Outlook Bank Credit Analyst

verfasst von CRASH_GURU, 06.01.2006, 08:50

-->“Things like the following, from Friday’s Wall Street Journal, point to a tough year overall: ‘With only rare exceptions, when the yield curve has inverted in the past 50 years, it presaged recession. When [the yield curve inverted] on Tuesday, however, it set off a flurry of research notes from economists intoning four of the most dangerous words in investing: This time is different.’ To me, though, the inverted yield curve is yet another sign that the four-year cycle is at work here, and I would therefore not be in any hurry to put new money to work.”
Walter Deemer
Market Strategies And Insights
January 3, 2006
www.walterdeemer.com

“We are long in both of these venues because are models are positive. But, Gold is quite overbought. Silver is also overbought, but it looks higher based on its progress pattern. We have long had a major position in Central Fund of Canada (CEF) because it is the most convenient way for us to own silver bullion directly. But the fund has gone from a discount to a to a 7% premium which is a warning sign.”
Paul Macrae Montgomery
Universal Economics
January 3, 2006
pmmontgomery@montgomerycap.com


“ONE OF THE BIG arguing points of the bulls is the extraordinary strength in corporate earnings. And, no question, we've had a spectacular boom in profits. In the third quarter of 2005, to illustrate, operating profits of the S&P 500 were up a neat 11.5%, the 14th quarter in a row of double-digit gains.

However, as the indefatigable David Rosenberg of Merrill Lynch points out, such a splendid performance reflects not so much any inordinate growth of revenues as the impact of an unprecedented mass of buybacks -- $456 billion worth of stock repurchases that TrimTabs Investment Research estimated took place last year.

Operating earnings in dollar terms -- as against per-share net -- actually were up only 7.8% over the comparable year-earlier total. Which, David notes, was the narrowest gain in three years.

The bottom line: there's a good deal less to the corporate bottom line than meets eye.”
Alan Abelson
Up And Down Wall Street
January 2, 2006
www.barrons.com


“ENERGY: Good News For Consumers; Intermediate-Term Momentum Models Turned Negative For Natural Gas. In our last piece on Natural Gas (Technical Perspectives dated November 23, 2005), we suggested that prices for the commodity could retreat further, as the intermediate-term technical momentum models for Natural Gas were neutral but deteriorating. In the interim, a dramatic rally developed taking the price of Natural Gas to new highs! However, as those new highs evolved, weekly technical models did not confirm the new price high on December 5, 2005 at 14.31. Instead, the intermediate term models have diverged negatively from the price by setting lower highs as the price rose to new highs. Over the past three weeks, the price of Natural Gas has dropped from 14.31, on a closing basis, to 11.11, or 22%. Now that the intermediate-term technical momentum models have turned negative for Natural Gas, the odds have increased that a more pronounced pullback could occur. If support at 10.65 were taken out, the break would allow us to project a downside target to the 10.00-8.00 range. The target, if achieved, would be good news for the consumer.”
Ron Daino
Technical Perspectives
Louise Yamada Technical Research Advisors LLC.
December 28, 2005
ron.daino@lyadvisors.com


“According to detailed statistical work conducted by none other than Fed Chairman Greenspan himself, MEW [mortgage equity withdrawal] in recent years has been running at 6-7% of after-tax disposable personal income, as displayed in the chart below....



It shows that when home price appreciation is running higher than mortgage rates, the market booms, if not bubbles, as momentum players chase the market higher, a text book example of what George Soros calls reflexive demand. But once the momentum breaks - and again...declining affordability is the fundamental break - reflexive demand becomes reflexive supply, as former speculative buyers become eager sellers. Reflexive markets - and property is one if there ever was one - inherently tend to have V-shaped tops, not rolling tops. Thus, both volumes in total home sales, particularly existing home sales, and MEW are set to fall sharply in the year head. Not the stuff of recession, I hasten to add...but clearly the stuff of a serious slowdown in consumer spending.”
Paul McCulley
MEW Drag
Pimco Fed Focus
December 23, 2005
www.pimco.com


