tag:blogger.com,1999:blog-367220432012-01-31T21:33:31.110-05:00A Disciplined Approach to InvestingDavid Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.comBlogger12361100tag:blogger.com,1999:blog-36722043.post-30845100175914567532012-01-29T11:24:00.002-05:002012-01-29T12:15:04.770-05:00<div style="text-align: justify;">In a recent research report by <a href="http://thomsonreuters.com/products_services/financial/">Thomson Reuters</a> they note that a company's stock buyback activity generally does not add value subsequent to the buyback. A reason cited is the fact companies generally have more cash on hand in good economic environments and this tends to be after the stock price has already reflected a more positive operating environment. The report concluded:<br /><blockquote style="color: rgb(51, 102, 102);">"...most companies in the S&amp;P 500 index have not been successful in adding value through stock buybacks in the time frames we observed. The positive correlation between buyback activity and price suggests a combination of poor market timing as well as policies that increase repurchases when firms have more free cash flow. This may be partially explained by the need for officers of public companies to make some use of the cash on hand, including keeping less of it due to the possibility of being taken over. The negative correlation between repurchases and forward returns shows that most buybacks did not pay off within the year after purchase."</blockquote>Even for the market (<a href="http://investing.money.msn.com/investments/market-index?symbol=%24INX&amp;ocid=qbe">S&amp;P 500 Index</a>) overall, the increased buyback activity occurs at ever increasing price levels.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/RurVbHWG4uZOhBFfRsvgc-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-ihAGfAq3Dt0/TyVi8I6HxiI/AAAAAAAAGS4/evDxk_Faagw/s800/buybacks%2520thru%2520Q3%25202011.PNG" width="499" height="399" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />One interesting aspect of the buyback activity at this point in time is it does seem to be at a sufficient level that it makes up for the lack of investor fund flows into equity mutual funds. As the below chart notes, cumulative outflows in equity mutual funds is running at a little over $400 billion dollars since 2006. Buybacks over that same time period total approximately <a href="http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3D20111221_500_Buyback-PR.pdf&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fpdf&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1244045289630&amp;blobheadervalue3=UTF-8">$2.1 trillion through the 3rd quarter of 2011 as reported by Standard &amp; Poor's (PDF)</a>.<br /><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/2HRqWKwJWUSlq5C7bdXrzu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-o8CjRLNUTXE/TyVtQlASwPI/AAAAAAAAGTQ/mKTGFXoJ4iU/s800/fund%2520flows%25202011.PNG" width="516" height="339" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">A few companies were highlighted in the Thomson report as having timed their buybacks successfully. One example is St. Jude Medical (<a href="http://investing.money.msn.com/investments/company-report?symbol=stj">STJ</a>). As the below chart shows, the company tended to successfully execute its buyback on dips in the company's stock price.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/AAeKatiJXQ53YkbL3hVkx-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-iusweqZdNxc/TyVi71Jrn6I/AAAAAAAAGSs/1tHwCKAadu0/s800/stj%2520buybacks.PNG" width="558" height="431" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><br /><div style="text-align: justify;">On the other hand, Exxon Mobil's (<a href="http://investing.money.msn.com/investments/company-report?symbol=xom">XOM</a>) buyback timing seems to occur after the company's stock price has rallied.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/82vKU4esbHB4Xb5MIBo7ge0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-THE-nX8ffi4/TyVi7uL_CrI/AAAAAAAAGSo/zwzKRty8EBU/s800/xom%2520buybacks%25202011.PNG" width="517" height="413" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">For investors then, buybacks tend not to be a good predictor of future stock price performance. We have written several <a href="http://disciplinedinvesting.blogspot.com/2008/04/best-buy-increases-earnings-per-share.html">posts in the past about some of the pitfalls in company stock buyback programs</a>. Ideally, investors should focus on a company's dividend practices. When a company increases its dividend, it is making a long term commitment of its future cash flow; hence, a more significant statement about future earnings prospects.<br /><br /><span style="font-size:85%;"><span style="font-style: italic;">Disclosure: Long XOM and no position in STJ</span></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3084510017591456753?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-89192122764052530362012-01-27T08:37:00.001-05:002012-01-27T08:39:50.949-05:00<div style="text-align: justify;">Fortunately for investors, the calendar has turned to a new year and 2012 has gotten off to a strong start in January. As our <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=4l9uasvCHTc%3d&amp;tabid=364">4th Quarter Investor Letter</a> notes, 2011 was a flat but volatile year for the market (<a href="http://finance.yahoo.com/q?s=%5EGSPC">S&amp;P 500 Index</a>); however, as of 12/31/2011, the 3-year annualized return for the S&amp;P is 14%. Not bad for a 3-year time period. The disparity in valuations between stocks and bonds is near record levels as we discuss in our Investor Letter.<br /><br />The Letter can be accessed directly from <a href="http://www.horancapitaladvisors.com">our website</a> at the following link: <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=4l9uasvCHTc%3d&amp;tabid=364">4th Quarter 2011 Investor Letter</a><br /><br />We hope you find the content of our letter insightful as we look to 2012.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8919212276405253036?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-1201530039397915972012-01-15T22:00:00.000-05:002012-01-15T22:00:57.553-05:00<div style="text-align: justify;">Approximately two years ago Carmen M. Reinhart and Kenneth S. Rogoff completed a comprehensive study, “<a href="http://www.economics.harvard.edu/files/faculty/51_Growth_in_Time_Debt.pdf">Growth in a Time of Debt</a>”, which looked at public debt levels around the globe and the resultant impact on economic growth for the respective economies. The study noted the historical consequences of various debt levels relative to an economy's GDP growth with the impact of increasing public debt levels on a country's economy being different for emerging and developed economies. The study authors concluded economic growth does tend to suffer significantly when a country's debt to GDP level exceeds 90%. For some emerging economies, debt to GDP levels over 70% begin to constrain growth. In the U.S. public debt to GDP is now over 90%.</div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/l2jZcxSp9hlhSdpSvxfc5e0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-lU21VkbELTg/TxN8uSBbD6I/AAAAAAAAGRg/FzhyWiqqoMQ/s800/debt%252520gdp%252520growth.PNG" height="371" width="499" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />Reinhart and Rogoff noted in their study:<br /><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>"The simplest connection between public debt and growth is suggested by Robert Barro (1979). Assuming taxes ultimately need to be raised to achieve debt sustainability, the distortionary impact imply is likely to lower potential output. Of course, governments can also tighten by reducing spending, which can also be contractionary. As for inflation, an obvious connection stems from the fact that unanticipated high inflation can reduce the real cost of servicing the debt. Of course, the efficacy of the inflation channel is quite sensitive to the maturity structure of the debt. Whereas long-term nominal government debt is extremely vulnerable to inflation, short term debt is far less so. Any government that attempts to inflate away the real value of short term debt will soon find itself paying much higher interest rates...<br /><br />...In principle, the manner in which debt builds up can be important. For example, war debts are arguably less problematic for future growth and inflation than large debts that are accumulated in peace time. Postwar growth tends to be high as war-time allocation of manpower and resources funnels to the civilian economy. Moreover, high war-time government spending, typically the cause of the debt buildup, comes to a natural close as peace returns. In contrast, a peacetime debt explosion often reflects unstable underlying political economy dynamics that can persist for very long periods."</blockquote></div><div style="text-align: justify;">Finally, as the below chart shows, debt levels in Europe (emerging and developed) and the U.S., have seen significant growth since just 2003.<br /><br /></div><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/uNxdm5o9tqe0G2G-TBfyNu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-cyhIhLTrHDM/TxN8uesHTDI/AAAAAAAAGRk/qrcXabEHshs/s800/debt%252520gdp%25252020032009.PNG" height="520" width="511" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">An important outcome of these higher debt levels will be how each country decides to reduce its dependence on debt (balance governmental budgets), while at the same time not implementing policies that constrain private sector growth.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-120153003939791597?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-55544597333418402152012-01-15T13:50:00.001-05:002012-01-15T13:53:03.221-05:00<div style="text-align: justify;">From time to time questions arise about using leveraged ETFs in one's portfolio strategy. We caution longer term oriented investors to not use these type of ETF investments. For example, if an investor believes the market will rise in the near term, why not consider a two or three times ultra bull ETF. In this case an investor would expect the ETF to generated two or three times the return of the underlying index. Well, for an investor, it is not that simply due to how the math calculation works. Let's look a 2x's ultra long or bullish ETF example.<br /></div><ul style="text-align: justify;"><li>Lets assume at the beginning of day 1 an index is trading at $100. At the end of the day the index closes at $90 or down 10%. The leveraged ETF would close at $80 or down 20%.</li><li>On day 2 the index rises to $99 or up 10%. The 2x's leveraged ETF would increase to $96, that is $80 * 1.20=$96.</li><li>Over the two day period though the index is down 1% while the leverage ETF is actually down 4% or four times worse than the index return versus the expected two times worse return.<br /></li></ul><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/PK0mJCIoDMxr_EwgxolDM-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-BUrnEn0DX94/TxMfgqRy7OI/AAAAAAAAGRE/x1Xma_gGakE/s800/leveraged%252520ETF.PNG" width="343" height="170" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">One problem with many of these leverage ETFs is they reset daily and individual investors generally do not rebalance their portfolios on a daily basis. So as one can see, the performance of these ETFs over a period longer than one day can differ significantly from their stated daily performance objectives. More on this topic can be found on the SEC's web site in an article they wrote titled, <a href="http://www.sec.gov/investor/pubs/leveragedetfs-alert.htm">Leveraged and Inverse ETFs: Specialized Products with Extra Risks for Buy-and-Hold Investors</a>.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5554459733341840215?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-46827357892768271922012-01-07T09:47:00.001-05:002012-01-07T09:48:03.238-05:00<div style="text-align: justify;">The recent <a href="http://wealthtrack.com/">WealthTrack</a> interview conducted by Consuelo Mack features Ed Hyman, Chairman and Founder of ISI Group, and Bob Doll of BlackRock. Ed Hyman has been rated the #1 economist by Institutional Investor for 32 years running. Both strategist see the U.S. as the best house in a bad neighborhood for investors. Hyman notes the US economic data has been better, but not great, every week for the past three months. For more on their insights for 2012, readers can view the below video.<br /></div><br /><center><iframe src="http://blip.tv/play/AYLmnSYC.html?p=1" allowfullscreen="" frameborder="0" height="332" width="550"></iframe><embed type="application/x-shockwave-flash" src="http://a.blip.tv/api.swf#AYLmnSYC" style="display:none"></embed></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-4682735789276827192?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-29979434906809190702012-01-02T23:09:00.000-05:002012-01-02T23:10:05.594-05:00<div style="text-align: justify;">The equity risk premium recently reached levels last seen at the height of the financial crisis in 2008. The high risk premium level suggests equities are attractive at this point in the market cycle. One key is whether corporate earnings can continue to make new record highs in 2012. Earnings growth is expected albeit at a slower rate than achieved in 2011. Given the level of stock buybacks and more importantly, company dividend increases, it seems equities could do well looking forward. The buyback and dividend actions by companies provide some level of favorable insight into company earnings expectations. As is typically the case, unforeseen events can derail a favorable market environment. The known risks are numerous and will continue to result in somewhat volatile price action (sovereign debt issues, political rhetoric in the U.S., dealing with the U.S. budget deficit and debt levels, just to name a few), but our forecast suggests equity prices should end 2012 higher.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/FsM1Pi1pxFrrjJnhN2EeZ-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-quWgfonhcuo/TwJ535-69rI/AAAAAAAAGQk/waa8TuBYM-U/s800/risk%252520prem%252520sp%252520pe.PNG" height="359" width="543" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2997943490680919070?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-61357081905840918362012-01-01T16:29:00.000-05:002012-01-01T16:29:35.477-05:00<div style="text-align: justify;">The Dogs of the Dow in 2011 significantly outperformed the <a href="http://finance.yahoo.com/q?s=%5Edji">Dow Jones Industrial Average Index</a> (DJIA) and the S&amp;P 500 Index on a price only basis in 2011. The Dow Dogs returned 12.2% versus the DJIA return of 5.5%. The <a href="http://finance.yahoo.com/q?s=%5Egspc">S&amp;P 500 Index</a> was essentially flat on the year.<br /><br />The Dow Dog strategy consists of selecting the ten stocks that have the highest dividend yield from the stocks in the Dow Jones Industrial Index (DJIA) after the close of business on the last trading day of the year. Once the ten stocks are determined, an investor would invest an equal dollar amount in each of the ten stocks and hold them for a year. The strategy has generated <a href="http://www.dogsofthedow.com/dogyrs.htm">mixed results over the years</a>.<br /><br />The Dogs of the Dow for 2012 have two new additions, Procter &amp; Gamble (<a href="http://finance.yahoo.com/q?s=PG">PG</a>) and Kraft (<a href="http://finance.yahoo.com/q?s=KFT">KFT</a>). The two stocks eliminated from the Dow Dogs are Chevron (<a href="http://finance.yahoo.com/q?s=CVX">CVX</a>) and McDonald's (<a href="http://finance.yahoo.com/q?s=MCD">MCD</a>). Below is a list of the Dogs of the Dow for 2012.<br /></div><br /><center><iframe src="https://docs.google.com/spreadsheet/pub?key=0ApEoA4TOB4wPdHlZX3h3VTBrSUsxbkNnT3VxNlV3d0E&amp;single=true&amp;gid=0&amp;output=html&amp;widget=true" frameborder="0" height="300" width="500"></iframe></center><div style="text-align: center;"><a href="https://docs.google.com/spreadsheet/ccc?key=0ApEoA4TOB4wPdHlZX3h3VTBrSUsxbkNnT3VxNlV3d0E">Full View</a><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6135708190584091836?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-37403210204866618352011-12-31T12:37:00.000-05:002011-12-31T12:38:10.932-05:00<div style="text-align: justify;">During moderate periods of inflation, equities tend to generate decent performance results. I posted the below chart in a post, <a href="http://disciplinedinvesting.blogspot.com/2010/06/where-to-invest-in-inflationary.html">Where To Invest In An Inflationary Environment</a>, in mid 2010 that details the performance of various investment categories based on different inflation ranges going back to 1972.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/HhwBV4tNwVwywF5NIR6bNu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-n48Gak9hdis/TB5q4w8USQI/AAAAAAAAFB8/SzRRIyNptt4/s800/cpi%252520asset%252520class%252520performance%2525206%2525202010.PNG" width="548" height="279" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Since mid year 2010 inflation has been trending higher with the latest year over year report showing inflation running at nearly 3.5%.<br /></div><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/QHN3ND9RYEx075m3GQ-hnO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-rKzenP0gzBE/Tv9FP91zcnI/AAAAAAAAGQI/WVjHiQA_hRI/s800/cpi%25252012%2525202011.PNG" width="448" height="346" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The blog at Crossing Wall Street selected the below chart as the <a href="http://www.crossingwallstreet.com/archives/2011/12/chart-of-the-year.html">Overlooked Chart of the Year</a>. The chart compares the S&amp;P 500 Index to the market’s expectation for inflation (the 10-year TIP spread). Of late, there has certainly been a high correlation to higher inflation expectations and the S&amp;P 500 Index return.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/RUTSsaPE_EnUycYftXK9Au0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-gFDlmFDp_Jo/Tv9FP-wz1VI/AAAAAAAAGQE/ixxvgf6xwJo/s800/sp%252520and%252520infl%252520expec.PNG" width="628" height="376" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Determining the true level of inflation is also a frequent topic. The Shadow Government Statistics (SGS) site makes an effort to track data on indexes when the calculation methodology is changed. In 1990, the CPI calculation was changed and a <a href="http://www.shadowstats.com/alternate_data/inflation-charts">comparison of the current CPI versus the 1990-based calculation</a> can be found on the SGS site.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3740321020486661835?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-60077601343655334302011-12-30T16:44:00.000-05:002011-12-30T16:45:46.373-05:00<div style="text-align: justify;">With the close of trading today, following is a quick look at the 2011 price performance of a few select equity markets around the globe.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/y3ChKaN_Klm2J1vUNBsik-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-ePcVCfVrHhE/Tv4vpeQLBcI/AAAAAAAAGPs/XJCeFbnV2UY/s800/2011%252520performance.PNG" width="421" height="444" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://www.reuters.com/article/2011/12/30/us-markets-stocks-idUSTRE7AO0B420111230">Reuters</a></span></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6007760134365533430?