Monthly Archives: October 2015

Daily Market Update – October 22,  2015  (Close)

The earnings keep coming as this week and next are traditionally the busiest ones for earnings of the DJIA members and key S&P 500 players.

For the most part the results have been pretty underwhelming with the same tired story of companies reporting beats on earnings, but having missed on revenues.

While that was true this morning, the earnings reported after the closing bell were going to be quite another story and may give today’s 320 point DJIA some legs for even more.

But even with that good news, I still don’t quite understand what investors get so hung up on the EPS metric, especially when it is so easily manipulated, as has been the case for the past couple of years with an avalanche of stock buy backs.

There has to be some better way of comparing relative performance from one time period to the next and to your peers.

More importantly, there has to be some measure that’s less easy to bend through the use of investor’s cash that’s sitting in the corporate bank vault.

Granted, there are always different accounting tools that can be used to accentuate certain aspects of both items in the assets and liabilities columns, but there should be some replicable measure that simply looks at operating revenues and operating expenses that strips out all of the fudge factors that creep in to those numbers.

That’s too easy and makes management too accountable for performance, so that will never happen. Part of it is also due to the IRS code that allows for periodic manipulation and difficulty in making those quarterly comparisons.

One thing that you rarely hear anymore when earnings are being reported is the phrase “clean number.” There are just so many adjustments from quarter to quarter that investors are often left to shoot blindly when earnings are released, so it’s no wonder why you so often see incredibly wild gyrations immediately after the earnings are released, although they are also accentuated by the low trading volume seen in the after hours or prior to the market’s opening.

Maybe there should simply be a freeze on trading from the time earnings are reported to the end of the conference call.

Right. As if that’s ever going to happen, as gambling is still a big part of “investing” and there are many who play for the big moves and very quickly take profits or cut losses, if they can find someone on the other side of the trade,

This morning looked like another relatively quiet one, although the futures had been slowly working their way higher, especially the DJIA which is getting a very big pop from McDonalds as its earnings have surprised everyone and its shares are taking their single biggest one day move that I can ever recall.

The rest of the market did take note, but most of the credit was given to the ECB, when Mario Draghi gave reason to believe that another round of Quantitative Easing was in the works.

That may have had some applicability to our own markets up until 4 PM today. Up until that time, with no really consistently positive news coming from earnings, there didn’t appear to be anything to convince the FOMC that this was the time for them to raise rates next week.

Some of this afternoon’s earnings, though, may be the first series of numbers to paint a different picture of things.

The FOMC members are no doubt paying attention and they have no doubt listened to the views of overseas central banks and the IMF. Now all they have to do is balance the opinions of opposing sides with the data.

While there was no real reason for partying this
week, the party was pronounced.

Initially I thought that there was going to be plenty of reason to party next week in anticipation of free and easy money policy continuing, even though the anticipated rate increase would still leave us in the same kind of environment.

Now I’m less certain of there being reason to drive prices up even more. That may be bordering on being reckless.

But until then the rest of this week will still likely be just sitting back and seeing what opportunities may present themselves or get taken away, with regard to those positions expiring this week. After having opened 3 new positions and with only a single position expiring next week, I’d like to have some opportunity to raise cash through assignments in order to create new positions next week and keep the income generating cycle moving forward.

Daily Market Update – October 22,  2015  (8:30 AM)

The earnings keep coming as this week and next are traditonally the busiest ones for earnings of the DJIA members and key S&P 500 players.

For the most part the results have been pretty underwhelming with the same tired story of companies reporting beats on earnings, but having missed on revenues.

I still don’t quite understand what investors get so hung up on the EPS metric, especially when it is so easily manipulated, as has been the case for the past couple of years with an avalanche of stock buy backs.

There has to be some better way of comparing relative performance from one time period to the next and to your peers.

More importantly, there has to be some measure that’s less easy to bend through the use of investor’s cash that’s sitting in the corporate bank vault.

Granted, there are always different accounting tools that can be used to accentiate certain aspects of both items in the assets and liabilities columns, but there should be some replicable measure that simply looks at operating revenues and operating expenses that strips out all of the fudge factors that creep in to those numbers.

That’s too easy and makes management too accountable for performance, so that will never happen. Part of it is also due to the IRS code that allows for periodic manipulation and difficulty in making those quarterly comparisons.

One thing that you rarely hear anymore when earnings are being reported is the phrase “clean number.” There are just so many adjustments from quarter to quarter that investors are often left to shoot blindly when earnings are released, so it’s no wonder why you so often see incredibly wild gyrations immediately after the earnings are released, although they are also accentuated by the low trading volume seen in the after hours or prior to the market’s opening.

