Thursday
Jan312008

Top Ten Worst Januarys: S&P 500 & Nasdaq

For both the S&P 500 and Nasdaq, this month made the top-ten list for the worst starts in each index's history (For the Dow, this January marked the 14th worst ever).  In fact, for the Nasdaq, this was its worst January in history.  Below we highlight the worst ten Januarys for each index, and how it fared during the month of February and the rest of the year.  Unfortunately for the bulls, while February has a positive bias, the historical record for the rest of the year leans towards the negative side.

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Thursday
Jan312008

Bespoke Money Management

If you're interested in learning about Bespoke Investment Group's Money Management services, please email info@bespokeinvest.com or call 914-315-1248.  We'll send you an introductory packet and then begin to create a personal investment strategy if you wish to form a relationship with Bespoke.  We offer aggressive and conservative equity strategies as well as an all-ETF asset allocation strategy.

Thursday
Jan312008

Is The Hedge Fund Unwind Winding Down?

Earlier in the year, in two reports for Bespoke Premium subscribers we highlighted how the worst performing stocks during the opening days of the year were the stocks which had the highest ownership among large hedge funds and institutional investors.  As shown in the chart below, since the start of the third quarter, the stocks with the highest ownership levels among hedge funds have steadily underperformed the market.

However, as noted in the lower chart, over the last two weeks, the gap between each group's performance has narrowed, indicating that the selling pressure that was evident in names widely held by hedge funds has, at least temporarily abated.  We'll be watching this over the near future, but if this trend continues it will be a good signal for the overall market.

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Thursday
Jan312008

S&P 500 Stocks With The Lowest Relative P/E Ratios

We recently calculated the relative P/E ratios of the stocks in the S&P 500.  The relative P/E ratio compares the stock's estimated P/E ratio over the next 4 quarters to the average P/E ratio of the sector that the stock is in.  A relative P/E ratio less than 1 means the stock's P/E is less than its sector's average.  We like to use relative P/E ratios because it compares apples to apples instead of apples to oranges. 

Below we highlight the 5 stocks in each sector with the lowest relative P/E ratios.  These stocks have low valuations compared to other stocks in their sectors.  In the list below, we like to see stocks that have low relative valuations but also have low PEG ratios (P/E to growth rate) and are up on the year.

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Relativepe   

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Thursday
Jan312008

Initial Jobless Claims at Highest Levels Since Katrina

While initial jobless claims had recently been one bright spot in the economic puzzle, today that light dimmed, as the most recent report showed that claims rose to 375K this week.  This marks the highest levels since Hurricane Katrina in the fall of 2005.

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Thursday
Jan312008

Asset Class and Stock Performance During the Current Easing Cycle

Asset130 The S&P 500 has had some wild swings since the Fed began its current easing cycle with its cut in the Discount Rate on August 17th.  After rallying to new highs in October, the index has fallen 13.37%, but it is down just 3.93% since the close on 8/16.  At right we highlight the performance of the ten sectors that make up the S&P 500 since the easing cycle began, as well as the performance of oil, gold, the dollar and the 10-Year. 

Even though Financials and Consumer Discretionary have rallied of late, they are still the worst performing sectors since 8/16.  Financials are down 14.73%, while the Consumer Discretionary sector is down 10.62%.  The Materials sector is up the most at 10.14%, followed by Energy and Utilities.  The real winners have been gold and oil.  Since the current easing cycle began, gold is up a whopping 42% and oil is up 28%.  The dollar is down 8% and the yield on the 10-Year Treasury Note is down to 3.60% from 4.66%.

With Financials and cyclical sectors down, the easing cycle has yet to have an impact on the things it is supposed to impact most.  But where would things be without any intervention?

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Below we highlight the best and worst performing stocks in the S&P 500 since 8/16.  CNX is up the most at 94%, followed by MON (77%), HES (64%) and RRC (48%).  ABK, MBI, ETFC and CFC are down the most. 

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Wednesday
Jan302008

AMZN Trading Down After Hours on Earnings

Amazon (AMZN) is currently trading down more than $6 after reporting inline earnings after the close.  The stock initially traded up $4, but investors quickly showed that the bears were in charge and sent shares on a nose dive.  We pulled up AMZN's historical reports from the Bespoke Earnings Report Database to see how it typically trades on the following day when it gaps down on earnings.  As shown below, the stock has averaged a further decline of -0.66% from the open to close when opening lower after a weak quarterly report.

To learn more about the Bespoke Earnings Report Database, click here or try this sample.  Please call 914-315-1248 to purchase.

Amzn

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Wednesday
Jan302008

Knowing The Bias of the Source

Patriots_fan_2 As we approach the Super Bowl, if you were to ask this guy who he thought was going to win the game, would you really expect an objective answer?  Of course not.  He's obviously biased. The same bias can easily be seen in the news on ABK and MBI today, but investors don't seem to care.

CNBC just reported that short seller Bill Ackman, who has stated several times that he is short and bearish on these names, wrote a letter to the NY State Insurance Commisioner saying that the problems at MBI and ABK are much worse than generally thought.  As a result both stocks have declined by over 10% in short order.

