the House to pass this bill the stock market will give a big cheer, just as it did when Bill Clinton lost control of the house in the 1994 elections. And one wonders if passing the bill would give a sense of finality (finally) and allow business to focus on business rather than the irritant of health insurance, which would also be good for the public mood. On the other hand, this bill imposes tax increases before the spending kicks in. So that might make it bad for the public mood and anti-Keynesian. So I'm ignoring this bill in discussing investment options.

Let us step back and with apologies to Barry Ritholtz and his blog, look at the big picture.

Money printing and various forms of credit extension into such things as the black hole of Fannie/Freddie and the new black hole of Ginnie Mae (FHA), plus population growth plus cyclical factors have "strengthened" the real economy-- whatever that really means. There will be growth in the spring. But much is rotten in the state of this country. The Federal government is not close to a true AAA credit any more. Multiple states are fiscally mismanaged. Many financial institutions that remain too big to fail would be insolvent today on a mark to market basis. Thus your money in the bank is not there. Gold is roughly trading at an historical average price relative to the (long-suffering) S&P 500 index.

Doubling back to the Fed-- if the economy remains so weak that cash must be trash and even the alleged security of 10-year Federal debt only pays $3.65 per $100, how are stock buyers so sure that the future is so bright as to pay such a large premium over tangible book value as they are today and to accept such a historically low rate of return on BBB-rated corporate debt?

Yet even more than the bond market to my eyes, the stock market has pockets of relative attraction. Discount retailers have surging stock prices but TJX and DLTR remain at quite ordinary P/E's. Everest Re is a totally boring reinsurer that trades far under tangible book value yet has a top-notch quality rating by S&P's stock advisory service. Chubb, a cream of the crop sort of insurer, trades marginally above tangible book, has a 3% dividend yield, has a very high free cash flow yield (as do the other names mentioned above), and could be a mega-company's takeover meal to boot. McDonald's is operationally outperforming its peers and has a stock chart that has already broken to new alltime highs in its 50 and 200 day moving averages. It yields almost that of the 10 year Treasury but in 10 years, if dividends rise 7% per year, it will be paying investors twice what the T-bond will pay out in year 10. What will the "stub" of the MCD equity be worth then? I dunno, but as a conservative income and inflation hedge, plus the strong chart pattern, I find it a worthwhile part of a diversified portfolio.

Every name mentioned above is "defensive". With ECRI sounding the tocsins about more frequent recessions ahead, but with many stocks pricing in a strong and/or prolonged economic expansion, yours truly finds this a stock market that only a pro should short but that most people should be leery of. As it should be of most of modern, debt-infested finance.

Copyright (C) Long Lake LLC 2010

The '500' Fills the Gap

While many individual stocks look reasonably valued on a price-earnings basis, the market as a whole is looking more and more tired and more and more like a "sell" rather than a venue for gamblers.

The chart nearby (click on to enlarge) shows the S&P 500 for the past two years. It has now filled the gap around 100 created when things began to implode late in September.

Not shown is that the index is slightly more than 20% above its 200 day moving average. On the one hand, this reflects the dramatic turnaround in corporate profits. Teleologically, companies cut back inventory "too much", especially in view of all the government stimulative measures. Worse, companies cut back staff and are reluctant to hire; though, they will eventually hire if profits hold up.

Moving on, the VIX, an index that reflects actual or feared volatility and in practice correlates with the perceived trend of stock prices, has collapsed 25% from about 28 to about 21 in only two weeks. This is a large decline in a short time. In the rally since March, this situation has either been followed by a correction in stock prices or some stability in prices offset by a rise in the VIX (a rising VIX means rising volatility, and generally reflects bearish sentiment). Of course, past performance doesn't predict future . . . you know the rest. But it's nice to have precedent on your side.

From a technical standpoint, the financials, which led this rally, lagged today even as a bullish event happened over the past two days, which is a significant widening in the 2-10 year Treasury spread. Higher quality, boring stocks that have not participated in the rally began to participate, such as MCD and GSK. Might the fast money be "tired of" financials?

Nokia before the opening and IBM after the close each saw their stocks fall on bad news, which is what happens in an average market. Meanwhile, Intel had a legitimate beat-and-raise and the stock did not do much, even though it is depressed on a 2-year basis. And Alcoa, with a less impressive earnings beat, has also done little since an exuberant day; in fact it has trended down over the past week. So, under cover of rising averages, we are seeing lots of new 12-month highs, little but rising earnings estimates, and other bull market action, but evidence of fatigue.