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-65974236076013904542011-12-26T21:02:00.000-05:002011-12-26T21:02:50.633-05:00<div style="text-align: justify;">The investment mantra this year has been to focus on dividend paying stocks. Over the long run, payers have had a tendency to outperform the non payers and this has certainly been the case this year. On the other hand though, valuations do matter and the below chart provides investors with a cautionary view of simply buying "any" investment that has yield.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/bGC3PsR4sb_1w-T7rg9t4O0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-zz8E_7GkHuA/TvkmJXqX9RI/AAAAAAAAGPU/wAnNhB-YBzk/s800/valuaiton%252520payers.PNG" height="300" width="634" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: </span><a style="font-style: italic;" href="http://www.southofwallstreet.com/">South of Wall Street</a></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6597423607601390454?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-33809031695551700412011-12-17T17:42:00.000-05:002011-12-17T17:42:00.988-05:00<div style="text-align: justify;">Recent mutual fund flow data shows investors continue to favor bonds over equities.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/35SvlidRrwQBgykTNbm0qu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-ywYfIC07nHc/Tu0Smm4NQtI/AAAAAAAAGO0/lpovV3QnGTE/s800/fund%252520flow%25252012%2525202011.PNG" height="381" width="508" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/2yl2uUnmoo_jas8Hx_snxO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-gbOLM_F_MyU/Tu0SoFKWLvI/AAAAAAAAGO8/R6KsFKGuUy4/s800/fund%252520flows%25252012%2525207%2525202011.PNG" height="270" width="602" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://www.ici.org/research/stats/flows/flows_12_14_11">ICI</a></span></span><br /></div><div style="text-align: justify;">With the sovereign debt issues in Europe top of mind for investors, they continue to bet the best of the worst fixed income investments are U.S. Treasuries. One risk investors face with fixed income investments is the negative impact of a rise in rates. The 10-year U.S. Treasury yield is a meager 1.85% in spite of the fact the consumer price index is running at a <a href="http://www.bls.gov/news.release/pdf/cpi.pdf">year over year rate of 3.4%</a>. Investors are in for a rude awakening when rates do begin to move higher (bond prices have an inverse relationship to the move in interest rates).<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/4oqbeESnbXUpliyeWKlceO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-R00ooGdIBoQ/Tu0Sl8ctacI/AAAAAAAAGOs/YMtDuEBYJWg/s800/cpi%25252010%252520year%252520treasury.PNG" height="376" width="475" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3380903169555170041?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-32617211167370009942011-12-15T10:08:00.000-05:002011-12-15T10:08:33.579-05:00The improvement in the unemployment rate earlier this month was certainly positive on the surface. The rate declined to 8.6% from the previously reported 9%. The improvement though came largely from the 300,000 individuals that simply stopped looking for a job. As a result, these additional people are not counted among the unemployed. As the below chart shows, the number individuals not in the labor continues to rise.<br /><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/KId_qj2G9tUdWD8CYl7Q9-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-kjYauLXS8j4/TuoMjHMqaPI/AAAAAAAAGN0/01pgVf3Wkm4/s800/not%252520in%252520labor%252520force.PNG" width="457" height="343" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />This fragile state of the consumer also shows up in the number of individuals on food stamps.<br /><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/0pwGQjy08pfbjpGlZokXDO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-k6RVn0UJM80/TuoMjABNqrI/AAAAAAAAGNw/QaHYho_LuNQ/s800/snap.PNG" width="481" height="317" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3261721116737000994?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-13268292756993614082011-12-11T18:13:00.002-05:002011-12-11T19:20:58.015-05:00<div style="text-align: justify;">Going forward <a href="http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3D20111201_DividendAristocrat-Methodology-Change.pdf&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fpdf&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1244032406584&amp;blobheadervalue3=UTF-8">S&amp;P has changed the methodology</a> on how they determine which companies qualify as Dividend Aristocrats. S&amp;P notes they will only count regular dividend payments when determining the calendar year total dividend payments of a company. Special cash dividends will no longer be considered.<br /><br />The table below contains a list of Standard &amp; Poor's Dividend Aristocrats for 2012. The rebalance will take place at the market's close on December 16, 2011. The green highlighted companies are the additions and the yellow highlighted company is the deletion. S&amp;P has added ten new Aristocrats while eliminating one, CenturyLink, Inc.<br /></div><br /><center><iframe src="https://docs.google.com/spreadsheet/pub?hl=en_US&amp;hl=en_US&amp;key=0ApEoA4TOB4wPdGJFeHEyc3RIWlBlZnl1TnMzUUk1Nmc&amp;single=true&amp;gid=0&amp;output=html&amp;widget=true" frameborder="0" height="300" width="500"></iframe></center><div style="text-align: center;"><a href="https://docs.google.com/spreadsheet/ccc?key=0ApEoA4TOB4wPdGJFeHEyc3RIWlBlZnl1TnMzUUk1Nmc">Full View</a><br /></div><br /><div style="text-align: justify;"><a href="http://blogs.barrons.com/incomeinvesting/2011/12/07/att-colgate-medtronic-join-dividend-aristocrats/">Barron's Income Investing Blog</a> highlights some year to date dividend comments from Howard Silverblatt, Senior Index Analyst for S&amp;P:<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote><ul><li>Year-to-date (YTD) dividend payers in the S&amp;P 500 have returned 1.72%, compared to the non-payers loss of 4.63%.</li></ul><ul><li>The actual dividend payment YTD is up 16.2%.</li></ul><ul><li>The indicated dividend rate (based on the current rate) is up 16.8% YTD, but still off 4.9% from the June 2008 high.</li></ul><ul><li>From 1995 the S&amp;P 500 indicated dividend yield has averaged 43% of the U.S. 10-year Treasury note, the current rate is 105%.</li></ul><ul><li>215 issues have a current yield higher than the 10-year Treasury.</li></ul></blockquote></div><br /><br /><span style="font-style: italic;font-size:85%;" >Disclosure: Long ABT, APD, ADP, BDX, CTL, CB, BEN, GPC, ITW, JNJ, LOW, MCD, NUE, PG, WMT</span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1326829275699361408?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-34239035731338604552011-12-11T15:50:00.000-05:002011-12-11T15:51:03.233-05:00<div style="text-align: justify;">Much of the rhetoric coming out of Washington is focused on the need for more revenue, specifically from individual tax payers. The millionaire tax discussion is emblematic of this focus. As the below chart shows though, individual tax receipts into the U.S. Treasury are up 22% on a year over year basis through the end of September with overall receipts up nearly 7%.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/bGxHrSXBoeLJuazcRJfIp-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-joKTEN820cQ/TuUJmszyS_I/AAAAAAAAGNA/RgTNAN2_-y8/s800/govt%252520rev%252520ind%252520tax%252520receipts.PNG" height="362" width="549" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Additionally, individual receipts for the government are near the level received in 2007. On the other hand, government spending has grown 2% on a year over year basis.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/oV0nHRs3H0OB9vH5I6prce0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-AQPgV_7rPgQ/TuUH6-rniiI/AAAAAAAAGMo/lEhyIoWU3xE/s800/ind%252520tax%252520receipts.PNG" height="360" width="555" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/U1ZMqkRM5ObZO8b550xuXe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-t-yIcRAsbt0/TuTsxQtfP5I/AAAAAAAAGMI/SygAeqkHAqk/s800/govt%252520deficit.PNG" height="274" width="371" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">In short, Washington needs to have a greater focus on cutting spending, while at the same time promoting policies that are favorable to businesses to enable greater employment growth.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3423903573133860455?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-24236047128124364412011-12-04T19:12:00.000-05:002011-12-04T19:12:38.259-05:00<div style="text-align: justify;">A common view from pundits on the strength in retail sales on Black Friday and Cyber Monday is much of the increase represented consumers buying forward. In other words, the common take on the strong sales report was it likely won't continue into December. If history is any guide, the below chart might indicate additional retail sales growth is likely for the balance of the weeks leading up to Christmas.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/0zyZdBHSbviQcaFBC0EHWe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-fEx9391yXa8/TtwJfI0AbKI/AAAAAAAAGLA/hNj0je0Ez30/s800/cyber%252520sales%25252011%2525202011.PNG" height="387" width="620" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The dollar value of total cyber sales increased 22% versus last year and dollars spent per buyer increased 9%.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/4_nPUmNzzMDGWJhq94sieO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-CFRjG_3UfWU/TtwK8oZu5yI/AAAAAAAAGLY/Qz3sSKUgX-Q/s800/cyber%252520sales%252520dollars%25252011%2525202011.PNG" height="256" width="429" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Since consumers account for 70% of GDP, these retail sales figures suggest Q4 GDP could surprise on the upside.<br /></div><br />Source:<br /><br />comScore<br /><a href="http://www.comscore.com/Press_Events/Press_Releases/2011/11/Cyber_Monday_Spending_Hits_1.25_Billion">Cyber Monday Spending Hits $1.25 Billion to Rank<br />as Heaviest U.S. Online Spending Day in History</a><br />November 29, 2011<br />http://www.comscore.com/Press_Events/Press_Releases/2011/11/Cyber_Monday_Spending_Hits_1.25_Billion<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2423604712812436441?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-60227820567694091602011-12-04T17:32:00.000-05:002011-12-04T17:33:11.167-05:00<div style="text-align: justify;">I noted in a post a few weeks ago about the positive trend in the <a href="http://disciplinedinvesting.blogspot.com/2011/11/job-openings-continue-to-rise-jolts.html">JOLTS (Job Openings and Labor Turnover Survey) report</a> which was released by the US Department of Labor and indicated job openings, as of the end of September, were at their highest level since 2008. Additionally, jobless claims, a key leading indicator, have now moved below 400,000 on a four-week moving average basis, which signifies an improving job market. The <a href="http://disciplinedinvesting.blogspot.com/2011/12/market-driven-by-emotions-versus.html">ADP Private Payroll report</a> showed a 206,000 job gain in November, well above estimates and the best reading since March 2010. <a href="http://money.cnn.com/2011/12/02/markets/premarkets/index.htm">The broader November jobs report</a> indicated the US economy added 120,000 jobs and that the unemployment rate declined to 8.6% from 9.0%, the lowest rate since March 2009.<br /><br />On the corporate side the October Index of Leading Economic Indicators rose 0.9%. This was the sixth monthly increase in a row. Nine of index’s 10 components saw increases for the first time since May of 2003. As noted by the conference board,<br /></div><div style="text-align: justify;"><blockquote><span style="color: rgb(51, 102, 102);">“the LEI is pointing to continued growth this winter, possibly even gaining a little momentum by spring. The lack of confidence has been the biggest obstacle in generating forward momentum, domestically or globally. As long as it lasts, there is a glimmer of hope.”</span><br /></blockquote></div><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Z0XG8n44ZjynorrUBD5uF-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-Jzp9db_xbzw/Ttvp_4pphTI/AAAAAAAAGKY/6uiXsuWu13A/s800/lei%25252010%2525202011.PNG" height="365" width="482" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />Other positive corporate data points:<br /><div style="text-align: justify;"><blockquote><ul><li>Industrial production rose 0.7% in October</li><li>Chicago PMI rose to 62.6 from 58.4, a seven-month high, and the new orders component rose to its highest level since March at 70.2</li><li>The Institute for Supply Management’s (ISM) Manufacturing Index rose to 52.7, the highest level since June</li><li>New orders increased to 56.7 from 52.4</li></ul></blockquote></div>Lastly, a number of our articles are republished by SeekingAlpha. Yesterday they republished our post, <a href="http://seekingalpha.com/article/311604-the-emotionally-driven-market-is-fundamentally-strong">Market Driven By Emotions Versus Fundamentals</a>. What was interesting is the number of bearish comments (contrarian indicator?) and one comment about the macro environment having a controlling influence on the markets direction.<br /><div style="text-align: justify;"><br />The biggest potential market negative seems to be the debt crisis in the Eurozone. On the other hand, the economic environment in the U.S. continues to improve in spite of the downward revision to third quarter GDP from 2.5 to 2.0. The revision was largely attributable to a decline in private inventories, which reduced overall GDP by 1.55 percentage points. This type of revision likely means higher growth in Q4 and into early 2012 as businesses have to rebuild inventory levels to keep up with what appears to be improving demand. Our post, <a href="http://disciplinedinvesting.blogspot.com/2011/12/market-driven-by-emotions-versus.html">Market Driven By Emotions Versus Fundamentals</a>, details some of this demand by touching on the strength in retail sales on Black Friday and Cyber Monday.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Pl6TWATumR-o_H1NvTUOV-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-C8NB7CVhmOY/Ttvp_77pJVI/AAAAAAAAGKo/1fKJAcw-MpU/s800/sales%25252012%2525202011.PNG" height="374" width="620" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/L1NJ__5tNzKIBOaAMsDIU-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-I-y1Vbjb-3U/Ttvp_wGMk8I/AAAAAAAAGKc/c23dkPP5eJs/s800/inv%252520sales%25252012%2525202011.PNG" height="373" width="625" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">There are many positive data points for investors to consider. Certainly the issues in Europe, not to mention in Washington, are not to be made light of. However, the magnitude of the market's advance last week might be some indication of the attractiveness of U.S. equity valuations. Market volatility is high though, so investors should take a disciplined approach if they are building equity positions.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6022782056769409160?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-21304815749805443192011-12-02T17:31:00.001-05:002011-12-03T09:52:23.050-05:00<div style="text-align: justify;">I write this shortly after the Dow Jones Industrial Average rockets higher by nearly 500 points, or 4+%, in just one day, I think back to the concerns raised in recent interactions with some investors expressing concern about the market’s volatility. In August and September, 40% of the trading days in the S&amp;P 500 Index saw daily price swings of plus or minus 2%. This level of volatility was last seen in the early 1930’s. Increasingly, the market seems to be trading more on emotion than on company fundamentals. The rally at the end of November was fueled by the announcement that central banks around the globe would provide a liquidity back stop for the European debt issues. The European crisis is contributing to investors trading on short-term emotion while they worry about a repeat of the negative performance seen in 2008 and 2009. One can certainly see similarities; however, we believe there are more recognizable and important differences.<br /></div><br /><div style="text-align: justify;">Liz Ann Sonders, Chief Investment Strategist at Charles Schwab noted in a recent report,<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>“the problems in the eurozone are nothing new: too much debt from eurozone member countries to over-leveraged European financial institutions. Adding to the woes is the lack of global competitiveness among many of the zone's members, thanks to the tying of 17 vastly different economies and policies to one (too-strong) currency. <span style="font-weight: bold; font-style: italic;">The lack of a single fiscal authority within the eurozone that's capable of enforcement or supervision has allowed the problems to fester and the can to be continually kicked down the road (emphasis added)</span>.”</blockquote></div><div style="text-align: justify;">There are many differences in Europe’s problems now and the subprime crisis in the U.S. in 2008. On the positive side, much was learned from the crisis in the U.S. and one outcome is the banks in the U.S. are much better capitalized today. Additionally, the crisis in Europe is one of a top down crisis versus the U.S. crisis which started at the bottom with Lehman Brothers, etc. In short then, European governments have a little more time in crafting a solution.<br /><br />For investors, we recommend focusing on the fundamentals both economically and at the company level. Economically in the U.S., the data continues to come in better than expected. The November ISM manufacturing index report was stronger than expected (52.7 vs. 51.8) and joins a growing list of indicators that suggest moderate economic growth in the fourth quarter of around 3%. Retail sales on Black Friday exceeded expectations and cyber Monday sales were up a better than expected 24%. The labor market continues to show improvement as can be seen in the below charts: ADP’s Private Employment change for November continues to show improvement and announced corporate layoffs continue to decline.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/jYeRYrZ3kUZ_jns76UWZDO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-q-JVQtQ2rew/TtlPTwxk29I/AAAAAAAAGJw/qKpzoTYIA8A/s800/ADP%252520Employment.PNG" width="428" height="325" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/OPJRbuGjmWwvKaqQHeADA-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-FjKApESn-FI/TtlPT-jJdsI/AAAAAAAAGJ4/b--vwCyC-lQ/s800/layoffs%252520announced.PNG" width="431" height="325" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">At the company level, valuations for U.S. equities continue to look more attractive. The below chart represents a broader market P/E measure. The NIPA P/E ratio measures earnings from the GDP calculation and divides it into the S&amp;P 500 Index. Using this measure, valuations are at levels last seen in the early 1980’s. In addition to attractive P/E valuations, corporate balance sheets have record levels of cash. This cash is being returned to shareholders in the form of higher dividend payments and stock buybacks.