Tuesday
Sep162008

AIG and the Market After Hours

In late breaking news tonight, it looks like AIG will get a loan of $85-$90 billion from the Fed, and the government will get warrants for a stake in the company.  This effectively bails out counterparties, but is expected to severely dilute shareholders.  Not surprisingly, SPY is trading higher on the news after hours, but we'll see how long it lasts.

Spy

Updates:

Fed Readies AIG Loan of $85 billion for an 80% Stake

Fed Plans $85 Billion Rescue for AIG

"The Bald and The Beard are currently briefing Congress"

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Tuesday
Sep162008

High Yield Spreads Hit Highest Levels Since 2002

Yesterday's increase in anxiety over the stability of financial assets propelled the spreads on high yield bonds to spike to their highest levels since 2002.  According to the Merrill Lynch Index of High Yield Bonds, junk bonds are now yielding 905 basis points (bps) more than Treasuries of similar duration.  Since bottoming last Summer, spreads have widened by 275%.  Interestingly, while it seems bad now, spreads are still 20% below their peaks from 2002.

High_yield_credit_spreads_091608

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Tuesday
Sep162008

S&P 500 Energy Stocks

Earlier we noted that not one stock in the S&P 500 Energy sector was trading above its 50-day moving average.  Below we highlight the individual stocks in the sector and where they're trading relative to their 50-days.  As shown, Massey Energy (MEE) is the furthest below its 50-day at -47.3%.  MEE is followed by NOV (-33.6%), CNX (-32.5%), NBR (-31.8%), and COG (-27%).  Tesoro (TSO), Valero (VLO) and Sunoco (SUN) are down the most year to date, but they're currently trading at some of the closest levels to their 50-days in the sector.  Exxon Mobil (XOM), which makes up nearly a third of the entire sector, is currently trading 8% below its 50-day and down 21.89% year to date.

Spxenergy

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Tuesday
Sep162008

CNBC's $190 Billion Reporters

A few minutes ago, CNBC's Charlie Gasparino reported that in discussions at the NY Fed regarding the fate of AIG, the prospect of the government providing some sort of assistance was on the table.  On that news, the S&P 500 staged a 1.8% rally in a matter of minutes.  In terms of market cap, the S&P 500 added $192 billion.  Minutes later, that $192 billion evaporated when another CNBC reporter said that the government's previously stated position regarding AIG (of providing no assistance) had not changed.  When hundreds of billions of dollars are created and erased in a matter of minutes like this, saying that the market is in a state of anxiety is quite an understatement.

Sp_500_intraday_0918

Tuesday
Sep162008

What's In Store For Municipal Bond ETFs

l

Munibondetfs

Tuesday
Sep162008

Big Picture Points Out 50% Retracement

Barry Ritholtz over at The Big Picture points out in a recent post that the Dow has now reached a 50% retracement of the 10/02-10/07 bull market.  Fibonacci retracements are a form of technical analysis that typically act as support levels in the near term.  Retracements of 23.6%, 38.2%, 50%, 61.8% and 76.4% are the support levels that traders look for, and as shown below, the 23.6% and 38.2% levels have acted as short-term support during this bear market.  As The Big Picture notes, "the 50% retrace is where one would expect to see some sort of rally."

50pctretrace

Tuesday
Sep162008

Percentage of Stocks Above 50-Day Moving Averages

Even though the market has made a new low, 33% of stocks in the S&P 500 are still trading above their 50-day moving averages.  At the lows last November, the indicator reached 18%.  In January, it reached 10%.  And in March, the indicator got down to 15%.  Conventional wisdom would suggest that we need to get back down to the teens before at least a short-term bottom is reached, so we'll see what happens.

On a sector basis, Consumer Discretionary and Consumer Staples are still hanging in there the best due to the recent strength in the dollar.  And while a lot of Financials are getting taken to the woodshed, 42% are still trading above their 50-days.  At the bottom of the barrel is Energy, where the indicator at least can't get any worse.  None of the 39 S&P 500 Energy sector stocks are trading above their 50-days.

Spx50day

Finlindu50day

Inftenrs50day

Condcons50day

Hlthmatr50day

Utiltles50day    

Tuesday
Sep162008

Panic Officially Sets In

The moves in the 10-Year Treasury yield and the VIX volatility index highlight that panic has officially set in.  At the start of the week, the 10-Year yield was 3.70%, while the VIX was at 25.6.  They're currently at 3.25% and 33.6, respectively.  Remember, the best thing to do when others panic is to not panic yourself.