What happens in a wild bull market is that you see stocks trading way above their 200 day moving averages. We are seeing this. When these stocks have the worst fundamentals, many prudent investors simply stand back. MU and AMD are two of many examples. Not counting its recent minor drop, GS is about 40% above its moving average and is quite the momentum stock these days. Meanwhile, there has been nearly zero corporate insider buying for several months. These guys are almost always right, though with a lag.

These sorts of stocks, even if the fundamentals are strong, have so much profit in them that in a normal bull market, one not fueled by short covering or hot money, that they move up more slowly.

Eventually, financial markets are weighing machines. The weights comprise return of capital or dividend payouts. A rising stock price for 2 decades did AIG shareholders no good when it went near zero, given the lack of meaningful dividend payouts along the way. With the S&P 500 once again yielding more or less exactly 2.0%, and with old Wall Street hand remembering when a normal (wide) fluctuating range of dividend yields was 3% at bull market tops and 6% at bear market bottoms, what we are seeing is levitation ahead of proven fundamentals.

Unfortunately, indicators such as Gallup.com's polling shows that consumer spending has not risen at all.

Based on 14-day averages of responses to smooth out weekend and other variations, Gallup found that in May 2008, consumers spent as much as $112/day above and beyond fixed costs such as mortgages (!).

Two months ago, that had rebounded from below $60/day to as high as $72 (Aug. 18). The index has dropped back to $60. Where are the money printers when we need them?

The same polling continues to detect no net hiring, which has been quite accurate in predicting the BLS monthly data. Employment is almost undoubtedly shrinking at a significant pace, and initial unemployment claims are probably understating the case due to reluctance of large and small companies to hire. And when they can hire overseas, they are doing so. There are no healthcare benefits and few if any payroll taxes in China!

The 10-year Treasury yield is back to 3.47% at a time when the CPI is negative and rents are falling for the first time in 17 years. The real yield is very high. As the peak momentum of the economic move off the bottom inevitably arrives--some week-- measured in various ways--it is likely that the media will start talking of a growth slowdown. Not only are Treasuries a buy for real return, if you ask virtually anyone which asset class will provide a better return over, say, two years or ten years, choosing between stocks, gold and Treasuries, how many people do you know who will say Treasuries? (I would also suspect that if people were asked to choose between all cash for 10 years vs. a 10-year Treasury, most people would take cash over a 3.47% annual yield.)

Gold was down on a day when oil surged. This smacks of profit-taking, given that the dollar was unchanged against a basket of other currencies.

The stock averages look vulnerable here, and many individual issues probably are more likely to drop than rise. However, the boring stocks such as MCD, GSK and WMT that have done little or nothing since March could rise even if the averages have what might be a pause that refreshes a/k/a a correction.

In a confusing world in which the financial crisis remains unresolved, yours truly remains long government securities, dividend stocks with strong long-term charts, gold and cash. Dynamic it's not. But given an outperformance over stocks by 40% last year by being in bonds and cash and out of stocks, I don't feel that aggressiveness is needed right now. Avoiding losses and investing for income and/or capital gains when they appear low risk is the DoctoRx watchword in managing money.

NOTE: Nothing said herein is investment advice for any individual. Econblog Review and DoctoRx are NOT professional money managers.

Copyright (C) Long Lake LLC 2009

Long T-Bond Yield Breaking Down as Lips Flap at the G20

Friday was an upside day for Treasury bond prices, as the 30-year equalled or minimally breached its low of the prior cycle of 4.10 in 2003. A technician opined to me that a standard charting technique had "confirmed" a bull move was underway in this issue, with a yield target of 3.50%. A different technique that I use, called "eyeballing" the chart, suggests 3.7% is a first target. The 'TLT' proxy for the long Treasury continues to move up strongly and will continue to rise if the 30-year issue goes well below 4%.

This occurred as the ECRI's Weekly Leading Index Growth Rate went to yet another all-time high, and the yield curve tightened, with the yield on the 2-year Treasury rising while the yield on the 10-year falling. Perhaps in sympathy with a sense that the best of times has ended for financials, JPM and BAC were among the participants in a broad drop in price for financial stocks. There is tremendous risk in these names for at least a few months.