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/9Biti-Nxv3n3-n8acDL7O-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-S2HsLqZbGGo/TtlPT71e62I/AAAAAAAAGJ0/MO16LDGNK80/s800/nipa%252520pe%252520ratio%25252012%2525202%2525202011.PNG" width="460" height="351" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">In conclusion, the economic data continues to come in better than expected and stock valuations are attractive. Certainly, the news coming out of Europe is going to be market moving and volatility will likely remain high. However, in the longer term, company fundamentals will be the ultimate guiding force for future equity valuations and fundamentals look strong.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2130481574980544319?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-2371833179732027512011-11-25T13:49:00.002-05:002011-11-26T17:07:45.385-05:00<div style="text-align: justify;">Given all the negative news one is hearing and reading about, I expected investor bullish sentiment to be much worse than actually reported by <a href="http://www.aaii.com/sentimentsurvey/">AAII</a>. Much of the European news is negative and today, at the close of trading, the Dow Jones Industrial Average reported its worst Thanksgiving week performance (-4.8%) since the markets began observing the Thanksgiving holiday in 1942<span style="font-size:100%;">¹</span>.<br /><br />As the below chart details, the bullish sentiment declined to 32.7% this week versus last week's reading of 41.9%. Bearish sentiment rose to 38.3% versus the prior week's level of 31.0%. This results in a bull/bear spread of -5.6%. Market bottoms have generally occurred when the bullish sentiment reading falls into the 20%+ range and the bull/bear spread widens to a negative 20+%.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/tQa5M9VKX-i7WZazw7vti-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-TSqDQTc41pE/Ts_Uc5C9vTI/AAAAAAAAGIQ/OIRHqBsF2UI/s800/sentiment%25252011%25252023%2525202011.PNG" height="366" width="587" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Additionally, the CBOE Equity Put/Call Ratio, although elevated, was reported at .72 on Wednesday. In the case of the equity/put call ratio, a level above 1.0 is a pretty good sentiment level suggesting the market may be oversold.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/QLl4PLEIk5gZllC41VVqM-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-8ADEi1q0TmQ/Ts_XoCBMaKI/AAAAAAAAGIo/oEq-GuxqtcM/s800/put%252520call%25252011%25252023%2525202011.PNG" height="348" width="468" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Lastly, the percent of S&amp;P 500 stocks trading above their 50 day moving average has declined from over 90% at the beginning of November to 21% on Wednesday. The market appears oversold by this measure, however, not significantly.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/eSsvU4hFzp6FhP5yGE4MNO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-0Tyi1zYOBdU/Ts_fCAVKrHI/AAAAAAAAGJA/oKMAl1vOW-M/s800/sp%252520500%25252050%252520day%25252011%25252023%2525202011.PNG" height="374" width="597" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />¹<span style="font-size:85%;"><a style="font-style: italic;" href="http://online.wsj.com/article/SB10001424052970204630904577059772604803532.html?mod=WSJ_Markets_LEFTTopStories">The Wall Street Journal</a></span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-237183317973202751?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-87839247052673810452011-11-25T11:51:00.002-05:002011-11-26T17:07:03.639-05:00<div style="text-align: justify;">The current issues impacting the Eurozone countries harkens back to the problems with the gold standard in the 1930s. Many believe the U.S. depression in the 1930s was worsened by the fact the U.S. and many other countries were on the gold standard. With the gold standard exchange rates were fixed i.e., depreciating ones currency was not an option. The gold standard did not create the depression; however, it most likely pushed the country into a depression. For more on this, one can read, <a href="http://isites.harvard.edu/fs/docs/icb.topic467999.files/October%2022%20and%2027%20-%20Trade%20Money%20and%20Finance/Eichengreen.pdf">"The Gold Standard and the Great Depression"</a> in <span style="font-style: italic;">Contemporary European History</span> by Barry Eichengreen and Peter Temin.<br /><br />With the Euro, currency depreciation is not available to countries like Greece. As a recent Bloomberg BusinessWeek article noted, the option available to these stressed countries is cutting wages and government benefits. Now I am not saying this is a bad idea; however, significant economic contraction occurs. BusinessWeek notes,<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>"The most unfortunate difference between then and now is that the euro, unlike the gold standard, is a raccoon trap: Its designers deliberately left out an exit procedure. That means you can get in, but you can’t get out without leaving a part of yourself behind. Eichengreen points out that Britain was growing again by the end of 1932, just over a year after abandoning gold under duress. Today a country—say, Greece—that quit the euro would take far longer to right itself. That’s because unlike Britain, to get relief Greece would have to default on its euro-denominated debts and damage its credit rating. "The Greek government," Eichengreen says, 'will be hard-pressed to find funds to recapitalize the banking system. Greek companies won’t be able to get credit lines. The new Greek government is going to have to print money hand over fist. At some point they would be able to push down the drachma and become more competitive. But the balance is different now.'"</blockquote></div>In the end, the worst part of the Euro union was the fact it was/is a monetary union and not a fiscal union. The decisions in Europe will be difficult; however, in order to prevent a contagion, the ECB will likely need to structure a facility not too dissimilar than the unpopular TARP program in the U.S. For the ECB though, they would be making loans to countries like Greece and Italy. The alternative is kicking out profligate countries and this would be economically difficult for Europe.<br /><br />Source:<br /><br /><a href="http://www.businessweek.com/magazine/the-euro-as-good-and-bad-as-gold-11172011.html">The Euro: As Good (and Bad) as Gold</a><br />Bloomberg BusinessWeek<br />By: Peter Coy<br />November 17, 2011<br />http://www.businessweek.com/magazine/the-euro-as-good-and-bad-as-gold-11172011.html<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8783924705267381045?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-32351883510942020672011-11-24T09:33:00.000-05:002011-11-24T09:33:11.504-05:00<div style="text-align: justify;">Consuelo Mack interviews Tom Gallagher on this week's <a href="http://www.wealthtrack.com/">WealthTrack</a>. Tom was formally with ISI Group until retiring recently and is now a principal at The Scowcroft Group. While at the ISI Group, Tom was voted the #1 analyst on Washington matters by Institutional Investor from 2001-2010. In the interview, Tom notes government policies have rarely been this important or influential in the economy and markets. He discusses what to expect from the White House, Congress and the Federal Reserve and what it means for your investments in this deleveraging environment. He notes where investors focus in the run up to the technology bubble was on capital gains, in this environment, income return from ones investments is where ones focus should be at this point in time.<br /></div><br /><center><iframe src="http://blip.tv/play/AYLe9AcC.html" allowfullscreen="" frameborder="0" height="332" width="550"></iframe><embed type="application/x-shockwave-flash" src="http://a.blip.tv/api.swf#AYLe9AcC" style="display:none"></embed></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3235188351094202067?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-24252365560529316702011-11-22T14:54:00.001-05:002011-11-22T19:10:44.145-05:00<div style="text-align: justify;">One index measure investors review to gauge the level of fear in the market is the <a href="http://disciplinedinvesting.blogspot.com/2008/10/what-is-vix-index.html">VIX Index</a>. Currently, the VIX is trading at 31.78, down a little over 1 point today. High levels in the VIX translate into a fearful market and can be indicative of a short term market bottoms. In the early part of 2010, the market's first encounter with the Euro crisis, the VIX hit 48. The S&amp;P 500 Index bottomed shortly after this. In other words, the VIX can be viewed as a contrarian indicator.<br /><br />Another variation of the VIX is to look at the VIX Index divided by the 10-year Treasury Index. Again, high levels in the VIX show investor fear in the equity markets. A low level in the 10-year Treasury indicates bond investors generally have an anemic growth and inflation outlook over the longer term. Consequently, a high ratio number is a contrarian investment measure. The below chart contains a graph (blue line) of this ratio along with a graph of the S&amp;P 500 Index (red line).<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/coL1pU1jzZaX_ZTAhd4C1u0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-wHIzND8VIt0/Tsw5uUKeCJI/AAAAAAAAGH0/5NQVCrBJT4M/s800/vix%25252010%252520year%252520tres.PNG" height="353" width="466" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><span style="font-style: italic;font-size:85%;" >h/t:<a href="http://scottgrannis.blogspot.com/2011/11/panic-exhaustion-revisited.html"> Calafia Beach Pundit</a></span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2425236556052931670?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-56612058245510303032011-11-20T17:54:00.000-05:002011-11-20T17:54:55.354-05:00<div style="text-align: justify;">At the end of September, the <a href="http://www.bls.gov/news.release/pdf/jolts.pdf">Bureau of Labor Statistics reported (PDF)</a> there were 3.4 million job openings. This compares to 2.2 million job openings at the end of the most recent recession or a 54% increase.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/oXabQf2k_HBqDuutqv4I3-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-8s5MLDdTIvk/TsmCfg3Qu3I/AAAAAAAAGF0/erqcD2yvg3o/s800/job%252520openings%2525209%2525202011.PNG" height="373" width="617" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">This improvement in job openings is certainly a positive sign economically; however, companies indicate they are having a difficult time finding qualified employees as noted in this Cincinnati Enquirer article: <a href="http://news.cincinnati.com/article/20111120/BIZ/111200334/Wanted-Anyone-who-can-qualify">Wanted: Anyone who can qualify</a>.</div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5661205824551030303?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-30584638703848854212011-11-15T21:25:00.000-05:002011-11-15T21:25:50.764-05:00<div style="text-align: justify;">For dividend investors, one of the keys is to invest in those companies that have a sufficiently high dividend yield that is sustainable and that have high dividend growth rates. Investors focusing only on high yielding stocks run the risk of investing in a company that can not sustain its dividend and then face a dividend cut. Dividend cuts most often have a negative impact on a company's stock price.<br /><br />As noted by Sudhir Nanda, head of quantitative equity research at T. Rowe Price, "This makes intuitive sense. Companies with <a href="http://disciplinedinvesting.blogspot.com/2008/07/dividends-have-signaling-effect.html">growing dividends are signaling confidence</a> about their future earnings. They tend to be stable businesses, well positioned in their markets, and able to perform throughout market cycles, which make them good candidates for long-term growth." The below table details the extra performance gained by those companies that have these dividend characteristics.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/u4X-qTRwKU0mjdVV892iKu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-li8kv0ZsKJk/TsKIlcjQNHI/AAAAAAAAGFU/u74NKT7ahJ8/s800/yield%252520and%252520growth%252520div%2525209%2525202011.PNG" height="384" width="479" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Over the long run, dividend growth stocks have outperformed non-growth payers, non-dividend payers and dividend cutters as I have noted in several past posts. Below is a chart separating the stocks by dividend policy for equities in the Russell 1000 Index.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/ctjV6fzCT1MZZHYoG_x_Re0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-UF0eT8MSuc0/TsKIlUuqERI/AAAAAAAAGFQ/i-Xju3dEACU/s800/div%252520growers%252520through%2525209%25252030%2525202011.PNG" height="402" width="460" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">For investors, one factor to keep in mind is dividend paying stocks tend to underperform the overall market in volatile upward market spikes. However, in volatile down market periods, the higher quality dividend growers generally hold up better; and thus tend to outperform over a complete market cycle.<br /><br />There are many reasons why dividend growth stocks appear attractive in this market environment, not the least of which is they tend to be less volatile. Companies are sitting on record levels of cash and are likely to use some of this cash for increased dividend payments.<br /><br />The obvious is stocks are not bonds; however, investors looking to increase their allocation to equities should consider dividend paying stocks. On a year over year basis through September 30th, S&amp;P 500 dividend payments are up over 14%. Year to date through November 8th, for companies that have increased their dividend, S&amp;P reports the median increase is 14.55% and the average increase is 27.82%; 27 companies have at least doubled their dividend. This is an attractive growth rate of income investors aren't likely to find in bonds. More on this strategy can be found in my article, <a href="http://disciplinedinvesting.blogspot.com/2011/09/dividends-as-alternative-to-low-bond.html">Dividends As An Alternative To Low Bond Interest Rates</a>.<br /></div><br />Source:<br /><br /><a href="http://individual.troweprice.com/public/Retail/xStaticFiles/Fall2011PriceReport.pdf">Dividend Growth Stocks May Be Timely As Economy Sputters (PDF)</a><br />T. Rowe Price Report<br />Fall 2011<br />http://individual.troweprice.com/public/Retail/xStaticFiles/Fall2011PriceReport.pdf<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3058463870384885421?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-28988526727838650642011-11-13T21:19:00.001-05:002011-11-15T11:21:37.933-05:00For the third quarter of 2011, 454 companies in the S&amp;P 500 have reported results with 70% reporting earnings above expectations. The estimated earnings growth rate for Q3 is 17.7% according to Thomson Reuters.<br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/udp-6txp4q7WHuSs1Ce5C-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img height="344" src="https://lh3.googleusercontent.com/-ujk_OJRik80/TsB8by_3eWI/AAAAAAAAGEc/FAHqS9yqpVo/s800/q3%2525202011%252520earnings.PNG" width="615" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size: x-small;"><i>&nbsp;Source: Thomson Reuters</i></span></div><br />Companies are expressing less optimism about fourth quarter earnings though. Thomson Reuters reports there have been 70 negative EPS announcements for Q4 compared to 22 positive announcements. This equates to a 3.2 negative to positive ratio. This is the highest level of N/P since Q4 2008 when the ratio stood at 3.4. The long term average N/P for the S&amp;P 500 Index is 2.3. Below is a breakdown of the&nbsp; revised earnings growth rates for Q4 by S&amp;P 500 sector.<br /><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/_vS6a3g_uAZd4F2XT7s1x-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img height="269" src="https://lh6.googleusercontent.com/-n9F3aknKGNQ/TsB_IyJautI/AAAAAAAAGE0/AFKWWpvscBU/s800/q4%252520sector%252520earnings.PNG" width="494" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2898852672783865064?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-82465856714091543682011-11-12T17:05:00.001-05:002011-11-12T17:06:00.271-05:00<div style="text-align: justify;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/-vLe8TsWfHMA/Tr7cs_u_9ZI/AAAAAAAAGC8/R4MYE6JWS_E/s1600/italian%2Bbond%2Byld.PNG"><img style="float: right; margin: 0pt 0pt 10px 10px; cursor: pointer; width: 220px; height: 280px;" src="http://3.bp.blogspot.com/-vLe8TsWfHMA/Tr7cs_u_9ZI/AAAAAAAAGC8/R4MYE6JWS_E/s400/italian%2Bbond%2Byld.PNG" alt="italian bond yield" id="BLOGGER_PHOTO_ID_5674215246114321810" border="0" /></a>Much of the volatility impacting global markets of late is the result of the European sovereign debt issues. Italy is the latest country to see its bond rates soar.<br /><br />According to a recent <a href="http://online.wsj.com/article/SB10001424052970204358004577027492657312740.html?mod=googlenews_wsj#project%3DITALDEBT110911%26articleTabs%3Darticle">article in the Wall Street Journal</a>, Italy has €1.9 trillion ($2.6 trillion) in government debt or nearly one-quarter of all euro-zone public debt. Over the course of the next year, Italy must refinance over 15% of its outstanding debt obligations. Given the magnitude of Italy's budget deficit and the recent rise in Italian bond yields, suggests investors are not confident of Italy's ability to deal with these maturities. The size of these debt obligations could be overwhelming for the EU on top of dealing with the debt issues in Greece. This is the type of contagion the EU is trying to prevent.<br /><br />If history is any guide, past debt defaults by countries have occurred at levels where country debt to revenue levels were much lower. In a November report by <a href="http://www.arpllp.com/">Absolute Return Partners</a> they highlighted the debt to revenue ratios of countries today versus these prior country defaults.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Ds2rOF87pri_B-L_hD41qe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-zu4iq8X-Qjw/Tr7iaoybarI/AAAAAAAAGDs/lDWx8jRB5Os/s800/debt%252520rev%252520default.PNG" width="494" height="325" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">One might ask why Japan is not experiencing a crisis. For one, it has a more diverse economy and more importantly, its interest rates remain at very low levels. However, if Greece and Italy are an example, rates can rise very quickly. As noted in <a href="http://www.arpllp.com/core_files/The_Absolute_Return_Letter_1111%281%29.pdf">Absolute Return Partners' November report</a>, "'A country is bust when the markets decide,'" as stated by Albert Edwards, Societe Generale Cross Asset Research.<br /><br />So how does the U.S. debt structure compare with countries in Europe that are encountering refinancing risk. If one looks at the country debt level, both on and off balance sheet debt, the U.S. is only behind France in terms of liabilities.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/7uOah_W9YVzUGD7LcOC3R-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-P1aZj4PFgR0/Tr7iaSi2k5I/AAAAAAAAGDc/_eg2ntsm3kY/s800/debt%252520gdp%252520eu.PNG" width="501" height="307" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Of potential concern for the U.S. is the level of debt maturing over the course of the next five years.