Monday
Aug182008

Inflation: CPI vs The Market

Last week's release of the CPI for July showed the highest year/year inflation reading since January 1991.  Ironically, however, in the same month where inflation hit a seventeen-year high, commodities had their worst month in over 28 years (since March 1980).  So on the one hand we have a government report saying inflation is high, and on the other we have the market moving in another direction.  Who do you have your money on?

Crb_index_july_2008_3

 

Monday
Aug182008

Will Your Home Heating Bill Be Higher or Lower This Winter?

"If you think it's bad for the consumer now, wait until Winter and those home heating bills start coming in."

How many times have you heard the above statement or some variation of it in the last six months.  Well, now that commodities have come back down to earth, you'll probably be hearing it a lot less.  In fact, with natural gas now trading with a $7 handle, current prices are only slightly above the average price from last year's Fall/Winter period.

Natural_gas

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Monday
Aug182008

Performance Since the Dollar's Lows

While the Dollar has had quite a run over the last couple of weeks, it really made its low back in April.  Below we highlight the change in various sectors and asset classes since the currency bottomed on April 22nd.  Since 4/22, the Dollar is up 8.01%, but the Health Care sector is up even more at 8.04%.  Consumer Staples is the only other sector in positive territory at +2.9%.  Oil is down 4.5%, the S&P 500 is down 5.7%, gold is down 14%, the Energy sector is down 15%, and Financials are down nearly 19%.

Dollarlows

Friday
Aug152008

Global P/E Ratios and Dividend Yields

Below we highlight the estimated current year P/E ratios and dividend yields for the major equity indices of 13 countries.  As shown, Europe has the lowest estimated P/E ratios, with Italy, the UK and France all below 10.  The US ranks 3rd to last behind China and Japan.  European equity markets also offer some attractive dividend yields well above 4%.

Peratios

Divyields

 

Friday
Aug152008

Consensus Economist GDP Estimates and Recession Odds

Earlier in the week, Bloomberg released their monthly survey of more than 50 economists.  In this month's survey, the median estimate for the odds of a US recession in the next 12 months was at 51%, about inline with the 50% readings in the prior two months.  Recession odds from economists seem to have peaked in the April survey at 70% for the time being.

Economistrecession

The median economist estimate for GDP growth in each of the next four quarters also remains positive.  Economists are expecting growth of 1% in Q3 '08, 0.4% in Q4 '08, 1.4% in Q1 '09, and 2.1% in Q2 '09.

Economistgdpest 

Friday
Aug152008

Investor Presidential Survey Results: 8/11-8/14

John McCain leads Barack Obama by 3 points in this week's Investor Presidential Survey.  While Obama has a 2-4 point lead in the broad polls, participants in our poll slightly favor Republican candidate John McCain.  Intrade's contracts still have Obama well in the lead, with odds for him winning at 60.4% versus McCain's odds of 36.5%.  Check back with Bespoke on Monday to take part in next week's survey.

Obamamccain811

Obamamccainhistory

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Friday
Aug152008

Buffet's Berkshire Holdings Doing Well in Q3

While T. Boone's holdings aren't doing so well this quarter, Warren Buffett's are.  Based on Berkshire's quarterly 13-F filing yesterday, his positions as they stood at the end of June are collectively up 9.06% -- pretty good compared to the S&P 500's return of just over 1% since then.  Berkshire decreased shares in BUD in the second quarter, added to IR and SNY, and took a new position in NRG Energy.  Unfortunately, the NRG position is the one down the most this quarter at -17.9%.  Below we highlight Berkshire's holdings at the end of the second quarter as reported in its 13-F.  This only includes equities listed on US exchanges and excludes details on a stake in ConocoPhillips (COP).