Silver dropped 1 1/2% today, triple gold's drop. Gold continues to act like a store of value. The feeling at EBR is that having been burned by the unreal tech names a decade ago and the more amazingly unreal financial names such as Fannie and Freddie last year, investors will continue to want physical ownership of real things such as metals, but with enough faith in the underlying financial system to trust exchange-traded funds to hold the metals for them. This blogger prefers for core holdings to own ETFs that actually claim to own nothing but metal, meaning essentially no "derivatives" (e.g., futures contracts on the metal). However, for trading purposes, an "impure" ETF such as GLD is more liquid than a "pure" one such as GTU.

After quadrupling in the past 8 years, physical gold is probably at fair value relative to many ways to value it.
It may however be analagous to the NASDAQ in 1995 or 1996, with much more upside to go (even if unjustified). The NASDAQ tripled in the 8 years beginning in January 1988, then went up 5 times in the next five years.

Among stocks, the more internationally-oriented McDonald's rose on a down day, while the largely domestic name Wal-Mart took a serious tumble (for it). These were the only 2 Dow 30 stocks to rise in 2008, but their prices have diverged this year. MCD raised its dividend 10% and now yields close to 4%, with steady rises in the dividend appearing likely in years to come. Growth and income. The problem with the general stock market and the NAZ in particular is that growth without current income to stockholders is problematic, especially when the earnings somehow never to simply show up as unencumbered cash on the balance sheet.

Quarter-end window dressing aside next week, the growing technical strength in the long Treasury bond is adding to the headwinds that stocks face; what if the Japan scenario is truly in the cards?

(Those who watch the headlines will notice that the G20 meeting and the wasted breath on the Iran nuke situation are being ignored here for now. The first is toothless and the second is old news to the governments involved. Markets are for now moving to a different rhythm.)

Copyright (C) Long Lake LLC 2009

14 TRILLION . . . CALORIES

When financially-oriented souls think of the number 14 trillion, they usually think of U. S. GDP. They may also with good reason think of it as the stated Federal deficit plus the amount pledged to support what's left of the financial system.

However, another estimate of the importance of 14 trillion is the number of calories Americans would need to shed in order to get to some semblance of normal weight.

This number can be estimated as follows. 300 M Americans X 15 lbs overweight (or more) X 3500 calories/pound gets one there, plus a little for good measure.

What does this number have to do with an economics post?

Think of the outperformance of McDonald's vs. Wal-Mart. McDonald's stock is the best performer of the Dow 30 over the past 24 months, having returned about 10% in that time frame. Wal-Mart sells what are arguably more necessary items than MCD, yet its stock price keeps eroding. Today, MCD got a lift because an analyst touted the rollout of its premium espresso/cappuccino line.

It would seem that despite a poor economy, Americans are more hooked on junk food and sugary coffee drinks than on the low-margined necessities that Wal-Mart sells.


Copyright (C) Long Lake LLC 2009

Looking for Trends in all the Wrong Places?

Since the salespeople on CNBC want the average Joe to focus on the stock market as a whole, which has a decent hopeful chart in the setting of an economic banana that is so long in the tooth that it likely is winding down, it makes sense to look at trends in key markets and stocks to try to divine what forces of supply and demand have been extant. (Click on any chart to enlarge.)

By far the best-looking chart on the upside is gold. Above is the lifetime chart of its major exchange-traded fund, "GLD". The commodity formed a 20-year base between 1979 and 1999 or so, and is currently holding in nominal dollars just above its 1980 spike high of about $875/ounce. The short-term chart is also strong:

No matter how many formerly depressed common stocks are now above their 50 day moving averages, GLD shows short, intermediate and long-term strength. Gold has been a store of wealthy for millenia. Which will impress Asian creditors in 10 years more: gold, or Federal Reserve notes backed by junk bonds?

Next, let's consider gold's counterparty, the long Treasury bond, as exemplified by the ETF "TLT". Here's a multi-year view; not bad considering that unlike GLD, this has been paying dividends steadily. TLT has come back to former resistance which could now be support. The short-term moving average trends raise a real possibility that at some point this year, a rally at least back to the 200 day ma could occur.

Probably the single best investment characteristic that the intermediate or long Treasury has is that it is hated as an investment by pros and the public alike. A zero-coupon 10 or longer duration Treasury can be held to maturity for the stated yield, preferably in a tax-deferred account; or if rates fall enough, the price upside is leveraged due to the zero coupon feature and thus a nice capital gain can be reaped.

Turning to stocks, former leadership which should still be leadership has vanished. Consider the only two Dow 30 gainers of 2008, MCD and WMT. Here are their one-year charts with moving averages.