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Xbb8FK9DK29Ntceb8ccEkO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-73YozNqSXx8/Tr7iaUkeh2I/AAAAAAAAGDY/ObPYtDz5NEE/s800/us%252520debt%252520maturity%2525202011.PNG" width="402" height="345" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://www.centerforfinancialstability.org/research/USFiscal031011.pdf">Center For Financial Stability (PDF)</a></span></div><br /><div style="text-align: justify;">Compared to many other countries, the percentage of short term debt maturing in less than five years is largest for the U.S.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/rYsRGIOy1mv3wJldpMPg0e0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-lOpFBZQZsWw/Tr7iaAHAXaI/AAAAAAAAGDU/WDo1Q2NuSKw/s800/us%252520debt%252520mat%252520table%2525202011.PNG" width="255" height="317" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://www.centerforfinancialstability.org/research/USFiscal031011.pdf">Center For Financial Stability (PDF)</a></span></div><br /><div style="text-align: justify;">Of particular concern for the U.S. is the level of its budget deficit in spite of the fact <a href="http://disciplinedinvesting.blogspot.com/2011/10/deficit-debt-and-law-of-large-numbers.html">revenues into the treasury continue to grow</a>. The U.S. currently borrows nearly 39 cents for every dollar it spends. Additionally, interest expense is $241 billion or 6% of the government's budget. Given the low level of interest rates on the Treasury's debt, the 10-year Bond is just over 2%, it would not take much of an interest rate spike in the U.S. to negatively impact the government's budget.<br /><br />Absolute Return Partners highlighted comments from the Fed's summer Jackson Hole Wyoming meeting where the Bank for International Settlements concluded,<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>"...the debt problems facing advanced economies are even worse than we thought. Given the benefits that governments have promised to their populations, ageing will sharply raise public debt to much higher levels in the next few decades. At the same time, ageing may reduce future growth and may also raise interest rates, further undermining debt sustainability. So, as public debt rises and populations age, growth will fall. As growth falls, debt rises even more, reinforcing the downward impact on an already low growth rate. The only possible conclusion is that advanced countries with high debt must act quickly and decisively to address their looming fiscal problems. The longer they wait, the bigger the negative impact will be on growth, and the harder it will be to adjust."</blockquote></div><div style="text-align: justify;">For the U.S. then, they must address their deficit issues sooner versus later. One significant component will be to create an environment that has a positive influence on economic growth. Additionally, the growth rate in entitlement expenditures must be curtailed. The solutions offered by the ill conceived deficit committee in Washington will certainly be important.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8246585671409154368?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-31363152600858175932011-11-06T10:38:00.000-05:002011-11-06T10:38:58.674-05:00<div style="text-align: justify;">It appears the high level of unemployment and the underemployment level (U-6) are becoming a long term structural issue. The U-6 has trended somewhat lower; however, seems stubbornly stuck above 16%. Additionally, the unemployment rate seems stuck above 9%.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Tixeg4_cQUWXMENV7BL9dO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-nmwl5spaKFk/TrafbHyZbeI/AAAAAAAAGBc/_nsPxwLwYQc/s800/unemployment%252520u6%252520oct%2525202011.PNG" width="504" height="397" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The mismatch between skills and job openings seems to be more structural as time goes on. As noted by the BLS, the relationship between the unemployment rate and the vacancy rate is known as the Beveridge Curve, named after the British economist William Henry Beveridge (1879-1963). The economy’s position on the downward sloping Beveridge Curve reflects the state of the business cycle. The BLS goes on to note that during an expansion, the unemployment rate is low and the vacancy rate is high. During a contraction, the unemployment rate is high and the vacancy rate is low. The position of the curve is determined by the efficiency of the labor market. <span style="font-style: italic;">For example, a greater mismatch between available jobs and the unemployed in terms of skills or location would cause the curve to shift outward, up and toward the right (emphasis added).</span><br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/9h2m7bCvYEsMZoTTeER5ku0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-0xZXWspcbT4/TragfeNdSQI/AAAAAAAAGB0/jMM9c2s8gC4/s800/beverage%252520curve%252520bls.PNG" width="539" height="347" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://www.bls.gov/web/jolts/jlt_labstatgraphs.pdf">Bureau of Labor Statistics (PDF)</a></span></span><br /></div><br /><div style="text-align: justify;">The potential upward shift that may be occurring can be seen in the below chart from July.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/EOtEmG1I0txZaQZaqpeb6e0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-WTPS1oyW5G4/TrahZXc_1KI/AAAAAAAAGCM/5jyfKxY0_6o/s800/beveridge%252520curve%252520fidelity.PNG" width="436" height="323" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="https://guidance.fidelity.com/viewpoints/fixed-income-viewpoints">Fidelity</a></span></div><br /><div style="text-align: justify;">This structural change in employment is likely a trend that won't be reversed in a short period of time. Many of the unemployed have been displaced from <a href="ftp://ftp.bls.gov/pub/special.requests/lf/aat26.txt">construction related fields</a> where the unemployment rate is over 20%. Little improvement is seen in construction, both commercial and residential, near term.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3136315260085817593?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-44345904319951026862011-10-31T19:48:00.001-04:002011-10-31T19:49:27.350-04:00<div style="text-align: justify;">October was certainly a good one for the U.S. equity markets in spite of the 276 point decline today. The Dow Jones Industrial Average increased more than 1,000 points in the month returning 9.5%. The S&amp;P 500 Index increased 10.8% in the month and was the best return since December 1991. A 3-5% pullback certainly would not be surprising given the strength of the advance in October. Will investor then buy into this pullback? I believe they will. One key will likely be the ability of the market to find support around the 200 day moving average of 1,274.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/lBGdlqBGqrYknaLJcPIcpe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-g-d5Drep-rk/Tq8mRCJvgiI/AAAAAAAAGAg/61ZHycgO7Bk/s800/s%252526p%252520500%25252010%25252031%2525202011.PNG" width="605" height="645" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">From a fundamental perspective, valuations and earnings for companies in the S&amp;P 500 Index in Q3 are coming in at a respectable level. Of the 315 companies that have reported results for Q3, 71% have reported earnings above analyst expectations and this is higher than the long term average. Importantly to, revenue growth has growth has exceeded expectations as well.<br /><br />Almost two years ago, I wrote <a href="http://disciplinedinvesting.blogspot.com/2009/12/key-economic-indicators-suggest-worst.html">a post that focused on indicators investors might evaluate to determine the future direction of the economy</a>. Following is an update on several of those indicators and they do suggest the economy is not going to dip into another recession.<br /></div><br /><u style="font-weight: bold;">Durable Goods Orders</u><br /><ul style="text-align: justify;"><li>a positive trend continues in durable goods orders since the recession end in 2009.<br /></li></ul><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/qJbM1SnGYteA5nmBaIcSNe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-YyEGmrfa-tk/Tq4Hrk3RjtI/AAAAAAAAGAA/ojAclqJQl0M/s800/durable%252520goods%2525209%2525202011.PNG" width="611" height="372" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><u style="font-weight: bold;">Jobless Claims</u><br /><ul style="text-align: justify;"><li>jobless claims remain stuck above 400,000; however, they are trending lower. This is indicative of of a slow growth economy. The initial report for Q3 GDP was growth at 2.5%.<br /></li></ul><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/MNv0XeZZE8egO6Bcyvxjzu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-9KqWa49_KOg/Tq4HsQ0WylI/AAAAAAAAGAE/oZjPhtdM5Dc/s800/unemplo%252520claims%25252010%25252022%2525202011.PNG" width="612" height="373" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><u><span style="font-weight: bold;">Retail Sales</span><br /></u><ul style="text-align: justify;"><li>strength in retail sales continues to surprise on the upside.<br /></li></ul><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/HwKGfbtUwjiKddAnLAGJ6e0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-prVFeRzKTD0/Tq4HrhYtPYI/AAAAAAAAF_0/WRZjYE70CI0/s800/retail%252520sales%2525209%2525202011.PNG" width="611" height="372" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><u style="font-weight: bold;">Chicago PMI</u><br /><ul style="text-align: justify;"><li>the Chicago ISM-Purchasing Managers Index came in below expectations today; however, the reading remains above 50 indicating an expansionary environment.<br /></li></ul><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/osdileNV70uuEY0GF3-OKO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-ng6WSWiQiH8/Tq8qHgT2wGI/AAAAAAAAGA4/XDQrIhBYTVw/s800/chicago%252520pmi%25252010%2525202011.PNG" width="484" height="370" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><u style="font-weight: bold;">Consumer Confidence</u><br /><ul style="text-align: justify;"><li>an area of concern is the confidence level of consumers and businesses. The lack of business confidence was highlighted in the <a href="https://www.ism-chicago.org/chapters/ism-ismchicago/files/ISM-COctober2011-FINALDRAFT-ISMHomepage.pdf">Chicago Purchasing Managers release</a> today. Businesses have concerns above the strength of the economy going into 2012. As the below chart shows, consumer confidence (blue line) is trending lower as well. This lack of confidence on the part of both businesses and consumers will likely constrain economic growth and result in a slow growth environment through the election in 2012.<br /></li></ul><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/sZI6_XbXlADTmb_3KylYGO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-oX0SNbrsRV8/Tq4HrqGDywI/AAAAAAAAF_w/OAHDWF1c2Uw/s800/cons%252520conf%252520s%252526p%2525209%2525202011.PNG" width="475" height="351" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Looking to the end of the year, volatility will likely be the norm. Washington, D.C.'s so-called Gang of 12 needs to come up with a "credible" deficit reduction plan. With the U.S. dealing with its debt issues along with the EU's sovereign debt issues, the cure for dealing with over leverage will likely be slower economic growth, but growth nonetheless. These issues alone will influence market action in the short term. Company fundamentals though look to be good and fundamentals tend to drive long term investment returns.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-4434590431995102686?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-9496844514338891982011-10-22T16:16:00.001-04:002011-10-22T16:16:00.168-04:00<div style="text-align: justify;">For some perspective on one of the more important global stock markets, today's chart focuses on Chinese stocks and presents the current trend of the iShares FTSE/Xinhua China 25 Index (FXI). As today's chart illustrates, Chinese stocks have endured what amounts to an extremely wild ride since 2005. The FXI trended upward at an ever accelerating rate (i.e. parabolic) from 2005 to Q4 2007. As the credit bubble began to unravel, so too did Chinese stocks with the FXI trending downward at an ever accelerating rate from Q4 2007 to Q4 2008. Beginning in Q4 2008, the FXI surged -- gaining over 155% trough to peak. Since that post-financial crisis peak back in Q4 2010, Chinese stocks initially treaded water but more recently have entered in to a steep downward trend channel. Considering China's increasingly significant contribution to the global economy, this recent stock market action is most definitely a red flag.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/B3J1uMPeBtFptHWtesjyM-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-FPO-6cBLcHo/TqMixaejteI/AAAAAAAAF_U/z55ykOBTfDQ/s800/china%25252010%2525202011.PNG" width="445" height="332" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://www.chartoftheday.com/">Chart of the Day</a></span></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-949684451433889198?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-86106857726545265182011-10-21T23:22:00.001-04:002011-10-21T23:23:10.716-04:00<div style="text-align: justify;">Correlations were high in the strongly negative performing third quarter for most equity markets. So far in October though, the market has rallied strongly off the lows resulting in one of the best performing Octobers since 2000 with one week remaining. Europe's efforts to come up with a solution to their sovereign debt issues and Washington's Deficit Panel or Gang of 12 outcome could create headwinds for the market. Our <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=JRZ5WDlkKBE%3d&amp;tabid=364">3rd Quarter Investor Letter</a> contains our prospective views on the market for the balance of the year and into 2012.<br /><br /><a href="http://www.horanassoc.com/horan-capital-advisors.aspx">HORAN Capital Advisors'</a> complete Investor Letter can be accessed at the following link: <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=JRZ5WDlkKBE%3d&amp;tabid=364">3rd Quarter Investor Letter</a><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8610685772654526518?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-78484879092209216192011-10-19T22:48:00.002-04:002011-10-20T15:41:49.597-04:00This evening I had a conversation with an individual whose career is working as an economist. The discussion topic focused on taxes and the deficit. He was adamant that the risk for the U.S. was centered around the "law of large numbers" as it relates to this countries debt level.<br /><br />This brought to mind the article post written by Terry Horan, the CEO of our business partner firm HORAN Associates, on his blog today, <a href="http://www.horanassoc.com/blog/id/973/parties-in-the-park-and-dancing-in-the-dark.aspx">Parties in the Park and Dancing in the Dark</a>. In his post he discusses the 99 Percenters argument that they believe the system is rigged, they are not getting a fair shake and it is time for change.<br /><br />In Terry's post he shows the below table of federal tax receipts, spending and the government deficit, which was d<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/-fMSjbrIoj10/Tp-PRhDrqKI/AAAAAAAAF_E/drcq-8m1Tes/s1600/fed%2Bdeficit%2B2011.PNG"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 256px; height: 174px;" src="http://3.bp.blogspot.com/-fMSjbrIoj10/Tp-PRhDrqKI/AAAAAAAAF_E/drcq-8m1Tes/s400/fed%2Bdeficit%2B2011.PNG" alt="" id="BLOGGER_PHOTO_ID_5665404387349735586" border="0" /></a>etailed in a recent <a href="http://online.wsj.com/article/SB10001424052970204479504576637513885592874.html">Wall Street Journal article</a>. In the table the deficit is also shown as a percentage of GDP. What stands out is the growth in the deficit due mostly to an increase in spending. Tax receipts for 2011 are higher than 2010 and 2010 is higher than 2009. For 2011 personal income tax collections were higher by 21%!<br /><br />Also <a href="http://online.wsj.com/article/SB10001424052970204774604576631350061505880.html">reported by the Wall Street Journal</a>, "revenue rose 6.5% billion to $2.3 trillion, the equivalent of 15.4% of gross domestic product, largely due to higher income-tax receipts in fiscal 2011, the Treasury said. Spending climbed 4.2% to $3.6 trillion, or 24.1% of GDP, largely due to higher spending on interest, Medicare and Social Security. <span style="font-weight: bold; font-style: italic;">Thirty six cents of every dollar spent by the federal government in fiscal 2011 was borrowed (emphasis added)</span>.<br /><br />The fallacy of showing the deficit as a percentage of GDP is, at some point, the debt grows to a level where it can't be repaid within any reasonable time if at all. Or, in looking at Greece, there are no buyers of the debt. For the U.S., it's buyer is China.<br /><br />What makes the discussion about our $14 trillion debt difficult for the average person to comprehend is the absolute size of the number where billions and trillions simply do not seem like real numbers--the "law of large numbers". A recent article at the American Thinker website, <a href="http://www.americanthinker.com/2011/07/the_national_debt_is_beyond_our_comprehension.html">The National Debt is Beyond Our Comprehension</a>, attempts to put the amount into perspective.<br /><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>"We can probably get our minds around a million dollars, but beyond that the numbers become mere abstractions. They simply cease to be real. They are not real, because we really cannot visualize them in a meaningful way. We may have gotten used to hearing about billions, but trillions are really beyond our mental grasp. How many of us, for example, can state the number of zeros in a trillion without having to count them? There are twelve. Now try to mentally visualize the number one trillion. Can you do it? Can you really see a "1" followed by twelve zeros in your mind? I can visualize a billion, but that is only nine zeros: three groups of three. It takes some effort to mentally see four groups of three zeros.<br /><br />Suppose someone was going to give you $1 every second of every minute, of every hour, of every day without stopping. How long would it take them to give you $1 trillion? Well, let's see. There are 60 seconds in a minute, so that is $60 every minute. Then there are 60 minutes in every hour, so that means we would receive $3,600 every hour. Wow! Even my plumber doesn't charge that much. In a single day, therefore, you would receive $86,400. Most people don't get that much in a year.<br /><br />Since there are 365¼ days in a year, at the rate of $1 per second the pile of dollar bills would amount to only $31,557,600. Now we are talking real money. That is a lottery jackpot most of us would love to win. But that is still just a number in the low millions.<br /><br />So, at a dollar a second how long would we have to wait before we could see the pile grow to $1 trillion? Are you ready for the answer? Drum roll, please. It would take over 31,688 years. Even at $10 per second they would still have to have started handing you the money more than a thousand years before the birth of Christ! And even at $100 per second none of us could live long enough to get it all.<br /><br />At $100 per second we are still only talking about $8,640,000 a day. So in a year you would have accumulated only a little over $3 billion. It will take more than 316 years to reach $1 trillion.