Friday
Jan182008

Nasdaq Historical Bear Markets

The Nasdaq is now down 18.37% from highs reached on 10/31/07.  A bear market occurs when the price declines by 20% or more after previously rallying by 20% or more.  While it's not yet a foregone conclusion that the Nasdaq will turn into a bear, it's getting very close, and investors should be prepared for what the typical bear looks like.  Since the Nasdaq index was created back in 1971, it has suffered 13 bear markets.  The average bear has been 216 days long for an average decline of 36.51%.  Only 4 out of the 13 bears saw declines of less than 30%, and 4 bears saw losses of more than 40%.

Nasdaqbears

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Friday
Jan182008

Dow 30 Statistics

Below we highlight the 30 Dow stocks sorted by percent change year to date.  INTC is down the most at -28.32%.  INTC is followed by AA (-21%), C (-18%) and AXP (-17%).  We also provide each stock's current P/E ratio and dividend yield as well as where these two fundamental data points stood at the start of the bull market on 10/9/02.  Stocks highlighted in yellow have lower P/E ratios and higher dividend yields than they had in October 2002.  INTC's P/E is currently 16.47 and it yields 2.67%.  (Wait a minute, INTC yields 2.67%?!)  At the start of the bull market, INTC's P/E was 26.92 and yielded just 0.59%.  Other companies whose P/E ratios are down big since 10/9/02 are AA, DIS, MMM, XOM, KO, WMT, PFE and JNJ. 

Companies whose dividend yields are much higher than the start of the bull market are INTC, C, MCD, HD and PFE.  Interestingly, MO is a stock that many people expect to hold up well in the coming months.  However, MO has seen its P/E ratio go from 5.92 at the start of the bull to 16.22 at the moment.  Its dividend yield has decreased from 8.66% to 3.97%.  While MO is a defensive name, its current valuation is not nearly as attractive as it was at the end of the last bear. 

Dow30stats_2

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Friday
Jan182008

Dear Mr. Bernanke, Dear President Bush, Dear Congress: Please Watch This Commercial

Talking the talk and not walking the walk is about the worst thing that the Fed, the President, or Congress can do.  When you say that rates are going to be lower in the future or say you're going to provide an economic stimulus package, it causes economic activity to freeze until these things actually happen.  Why would anyone borrow money if they know rates are going to be lower in the future.  If you're going to cut rates, do it.  If you're not, let the market know that you're not.  This can all be summarized in the great Royal Bank of Scotland commercial below:

Friday
Jan182008

GE Trading Higher on Earnings

General Electric (GE) is currently trading higher by 3% in the pre-market.  From the Bespoke Interactive Earnings Report Database, we searched all of GE's prior quarterly reports and found that the stock has gapped higher on earnings 15 times since the end of 2001.  On these days when the stock gaps up, it has gone higher from the open to the close just 33% of the time, so traders typically fade the gap for GE.

Geearnings

Click the image below to try out a sample of the Bespoke Earnings Report Database.  Enter in any of the following stock tickers once you download the sample to test out the database - A, AA, AAI, AAP, AAPL.  Once you try it out, you'll quickly realize that owning this database gives you a clear advantage over anyone that doesn't.  If you would like to purchase the entire database or a database of a select basket of stocks or indices, call us at 914-315-1248 and receive it today.

Friday
Jan182008

Percentage of Stocks Above Their 50-Day Moving Averages Finally Oversold

Currently, just 11% of stocks in the S&P 500 are above their 50-day moving averages.  While the price of the S&P 500 moved into oversold territory a few days ago (3.1 standard deviations below its 50-day), the percentage of stocks above their 50-day's had not yet reached extreme oversold levels.  After reaching 11% after yesterday's close, the number is now as severe as it was during the August declines.

Above50day

Spxte 

Thursday
Jan172008

Recent Reports From Bespoke

Bespokepremium117_2 

In times like these, Bespoke Premium offers the unique, objective market research that investors are looking for.  In recent days, along with our normal reports on economic indicators, ETFs, sector technicals and earnings analysis, we have done in-depth reports on volatility, January seasonality, international revenues, large one-day declines and oversold markets.  In each report, we highlight how the current market environment compares to similar occurrences in the past, and more importantly, what to expect going forward.  Click here to subscribe.