Neither chart is strong, and on a 3 month relative strength basis, each is a disaster relative to the market as a whole. Earnings estimates for each company are falling, and each is close to its 12-month low in price.

For what little the opinion here may be worth, EBR is skeptical of the move in the financials, especially with the stock disaster that NTRS is sketching out, is skeptical of the charts of Wal-Mart and McDonald's (but at least their dividend yields beat cash and likely will rise for years to come), believes that the Fed and Treasury do not have your best interests at heart, and believes that the general stock market is nowhere near a level of fundamental undervaluation that justifies a buy and hold strategy. Cash is deliberately being trashed by the Fed, though the current deflation means holding cash is acceptable, and Treasuries over the longer haul look to be in oversupply. Gold is not overvalued on an historical basis. EBR thus favors it largely because competing investments look poor. EBR also likes Brazil for the nonce; a good way to play it is with its high-yielding currency, the ETF "BZF".

Accept that the economy is probably bottoming, at least for now, but from a very low level. The economy bottomed in 1975 and 2001, with much better stock-buying investment opportunities ahead when the fundamentals were better and inflation-adjusted stock prices were lower.

Copyright (C) Long Lake LLC 2009

Nowhere to Run, Nowhere to Hide

The markets continue to be uninspiring at best. Any hope that the President's speech to Congress last night would provide an uplift to any market was dashed. Not only did stocks sell off, they did so in the worst way, losing support both in the AM and into the close. A familiar pattern continues, with rotation occurring while the overall market trends lower. For example, HMO stocks were weak all day and weakened into the close. Gold and silver moved lower today after being higher at mid-day. Unlike the explosive move that Treasuries had last fall, gold is getting close to the anniversary of its all-time high. GLD has had about a zero total return over the past 12 months and thus has only been a relative-strength story. SLV is a worse performer; as silver is not really a monetary metal, its strength the past few months leads me to be skeptical not only of its move but that of gold, as well.

Within stocks, the McDonald's "indicator" is flashing red. The stock, the second-best performer among the Dow 30 last year, has a miserable short- and intermediate-term chart. An up-move to 57-58 will be met with supply from chartists. WMT has a down-chart in a more advanced state of breakdown. And these two companies are the best in breed amongst the Dow given the poor economies worldwide. Safe-haven stocks such as pharma companies look terrible, including stalwarts such as J&J. Strength today in P&G and AT&T follows a poor recent performance from them. More of the same bear market action, boringly and depressingly. Where is there an end of it, the silent wailing?

Treasuries have a poor technical configuration, but at least this is a seasonally weak time of year for them.

Meanwhile, the ranks of bears is shrinking as the markets deteriorate. Robert Prechter has removed his bear shirt and called for a sharp up-move in stocks. After the Obama victory, a number of other prominent bears such as Bill Fleckenstein turned somewhat bullish. The more the bears drop out while markets deteriorate, the more I want to think that something is wrong that these experienced pros are missing, and I don't want to be exposed to the downside action until I find out what they don't know. We all know that a stock market that has dropped so far, so fast can shoot upward at any time. We just don't know why it doesn't do so.

Technically and fundamentally, matters are a mess. The Administration and the Fed present somewhat coordinated strategies that present no coherent front and appear to leave Citi and its brethren zombiefied. Gold and silver appear to have been sold to the public a bit aggressively. Treasuries are beginning to have credit risk priced in and certainly have no shortage of supply. As for stocks: if the Dow 30 or the S&P 500 were a single stock, and you evaluated it on the basis of earnings, earnings growth, stock chart, and underlying hard assets (ignoring intangibles and goodwill), you would conclude that at best it was a trading vehicle, not a buy-and-hold type of stock.

The only one of the above that can be ascribed to the new President is the supply of Treasuries. It just may be that it is, from the standpoint of markets, 1931 or early 1974, and what is going to happenwhat happened will/would have happened more or less no matter who occupies/occupied the Presidency.


When money leaves all three major asset classes: common stocks, precious metals, and Treasuries on the same day, as it did today, that suggests it went to cash.

Consider doing the same.

Copyright (C) Long Lake LLC 2009

Wesnesday Morning Commentary

Some day, good news may be released from solitary confinement.