Panicmode

Monday
Sep152008

Stay on Top of These Hectic Markets

One of the hardest things about this market for active investors is coming into the office in the morning and trying to catch up on all the news and events taking place.  For that reason, one of the more popular reports included in the Bespoke Premium product suite is the Bespoke Morning LineupThe report is your premarket source for up to date information concerning market events occurring overnight and in the pre-market.  On a daily basis, we summarize major international market events, stock specific news of note, analyst actions, and economic indicators/events.  In addition, we also outline what major indicators, events, earnings reports, conferences, dividends, splits, and upcoming index changes are due the following day so that you can plan ahead and be ready.  The report's concise format allows readers to get the information they need without taking up their valuable time.

A couple of months ago, we released our new redesigned version of the Bespoke Morning Lineup.  In this version, we have added an additional page that provides even more essential information on the market heading into the trading day.  While page one still provides the information subscribers have become accustomed to, we have also added a summary of the Bespoke Market Timing Model so that readers can quickly see how our sentiment, technical, and fundamental indicators are stacking up.

Page two of the report can best be described as the market's "rap sheet." By looking at this page, readers get a quick perspective of the market's current trends and internals, and where it is versus where it has been.  In the left hand column of the page, we provide the historical 50-day moving average spread of the S&P 500, the daily number of stocks in the index that are overbought and oversold, and the relative strength of stocks vs bonds.  The middle column of the page summarizes the current market internals as well as a graphical depiction of where sectors, bonds, and commodities stand with respect to their current trading ranges.  Finally, in the right hand column we highlight yesterday's biggest movers, as well as overbought and oversold stocks that are the most likely to rise or fall based on their prior price patterns.

To see a sample copy of the Bespoke Morning Lineup from Monday, September 15th (a day that will go down in infamy), please click the following link: Bespoke Morning Lineup.  The last two pages of the sample also contain a helpful explanation of each category within the report.  If you like what you see, sign up for Bespoke Premium to receive this report every day and take back your morning!

Monday
Sep152008

Largest Declines In the Dow

Today's 500+ point decline in the Dow Jones Industrial Average ranks as the sixth largest of all time.  In terms of percentage declines, though, today's drop is much less dramatic.  With a percentage decline of 4.42%, today's drop is the 104th largest since 1900.

Ten_largest_djia_point_declines

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Monday
Sep152008

Buffett Holdings Doing Okay

Last week we highlighted the weak performance of BP Capital's holdings since the end of the second quarter.  Warren Buffett's holdings, on the other hand, have done extremely well.  As shown below, Berkshire Hathaway's equity holdings as they stood at the end of the second quarter are collectively up 10.83% versus the S&P 500's performance of -5.25%.  Berkshire's biggest holding, Coca-Cola, is up 6.8%, while his second biggest, WFC, is up 42.5%.  Buffett has come under criticism many times when the market is rallying for not owning the big winners.  When times get tough though, he always seems to have the last laugh.

Berkshire

Monday
Sep152008

S&P 500 and The Financials

With all this talk of imminent doom for our financial system, one would think that the Financial sector and the overall equity market would be making simultaneous lows.  As shown below, however, both are still above their July lows, and the S&P 500 Financial sector is even above its August lows.

Spxfinancials_2 

Update:

S&P 500 lows now broken.

Spx2008

Monday
Sep152008

China Finally Cuts Rates

Today, China cut their benchmark central bank rate for the first time since February 21st, 2002.  The People's Bank of China cut their one-year lending rate from 7.47% to 7.20%, which will be effective tomorrow.  Below we highlight a chart of China's central bank rate and its Shanghai Composite equity index over the last ten years.  As shown, rates rose in lockstep with China's equity markets from late 2005 to late 2007.  As the Shanghai Composite has nearly given up all of its bull market gains since 2007, China's 1-year lending rate had remained the same in the face of rising inflation and continued GDP growth.  Based on the chart below, however, rates may have a ways to go on the downside.

Chinarates

Monday
Sep152008

Blame it on Energy: S&P 500 Sector Performance

With the bankruptcy of Lehman and the turmoil at AIG, one would think that Financials would be the primary culprit behind today's early decline of 2.5% in the S&P 500.  However, while the sector is playing a large role in today's decline (-3.6%), Energy stocks are actually the worst performers on the day with a decline of 4.3%.

Sector_performance_2   

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Monday
Sep152008

The Cost Benefit of Higher Commodities

For the first time since January, we have reached the point where the year to date change in commodity prices should have a positive effect on the average American's wallet.  In the chart below we calculated the 2008 price change of the major food and energy commodities in the CRB index (Corn, Soy, Wheat, Cattle, Hogs, Oil and Natural Gas) and multiplied the changes by the annual per capita consumption of each item.  While this method may oversimplify the actual costs, it provides a good idea of how changes in commodity prices have impacted consumers wallets this year.

After peaking at an additional cost of $4.77 per person per day, year to date changes in commodity prices are now impacting the average American by acting as a net benefit of 2 cents per person per day.  While a 2 cent benefit is negligible, it sure beats paying an extra $4.77 per person per day.

Cost_of_commodities

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