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Wednesday
Jan302008

High Yield Spreads: Up, Up, and Away

As we have been doing periodically for several months now, below we have updated the latest spreads between high yield corporate bonds and comparable treasuries.  As of 1/23, spreads hit a high for this period of 748 basis points (although they have recently contracted by 63 bps down to 685 bps).  This translates into a 210% gain from the lows reached in June of 2007 and marks the largest spike in the series' history.  Additionally, the only time spreads were this high over the last ten years was during the bear market from 2000 - 2003.

High_yield_spreads0128

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Wednesday
Jan302008

Historical US GDP Numbers

Today's initial GDP reading of 0.6% was the lowest since the first quarter of 2007.  GDP was this low just 3 quarters ago, so it's not that out of the ordinary.  And it's important to remember that the number will be revised two more times before it is final.  It could go higher, but it could also go lower.  Below we highlight the historical final annualized GDP numbers going back to 1947 (4Q '07 is the only one that is not a final number).  We also highlight with red dots any time that GDP was less than 1%.  While a drop below 1% often times means we'll end up getting 2 consecutive quarters of negative growth, it doesn't always mean it will happen.  In fact, while the NBER declared a recession in 2001, we haven't had 2 consecutive quarters of actual negative GDP growth since 1991.

Gdpannualized1_2

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Wednesday
Jan302008

Divergences in Wants and Expectations

Yesterday, we asked readers what they thought the Fed would do with the Fed Funds Rate at the FOMC meeting today versus what they wanted the Fed to do.  As shown below, the leading response for what they thought the Fed would do was a cut of 50 bps to 3.00%.  A cut of 25 bps ranked second, and a cut of 75 bps ranked third. 

When asked what they wanted the Fed to do, however, there was not nearly as much agreement.  Surprisingly, the response that got the most votes was for the Fed to leave rates the same at 3.50%.  While 41% of respondents think the Fed will cut 50 bps, only 19% want them to cut by 50 (ranked 3rd).  These responses suggest that whatever the Fed does today, there will be quite a few people that will be unhappy.

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Fedwant

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Wednesday
Jan302008

Historical Market Performance on Fed Days

Below we highlight the average percent change of the S&P 500 on Fed Days (scheduled) over various time periods.  As shown, the average change on the day over every time period is positive.  Since 1990, the average change of the S&P 500 on Fed Days has been 0.26%.  Since 10/02, the average change has been 0.33%.  And on the last three days (current rate cut cycle), the S&P has averaged a gain of 0.53%.  These numbers compare to an average one-day change of about 0.04% for all days since 1990, so there is a slightly positive bias on Fed Days.

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The table below highlights the S&P 500's performance on all Fed Days since the bull market began in October 2002.  As shown, the last three Fed Days have been very volatile, with two +1% days and one -2% day.

Feddays130

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Tuesday
Jan292008

Daily, Weekly and Monthly Key ETF Performance

Below we highlight the recent performance of ETFs across all asset classes.  While there is lots of red across the board in the 1-month performance column for equity ETFs, things are much more positive when looking at today and the last 5 days.  Mid caps and small caps are slightly outperforming large caps over the last week, and the US dividend stock ETF (DVY) is up 8.92%!

While most commodity ETFs are up year to date, the oil ETF (USO) is down 3.67%.  And fixed income has been suffering at the expense of stocks over the past week.  While Treasuries are still up on the year, they have gone down over the last 5 days.

On the global front, the India ETN (INP) is down the most on the year at -15.52%.  INP is followed by Germany (EWG), China (FXI) and France (EWQ).

Etf129

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Tuesday
Jan292008

International Long Term Interest Rates

Remember back in June when investors were worried that yields on long-term US Treasuries were going to approach 6%?  Well don't look now, but as most of you know, the yield on the 10-Year Treasury is now at 3.5%.  Below we highlight the historical yields on selected long-term international treasuries.  As shown, with the exception of Australia, since the Summer, yields for government debt have fallen sharply as bonds have rallied.

While sentiment towards lower yields has not quite mirrored the levels we saw towards higher yields in June, fixed income investors should be aware that long-term interest rates are currently at extreme oversold levels. A rise in yields, at least in the short term, should be expected.

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Tuesday
Jan292008

Bespoke's Sector Snapshot

Below we highlight our trading range charts for the S&P 500 and its ten sectors.  We provide these charts along with a number of other sector indicators to Bespoke Premium members on a weekly basis in our Sector Snapshot (click here for example).  In or below the green shading is considered oversold, while in or above the red shading is considered overbought.  As shown, the gains over the last week or so have barely put a dent in oversold readings for many sectors.  The S&P 500 is still in a downtrend from its October highs and well below its 50-day moving average.

With strong relative strength since the start of the year, Financials and Consumer Discretionary are actually two of just three sectors that aren't oversold at the moment (along with Materials).  Unfortunately, all sectors are currently range bound or in downtrends, and we would therefore advise short-term traders to wait for more oversold readings or a break of the downtrends before becoming too aggressive.  That being said -- long-term investors that have been waiting to find entry points for certain sectors or stocks on oversold pullbacks should not feel bad about working into positions at these levels.

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