Here is today's Bloomberg.com "Breaking News" (ignore hyperlinks to each article):

•GM Seeks Up to $16.6 Billion in New U.S. Aid, Plans 47,000 More Job Cuts
•Stanford Attorney's Withdrawal `Screams Fraud,' Spurred SEC to Take Action
•MBIA Forms New Municipal-Bond Insurance Company as Part of Restructuring
•U.S. Stock-Index Futures Rise; Citigroup, JPMorgan, General Motors Advance
•Hedge Fund Managers Pressed to Consolidate After Record Losses Erode Fees
•Immelt Waives Bonus as GE Leaves Chief's Salary Unchanged at $3.3 Million
•Berkshire Cuts J&J, Procter & Gamble Stakes as Buffett Favors Fixed Income
•Obama Says Afghan War Is `Still Winnable,' Will Send 17,000 More Soldiers
•California Senate Deadlocked on $14 Billion Tax Increase to Repair Budget.

A Bloomberg video caption quotes a man from a financial company saying that investing in banks is like "gambling". Econblog Review has been saying for some time that investing in stocks in general is for gamblers. At least the Street is catching up to reality. When it gets there, it will probably overshoot to be overly pessimistic in its public pronouncements. Then it will be safe to get back in the stock water.

Here are articles that Naked Capitalism links to (go to NC for links):

Stimulus Big Winner: Battery Manufacturing MIT Technology Review. Egad, I did a study on advanced batteries back in 1993 and got to drive a US manufactured electric car. And guess what? Looks like we ceded leadership to Asia.
Late Change in Course Hobbled Rollout of Geithner's Bank Plan Washington Post
After Manhattan’s Office Boom, a Hard Fall New York Times
Californian dream turns into nightmare Financial Times
Switzerland threatened with bankruptcy Ed Harrison
Adventures in Flackery, Private Jet Edition Felix Salmon
On the December TIC data Rachel Ziemba
Germany may rescue debt-laden EU members Telegraph. This is a big deal.

The news is legitimately bad. Switzerland of all countries threatened with national bankruptcy?

This is not a contrarian signal to buy stocks, however. Given negative price action, long-term topping action in the charts of the stock averages, and poor earnings momentum for the economy, only gamblers should be in the stock market. Presumably at some point the stock market will have a big upward move and people will point to how negative other people were at the bottom and will say to buy on the bad news. But that's easier said than done, the retrospectroscope being the only accurate diagnostic instrument.

Unfortunately, our own Big Mac indicator, the stock of McDonald's Corp. (MCD), has broken support in the 57 range. MCD has been both fundamentally and technically the best Dow 30 stock. Both on a fundamental and technical basis, stocks could fall much, much farther even if President Obama's feared "catastophe" is avoided. Valuations are nowhere close to trough valuations at other major bear market lows, even ignoring the horrors of 1932.

For some reason, the 30-year Treasury bond has been in great demand the last few days. Since we put in our call that the 10-year T-bond looked good at over 3%, the yield has fallen sharply to 2.63%. Geopolitically and "geo-economically", there has been little decoupling of the world from the U.S. and the U.S. financial institutions may be in less poor shape than their counterparts in Europe. Gold continues to compete with Treasuries for the safe haven funds and to have a strong technical chart.

The best hope for the future is that the productive capacity of the world is intact and still growing, and the globe is relatively peaceful. Thus anyone who would like to ride out this economic downturn in Tierra del Fuego, Bikini Atoll or almost anywhere else in the world can get there safely.

Personally, I prefer living in areas suffering from real estate busts.

Gold, McDonald's, and Stocks for the Long Run

The above images are from Yahoo-Finance.

They compare the price action of McDonald's stock and the exchange-traded fund for gold, GLD over 5, 2 and 1 year periods.

Some time ago, Forbes Magazine introduced the Big Mac Index, which correlated prices of a Big Mac in different cities in different countries. This basically utilized a Big Mac as a form of currency, just as gold bulls assert that gold is money.

Interesting to see how gold and McDonald's have traded so closely for so many different time periods. Of course, GLD pays no dividend, while MCD has a significant dividend. These differences add up and provide most of the intellectual support for the "stocks for the long run" hypothesis.

So far as stocks for the long run go, Credit Suisse (click for link) has an advertisement for stocks with the veneer of academia. It goes to great lengths to come to the tortured conclusion that stocks are about as cheap as ever. The argument is that stocks over many years have returned 6.2% over inflation, and that the current mild deviation from that trendline shows that we're near a bottom. Yet if the ultimate return for stocks is a mere 5% over trendline, then stocks are way overpriced. On price to dividend, price to tangible book value, price to earnings metrics, etc., stocks are nowhere near as cheap as they have been at major market bottoms.

