A dog that did not bark today was the stock market. After Monday's drubbing, bulls wanted to stage a "Turnaround Tuesday". Instead, with less than an hour to go in the regular stock trading session, stocks are flat with the VIX down (a lower VIX indicating less fear in the marketplace as judged by certain options activity). However, Treasuries reversed from down in price to up in price, joining gold in the plus column.
Meanwhile, my favored proxy group for the fundamentals of the economy, namely large financials, are depressing. JPM, generally considered the best of the TBTFs, is weak again today. BofA stock looks horrible, as do C and AIG. A high-quality not-quite TBTF, the President's banker (Northern Trust) also has a failing chart. DE and CAT don't have hot charts, either.
I recently read an erudite piece out of Cumberland Associates that "sell in May and go away" historically has not applied when some circumstance or another that in my approaching dotage I cannot remember is present, as it was when the writer wrote that. But at least for industrially sensitive stocks and commodities, today's action is more consistent than not with the thesis that for the next few months, investors' trading accounts are better off on defense than offense.
Disclosure: I am short BAC and NTRS, though I am long a much greater quantity of offsetting longs in a similar investment niche. I am also long gold in various forms and have certain other longs and shorts. My major recent asset allocation change has been to sell out of almost all foreign currency positions and energy stocks as soon after the reported "hit" on Mr. bin Laden occurred and silver and oil began crashing, and replace much of those positions with long Treasury bonds and most of the rest with cash.
Copyright (C) Long Lake LLC 2011
Showing posts with label Northern Trust. Show all posts
Showing posts with label Northern Trust. Show all posts
Tuesday, May 24, 2011
Tuesday, April 21, 2009
Investor Optimism Premature?
One might think that 6 quarters into a recession, it would be time for big companies to finally exceed the expectations they feed the Street. Not so. And investors don't seem to care. About the first point, EBR has little comment. About the second point, EBR is concerned that complacency has returned, even with the stock market down in real terms as much as in the 1929-31 period the same number of months from the market peak.
Caterpillar reports sales down 29% year on year and states that it may cut its dividend (see Q16). The stock is selling at 4X tangible book value. It drastically lowered its yearly 2009 sales estimate from about $40 B only 3 months ago- when the worldwide economy also stank- to about $35 B today. The stock is only modestly down, in keeping with another report, wherein Bloomberg reports:
German investor confidence rose to the highest level in almost two years in April after stock markets rallied on government and central bank efforts to revive economic growth.
Since market close yesterday, IBM, Coke and Cat have missed sales projections. To miss sales projections this far into a bear market is disconcerting; yet the stock price, in keeping with the German optimism, are trading the stocks with minor price changes.
Meanwhile, there is no leadership. Amongst the financials, BofA and Citi have suffered huge percentage declines in the past couple of trading days. Perhaps most worrisome is that the banking company with the best chart on a longer-term basis, Northern Trust (NTRS), had a big earnings miss and the stock got crushed. The stock is now decisively below its 50 day and 200 day moving averages; and, the ascending 50 day MA never quite crossed above the descending 200 day MA.
In conjunction with today's earlier post documenting more than a weak straw in the wind that the tide is indeed turning against Big Finance, EBR takes the NTRS news and stock reaction as evidence that more pain probably lies ahead for the stocks of the financials- and with them the real economy given that the dependence of the economy on debt remains excessive.
Structurally strong charts remain with the mutual funds BTTRX, which tracks the long zero coupon Treasury market, and Ginnie Mae funds such as VFIIX and FGMNX. Of them, BTTRX is the safest buy from both a chart and fundamental standpoint, though nothing is optimally safe at present, unfortunately including cash in the bank given that FDIC is essentially bankrupt as a going concern.
Copyright (C) Long Lake LLC 2009
Caterpillar reports sales down 29% year on year and states that it may cut its dividend (see Q16). The stock is selling at 4X tangible book value. It drastically lowered its yearly 2009 sales estimate from about $40 B only 3 months ago- when the worldwide economy also stank- to about $35 B today. The stock is only modestly down, in keeping with another report, wherein Bloomberg reports:
German investor confidence rose to the highest level in almost two years in April after stock markets rallied on government and central bank efforts to revive economic growth.
Since market close yesterday, IBM, Coke and Cat have missed sales projections. To miss sales projections this far into a bear market is disconcerting; yet the stock price, in keeping with the German optimism, are trading the stocks with minor price changes.
Meanwhile, there is no leadership. Amongst the financials, BofA and Citi have suffered huge percentage declines in the past couple of trading days. Perhaps most worrisome is that the banking company with the best chart on a longer-term basis, Northern Trust (NTRS), had a big earnings miss and the stock got crushed. The stock is now decisively below its 50 day and 200 day moving averages; and, the ascending 50 day MA never quite crossed above the descending 200 day MA.
In conjunction with today's earlier post documenting more than a weak straw in the wind that the tide is indeed turning against Big Finance, EBR takes the NTRS news and stock reaction as evidence that more pain probably lies ahead for the stocks of the financials- and with them the real economy given that the dependence of the economy on debt remains excessive.
Structurally strong charts remain with the mutual funds BTTRX, which tracks the long zero coupon Treasury market, and Ginnie Mae funds such as VFIIX and FGMNX. Of them, BTTRX is the safest buy from both a chart and fundamental standpoint, though nothing is optimally safe at present, unfortunately including cash in the bank given that FDIC is essentially bankrupt as a going concern.
Copyright (C) Long Lake LLC 2009
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