<br /><br />A trillion dollars is so much money that you and I would probably not be able to spend that much for ourselves unless we bought a small country somewhere. Most of us would have trouble trying to spend a billion dollars, and a trillion is a thousand billion. So, if the government wants to reduce the deficit by a trillion dollars, it would have to do the equivalent of cutting a billion dollars from each of one thousand government programs...<br /><br />The frightening truth is that Congress cannot easily cut $1 trillion from the deficit. The reality is that if you gave a new congressman on his first day on the job a copy of the budget, and told him to cut $10,000 from the budget every second of every day nonstop, his term in Congress would be up before he had cut out $1 trillion."</blockquote></div>As much as the government would like taxpayers to pay more into the treasury, the real answer is spending cuts need to be the primary focus immediately. This is something the Deficit Panel or so-called <a href="http://online.wsj.com/article/SB10001424052970204774604576631350061505880.html">Gang of 12 committee in Washington is having difficulty</a> agreeing on.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-7848487909220921619?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-67522326943654324842011-10-05T15:28:00.001-04:002011-10-05T15:50:10.645-04:00<div style="text-align: justify;">Preliminary buyback data released by Standard and Poor's indicates S&amp;P 500 companies bought back $109 billion of their stock in the second quarter. This is the first time buybacks have exceeded $100 billion since the first quarter of 2008 when buybacks totaled $113 billion. On a year over year basis, the Q2 buyback amount was 41% higher than the buyback total in Q2 2010.<br /></div><br />Howard Silverblatt of S&amp;P notes, <span style="color: rgb(0, 0, 0);"></span><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>"At this point, companies are continuing to use buybacks to prevent earnings dilution from employee options, as well as shares used for dividend reinvestment programs. Few companies are venturing outside of the box to purchase additional shares, as was the common practice from late 2005 through mid-2007."</blockquote></div> Silverblatt goes on to note, <div style="text-align: justify;"><blockquote><span style="color: rgb(51, 102, 102);">"Exxon Mobil's buybacks have reduced its share count by 18.5% over the past five years ($129 billion), which may cost it its position as the largest company in the world."</span><br /></blockquote></div><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/zicCHOjZXdhDQ_g1lm0mo-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-GLjGxGVHs6E/ToyoRp13yYI/AAAAAAAAF-Y/8RO2oGGy5kk/s800/buyback%2525206%25252030%2525202011.PNG" height="535" width="523" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Data source: <a href="http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3D20110920_SP500_BUYBACK_PR.pdf&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fpdf&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1243988343321&amp;blobheadervalue3=UTF-8">Standard &amp; Poor's</a></span></span><br /></div><br /><div style="text-align: justify;">Interestingly, as the box in the chart details, the cumulative earnings generated by the companies in the S&amp;P 500 Index since 2001 have been returned to shareholders either in the form of a dividend or stock buybacks.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6752232694365432484?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-966811210754213732011-10-01T14:39:00.000-04:002011-10-01T14:39:48.528-04:00<div style="text-align: justify;">It has been some time since I last reported on the performance of companies that buyback their own equity shares. With a number of companies sitting on large amounts of cash and announcing share buybacks, including Berkshire Hathaway (<a href="http://investing.money.msn.com/investments/stock-price?symbol=BRK.A">BRK.A</a>), one way to track the performance of companies buying back shares is to review the performance of the <a href="http://www.invescopowershares.com/pdf/P-PKW-PC-1-E.pdf">PowerShares Buyback Achievers Portfolio</a> (<a href="http://investing.money.msn.com/investments/etf-list/?symbol=pkw&amp;ocid=qbeb">PKW</a>). The PowerShares Buyback Achievers Portfolio will normally invest at least 90% of its total assets in common stocks that comprise the <a href="http://www.indxis.com/pdfs/BuyBack.pdf">Share BuyBack Achievers™ Index</a>.<br /><br />The PowerShares Buyback Achievers Portfolio is based on the Share BuyBack Achievers™ Index. To become eligible for inclusion in the Index, a company must be incorporated in the U.S., trade on a U.S. exchange and must have repurchased at least 5% or more of its outstanding shares for the trailing 12 months.The Share Buyback Achievers™ Index is a trademark of Mergent® and currently consists of 142 companies.<br /><br />As the below chart and table detail, the Buyback Portfolio (PKW) has a recent history of outperforming the broader market S&amp;P 500 Index. Over the last two years ending 9/30/2011, PKW has generated a return of 21.87% versus the broader market <a href="http://investing.money.msn.com/investments/market-index?symbol=%24INX&amp;ocid=qbe">S&amp;P 500 Index</a> return of 7.03%.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/HLaIFK_rsbksnXocV4Hmc-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-7wEv8SN-YPE/TodDj3kHwWI/AAAAAAAAF9U/aWrFMxFvnfg/s800/pkw%2525209%25252030%2525202011.PNG" width="674" height="360" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/aM_sS5i5Z-RLz2PH5unsCO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-hwJnLn15rIk/TodDkFJ_XcI/AAAAAAAAF9o/VQ3o0atM85A/s800/pkw%252520returns.jpg" width="659" height="198" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Investors should be aware of the fact that the Buyback Achievers Portfolio does contain sector concentrations. Additionally, the Portfolio does not contain any energy stocks at this time.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/cfAti-o-nFfTSqf4qGiZW-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-TtRJWu14mmw/Todbrw6d-iI/AAAAAAAAF9w/lGs3huA1QCk/s800/pkw%252520sector%252520allocation.PNG" width="454" height="297" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center>The top 10 holdings in the Index are:<br /><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/hkIu8I_T562d_jy3njWIbe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-3y76PEjk8Ow/TodcmjNejMI/AAAAAAAAF-E/VSHCIbc299c/s800/pkw%252520top%25252010.PNG" width="415" height="220" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-96681121075421373?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-18485202438519586472011-09-26T11:41:00.000-04:002011-09-26T11:41:54.016-04:00<div style="text-align: justify;">In Francois Trahan's recent interview with <a href="http://www.wealthtrack.com/">WealthTrack's Consuelo Mack</a>, Francois explains why he believes the Fed has run out of bullets in managing the economy via the Fed Funds rate. In short, he believes the old economic rules do not work and new market drivers should be considered by investors. Francois believes the new Fed Funds rate is actually the consumer price index or CPI.<br /><br />Francois has been rated the #1 portfolio strategist for the last three years by Institutional Investor. The interview includes Francois' view on the market for Q4 and 2012.<br /></div><br /><center><iframe src="http://blip.tv/play/AYLU4wYC.html" allowfullscreen="" frameborder="0" height="332" width="550"></iframe><embed type="application/x-shockwave-flash" src="http://a.blip.tv/api.swf#AYLU4wYC" style="display:none"></embed></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1848520243851958647?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-44100320902740551992011-09-25T12:08:00.002-04:002011-09-26T22:00:34.895-04:00<div style="text-align: justify;">The low level of interest rates on fixed income investments is forcing investors to consider alternative income sources in their investment portfolio. One income source investors have considered as an alternative is dividend paying stocks. A caveat is stocks have historically been more volatile (standard deviation) than bonds as noted in the below table.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/NShwpiQUOePtufZFzF_HA-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-FarqHKIIkuY/Tn9LWhVcq2I/AAAAAAAAF88/2FqX8qcggdc/s800/asset%252520class%252520volatility%2525209%25252023%2525202011.PNG" width="390" height="410" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">However, given the low level of bond interest rates, the yield on dividend paying stocks is now at its highest level relative to bond interest rates in nearly 50 years.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/dZTsncpUpk6bWjpmqFdyn-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-4_O8f81ggoE/Tn9LWCckNjI/AAAAAAAAF84/voNXCHu3LhQ/s800/bond%252520yield%252520div%252520yield%2525209%25252025%2525202011.PNG" width="389" height="466" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">From a return standpoint, dividends have been a stable portion of equity returns. Dividend paying stocks have also been less volatile than the broader equity market as noted in the first table above.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/3rQpZKS-ERKaqmk32txP6e0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-_YBxy4S2MyI/Tn9LW-KrIYI/AAAAAAAAF9A/sY7NsOMhBtA/s800/decade%252520return%2525209%25252025%2525202011.PNG" width="398" height="599" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Lastly, given where bonds rates are today, it is hard to envision rates moving lower over the next three to five years given the state of the U.S. federal budget. Printing currency (higher potential inflation) and devaluing the dollar seems to be a likely path that will be pursued in Washington, D.C. Not if, but when rates turn higher, bond investors are likely to get hurt as bond values contract.<br /><br />For the dividend stock investor, corporate balance sheets are in pretty good shape with high levels of cash. A portion of these cash balances is likely to be used in increasing dividend payments to the company's equity holders. I suspect these low corporate payout ratios are likely to increase over the next three to five years; thus, providing some income growth for investors.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/OCoMDUbi-_mGd1ae7defse0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-XpQrm8EKRbk/Tn9LWGSFgAI/AAAAAAAAF80/76N-lSqYkSk/s800/div%252520payout%2525209%25252025%2525202011.PNG" width="385" height="469" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><br />Source:<br /><br /><a href="https://guidance.fidelity.com/viewpoints/non-bond-income">Generating Income From Stocks</a><br />Fidelity Viewpoints<br />By: Dirk Hofschire, CFA, VP, Asset Allocation Research, and James Morrow, Portfolio Manager, Fidelity Viewpoints<br />September 21, 2011<br />https://guidance.fidelity.com/viewpoints/non-bond-income<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-4410032090274055199?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-80837425545669576732011-09-21T20:21:00.001-04:002011-09-21T20:38:42.492-04:00<div><div style="text-align: justify;">As I have noted in the past, one investment strategy that seems to garner press attention from time to time is the "<a href="http://www.dogsofthedow.com/">Dogs of the Dow</a>" investment strategy. The strategy consists of selecting the ten stocks that have the highest dividend yield from the stocks in the Dow Jones Industrial Index (<a href="http://finance.yahoo.com/q;_ylt=Au9fVdXuOW2nsGIm3aFS0fG7YWsA;_ylu=X3oDMTE2bjA5a21tBHBvcwMxBHNlYwNtYXJrZXRTdW1tYXJ5SW5kaWNlcwRzbGsDZG93?s=%5EDJI">DJIA</a>) after the close of business on the last trading day of the year. Once the ten stocks are determined, an investor would invest an equal dollar amount in each of the ten stocks and hold them for a year.<br /><br />The strategy has generated <a href="http://www.dogsofthedow.com/dogyrs.htm">mixed results over the years</a>; in 2010 and year to date this year, the strategy has been fairly effective. Last year the Dow Dogs returned 20.5% versus the Dow Jones Industrial Index return of 14.1%. Year to date through 9/21/2011 the Dogs of the Dow have returned .8% versus the DJIA return of -3.9%.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/84lXascZCOKFiv8k17VmCO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-bxnu6sr0NjU/Tnp88wcfHfI/AAAAAAAAF8M/sFmFZ-7Pxq0/s800/dow%252520dogs%2525209%25252021%2525202011.PNG" width="625" height="328" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div align="center"><span style="font-size:85%;">Source: <a href="http://www.dogsofthedow.com/">Dogs of the Dow </a></span></div></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8083742554566957673?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-50153705372727770452011-09-16T09:50:00.000-04:002011-09-16T09:51:17.521-04:00<div style="text-align: justify;">With the recent sell off in the equity markets that began in mid July, one would suspect cash balances would be elevated. As the below chart notes, cash balances as a percentage of all mutual fund assets is near record lows though. Historically, low levels of money market cash have been associated with equity market tops.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/RGiMwzynEFWQWj1wLiFZ9O0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-g8aNU8_LqfI/TnM-cc-8dTI/AAAAAAAAF6g/OoF4yJ_vqXk/s800/cash%252520%252525.PNG" height="393" width="524" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">On the other hand given the meager interest rates paid on deposits investors might be going elsewhere with their cash. From a strategy perspective, some investors and money managers have moved cash investments to shorter term bond funds in an effort to earn a higher yield. When looking at fund flows into bond funds, this does not seem to be too much of the case though.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/CiHPjq2rfIQgzE3v-tkydO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-hxISxO7qFk4/TnM-cXTGRLI/AAAAAAAAF6k/UGcq-XglX8c/s800/fund%252520flows%2525209%2525202011.PNG" height="400" width="524" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Alternatively, maybe investors have moved cash to bank deposits. One reason for doing this would be an effort to at least receive FDIC insurance on their deposits. Also, some investors may be exhibiting cautious behavior due to potential sovereign debt exposure in money market funds. The below chart though doesn't seem to indicate significant deposits have been moved to banks outside of what we would normally expect.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/UrUS9dorsHM3K6_T-0y5sO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-8qBEzngSTCY/TnNCqrfmvLI/AAAAAAAAF7M/fhtmq7XrAL0/s800/deposits%252520at%252520dom%252520banks%2525209%2525202011.PNG" height="352" width="460" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />Even<a href="http://www.nyxdata.com/nysedata/asp/factbook/viewer_edition.asp?mode=table&amp;key=3153&amp;category=8"> margin debt is elevated</a> and stands at pre-Lehman levels.<br /><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/2a29K_CfX38pz3zQdEeZ8e0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-5ILFQR0DxBM/TnM-cf9CsfI/AAAAAAAAF6c/uzoZeIa86LA/s800/margin%252520debt%252520vs%252520free%252520credit.PNG" height="421" width="565" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">At the end of the day, it appears the market may be stuck in a trading range. This slow economic growth environment and global deleveraging cycle could be contributing to the lower cash levels. Possibly excess investor cash has been used to paydown debt. Positive technicals do include the MACD and RSI indices as noted below; however, recent market strength has been occurring on lower volume.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/4tCUfwsGhUALJGfaCW9ycO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-D7Vk8_AJ1YU/TnNSA-CnU4I/AAAAAAAAF7k/_s97-6_lDGI/s800/sp%2525209%25252015%2525202011.PNG" height="656" width="510" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5015370537272777045?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-21128210667288507802011-09-12T21:32:00.002-04:002011-09-12T21:34:06.551-04:00<div style="text-align: justify;">Today <a href="http://www.horanassoc.com/">HORAN Associates</a>, <a href="http://www.horanassoc.com/horan-capital-advisors.aspx">HORAN Capital Advisors'</a> business partner, launched a blog focusing on industry trends and data related to health care and wealth management. The blog, <a href="http://www.horanassoc.com/blog/articletype/categoryview/categoryid/81/healthwealthlife.aspx">HORAN Health.Wealth.<i>Life</i></a>, will focus on articles written by HORAN Associates' CEO, <a href="http://www.horanassoc.com/about-us/employee-directory/terence-l.-horan-clu-chfc.aspx">Terry Horan, CLU, ChFC</a>, and will focus on two of the greatest challenges Americans are facing today:<br /></div><ul><li>access to quality, affordable health care; and</li><li>securing professional counsel to build and sustain wealth for a lifetime</li></ul><div style="text-align: justify;">As Terry notes, readers will want to visit the new blog often "to stay informed on the two biggest challenges facing America today? One would certainly be access to great health care for the balance of what will in most cases be a very long life. Two would be making sure individuals and families will have enough accumulated wealth to live out this life with value and meaning. Because life without health is no great life and life without the means to enjoy it, actualize dreams, fulfill wishes and provide for coming generations is no great life either."<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2112821066728850780?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-74985488454730581382011-09-02T11:00:00.001-04:002011-09-02T11:01:54.253-04:00<div style="text-align: justify;">In today's release of the unemployment rate, there really isn't much positive data contained in the report. The unemployment rate remains at 9.1% with the non-farm payroll report showing no increase versus expectations of +75,000 increase. The broader measure of labor force utilization is known as the U-6. This measure shows the unemployment/underemployment rate increased to 16.2%. The U-6 measure is one that captures marginally attached workers which are individuals not looking for work although they would like a job and those that are employed in part time positions although they prefer full time employment. <br /></div> <br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/fYByfMiaqbVb4e0vbyA-8-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-alRjj5dqAUg/TmDrHgBVy5I/AAAAAAAAF6A/kyPz7kAqbb0/s800/unemployment%252520U6.PNG" height="359" width="473" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-7498548845473058138?