Also, the CS writeup assumes reinvestment of dividends for stocks but almost certainly does not account for reinvestment of income from the competing asset classes it looks at, bonds and cash in the bank. And the fairer comparator to stocks should not be government bonds but rather corporate bonds. Finally, in prior years, stocks were expensive to buy and sell, whereas bonds and cash were not.

It's sad to see the same hucksters trying to persuade the same people at this time that the stock market is cheap. Compared to what corporate debt yields, stocks are not cheap now. Government bonds are not cheap, gold at $930 is not cheap, cash yielding nothing is not cheap; not much is cheap amongst financial assets. Perhaps oil in the $30s per barrel will be proven cheap.

We'll see: that's what makes the markets interesting.

Copyright (C) Long Lake LLC 2009

Market Update

First, the good news. At Calculated Risk, CR summarizes the Credit Crisis Indicators this evening. The short-term financials are getting better.

The bad news is that all this was the run-up to and of course one of the causations of a vicious global economic downturn. While every recession is scary, the current one is setting various records. Simply scour CR's posts this week, and you will find records ranging from the known housing issues to obscure ones such as trucking tonnage and air cargo volumes. And of course the world is experiencing the lowest short-term rates in multiple countries at least in the past 300+ years. Lots of major bear markets have not had much credit crisis. But we'll take any improvement where we can get it.

That said, the markets are at a most interesting juncture. Here's a summary of the 3 major markets covered here.

1. Treasuries. Currently they are in a correction. The 10-year yield bottomed near 2%. This was a historic breakout in price of the continuous bond. In the last cycle, the 10-year bottomed intra-day around 3.1%. It is now around 2.8%. If it hits 3.1%, that would represent a 50% increase in rates from the bottom. That's about as much as a short-term jump as one ever sees and could represent an attractive purchase, especially considering that this is a seasonally weak time of years for Treasuries and the talk is of an oversupply of Treasuries.

In the meantime, TIPS continue to price in deflation, there is excess capacity everywhere except in gold mining and the only real hiring anywhere is for people to handle unemployment claims.

Long Treasury yields did not bottom until about 19 years after the Crash of 1929.

Treasuries are in a primary bull market. There is near-universal belief that rates are way, way too low. Thus there is every possibility that the correct approach for at least a while longer is to buy a 5-10 year Treasury, make a real return against deflation or minimal inflation, and sell the bond in a year or two at a profit; or at the worst hold till maturity. Unlike the NASDAQ that paid no interest and considering the opportunity cost, is down much more than the raw numbers (from 5100 to 1500), Treasuries really do pay one to own them (remember, it's a bond!). So, all the talk of a bond bubble strikes me as incongruous. Overpriced, perhaps; a bubble: not quite.

2. Gold. The most intriguing market of them all. The gold bull Jesse of Jesse's Cafe Americain links to a Times online article titled "Gold price could treble if China divests dollars, warns mining boss". The article quotes Barrick Gold's chairman as scaring us that "there was even a possibility that central banks, including China’s, might start to switch from dollar holdings to gold, which could cause the price of the metal to treble." It seems that every time that chestnut is trotted out, a peak in the gold price is nigh.

The article goes on to point out that:

"Gold has been one of the best-performing assets of recent months, rising in value by nearly 17 per cent since late October even as the price of other commodities, such as oil and copper, has dropped sharply."

"Investors have bought heavily into physical bullion in the form of coins and bars, and physically backed assets, such as exchange-traded funds, as a safe store of value at a time of increased volatility in other asset prices."

Technically, gold is fairly strong, but its 200 day moving average is pointing down and has not crossed yet but an up-sloping 50 day ma. Gold has had an interesting correlation with the stock market during this bear: it has peaked out of phase with the stock market but made important bottoms with it (gold stayed up in October 2008 but crashed as the stock market made its November bottom). This pattern will continue until one day it will not.

So with the short-to-intermediate technicals inconclusive, the take here is that there is too much optimism in the gold price to suit us. Its outperformance vs. essentially all other physical commodities is breathtaking. India is in or near a recession, as is China, and these locales are huge buyers of gold, and are very price-sensitive. Most gold use remains for jewelry, and no one anywhere on the face of the earth is buying gold jewelry anymore (well, that's a slight exaggeration, but you get the point). So the most likely fundamental direction for the price of gold is to go straight down. Numerous nervous people have already placed their orders; the worst timer of the gold price, Barrick, is a raging bull; and its chairman, who should be in the background quietly accumulating gold or his company's stock, is out in public touting his wares.

