"Investors will recall that 'q' is defined as the ratio of the market value of a firm to the replacement cost of its assets; in this case we are estimating those figures for the entire industry. According to Nobel Laureate James Tobin, the ratio of total stock market value to the stock market’s net worth (corporate net worth) is a reliable indicator of market valuation. When the stock market trades at a ‘discount’ to the replacement cost of its assets, the market is inexpensive, or cheaper to buy than build. This discount possesses 'q' ratios that are less than 1.0. Conversely, when 'q' exceeds 1.0, the market trades at a premium to its replacement cost. The run-up from 1996-2000 had 'q' approaching the unthinkable value of 2.0. The most recent (QII 2009) level of 0.78 is notably higher than the 0.65 posting in the first quarter, which was the lowest since QIV 1990."
Wednesday, September 30, 2009
Tuesday, September 29, 2009
Monday, September 28, 2009
- Michael Hartnett, Chief Global Equity Strategist at BAS-Merrill Lynch
- David Winter, portfolio manager of the Wintergreen Funds
- Whitney Tilson of the Tilson Mutual Funds
- investor need to look more towards individual companies when selecting investments. In short, the easy money has been made with the market rise off of the March lows.
- the interview quests suggest investors should look at the emerging markets for future growth opportunities.
More videos can be found at WealthTrack's video archive site.
Sunday, September 27, 2009
Friday, September 25, 2009
Thursday, September 24, 2009
Tuesday, September 22, 2009
Monday, September 21, 2009
A few technical thoughts on the above chart.
- Over 92% of stocks are trading above their 50-day moving average (see white circles at top of chart). The same can be said for the 200-day moving average. This type of chart pattern played out in the April/May period earlier this year. However, the April/May period was one where we saw increasingly lower volume. Today, we are seeing this high moving average percentage, but it is occurring on increasingly higher volume.
- In addition to the high percentage of individual stocks trading above their 50 and 200 day moving averages, the S&P 500 Index is significantly above its 200 day moving average. Bespoke Investment Group notes the S&P is trading 20% above its 200-day moving average and this has not occurred since May of 1983.
- From a valuation perspective, the market does not seem over or undervalued. The below chart is the P/E of the S&P 500 Index using average inflation adjusted earnings from the past ten years.
(data courtesy Robert Shiller, Yale Dept. of Economics)
- The MACD, both the slow and fast moving average lines are in a downtrend. This could signal market weakness in the near term. Offsetting this concern is the market's recent move higher has occurred on higher volume.
- It is positive to see higher volume, but this past week was a quadruple option expiration one. This expiration day likely influenced the volume for the week. Also, higher volume could be an indication of capitulation buying by investors that have felt left behind given their high cash levels. Volume in the 8 billion range would be more of the capitulation concern and recent weeks have seen volume below 6 billion.
- Are some market strategist that were once bearish now turning bullish? James Grant, editor of Grant's Interest Rate Observer, wrote an article in Saturday's Wall Street Journal titled, From Bear to Bull. He notes in the opening paragraphs of the article:
"As if they really knew, leading economists predict that recovery from our Great Recession will be plodding, gray and jobless. But they don't know, and can't. The future is unfathomable.
Not famously a glass half-full kind of fellow (emphasis added), I am about to propose that the recovery will be a bit of a barn burner. Not that I can really know, either, the future being what it is. However, though I can't predict, I can guess. No, not "guess." Let us say infer."
Thursday, September 17, 2009
The forward six month return from March 19, 2009, which was near the low for the bullish sentiment reading in this cycle, has now begun to turn lower. With this week's reading of 42+%, could the market be approaching a topping out level if we anticipate future six month returns? From a pure technical perspective, the bullishness reading is not at an extreme, but a cautious investment approach is probably warranted at this time.
Tuesday, September 15, 2009
The top five companies in terms of buybacks are:
- Exxon Mobil (XOM) at $5.246 billion
- Wal-Mart Stores (WMT) at $1.906 billion
- Intern'l Business Machines (IBM) at $1.671 billion
- Philip Morris (PM) at $1,474 billion
- Hewlett-Packard (HPQ) at $.999 billion
S&P 500 Stock Buybacks Hit Record Low (PDF)
Standard & Poor's
By: Howard Silverblatt & David R. Guarino
September 15, 2009
Disclosure: Long interest in XOM, WMT, IBM, PM
Saturday, September 12, 2009
Earlier this week it was reported that consumer credit outstanding fell at an annualized rate of over 10%. This represents a $21 billion drop consumer credit outstanding.
In addition to consumers paying off more of their outstanding debt with their free cash flow, they are saving more on their income on a percentage basis as well. This was highlighted in an earlier post at EconomPic.
Friday, September 11, 2009
This week's sentiment survey by the American Association of Individual Investors shows bullish sentiment remains essentially unchanged from the prior week at 37.33%. This compares to the long term average of the bullish sentiment reading of 39%. The bearishness level did increase to 44% versus last week's bearishness level of 37.97%. The net result is the bull/bear spread came in at -6.67% versus last week's spread of 0%. As the below chart notes, the market advance has been significant since the bullishness level hit 25.32% in early March.
Sunday, September 06, 2009
Dividend actions for the S&P 500 Index through August are anything but overly positive. As the below chart notes, positive actions YTD are down almost 50% from the eight month period in 2008. Equally concerning is negative actions are up over 173% for the period January through August of this year.
Data Source: Standard & Poors Market Attributes Snapshot (PDF)
Tuesday, September 01, 2009
The sector returns as well as dividend actions by sector are detailed in the below chart.