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-88937822571564273322011-08-28T22:50:00.000-04:002011-08-28T22:50:20.600-04:00<div style="text-align: justify;">The sentiment readings released so far this month continue to be reported at levels weaker than those associated with stronger economic growth. The IBD/TIPP Economic Optimism Index is reported near the beginning of each month. In August, the TIPP Economic Optimism Index declined by 5.6 percentage points to a historic low of 35.8 vs. 41.4 in July. The index is 8.6 points below its reading of 44.4 in December 2007 when the economy entered into its last recession. Index readings above 50 indicate optimism; below 50 indicate pessimism. The TIPP Index does a fairly decent job forecasting other sentiment reports released later in the month. <br /></div> <br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/18bchWGQgirclJhP9IcLQ-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-DiC_dAEsjQ0/TlrzGI245NI/AAAAAAAAF48/79SYN1fZfyg/s800/tipp%252520cons%252520confidence.PNG" width="496" height="368" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center> <br /><div style="text-align: justify;">The TIPP Index is comprised of three components, all of which declined in August: <br /></div><ul style="text-align: justify;"><li><span style="font-weight: bold;">The Six-Month Economic Outlook</span>: a measure of how consumers feel about the economy’s prospects in the next six months.</li></ul><ul style="text-align: justify;"><li><span style="font-weight: bold;">The Personal Financial Outlook</span>: a measure of how Americans feel about their own finances in the next six months.</li></ul><ul style="text-align: justify;"><li><span style="font-weight: bold;">Confidence in Federal Economic Policies:</span> a proprietary IBD/TIPP measure of views on how government economic policies are working.</li></ul><div style="text-align: justify;">Of the 921 adults/households surveyed nationally this month, 29% of households say that at least one member of the household is looking for a full-time job. The economic policies to date have certainly not created jobs. <br /></div> <br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/WJlhcACbu5UpuletqgIjne0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-ED5RNf4ngpA/TlrzGObO_DI/AAAAAAAAF5A/_h2sF5OJGYs/s800/unemployment%252520education%252520level.PNG" width="469" height="356" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center> <br /><div style="text-align: justify;">The consumer sentiment index released this past Friday was reported at 55.7 which was below expectations of 56, but, higher than the 54.9 reported in July. Tuesday the Conference Board releases its consumer confidence index. Consensus expectations are for the confidence report to come in at 52%. These levels are very depressed and far from an 80% reading that would be consistent with strong economic conditions. The importance of these sentiment and confidence figures is their correlation to consumer spending and more specifically retail sales. <br /></div> <br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/bwg2htlrnCZWy5GP05ofUe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-692mHxaF_Qs/Tlr6fV-LJgI/AAAAAAAAF5U/O9bWZe-hfI0/s800/conf%252520retail%252520sales.PNG" width="442" height="297" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://online.barrons.com/public/page/barrons_econoday.html?mod=BOL_hps_tnav_market">Barron's</a> <br /></span></div> <br /><div style="text-align: justify;">Historically consumers have accounted for 70% of GDP and this deleveraging cycle is certainly influencing the consumer.</div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8893782257156427332?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-17639023478885611902011-08-21T13:33:00.000-04:002011-08-21T13:34:32.252-04:00<div style="text-align: justify;">Once again the equity put/call ratio moved above 1.0 at the close on Friday, reaching 1.04. The equity P/C ratio tends to measure the sentiment of the individual investor by dividing put volume by call volume. At the extremes, this particular measure is a contrarian one; hence, P/C ratios above 1.0 signal overly bearish sentiment from the individual investor. This indicator's average over the last 5-years is approximately .7, indicating the individual investor has been generally mostly bullish and more active on the call volume side. <br /></div> <br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/zQErNpkOtraLikl2vbSGbu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-ur68iO9VWgU/TlEjCmuq97I/AAAAAAAAF28/AzPByZCjV6E/s800/put%252520call%2525208%25252019%2525202011.PNG" height="347" width="461" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center> <br /><div style="text-align: justify;">For the institutional investor, technical analyst generally consider the index put/call ratio as a reflection of institutional sentiment. The index P/C ratio is slightly elevated at 1.53 and above its 5-year average of 1.4; however, in August 2007, the index P/C ratio stood at 2.7. Some would consider the current level of the index P/C as neither a bearish or bullish market sign at this time. <br /> <br />At HORAN, we believe business fundamentals are contrasting with equity market actions. This divergence is being driven in large part by the lack of confidence in Europe in dealing with its sovereign debt issues and in Washington's inability to deal with its budget deficit. Additionally, the amount of regulatory uncertainty that includes health care reform and potential income tax reform is a factor in business' ability to commit to longer term expansion plans. All of this also weighs negatively on consumer confidence and sentiment as well. <br /> <br />As the below chart shows, consumer confidence remains in an uptrend since early 2009; however, since February 2011 the confidence trend has been declining. <br /></div> <br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/hdtaIgleWNpBwYWz1uUcJu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-lk7KKOLlhZI/TlE2fjTGyFI/AAAAAAAAF3k/BRjvASPNivs/s800/cons%252520conf%2525207%2525202011.PNG" height="325" width="437" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center> <br /><div style="text-align: justify;">Lastly, there are some positive economic data points. <br /></div><ul style="text-align: justify;"><li><a href="http://www.federalreserve.gov/releases/g17/current/">Industrial production</a> in July was reported at .9% versus expectations of .5%. May and June industrial production were revised higher as well.</li><li><a href="http://www.conference-board.org/pdf_free/press/TechnicalPDF_4269_1313655146.pdf">Leading economic indicators index</a> increased .5% versus expectations of a .2% increase.</li><li>The Conference Board's coincident economic index (CEI) increased .3% with all four of its components increasing. Industrial production is a component of the CEI. <br /></li></ul><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/mZaxf4ozJcn3vKuwQBBkpe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-BO46C1392m8/TlE53mA8pUI/AAAAAAAAF34/FKgS-wiCn-E/s800/ip%252520leis.PNG" height="315" width="412" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: justify;">It is difficult to predict the markets in the short term, but technicals are <a href="http://chart.ly/elrpjxk">starting to point to an oversold level as noted in this chart link</a> and fundamentals, corporate and economic, are not decidedly negative. It seems to portend a slow economic growth environment with a focus on deleveraging around the globe. <br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1763902347888561190?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com2tag:blogger.com,1999:blog-36722043.post-35031004119179804402011-08-19T07:34:00.000-04:002011-08-19T07:35:46.061-04:00<div style="text-align: justify;">Analyst are extrapolating the weak report for the <a href="http://www.philadelphiafed.org/newsroom/press-releases/2011/081811.cfm">Philadelphia Fed Outlook</a> on Thursday as a precursor to more stock market weakness. In actuality though, the monthly performance of the S&amp;P 500 Index has a very low correlation to the monthly Philly Fed report. The below chart shows the data from August 2007 through August 2011. The "red" plot point is the August 2011 data. <br /></div> <br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/AGo5p91aLr7nmym3pS9cLu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-3onT77WxO2U/Tk3S_fysEtI/AAAAAAAAF2U/9k5tVv8wR_k/s800/philly%2525201%252520month%252520sp.PNG" height="407" width="577" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center> <br /><div style="text-align: justify;">As the above chart shows, the monthly Philly Fed report and the monthly return for the S&amp;P 500 Index have a low correlation of .356. Additionally, the R-squared is only .127. The t-statistic is very low as well. The flatness of the best fit line is some indication that the market's performance is not very dependent on the monthly Philly Fed data. <br /> <br />In looking at the one year return for the S&amp;P 500 regressed against the one month Philly Fed data does show a higher correlation, .791 and a higher R-squared of .626. If I compare the data back to 1996, the correlation and R-squared are slightly lower than that show in the below chart. Additionally, the one month S&amp;P return versus monthly Philly Fed report has a very low correlation and low R-squared. <br /></div> <br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/78GUF7eh9DUfJYfav7A4SO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-X31sOwioeKU/Tk3S_NOTUCI/AAAAAAAAF2Q/JN50Mbnv4Oo/s800/philly%2525201%252520year%252520sp.PNG" height="407" width="574" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: justify;">In a vacuum and in the short term then, this one Fed report is not a good predictor of future market returns. Certainly, the Fed report deserves investor attention; however, this data needs to be balanced against other fundamental company data and other economic data. We do believe the risk of a recession has risen, maybe 50-50 now versus one in three several weeks ago. Issues in Europe and lack of leadership in Washington in dealing with budget and economic issues is weighing negatively on consumer and business sentiment. This negative influence on sentiment can negatively impact future economic activity. <br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-3503100411917980440?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-41648920341905366772011-08-08T21:24:00.000-04:002011-08-08T21:24:52.185-04:00<div style="text-align: justify;">After today's market downdraft, the market is certainly oversold on a short term basis. The percentage of stocks trading above their 50 day moving average is now at the same level reached in late 2008, i.e., .40%. The caveat is, historically, the market has had a tendency to trade lower on a prospective basis after these low moving average percentage levels are reached. <br /></div> <br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/k10gAlEUw2mcLCVveR6uEu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-oZPEPV_ef6c/TkCG3fv1tsI/AAAAAAAAF1c/9ixppVsBZ5g/s800/s%252526p%252520500%25252050%252520day%2525208%2525208%2525202011.PNG" width="610" height="375" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center> <br /><div style="text-align: justify;">Additionally, for those that are superstitious, the S&amp;P 500 Index feel 6.66% today and reached a low of 666 in March 2009. Could it be at least a short term bottom? <br /></div> <br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/ONqFYYZOp96uLdrcX7Q0P-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-ss2qZXT6rz8/TkCItXkR-II/AAAAAAAAF10/9C4Rr37l5qE/s800/s%252526p%252520500%2525208%2525208%2525202011.PNG" width="620" height="507" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center> <br /><div style="text-align: justify;">A key question will be the impact the recent market action has on consumer and business sentiment. Additionally, if Congress and the administration in Washington would simply stop pointing fingers at S&amp;P and admit and address the budget problem, i.e., reduce federal expenses, the market could find firmer footing. Now the increased risk is the negative impact on sentiment and is the potential impact on sentiment enough to tip the economy into a recession. Lastly, Europe has problems that could ripple through the global economy as well. <br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-4164892034190536677?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-60256977326438773492011-08-07T19:07:00.000-04:002011-08-07T19:07:24.256-04:00As S&amp;P noted in their downgrade of the U.S. government's credit rating, the rate of growth in the U.S.'s spending is a significant reason for the downgrade.<br /><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/nSeQ53Rol5K9VPOVQH5eBe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-85NTZ8I18bY/Tj8aOcHmHeI/AAAAAAAAF1A/n_taGddEYQM/s800/spending%252520vs%252520revenue.PNG" width="619" height="369" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6025697732643877349?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-17123801657366981212011-08-06T12:22:00.000-04:002011-08-06T12:22:57.900-04:00<div style="text-align: justify;">Talk to any owner of a business and they will tell you one of the major issues that inhibits the company's ability to grow is not only the level of regulations, but the proliferation of ongoing new regulations.<br /></div><br />A recent report by the Heritage Foundation notes,<br /><div style="text-align: justify;"><blockquote><ul style="color: rgb(51, 102, 102);"><li>The spring 2011 Unified Agenda (also known as the Semiannual Regulatory Agenda) <span style="font-weight: bold;">lists 2,785 rules (proposed and final) in the pipeline</span> (emphasis added).</li></ul><ul style="color: rgb(51, 102, 102);"><li>Of those, 144 were classified as “economically significant.” With each of the 144 pending major rules expected to cost at least $100 million annually, they represent at least $14 billion in new burdens each year.<br /></li></ul></blockquote></div><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/F2p8hv217V-O6-yCSi-s5u0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-SMOT1ziB7KQ/Tj1nlbR0DVI/AAAAAAAAF0c/b0JkSbg6noU/s800/gov%252527t%252520regs.PNG" width="587" height="417" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />Another negative impact of increased regulations is it swells the growth of government.<br /><div style="text-align: justify;"><blockquote><ul style="color: rgb(51, 102, 102);"><li>...regulatory staff at federal agencies (full-time equivalents) increased about 3 percent between 2009 and 2010, from 262,241 to 271,235, and is estimated to rise another 4 percent—to 281,832—in 2011.</li></ul><ul style="color: rgb(51, 102, 102);"><li>Federal outlays for developing and enforcing regulations are also expected to grow by 4 percent this year, from $46.9 billion in 2010 (in constant 2005 dollars) to $48.9 billion.</li></ul></blockquote></div><div style="text-align: justify;">Reducing the regulatory burden would be one way Congress and the administration in Washington could relieve some of the uncertainty facing companies in the private sector. Additionally, reducing the growth of regulations would stem the growth of government.<br /></div><br />Source:<br /><a href="http://www.heritage.org/research/reports/2011/07/red-tape-rising-a-2011-mid-year-report"><br />Red Tape Rising: A 2011 Mid-Year Report</a><br />The Heritage Foundation<br />By: James Gattuso and Diane Katz<br />July 25, 2011<br />http://www.heritage.org/research/reports/2011/07/red-tape-rising-a-2011-mid-year-report<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1712380165736698121?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-88168023688854591482011-08-05T21:16:00.001-04:002011-08-05T23:54:08.783-04:00<div style="text-align: justify;">For the first time in history, the U.S.'s credit rating was lowered by Standard &amp; Poor's from AAA to AA+. S&amp;P’s action is the most tangible vote of disapproval so far by Wall Street on the deal between President Obama and Congress to cut the deficit by at least $2.1 trillion over 10 years. S&amp;P has said that it wanted at least $4 trillion of deficit reduction. S&amp;P noted the recent debt ceiling hike did not adequately deal with the underlining deficit issues. The federal budget is at a point where Congress and the administration must deal with the growth in the budget's long term annual deficits.<br /><br />The full <a href="http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fpdf&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1243942957443&amp;blobheadervalue3=UTF-8">S&amp;P downgrade report can be read here</a>.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8816802368885459148?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-1523786156435513962011-08-05T16:14:00.002-04:002011-08-05T21:17:38.283-04:00<div style="text-align: justify;">This morning we sent out a client note covering the recent market action in light of the market's volatility. Much of the recent discussion has centered around the U.S. economy falling into a “double dip” recession. A recent<a href="http://finance.yahoo.com/q/pr?s=JPM+Profile"> JP Morgan</a> strategy comment to investors noted the following:<br /></div><div style="text-align: justify;"><blockquote style="font-style: italic;">“Historically, US recessions were about over expansion (consumer or business) followed by a contraction of liquidity-businesses/consumers have strong balance sheets and while the US bank system is extremely well capitalized today, it is hard to imagine the right impulse exists to create a recession.”<br /></blockquote></div><div style="text-align: justify;">Our market comment titled, <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=WhSML5txTVI%3d&amp;tabid=364">Uncertainty: A Correction but not 2008/2009</a>, can be read by clicking the comment title link.<br /></div><br />If we can answer any additional questions, please do not hesitate to call on us.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-152378615643551396?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-61311403991832087972011-08-02T23:09:00.002-04:002011-08-03T06:45:06.868-04:00<div style="text-align: justify;">Today's market sell off has the <a href="http://finance.yahoo.com/q?s=%5EGSPC">S&amp;P 500 Index</a> down for seven days in a row. The S&amp;P index has declined 6.8% in this seven day period. A result of this decline is the number of stocks trading above their 50 day moving average has declined to 14%, a level at which the market has rebounded historically.<br /><br /></div><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/5IqoEx7hkZiPhNuBz6GBYu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-hl14KjDSEs0/Tji3K-XmlPI/AAAAAAAAFyA/Jpd1ngTij-s/s800/s%252526p%252520%252525%252520above%25252050%252520day%2525208%2525202%2525202011.PNG" width="613" height="376" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">As we noted in our prior comments and <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=MhvokHxrYX4%3d&amp;tabid=364">second quarter newsletter</a>, the market does seem stuck in a trading range. Today's decline puts the S&amp;P at the bottom of the range that began in late February of this year. Additionally, the market could be in the process of making a double bottom, if not a triple one.