Caveat emptor on Au. Adventurous sorts could look at purchasing puts, as this market could fall fast. However, gold is in a long-term bull market, so it's most interesting and most people should be on the sidelines unless they want to own physical gold as a true hedge.

3. Stocks. The single worst-looking of the three major markets remains general stocks. Stocks remain in a major bear market, with aggressive supply meeting every jump in prices. Wednesday's move up looks like one of many panicky short-covering rallies, with no follow-through, and with financial stocks continuing to erode. Most depressing is the action of McDonald's, the Dow leader and the only Dow stock to be at a higher price than 1 year ago. It recently "beat" the Street, which however was unimpressed. The technicals are deteriorating. There have been a series of lower highs since the early August high, though as well there have been higher lows. McDonald's almost has to lead a break-out of the general stock market higher. 14 months into a recession, even meeting expectations should ordinarily let a strong company with a high dividend yield squeeze the shorts and pop higher, but instead the stock acts a bit too "heavy" despite the "beat". If MCD goes the way of Wal-Mart and collapses, this would be very, very bad for the market as a whole. Traders and investors should watch MCD carefully.

There is no leadership anywhere. ConocoPhillips wiped out 2 years of earnings with a "one-time" charge of about 32 billion dollars (real money even for a bank), and happily its otherwise OK quarter was not rewarded, and the stock collapsed today.

GlaxoSmithKline, one of the original roll-ups in the pharmaceutical arena, is back to 1997 stock prices. In the last boom, its stock price never got near its 1999 high. Worse, it is trading as if it were a growth company at 12X tangible book value. Pfizer is being taken apart for its multiple sins of halving the dividend and perhaps going to the well one time too many with its emulation of GSK by becoming another roll-up (see Econblog Review's take on the merger, Pfizer Buys Wyeth: Layoffs Financed by You and Me).

Other medical stocks are providing little leadership, even on good news.

The education stocks that the unemployed go to in a recession are, too predictably to suit us here, strong; the quality of the rally off the November low has been poor.

"Defensive" consumer stocks such as Procter & Gamble have cyclically high operating and net profit margins, which have nowhere to go but down, as well as multi-year low tax rates, which can hardly go lower and therefore should have nowhere to go but up in a world where governments have higher priorities than some marginal extra profits accruing to sellers of staples.

The real geniuses such as Drs. Roubini and Taleb remain bearish, along with most others who "got it right".

And while stocks and headlines can move in quite opposite ways, the stock market is made up of companies which are, for the most part, quietly or not-so-quietly withering on the vine.

Under the earnings/price momentum Value Line-type system that has served this blogger so well over 3 decades of investing, if the stock market were a stock, it would be a 5 (lowest on a 1-5 scale) for "Timeliness". If the bottom has been seen, that would be great news. There's no need to risk your money on that hope.

Where does that leave an individual with new money to put to work?

Consult your financial advisor . . .

Copyright (C) Long Lake LLC 2009

The Economy as Predicted by Stocks and Inflation as Predicted by Gold

The following graph was taken from Jesse's Cafe Americain.

What is of special note is not only that CEO Business Confidence, per the Conference Board's Jan. 16 writeup, is at its lowest level ever (it began in 1976), but that a cursory review of the worst bear markets shown, the ones ending in 1982 and 2002/3, show CEO confidence rebounding significantly before the ultimate stock market bottom. In this case, I fully expect to see the equivalent of the perp walks seen at the end of the most recent bear market or the Pecora Commission of FDR's time.

To save you clicking on the report from the Conference Board, it's grim: basically no CEO saw improvement in his industry or general economic conditions. What is most disconcerting to me is that they still predicted price increases, though only 1% for the year ahead. This may be over-optimistic, however.



Next, please review the most stalwart of all Dow Industrials. McDonald's (MCD) has broken down. I take this to be big and bad news. "Mickey D" made a lower high recently below the September high. Its 50 day moving average is below its 200 day ma for the first time in a long time, and both look to be in danger of turning down. In terms of its own long-term valuation metrics, it is neither cheap nor expensive, and it appears to have a secure yield far above competing short-term money rates. Its products are almost necessities in a world where people are trying to work two jobs if they can find them. It is highly international. Despite today's up-move in the markets, all it could do was to rally to what is now chart resistance. What this may portend for the economy scares me. If the market has seen its bottom, it should have been holding up better and then should be poised to break out to new all-time highs. Perhaps it will, but it's acting opposite to that currently.