Berkshireq2

Friday
Aug152008

T. Boone Pickens Holdings Down Nearly 20% This Quarter

The holdings in T. Boone Pickens' hedge fund at the end of Q2 aren't doing so well this quarter.  Based on the 13-F released by BP Capital yesterday, the fund's holdings are collectively down 19.7% since the start of July.  (This doesn't reflect the fund's cash position, short positions, or changes in the holdings since the end of the 2nd quarter.)  As shown, 26 out of 27 positions are down this quarter, with SD, BZP, FWLT and DNR down the most.  The one position that is up this quarter is CLNE, which is also the fund's smallest position.  Interestingly, the fund added to all but two positions from Q1 to Q2, and took new positions in CHK, DVN, TS, EOG and BZP.

Mr. Pickens has been front and center in the news recently for his Pickens Plan to end the United States' dependency on foreign oil by developing alternative fuel sources.  Based on the performance of Pickens' holdings this quarter, BP Capital investors might want him to just be quiet.

Bpcapital

Friday
Aug152008

Market Internals

The S&P 500 is currently trading just above its 50-day moving average right in the middle of its trading range.  While the index has been bouncing off the top and bottom of an upward sloping channel since the July lows, a one-year chart shows a longer-term downtrend still solidly in place (first chart below).  When looking at the ten-day number of daily advancers minus decliners in the S&P 500, it shows the index slightly overbought, but less so than it was a couple of days ago.

Tespx

Spx10day

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Friday
Aug152008

Bear Market Gold

With a decline of over 2% overnight, gold is the latest commodity to hit bear market territory.  The commodity is now down 21.5% from its highs during the collapse of Bear Stearns.  As highlighted below, gold is now at its lowest levels of the year and down over 6% YTD.  Looking back at the prior eleven bear markets in gold, the average decline has been just under 34% over a period of 18 months.

Bear_markets_in_gold

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Thursday
Aug142008

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Thursday
Aug142008

Percentage of Stocks Above 50-Day Moving Averages

Currently, 60% of S&P 500 companies are trading above their 50-day moving averages.  This number has peaked out just above 80% twice in the past year, so hopefully it can make it up there again before the index sees a pullback.  Health Care tops the list of sectors with 92% of stocks trading above their 50-days.  Consumer Discretionary and Consumer Staples rank second and third at 79% and 78%, while Energy is at just 3%.

Spx50day

Finlindu50day

Inftenrs50day

Condcons50day

Hlthmatr50day

Utiltels50day

      

Thursday
Aug142008

Dollar Up Ten Days in a Row

Since our post on the Dollar breakout last week, the currency has continued its trek higher.  It is currently trading well into overbought territory, however, and is also up ten days in a row for just the fifth time since we have daily pricing going back to 1971.  The last ten-day winning streak for the currency was all the way back in May 1990.  The currency has gone up eleven days in a row just twice, and it has never been up twelve days in a row.  While we expect the uptrend to continue for the Dollar, it can't go up every day.

Dollar814

Dollarwinning_2 

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Thursday
Aug142008

Cost of Rising Commodities Falls

Last week, we highlighted that the rising prices of commodities during 2008 was costing the average American an extra $1.77 per day this year, which was down sharply from the $4.77 we saw in early July when oil and most grains were peaking.  In the chart below we calculated the '08 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.  As shown, this week we have seen the daily increase in food and energy prices in '08 decline to $1.37, which is now at a four-month low.  A decline from $4.77 to $1.37 per day in a little more than a month is huge for consumers.

Commodity_cost

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Thursday
Aug142008

Russell 1,000 Stocks with the Highest Short Interest as a Percentage of Float

July month-end short interest figures were released earlier this week, and below we highlight stocks in the Russell 1,000 with the highest short interest as a percentage of float.  As shown, more than 50% of both Big Lots' (BIG) and Sears Holdings' (SHLD) equity float is sold short.  While SHLD is down 10% year to date, BIG is up significantly at 110%.  The 25 most heavily shorted stocks in the index all have more than 20% of their float sold short.  Other names on the list worth noting are Wynn Resorts, Las Vegas Sands, General Motors and KB Homes.  For more short interest analysis, subscribe to Bespoke Premium today.

Russellshort