</div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/j7G_mXKmEyJLX6MiT3hNDe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-261ZZTfPLbE/Tji4skYgLzI/AAAAAAAAFyY/7nm0h-MQmG0/s800/s%252526p%252520500%2525208%2525202%2525201011.PNG" width="612" height="504" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Lastly, several of the recent economic data points have come in on the weaker side. Confidence has been negatively impacted by the actions in Washington over the last several weeks; however, we believe the weaker manufacturing data points are partly related to the supply disruptions due to the tsunami in Japan. In short, we do not see a strong economic recovery from this point, but we do not see a double dip recession either. We believe the economy is stuck in a slow growth environment, which may not improve until business uncertainty is lessened. </div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6131140399183208797?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-2777439776703404742011-07-27T11:56:00.000-04:002011-07-27T11:57:25.711-04:00<div style="text-align: justify;">The debate over raising the debt ceiling is now focusing on an important issue <a href="http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3DUnitedStatesofAmerica_AAAA_7_14_11.pdf&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fpdf&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1243932109521&amp;blobheadervalue3=UTF-8">the rating agencies have highlighted, i.e., the deficit itself </a>and the level of the governments debt. The difficulty some members of Congress are having has to deal with the apparent lack of cuts in the early years of both Reid and Boehner's agreement. As an example, in the Boehner <a href="http://cbo.gov/ftpdocs/123xx/doc12336/HouseBudgetControlAct.pdf">plan, the cuts are very little in 2012 and is very much back end loaded</a>. The Reid plan is no better in reducing the deficit as well.<br /></div><br /><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">(click for larger image)</span></span><br /></div><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/gaR-q7kJJePM3FmRHs7cZu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-Jl2c7DgYDbU/TjArpcqy8hI/AAAAAAAAFxE/unHgcRSisiU/s640/July%252520boehner%252520plan%252520score.PNG" height="291" width="640" /></a></td></tr><tr><td style=" text-align:right;font-family:arial,sans-serif;font-size:11px;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Paraphrasing from a <a href="http://www.zerohedge.com/news/cbo-scores-boehners-laughable-deficit-cut-plan-jay-carney-admits-obama-still-does-not-have-actu?">recent article on Zero Hedge's website</a>, the CBO’s scoring of the Boehner budget proposal comes to a deficit reduction of $851 billion from 2012-2021. However, this plan is heavily back end loaded and, on a net present value basis the reduction is only $50 billion. The current federal deficit is about $1.4 trillion this year and growing; hence, some members interest in Congress to focus on expenses. Every year that passes without addressing entitlements, the more painful the medicine might be.<br /><br />It is becoming increasing likely the August 2nd deadline is not met. If that is the case, what is the impact on cash levels at the Treasury? It appears the Treasury has enough cash until 8/12 and could probably get to 8/15, an interest payment date. This is highlighted in a <a href="http://www.reuters.com/article/2011/07/27/us-usa-debt-default-idUSTRE76P5TI20110727">Reuters article this morning</a>. The table assumes that the Treasury will be able to at least roll over maturing debt on August 4, 11 and 15. See below chart from <a href="http://www.smra.com/">Stone &amp; McCarthy</a> research.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Ekp5wWdsdSZ0sW_dznuhxe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-KNOX18A6KQA/TjArpVotUWI/AAAAAAAAFxI/uek0YyN6WRw/s800/treassury%252520cash%252520bal%252520august%2525202011.PNG" height="260" width="402" /></a></td></tr><tr><td style=" text-align:right;font-family:arial,sans-serif;font-size:11px;"><span style="font-size:85%;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></span></td></tr></tbody></table></center><br />Both plans are highly likely to lead to a lowering of the government's credit rating given the reduced focus on the deficit and debt level.<br /><br /><span style="font-size:85%;"><br /><span style="font-style: italic;">h/t: <a href="http://www.zerohedge.com/article/republican-kevin-mccarthy-says-no-debt-deal-likely-today-or-over-weekend-treasury-now-projec?">Zero Hedge</a></span><br /></span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-277743977670340474?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-91120697634942544172011-07-25T08:44:00.000-04:002011-07-25T08:45:40.733-04:00<div style="text-align: justify;">Which countries are impacted the most in a debt default, assuming it does occur. Below is detail on the foreign holders of U.S. government debt. The trend in the debt holdings is <a href="http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt">available from the U.S. Treasury site</a>.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/irkQMAGbDp9kCQB3DMHEwe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-g6T-c1yDe6w/Ti1kr5451QI/AAAAAAAAFws/FI73_FKnW8w/s800/debt%252520holders%2525207%2525202011.PNG" height="479" width="420" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Graphic Source/Link: <a href="http://graphics.thomsonreuters.com/RNGS/2011/JUL/DEBT_WF.jpg">Reuters</a></span></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-9112069763494254417?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-59693671010799054872011-07-23T23:48:00.001-04:002011-07-23T23:48:10.399-04:00<div style="text-align: justify;">Raising the debt ceiling itself is not the issue facing Congress and the U.S. government. As the below chart shows, Washington seems to do a good job issuing new debt up to the maximum limit each time the debt ceiling is increased.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/PYMpFivIjp13NckNvLfEZO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-u89V6J8NGdk/TieW6bILGOI/AAAAAAAAFu0/FYuHm-WXudk/s800/debt%252520chart.PNG" width="495" height="370" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The result of Congress' propensity to spend is the government's budgeted expenses now far outpace incoming revenues. In fact, the government now borrows 40 cents of every dollar it spends as noted in the below chart.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/ZY0vCb-OKtLYCHSLqnCU5O0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-8vNxUrlIKdE/TiuFGgM-uXI/AAAAAAAAFwE/dzcRQnfj9h4/s800/govt%252520spending%252520vs%252520rev%2525206%25252030%2525202011.PNG" width="477" height="575" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The stickiness of the unemployment rate is contributing to this gap in expenses versus revenue. The below chart shows the "income security" spending component of the government's budget has nearly doubled to $603 billion from $374 billion since the beginning of 2008. This increase in the "income security" portion of the budget is highly correlated with the unemployment rate. The "income security category" includes unemployment compensation, housing and food assistance.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/akqiG86rpwAYVoAb2qDGJO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-YZ8RKlJEb7A/TityKq2F2tI/AAAAAAAAFvU/qUFX6GinDh4/s800/unemployemnt%252520Rate%252520and%252520Income%252520Security.PNG" width="553" height="414" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Not many CEOs have commented on the impact Washington's policies are having on business decisions, primarily the desire by businesses to increase employment. However, during a recent Wynn Resorts investor meeting, Steve Wynn, CEO of Wynn Resorts (<a href="http://finance.yahoo.com/q/pr?s=WYNN+Profile">WYNN</a>), noted the difficulty businesses are having navigating the new policies and regulations coming out of Washington. The audio of a portion of that meeting can be heard at this link: <a href="http://commoncts.blogspot.com/2011/07/audio-vegas-entrepreneur-steve-wynn.html">Wynn Investor Meeting audio</a>.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/sybVMJhq2Di_207j_VQ4wO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-rpn0S8-Wkz0/TityKmaIJ_I/AAAAAAAAFvY/20QiyRSSeXA/s800/deficit%252520and%252520income%252520security%2525206%2525202011.PNG" width="553" height="414" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">If politicians in Washington would simply develop a credible plan that reduced spending and created an environment that was conducive to growing revenue over some reasonable time frame, say ten years, the business environment in the U.S. would likely improve.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5969367101079905487?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-9299313289291064202011-07-20T23:59:00.001-04:002011-07-21T00:01:50.435-04:00<div style="text-align: justify;">It is nearly impossible to turn to any business or news program where the lead story is anything but commentary on the debt ceiling debate going on in Congress. As we noted in our <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=MhvokHxrYX4%3d&amp;tabid=364">2nd Quarter Investor Letter</a> published on Monday, the real issue is not simply raising the debt ceiling, rather the <a href="http://disciplinedinvesting.blogspot.com/2011/07/real-issue-with-debt-ceiling.html">growth in the debt</a> itself.<br /><br />As the below chart shows, Congress has the unique ability to increase the Federal debt (spend beyond its means) every time the ceiling is raised. The more significant issue facing the government is developing a plan that reduces the government's overall debt.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/PYMpFivIjp13NckNvLfEZO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-u89V6J8NGdk/TieW6bILGOI/AAAAAAAAFu0/FYuHm-WXudk/s800/debt%252520chart.PNG" width="495" height="370" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a><br /></td></tr></tbody></table></center><br /><div style="text-align: justify;">At <a href="http://www.horancapitaladvisors.com">HORAN Capital Advisors</a> we do believe the debt ceiling will be increased and if it occurs after the August 2nd deadline, the delay will not have a negative long term impact on the economy. A key will be whether spending reductions are incorporated into any debt ceiling increase that passes Congress.<br /><br />From an economic perspective, we noted in our recent newsletter that the steepness of the yield curve and bank lending are suggesting a better economic environment ahead. As the below charts detail, the 13-week rate of change in loans and leases at commercial banks has turned positive, i.e., above zero, for the first time since January 2009.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/6XEnAJDfoeJ-wPA0HDnMme0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-PKf1Gvfor0U/TieHhsQps-I/AAAAAAAAFuo/0ls0XaQs_xo/s800/bank%252520lending%252520ndr.PNG" width="548" height="289" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />Additionally, the below chart shows the steepness of the yield curve (fed funds versus 10 year treasury). This spread is near a record high and historically recessions have been 3+ years into the future; hence, a double dip recession does not seem to be just around the corner.<br /><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/UeRbsAFUShdOmit-SvspM-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-sMLdtMU9HGA/Tiedozh37pI/AAAAAAAAFu8/T5G7DPc-Tzc/s800/fed%252520funds%25252010%252520year.PNG" width="428" height="329" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Chart source: <a href="http://www.schwab.com/public/schwab/research_strategies/market_insight/todays_market/sonders/sonders_071811.html">Charles Schwab</a></span><a href="http://www.schwab.com/public/schwab/research_strategies/market_insight/todays_market/sonders/sonders_071811.html"><br /></a></span><br /></div><div style="text-align: justify;">Lastly, recent earnings announcements have been coming in on the strong side as 75%+ of companies that have reported have exceeded expectations.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-929931328929106420?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-84120794548676427752011-07-19T17:02:00.000-04:002011-07-19T17:03:54.388-04:00<div style="text-align: justify;">The debt ceiling debate is top of mind for investors and the market and our our recently released <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=MhvokHxrYX4%3d&amp;tabid=364">2nd Quarter Investor Letter</a> includes commentary on this issue. We hope you find the content of our letter insightful as we look to the balance of 2011.<br /><br /><a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors'</a> complete Investor Letter can be accessed at the following link: <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=MhvokHxrYX4%3d&amp;tabid=364">2nd Quarter Investor Letter.</a></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8412079454867642775?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-53517248674699259372011-07-18T10:04:00.000-04:002011-07-18T10:05:26.793-04:00<div style="text-align: justify;">Much of the media attention surrounding the debate going on in Washington is about the issue of increasing the debt ceiling. If one reads Standard &amp; Poor's recent report that placed U.S. government debt on "Negative Credit Watch", the primary issue cited in S&amp;P's report was not simply an increase in the debt ceiling. A bigger issue cited in the report was Washington's lack of any credible plan on reducing the actual level of debt. In <a href="http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3DUnitedStatesofAmerica_AAAA_7_14_11.pdf&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fpdf&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1243932109521&amp;blobheadervalue3=UTF-8">Standard &amp; Poor’s Negative Credit Watch report</a> S&amp;P concluded,<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>“Congress and the Administration <span style="font-style: italic;">have not achieved a credible solution to the rising U.S. government debt burden</span> <span style="font-style: italic;">[emphasis added]</span> and are not likely to achieve one in the foreseeable future.”</blockquote></div>The below video provides a clear summary of the current debate.<br /><br /><center><embed src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf" type="application/x-shockwave-flash" background="#333333" allowfullscreen="true" allowscriptaccess="always" flashvars="si=254&amp;contentValue=50108048&amp;shareUrl=http://www.cbsnews.com/stories/2011/07/17/ftn/main20080176.shtml?tag=stack" height="279" width="425"></embed></center><br /><div style="text-align: justify;">Lastly, Karl Denninger of The Market Ticker, provides a detailed summary of the debt issues facing the U.S. in a post titled, <a href="http://market-ticker.org/akcs-www?post=190174">The Truth About Budgets, For Both Left and Right</a>. It is an article that should be read in order to better understand the debt issue debate.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5351724867469925937?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-28768925119793113052011-07-11T10:32:00.000-04:002011-07-11T10:33:38.280-04:00<div style="text-align: justify;">By clicking the below graphic, readers can access estimated earnings growth rates for the S&amp;P and its sectors through 2012. Beginning in Q4 2011, financials are expected to show the strongest growth in earnings. Only time will tell.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="http://graphics.thomsonreuters.com/11/07/US_Q2EARN0711_SC.html"><img src="https://lh4.googleusercontent.com/-bu525Or8lI0/ThsI7PfQ2SI/AAAAAAAAFt8/uK-ykmxLv3Q/s800/earnings%252520growth%2525207%2525202011.PNG" height="432" width="627" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2876892511979311305?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-18651591493564124032011-07-04T03:00:00.001-04:002011-07-04T03:00:00.347-04:00<div style="text-align: justify;">Emerging market economies are at risk of overheating; however, many emerging countries are working to stem growth in an effort to prevent a hard landing of their economic growth. The countries at highest risk of overheating are detailed in the below table.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/C9_i6qo87lWziK4nuHBMgO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-htQYy9B9XVc/ThEubzMOM3I/AAAAAAAAFtw/J6iTbV16B8M/s800/overheating%252520economies.PNG" width="268" height="549" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The factors that make up the overheating index are displayed in the below interactive table.<br /></div><br /><center><object width="595" height="583"><br /><param name="movie" value="http://media.economist.com/sites/default/files/media/2011InfoG/Interactive/OverheatingEconomies_20110628_3/Overheating.swf"><br /><param name="allowFullScreen" value="true"><br /><param name="allowscriptaccess" value="always"><br /><embed type="application/x-shockwave-flash" src="http://media.economist.com/sites/default/files/media/2011InfoG/Interactive/OverheatingEconomies_20110628_3/Overheating.swf" allowscriptaccess="always" allowfullscreen="true" width="595" height="583"></embed><br /></object></center><br /><br />Source:<br /><br /><a href="http://www.economist.com/blogs/freeexchange/2011/07/global-growth">American Exceptionalism</a><br />The Economist<br />By: R.A.<br />July 1, 2011<br />http://www.economist.com/blogs/freeexchange/2011/07/global-growth<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1865159149356412403?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-43786318607780596222011-07-03T16:55:00.000-04:002011-07-03T16:55:56.039-04:00<div style="text-align: justify;">Stock buybacks and dividend increases for companies in the S&amp;P 500 Index have certainly been on the mend since the end of the financial crisis in 2009. For the first quarter, and on a year over year basis, dividends are 13.7% higher, buybacks are 62.7% higher and buybacks plus dividends are higher by 39.6%.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/VvtOlFY8-duyNMXR6T97Au0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-CGlrpzP93JU/Tg9k08UbaNI/AAAAAAAAFtA/Ka7L6Rc96d8/s800/buyback%252520cht%2525203%25252031%2525202011.PNG" width="528" height="482" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Data Source: <a href="http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobkey=id&amp;blobcol=urldata&amp;blobheadername1=content-type&amp;blobheadervalue3=UTF-8&amp;blobheadervalue1=application/pdf&amp;blobheadername2=Content-Disposition&amp;blobwhere=1243924289907&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename=20110629_BUYBACK_PR.pdf">S&amp;P (PDF)</a></span></span> <span style="font-size:85%;"><span style="font-style: italic;"></span></span><br /><br /></div><div style="text-align: justify;">In addition to the improvement in buyback and dividend payments, company cash balances now exceed a record $1 trillion, a 14.6% increase versus Q1 2010. It would certainly be positive if companies had the confidence to commit some of this cash to larger dividend increases.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/9heTXPXxE5lnB8-DOZ7Ypu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/--RMJGbJ2LMs/ThDORF6B2QI/AAAAAAAAFtg/KP9eJSIqflE/s800/cash%252520balance%2525203%2525202011.PNG" width="632" height="246" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://www.standardandpoors.com/products-services/articles/en/us/?assetID=1245304926923">Standard &amp; Poor's</a></span></div><br /><div style="text-align: justify;">Below is a table containing the top 10 S&amp;P 500 companies ranked by per share cash balances.