The best Dow performer of 2008 was Wal-Mart. It is farther along the stock breakdown stage than MCD. Here is its chart. It moved down today. Perhaps Target is sharpening its pricing; I wouldn't know, but something appears amiss here. You would have been better off buying a Treasury security of any duration from 1 to 30 years than Wal-Mart one year ago, despite its nicely positive 2008 return. This, with MCD, is classic big bear market action. Bears wear out the bulls. In fact, one additional point relates to some uber-bears, such as Bill Fleckenstein.
Last year, I read his book on Greenspan's bubbles. Mr. Fleckenstein publicly converted to the more-bull-than-bear camp late last year. I believe that the conversion that he announced and that of some other bears helped fuel the rally off the November lows. He announced that being bearish had simply become wearing on him. This is again, to me, classic big bear action. We generally get interested in markets because we are bullish on this or that. It is tough to be bearish; it's against a healthy emotional state.

But that's why quants use computers. Here at Econblog Review, we find it emotionally easier to basically ignore investing in the stock market when we don't like its looks, while following its twists and turns. Trying to make money on the downside is tough to do and tough on the spirit. We wish Mr. Fleckenstein very, very well, having admired his work and iconoclastic spirit for some time, but worry that his mini-conversion from the short-only camp was premature.


We all know that T-bonds have sold off lately, but the canary in the coal mine of inflation is gold. Gold, in the form of the GLD exchange-traded fund, looks to be in a critical technical position.

The first thing to notice, though the image is a bit obscured, is that GLD has provided a negative total return over the past 12 months. You can't eat relative strength. The second is that there are four (4) price peaks, and each one is below the prior peak. So far, each price peak has been followed by a lower low. The price peaks are out of phase with the stock market price peaks, but interestingly the price lows are in phase.

Most recently, GLD bounced off its upsloping 50 day ma and rebounded near its downsloping 200 day ma. With T-bonds selling off today, if there were true inflation fears, GLD should have been up in follow-through to its recent significant short-term rally. That it was down slightly may mean something.

Every stock and every market of importance over the past year of which I am aware that has had this sort of pattern of lower highs and lower lows has failed to break out to the upside. If Dr. Roubini is correct along with the TIPS market, and the Roubini "stag-deflation" is in the cards, then the fundamentals for gold are poor and those for 2-5 year Treasuries are OK. Most gold is purchased for jewelry use, though much of that is in Asia where people where jewelry that is not highly engineered and therefore sells close to the bullion price and therefore serves as money as well as adornment. Nonetheless, I know NO ONE who is spending on fripperies lately, and I know people both with good jobs such as doctors and people with serious money.

Every stock and bond professional I know who "called" this stock bear and Treasury bull at least one year ago doesn't trust today's stock market bounce. They are divided on the prospects for inflation vs. deflation over the short and medium term, though there is no interest in betting on low inflation over the long term. They all believe that the stock market is headed for new lows.

Also, some long-term wealthy investors I know who have bought and held stocks individually or through non-Madoff truly high-quality managers have been selling stocks over the past year and have now decided to get further out of the market. These people were truly in the market for decades. They are dismayed by what they see happening. They may well have voted for Barack Obama, but nonetheless they are moving definitively away from stocks. It is certain that a short-term bounce in the stock market will not tempt these serious investors back to the stock market any time soon. Unless the collapse of the large financial institutions worldwide is miraculously revealed to have been a big joke, they are getting out and staying out for some time.

The stock market remains too risky for most people. It is OK to miss the bottom of the market should we have seen it last November. If the stock market were a stock, and it were ranked by a standard earnings and price momentum screen such as the one Value Line pioneered and that has been widely imitated, the stock market would scream "sell". Gold would be more of a "Neutral", but we remain both viscerally attracted to it as a concept but skeptical of its price prospects over the short term due both to fundamental and technical factors. Treasury bonds would be more like NASDAQ stocks of the late 1990s, which is to say glamor, but the fundamentals and basic chart patterns are both OK to bullish. Just as the stock bubble, including the large-cap S&P stocks of the late 1990s, sent sensible hugely successful investors into retirement because the were too sensible too early and too long, so might this Treasury bull destroy short-seller after short-seller before rolling over, finally having sucked in the public at large, which may finally come to believe in bonds for the long run just when the dawn of a long-term Treasury bear market is born.

Anyway, it's time to support the local economy and support our favorite local eatery. You can't eat either relative performance or computer pixels.

Copyright (C) Long Lake LLC 2009