“DJTA: High as a Kite, and So Are Its Investors
The Dow Jones Transports, contrary to expectations (see August 24 issue), made a new all-time high. This has happened at a time when we have record nominal oil prices, a rusted-out rail system, airline bankruptcies, and when ‘Airline performance, food and service are in a tailspin—worse than they’ve ever been—according to a survey of 5277 frequent flyers and travel professionals.’ [USA Today, 11/7/05, p.1D.] Companies in the DJTA are struggling hard to make a profit even now after three years of economic recovery. Truckers are strong because it’s the only healthy area of transport left. Does anyone need further evidence that the stock market does not price itself according to ‘fundamentals’? For quite awhile it has not priced itself according to the ‘technicals,’ either, at least as I read them. The Transports’ pricing passed ‘loopy’ years ago. It seems nearly certain that the DJTA will ultimately fall even more than the Dow.

The Transports’ new all-time high is unconfirmed by the Industrials, putting a major Dow Theory non-confirmation in place, a smaller one of which occurred in January 2000. It is fitting that the first major high in the stock market, in 2000, saw a minor bearish divergence against the Industrials, while this test of the high, in 2005, is seeing a minor and a major bearish divergence against the Transports (see below). If the Dow gets above the March high, some people will call it a Dow Theory confirmation, but the key level for major-trend confirmation is the Dow’s 2000 high at 11,723. I still think the waves argue against that high’s being taken out.”



Robert Prechter
The Elliott Wave Theorist
December 16, 2005
www.elliottwave.com


“We have been staunch in our assertion the equity markets will remain within a trading range. Long-term investors think trading ranges are a lot of noise, signifying nothing! They fail to see the opportunity offered. Those who buy-weakness and sell-strength are more likely to add value and boost their investment performance. Caution is advised, as earnings are suspect. Investors must be concerned about the upcoming shortfall in profits. This is evidenced by the large number of earnings-forecast ‘misses’ evident now. Recent offenders include: Pfizer, Intel, Caterpillar, Norfolk Southern, HCA, Amazon, Flextronics, MGM Mirage, XL Capital, Citigroup, E-Bay, Boeing, GM, Eastman Kodak, Sprint, Biogen-Idec, Alcoa, Dow Jones, Honeywell, PPG, Cendant, American Express, Walgreen, Best Buy, Anheuser-Busch, Kerr-McGee, Biomet, Wm. Wrigley, and La. Pacific. Three disconcerting factors surround these names. First, they embody the ‘bell-weather’ leadership of the S&P 500. Second, just look at the diverse industries represented by these firms. Finally, nearly every one of these companies lowered their earnings guidance for either the next quarter, the next year or in the case of Pfizer, the next two years. While some optimists talk-up the percentage of firms that have beaten the Street’s consensus estimates (about 67%), we are more disturbed by the size of the misses and their continuing shortfalls. Rereading the list is sobering! In ’06, we foresee a profit-margin squeeze. This will be the result of five colliding factors: lower GDP growth, higher inflation, increasing interest rates, slower productivity gains, and pathetic pricing power. Our preliminary estimate for the S&P 500’s earnings falls within the range of 3%-6%…remove the energy stocks, and it’s 2%-5%. Figures like this sustain our resolve to maintain a ‘predominately defensive’ investment stance. Now more than ever, we believe risk-adverse tactics should be both employed and deployed.”
Charles A. Knott
Knott Capital
Executive Summary
December 2005
(610) 854-6000


“There continues to be a strange and rather uncomfortable economic picture of a benign near-term outlook, yet major structural concerns. From a longer-term perspective, it is anything but a goldilocks environment...Nonetheless, the odds seem good that the economy will muddle along for another year. Consumers are likely to retrench, but the corporate sector remains in excellent shape and low inflation means that the Fed will not have to get tough. In turn, this should ensure that the housing boom deflates slowly, not viciously...”
Martin H. Barnes
Bank Credit Analyst
November 30, 2005
www.bcaresearch.com

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