We also recently rebalanced our Model ETF Portfolio.  The Bespoke Model ETF Portfolio is down just 3.06% since we launched at the end of May. During this same time period, the S&P 500 is down 11.3%.  This clearly highlights the importance of having a money management plan in place that is diversified across all asset classes!  It's okay to be invested in stocks, but an individual's overall portfolio should have exposure to other assets classes like fixed income, commodities, international equities, real estate and currencies to spread risk.  Bespoke Premium members have access to our Model ETF Portfolio, but for readers that aren't aware of it, Bespoke offers an all-ETF investment strategy for its money management clients. This strategy is for individuals that want us to manage their assets using diversified, low-cost ETFs. 

Thursday
Jan172008

Lots of Stocks Down A Lot

Stocks have gone from rolling down a hill to falling off a cliff over the last three days.  Below we highlight the worst performing stocks in the Russell 3,000 since Monday's close. In three days, 15% of stocks in the index are down more than 10%.  That's a lot of value down the drain.  While we are at extreme oversold levels and will probably get some gains in the next week or so, there has been a clear shift to a downtrend, and it's important to take profits if you play the upside and get some quick gains.

Worstperf

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Thursday
Jan172008

And We're Free...Free Fallin'

Below we highlight charts of five major US indices.  We also provide the current percentage declines from each index's prior highs.  A bear market is a fall of 20% that was preceded by a rise of 20%.  Currently, the bears are one for five, with the Russell 2,000 falling into bear market territory today.  The Nasdaq looks to be the next to go if we don't get a turnaround real soon.  The tech-heavy Nasdaq is now 18% below highs reached on October 31st and has just 2% to go on the downside to reach bear territory.  The S&P 500, DJIA and Russell 1,000 are all about 15% off their highs.  With the free fall we're in now, we could easily be five for five by the end of January.

Spx117

Djia117

Ccmp117

Russell117

Rty117

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Thursday
Jan172008

Merrill Lynch: Stan O'Neal's Legacy

Merrill Lynch's (MER) Q4 $16.7 bln write-down brings their total in the second half of 2007 up to about $25 bln (Way to go Stan!).  With those write-downs, one third of MER's book value has now gone down the drain of the kitchen sink.  Below we highlight the quarterly book value of MER since 1990.  As of 12/31/07 (before the 'strategic' investments), MER's book value was $29.37 per share, which is the lowest level in over four years and down 33% from its peak of $43.55 at the end of Q2 07.  This marks the largest decline in book value at MER since at least 1990.

Merrill_book_value

Thursday
Jan172008

Freezing Under Pressure

BernankeWe've all come across people in our lives who talk the big game about what they will do, only to freeze under pressure when given the opportunity.  This morning we were reminded of those people when the testimony of Fed Chairman Bernanke scrolled across our Bloomberg.  Below we highlight some of the main points.

Fed_headlines

Now if we look back to 2006 and early 2007, all we kept hearing from the Fed was that rates couldn't be cut because of continued inflation pressures.  Today the Fed Chairman is saying that the Fed is 'ready to act in a decisive and timely manner' and 'take substantive additional action' to combat a fragile financial environment and slower growth prospects.  Additionally, the Chairman said inflation 'should moderate this year and next'.  We've now heard this same statement multiple times in recent weeks, and we're actually thinking about making a talking Bernanke doll with the exact phrases.  Do any manufacturers out there want to help us?

So here we have a Fed that is telling us that it expects an abatement of the one factor (inflation) that has kept it from being more aggressive in cutting rates, and yet they still remain frozen in the 'ready to act' phase.  What are they waiting for?  We're not saying rate cuts are the answer, but we just need decisiveness and confidence from the group that controls the money.  Saying you're going to do something and then leaving the markets in limbo is not very 'decisive and timely'.  Until the 'ready to act' actually becomes action, the short side of the trade will keep working.

Thursday
Jan172008

US Housing Market Now Expected to Fall 21% From Peak

Based on the current prices of CME housing futures that track the S&P/Case-Shiller home price indices, the median home in the US is now projected to fall 21% from its peak in 2006 to its expected trough in November 2010.  The chart below highlights the historical Case-Shiller data as well as the CME housing futures that track the index. 

Hey, look on the bright side -- at least the futures are predicting a bottom in 2010.  By November 2011, the average home price is only expected to be down 18% from its peak.   