Maybe there should simply be a freeze on trading from the time earnings are reported to the end of the conference call.

Right. As if that’s ever going to happen, as gambling is still a big part of “investing” and there are many who play for the big moves and very quickly take profits or cut losses, if they can find someone on theother side of the trade,

This morning looks like another relatively quiet one, although the futures have been slowly working their way higher, especially the DJIA which is getting a very big pop from McDonalds as its earnings have surprised everyone and its shares are taking their single biggest one day move that I can ever recall.

With no really consistently positive news coming from earnings, there doesn’t appear to be anything to convince the FOMC that this is the time for them to raise rates next week.

They are no doubt paying attention and they have no doubt listened to the views of overseas central banks and the IMF.

While there may be no partying this week on the floors of the stock exchanges, that may change next week in anticipation of free and easy money policy continuing, even though the anticipated rate increase would still leave us in the same kind of environment.

But until then the rest of this week will likely be just sitting back and seeing what opportunities may present themselves or get taken away, with regard to those positions expiring this week. After having opened 3 new positions and with only a single position expiring next week, I’d like to have some opportunity to raise cash through assignments in order to create new positions next week and keep the income generating cycle moving forward.

Daily Market Update – October 21,  2015  (Close)

The earnings are continuing to flow in this morning and there’s still not much reason to pout or to be overjoyed, as far as the broader market goes.

There is a pattern and it is continuing the same one that we’ve seen the past couple of quarters as companies are beating earnings on a per share basis, but still falling short on revenues, due to currency exchange.

Bad winters and currency exchange have been the predominant themes of the past couple of years as this recovery has been moving forward at a glacial pace and even those who remember the 70s and early 80s would welcome some cause for an interest rate increase.

Meanwhile, those positive earnings statistics may be getting ready to complete their run as all of that money for stock buybacks is beginning to run dry. Caterpillar and IBM weren’t alone in buying back their shares at their price peaks, as so many companies have decided that there’s no reason for them to use their money to expand when there’s no foreseeable increase in the businesses.

You really can’t blame a CEO for wanting to go along for that rocket ride higher, especially when their own contract may offer incentives that are closely tied to share performance and simply using all of that spare cash to buyback shares instead of doing something constructive with it.

As a shareholder, I’d much rather get a dividend increase or even a special dividend, than to see money being spent on something that really has no value and creates nothing of real value, all in the name of share price optics.

So what if that performance may be fueled by using other people’s money and doing so without regard to value?

But sooner or later those quarter to quarter comparisons aren’t going to be looking so good, unless there’s a real increase in revenue.

After a long period of driving earnings per share by cost reductions and share buybacks, there’s not much left, other than actual performance.

While there are lots of earnings still to be reported this week, the market seems to be basically yawning. The real actions is in take over stories and the rest of the market is simply waiting for next week’s FOMC meeting.

Today was another day of yawning, although there were some big stories and some big moves. It’s just that the rest of the market wasn’t too interested.

The really important earnings may be those from the retail sector, but they won’t come until after the FOMC decides what to do about interest rates.

It’s looking more and more that the pleas from The IMF and the ECB for our Federal Reserve to delay a rate hike until 2016 may become the case, as there doesn’t appear to be too much suggesting that things are heating up more than can be handled.

As I mentioned yesterday, I think that the days before next week’s FOMC meeting may again be greeted by enthusiastic buying as traders acknowledge the continuing gift of low interest rates.

Of course, if that’s going to be the case, we might as well expect that when interest rates do finally look as if they’re going to be increased, traders will do what they did before and go into some sort of a panic, even though the new interest rates will still be among the lowest we’ve ever seen.

As long as you don’t apply logic to anything, it all makes lots of sense.

Daily Market Update – October 21,  2015  (8:45 AM)

The earnings are continuing to flow in this morning and there’s still not much reason to pout or to be overjoyed, as far as the broader market goes.

There is a pattern and it is continuing the same one that we’ve seen the past couple of quarters as companies are beating earnings on a per share basis, but still falling short on revenues, due to currency exchange.

Bad winters and currency exchange have been the predominant themes of the past couple of years as this recovery has been moving forward at a glacial pace and even those who remember the 70s and early 80s would welcome some cause for an interest rate increase.