Composite08

Thursday
Jan172008

S&P 500 50-Day High/Low Spread At 5-Year Highs

Another volatility indicator that we track along with the VIX is the 50-day high/low spread of the S&P 500.  This takes the difference (%) between the index's high and low each day and averages it over the last 50 days.  Currently, the 50-day high/low spread is at 1.68% -- its highest level since early 2003. 

50dayhilow_2

Thursday
Jan172008

Baltic Index Down 37% Since Mid November

Every once in a while, an economic term or indicator that was previously not widely followed finds its way into the mainstream financial conversation.  Before the Fall, if you had asked nine out of ten people what the TED Spread was, we don't even want to guess what the typical response would have been.  Once the credit crisis accelerated though, this was the indicator that everyone was watching to guage the stress in the system.  Now that the TED Spread is back to approaching more normal levels, we suspect that it will go the way of Spuds MacKenzie.

One indicator that seems likely to replace the TED Spread as the indicator du jour is the Baltic Dry Freight Index.  While many readers may be familiar with the term, for those who aren't, the Index measures the cost of moving raw materials by sea in container ships.  Many economists consider the index to be a good leading indicator of economic activity, because if not as many people are looking to move cargo, ships will be in less demand, causing a drop in the price that shippers can charge.

For many economists, recent declines in the Baltic Index have reinforced views that the economy is not only weakening, but heading into recession.  While the 37% decline since mid-November makes good headlines, some perspective is needed.  Using data going back to 1985, there have been nine other periods where the Baltic Index declined by 35% or more.  Over the same period, the economy has slipped into recession only twice.  So while the Baltic Index typically declines leading up to or during recessions, declines in the index do not necessarily mean that a recession is on the horizon.

The chart below shows the performance of the Baltic Index since 1985.  At first glance, the chart is reminiscent of the Nasdaq in 2000 or a homebuilder stock in 2005. Whether or not the Baltic Index is a bubble that has now burst is up for debate, but we would note that part of this sharp increase can be linked to China's entrance into the WTO on December 11, 2001 (red line).   

Baltic_index

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Wednesday
Jan162008

More From Bespoke

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Wednesday
Jan162008

Bespoke's Fourth Quarter Earnings Calendar: Updated 1/16

We have just updated our earnings calendar to show earnings reports from 1/16-1/30.

In order to help you stay on top of earnings season, Bespoke has created an in-depth calendar that highlights over 2,000 US stocks due to report in the next month and a half.  The calendar is more advanced than typical earnings calendars because it includes detailed information about each stock's historical reports.  We looked at each company's quarterly reports going back to the end of 2001 and calculated the percentage of the time the company has beaten or missed EPS and revenue estimates as well as guided higher (we only provide beat rates for companies that we have at least 8 historical report dates for).  In addition, we also provide the average one-day price change following earnings reports to highlight how the stock typically trades on earnings.  The average absolute one-day price change is included as well to highlight the stock's volatility in reaction to earnings.

Bespoke will continuously update its earnings calendar to show the next two weeks worth of earnings reports.  However, if you sign up for our www.BespokePremium.com service, you will receive a more in-depth interactive file of the entire earnings season calendar that is sortable by stock and all other categories.

To access the basic Bespoke Earnings Calendar, click the button below or at the top right of this page.  For the premium interactive calendar, subscribe at www.BespokePremium.com.

Below we provide information on the Bespoke Earnings Database as well:

The Bespoke Earnings Report Database is the ultimate earnings guide for traders and investors alike.  The database provides detailed earnings analysis for over 2,700 stocks.  We take earnings analysis to the next level by not only highlighting how the actual reports compare to analyst estimates, but also how the stock price reacted to the report.  Users of this database can easily find how a stock or basket of stocks typically reacts to earnings in order to prepare themselves for future quarterly releases.  Traders can also see how stocks perform after gapping up or down on earnings to develop trade ideas. If Apple opens down $2 on earnings, what does the stock typically do next?  How does the stock do when it beats earnings estimates and guides higher?  Which stocks beat or miss estimates the most?  Which stocks react the most positively or negatively to earnings reports?  This database can answer these questions and many more for the majority of US stocks that trade today! 

Click the image below to try out a sample of the Bespoke Earnings Report Database.  Enter in any of the following stock tickers once you download the sample to test out the database - A, AA, AAI, AAP, AAPL.  Once you try it out, you'll quickly realize that owning this database gives you a clear advantage over anyone that doesn't.  If you would like to purchase the entire database or a database of a select basket of stocks or indices, call us at 914-315-1248 and receive it today.