Meanwhile, those positive earnings statistics may be getting ready to complete their run as all of that money for stock buybacks is beginning to run dry. Caterpillar and IBM weren’t alone in buying back their shares at their price peaks, as so many companies have decided that there’s no reason for them to use their money to expand when there’s no foreseeable increase in the businesses.

You really can’t blame a CEO for wanting to go along for that rocket ride higher, especially when their own contract may offer incentives that are closely tied to share performance and simply using all of that spare cash to buyback shares instead of doing something constructive with it.

AS a shareholder, I’d much rather get a dividend increase or even a special dividend, than to see money being spent on something that really has no value and creates nothing of real value, all in the name of share price optics.

So what if that performance may be fueled by using other people’s money and doing so without regard to value?

But sooner or later those quarter to quarter comparisons aren’t going to be looking so good, unless there’s a real increase in revenue.

After a long period of driving earnings per share by cost reductions and share buybacks, there’s not much left, other than actual performance.

While there are lots of earnings still to be reported this week, the market seems to be basically yawning. The real actions is in take over stories and the rest of the market is simply waiting for next week’s FOMC meeting.

The really important earnings may be those from the retail sector, but they won’t come until after the FOMC decides what to do about interest rates.

It’s looking more and more that the pleas from The IMF and the ECB for our Federal Reserve to delay a rate hike until 2016 may become the case, as there doesn’t appear to be too much suggesting that things are heating up more than can be handled.

As I mentioned yesterday, I think that the days before next week’s FOMC meeting may again be greeted by enthusiastic buying as traders acknowledge the continuing gift of low interest rates.

Of course, if that’s going to be the case, we might as well expect that when interest rates do finally look as if they’re going to be increased, traders will do what they did before and go into some sort of a panic, even though the new interest rates will still be among the lowest we’ve ever seen.

As long as you don’t apply logic to anything, it all makes lots of sense.

Daily Market Update – October 20,  2015  (Close)

The earnings were flowing in as the morning was ready to begin, but the biggest news and the biggest moves wee coming from companies with news unrelated to earnings. When stock prices are low corporate opportunists and activists take center stage and companies take actions that they probably should have taken before the barrel was placed against their head.

As far as the earnings go, so far they haven’t been terribly exciting and they haven’t had too much impact on the market. Companies are still attempting to mitigate bad news with announcements of share buybacks, but that’s having less and less impact, even as buybacks make much more sense at lower share prices and should be more applauded by investors now than when being undertaken at record highs.

This morning was shaping up no differently and the excitement level is hard to find, as there is no pattern developing in the health, quality and forward looking nature of earnings being reported.

What does appear to be a continuing pattern is that the market is punishing unexpected bad news much more than it is rewarding unexpected good news.

With the FOMC getting ready to meet next week the days are dwindling to just a handful remaining for any meaningful economic data to be released that could reasonably be expected to lead to an FOMC decision to raise interest rates.

Given the way in which the market turned around its thinking and again decided that a delay in that rate hike was a good thing, I would imagine that as we draw closer to the FOMC meeting we could expect another in a series of higher moving days.

As long as there’s no overwhelmingly negative picture being painted by corporate earnings that next move higher may be coming. Ironically, even a sad earnings picture may end up being a good thing as far as minimizing the likelihood of a rate increase, so traders may actually be indifferent to earnings this time around.

That may explain the relatively listless trading of the past week.

I was happy to find some potential investment opportunities yesterday and now wouldn’t mind if that listlessness continued in order to have a better chance at seeing those positions either get assigned or be in position for rollovers.

With what has become the new normal for new positions opened in a week, maybe even a little bit higher than the new normal, I don’t expect to part with much more cash for the week. However, every time that I think that’s going to be the case it seems that something pops up to change my mind. Despite the market having impressively recovered most of the large correction since the end of August, there still appear to be opportunities. I don’t have too much free cash to explore those opportunities, but as I’ve done for the past few months, I don’t mind borrowing from myself with the intention of a quick repayment of those loans.

So far, that short term horizon has been working out since the market took its plunge some two months ago.

With only one position expiring next week, I’d like to see more assignments than rollovers, but either would be just fine. In fact, the one position expiring next week is one that I’ve been trying to rollover for the past week and am hopeful that I can still keep that trade alive, as it has been a classic revenue machine despite having had very little net movement in share price.

That trade didn’t end up going today, either.

Otherwise, this week, just as has been the case for the past month or so, has been dictated by energy and materials. Thus far, the past few days have been negative in those sectors, but as also has been the case over the past few months, that’s bound to change and then change again and again.