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/o3tWJKK5I0TUn-PuLCBMp-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-tgks6W8jTog/ThDTWA10zPI/AAAAAAAAFtk/upfU51x6PHE/s800/cash%252520balance%252520top%25252010%2525203%25252031%2525202011.PNG" width="548" height="345" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;">Source: <a href="http://www.standardandpoors.com/products-services/articles/en/ap/?assetID=1245306102384">Standard &amp; Poor's</a></span><br /></div><br /><div style="text-align: justify;">Lastly, investors are encouraged to examine company 10-Qs and 10-Ks to assess the quality of corporate cash balances. An article by professors at Villinova University and Pennsylvania State University title, <a href="http://blogs.smeal.psu.edu/grumpyoldaccountants/archives/15">What's Up With Cash Balances</a>, notes the recent poor quality of cash balances reported in financial reports. For example, in a recent 10-K for Pep Boys (<a href="http://investing.money.msn.com/investments/company-report?symbol=pby">PBY</a>), the company states:<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>All credit and debit card transactions that settle in less than seven days are also classified as cash and cash equivalents.</blockquote></div><div style="text-align: justify;">Instead of showing as cash, these transactions should be classified as receivables. The article notes other liberties taken by companies with the classification of cash assets. Certainly, corporate cash balances are higher; however, actual cash may note be as high as it seems.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-4378631860778059622?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-1274670046785386242011-07-02T14:43:00.000-04:002011-07-02T14:44:01.717-04:00<div style="text-align: justify;">In our post in mid June titled, <a href="http://disciplinedinvesting.blogspot.com/2011/06/market-adjusting-to-slower-growth.html">Market Adjusting To Slower Growth Economic Environment</a>, we noted the put/call ratio had climbed to 1.1 and was at a level last reached at the market's low in March 2009. At the time of our post, the S&amp;P 500 Index was trading at 1,271. Since that time the put/call ratio has declined to .56 and the S&amp;P has rallied to 1,339, an advance of 5.3%.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/MWtjYETEg2P-4RAT4lunAe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-Oz6LrrcKYr4/Tg9k04O8UBI/AAAAAAAAFtE/eKvnb2HQF10/s800/put%252520call%252520S%252526P%2525207%2525201%2525202011.PNG" width="545" height="402" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authuser=0&amp;authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The ability of the market to move higher in the coming week's may hinge on the market's view on a number of economic reports next week: durable goods report on Tuesday, jobless claims on Thursday, private payrolls, unemployment rate and wholesale inventories on Friday.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-127467004678538624?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-42097267548391100702011-06-26T09:07:00.001-04:002011-06-26T09:07:39.172-04:00<div style="text-align: justify;">Consulo Mack interviews Michael Mauboussin in this week's <a href="http://www.wealthtrack.com/">WealthTrack</a> video. Mauboussin is Chief Investment Strategist at Legg Mason Capital. In this interview, Mauboussin discusses why investors tend to buy high and sell low and why higher trading activity often leads to lower returns. Mauboussin is one of the leading experts on the behavioral tendencies that impact investor returns. Mauboussin believes the economy is in the earlier stages of a recovery and favors large cap equities at this point in the economic cycle. This is a must view interview for investors.<br /></div><br /><center><embed src="http://blip.tv/play/AYLEqE0C" type="application/x-shockwave-flash" wmode="transparent" allowscriptaccess="always" allowfullscreen="true" width="480" height="294"></embed></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-4209726754839110070?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-29002000541085532832011-06-25T13:48:00.001-04:002011-06-25T13:49:06.660-04:00<div style="text-align: justify;">Since January 1, 2000 small cap and mid cap stocks have significantly outperformed large cap U.S. equities.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/YPclFjJDgNsUpj4bv-hbUe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-Z2YGAUCL8TI/TgYaareEqWI/AAAAAAAAFss/UYbciJV5qbQ/s800/mid%252520vs%252520lg%252520sm%2525203%25252031%2525202011.PNG" width="548" height="391" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">From a valuation perspective, since the beginning of 1992, mid cap equities are trading at historically high valuations compared to large cap stocks on a relative basis. Absolute valuations of mid cap stocks still look reasonable; however, if there is a reversion to the mean, large cap equities are likely to gain the upper hand on performance as one looks forward. Maintaining some exposure to mid caps will likely be beneficial though as merger activity often times targets the mid cap companies.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/--nA36DVBciDDtwYZiz35-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-KpKdWRvmaaQ/TgYaaXAoHuI/AAAAAAAAFso/o9wG9Cnyc-s/s800/mid%252520lg%252520relative%2525203%25252031%2525202011.PNG" width="548" height="407" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://individual.troweprice.com/staticFiles/Retail/Shared/PDFs/PriceReports/Spring2011PriceReport.pdf">T. Rowe Price (PDF)</a><br /></span></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2900200054108553283?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-49726207973207130212011-06-19T18:28:00.000-04:002011-06-19T18:28:54.282-04:00<div style="text-align: justify;">Market volatility of late seems to be the norm due to concerns over European debt defaults, budget deficits and slow worldwide growth expectations. These issues are being somewhat offset by the large amount of liquidity that resides on corporate and individual balance sheets. This liquidity is seeking a home that offers better returns than U.S. Treasuries. The 5-year Treasury is yielding around 1.53% and the 10-year treasury is under 3%, trading at a yield of around 2.95%.<br /><br />Our positioning of our client portfolios maintains an overweight in health care (more defensive sector) and technology (generating strong earnings growth). We continue to maintain an underweight in the financial sector, more specifically in banks, due to our concern about their earnings growth ability in the near term given the large amount of regulation coming out of Washington D.C. Our portfolio structure continues to focus on reducing the volatility in our client investment accounts.<br /><br />We do believe the economy is still growing, although at a slow pace. Some of the factors inhibiting growth are the result of supply chain disruptions caused by the tsunami in Japan and floods in the Midwest. We believe the recent market pullback is an adjustment to a slower growth global economic environment.<br /><br />It is likely money flow into equities and out of bonds could pickup in the second half of this year coincident with better clarity on economic growth. The financial condition of most large companies is strong as they hold record levels of cash on their balance sheet and continue to deliver strong earnings results, although earnings comparisons become more difficult in the second quarter. These financially strong companies should provide better returns than the low rates available on treasuries. The recent market pullback seems to be providing investors underweight in equities with an opportunity to add to equity allocations and/or equity positions.<br /><br />The equity put/call ratio at 1.1 is higher than the level reached at the market low in July 2010 and higher than the level at the market's low in March of 2009.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/SHQmbJePVCiTPc4wRp4nEO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-R4jnCWkKki4/Tf5xxBTk-iI/AAAAAAAAFsU/DOZ2DAtpkMg/s800/equity%252520put%252520call%2525206%25252019%2525202011.PNG" width="513" height="380" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Additionally, individual investor bullish sentiment as reported by the <a href="http://www.aaii.com/sentimentsurvey">American Association of Individual Investors</a> remains at low levels. Last week's reading was reported at 29.0%. Although this represents an increase of 4.58% from the prior week's reading, the 8-period moving average continues in a downtrend and came in at a lower 30%. This contrary indicator tends to be most accurate at the extremes.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/QZmBJgGVkKMCvRpIDr9HoO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-Ap7c5KdsY-A/Tf5xn52lxCI/AAAAAAAAFsQ/7Zjpd0yM2-0/s800/sentiment%2525206%25252019%2525202011.PNG" width="592" height="359" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The excessive investor pessimism, a potential resolution to the Greek debt crisis before the end of the weekend or early next week, even if only a short term one and decent equity fundamentals could see the market recover from oversold conditions in the near term.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-4972620797320713021?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-15961765632708804082011-06-09T09:11:00.000-04:002011-06-09T09:11:34.785-04:00<div style="text-align: justify;">This morning the <a href="http://www.aaii.com/sentimentsurvey">American Association of Individual Investors</a> reported a decline in individual investor bullish sentiment 24.42% versus last week's reading of 30.18%. The bearish sentiment level jumped over 14% to 47.67% versus last week's bearishness level of 33.43%. This resulted in a bull/bear spread of -23.3% versus last week's -3.3%. Lastly, the 8-period moving average of the bullish sentiment reading is approaching levels reached in March 2009, a market turning point.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/aoE4PrjV_RdMwncMSo99--0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-8cvf2KSRauE/TfDF27SDHSI/AAAAAAAAFsA/pyDYRXwEa6U/s800/sentiment%2525206%2525209%2525202011.PNG" height="367" width="589" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1596176563270880408?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-85170804157671873632011-06-06T21:52:00.000-04:002011-06-06T21:52:50.107-04:00<div style="text-align: justify;">The <a href="http://investing.money.msn.com/investments/market-index/?symbol=$US:INX">S&amp;P 500 Index</a> has generated a negative return in each of the last five weeks and has started the sixth week on a down note. From a technical perspective the market appears oversold.<br /><br />The percentage of stocks selling above their 50 day moving average has fallen to levels last seen during the March lows earlier this year. After the close today only 24% of S&amp;P 500 stocks are trading above their 50 day moving average compared to 27% in March. Additionally, the percentage of stocks trading above their 150 day moving average is at a level last seen in the third quarter of 2010.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/IrKH3OyWdcyunYtwyv12Vu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-l29_sOdxTW8/Te1_kcntWDI/AAAAAAAAFrk/jwpkRT2zwZg/s800/s%252526p%252520%252525%252520above%25252050%2525206%2525206%2525202011.PNG" width="612" height="376" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/yj5-x_2OM7Pi-7t1uo6FHe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-gSFkWsv_zrY/Te1_siJzKXI/AAAAAAAAFrs/5AAtJ0Fzqzo/s800/s%252526p%252520%252525%252520above%252520150%2525206%2525206%2525202011.PNG" width="616" height="375" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/so-YjxuAAQ-s8pWAlyzeQO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-Z-nU-y9h-sQ/Te2DgLCoC9I/AAAAAAAAFr0/vKFWMt3IrEQ/s800/s%252526p%2525206%2525206%2525202011.PNG" width="507" height="539" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8517080415767187363?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-24523298169848910052011-06-04T08:42:00.001-04:002011-06-04T08:43:19.632-04:00<div style="text-align: justify;"><a href="http://www.chartoftheday.com/">Chart of the Day</a> recently provided information on the historical monthly performance of the Dow. Below is what they had to say along with their graphic.<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>"[The] chart illustrates the Dow's average performance for each calendar month since 1950 (blue columns) and the average monthly performance of the Dow from 1950 to the present (gray line). [The] chart illustrates that the Dow has tended to perform best during the last several months and first several months of a calendar year. During the middle of a calendar year, the Dow has tended to struggle (with the exception of July). It is worth noting that there have been only two calendar months during which the Dow has declined on average -- June and September."<br /></blockquote></div><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/D5Lb0GJO8axN36Fkh8SKTe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-mMIXn_fYDOY/Teonjkzp0vI/AAAAAAAAFrQ/iInV5GdeGnc/s800/dow%252520monthly%252520perf.PNG" width="445" height="329" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: </span><a style="font-style: italic;" href="http://www.chartoftheday.com/">Chart of the Day</a></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2452329816984891005?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-1033471976471216422011-06-01T23:29:00.001-04:002011-06-01T23:33:30.821-04:00<div style="text-align: justify;">Before May and now the first day of June, it seems the S&amp;P 500 Index desires to do anything but move higher. The <a href="http://investing.money.msn.com/investments/market-index/?symbol=$US:INX">S&amp;P 500 Index</a> had advanced over 9% through the first four months of the year. It is not reasonable to think the market can move higher by 9% every four months. So in May, the S&amp;P declined 1.13% and June is starting off on a weak note by declining 2.28%. After the markets decline today, the S&amp;P 500 Index is still up 5.38% on a year to date basis.<br /><br />The next support level for the <a href="http://investing.money.msn.com/investments/market-index/?symbol=$US:INX">S&amp;P</a> is 1,305; however, it is difficult to guess market bottoms. From a fundamental perspective though, valuations for large cap U.S. equities continue to look more and more attractive. The forward four quarter P/E ratio for the S&amp;P 500 Index is 12.8 times based on projected earnings of $103.57 for the S&amp;P 500.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/5ODTjO324ODuJez2wCJet-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/-lMUrjB_101M/Teb5W7hO-bI/AAAAAAAAFq0/qwfC8Vrauyk/s800/s%252526p%252520forward%252520valuation%2525206%2525201%2525202011.PNG" width="411" height="139" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a><br /><br /></td></tr></tbody></table></center><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/i7O9bIwYBv3EGbm6QD47du0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-_uKxbAHkyzA/Teb7ccH_LpI/AAAAAAAAFrE/KGId6KZ3rgA/s800/s%252526p%2525206%2525201%2525202011.PNG" width="572" height="492" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a><br /></td></tr></tbody></table></center><br /><div style="text-align: justify;">The sell off today was triggered by the weaker than expected ADP payroll report. Unfortunately, we believe this type of weaker, or less than robust, economic data will be the norm over the course of the next 6-12 months. The unemployment rate will likely remain stubbornly high as we noted on page 3 of our <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=xL240okVjOE%3d&amp;tabid=364">first quarter investor letter</a>.<br /><br />The small down tick in the U.S. Leading Economic Index is not unusual when the economy is entering the mid-cycle of a recovery.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Vyz9mpIM1FRNctv8bGweFe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/-hZN6gdOhJJM/Teb5XGZCSsI/AAAAAAAAFq4/sfwgojt2k5E/s800/lei%252520sp%252520ip.PNG" width="542" height="415" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Additionally, companies have reduced inventory levels relative to sales to the point that a slight improvement in demand will likely result in the need to increase manufacturing to replenish stocks.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/TObFS11fKeWv4F49z84nne0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/-uJT2UEwLXw8/Teb5Wx_UcOI/AAAAAAAAFq8/BR86Wb4JP0I/s800/invsales%25252032011.PNG" width="599" height="371" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">And finally, as Liz Ann Sonders notes in a r<a href="http://www.schwab.com/public/schwab/research_strategies/market_insight/todays_market/sonders/sonders_053111.html">ecent strategy article</a>, Chief Investment Strategist at Charles Schwab &amp; Co. (<a href="http://investing.money.msn.com/investments/company-report?symbol=schw">SCHW</a>),<br /></div><div style="text-align: justify; color: rgb(51, 153, 153);"><blockquote>"The...massive flow disruptions in Japan are already beginning to turn. Commodity prices have come off the boil. Finally, both monetary and fiscal policy remains stimulative; even considering the finale of QE2 in a few weeks. The Fed has no intention of draining its balance sheet any time soon, nor raising rates.<br /><br />Corporate America has rarely been healthier, and the cash firepower available to companies is massive. Debt-to-equity for US companies is at its lowest in over 20 years and they hold nearly $2 trillion in cash on their balance sheets.<br /><br />With leverage so low, if it simply returned to the average of the past decade, companies would have an extra $2.7 trillion to spend, according to the Financial Times. Deal-making is back.<br /><br />In sum, growth has certainly slowed, but many of the contributing factors are temporary in nature. <span style="font-style: italic;">Assuming US GDP growth can rebound back above 2%, historically this isn't a bad backdrop for stocks. Looking at all years when US GDP growth was between 2% and 3%, the average return for the S&amp;P 500 was nearly 14%, with only two down years out of 11 total. Not bad (emphasis added)."<br /></span></blockquote></div><br /><span style="font-size:85%;"><span style="font-style: italic;">Disclosure: Long SCHW</span></span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-103347197647121642?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-17738108065263787192011-05-31T11:00:00.000-04:002011-05-31T11:00:00.588-04:00<div style="text-align: justify;">Much has been made lately regarding food inflation and the lack of impact on the Consumer Price Index. In large part, the reason for this is due to the fact, in the U.S., the food component in CPI is a much smaller weighting than in developing countries around the globe.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Y3yXIYFiGKQNx8L_kOmMle0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-3OB_QJwbTg4/TeUAynlnXzI/AAAAAAAAFqc/yKadw9-dCYA/s800/weight%252520food%252520in%252520CPI.PNG" height="406" width="337" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: </span><a style="font-style: italic;" href="http://personal.fidelity.com/products/funds/content/pdf/2010_market_update.pdf">Fidelity (page 20)</a></span><br /></div><br /><div style="text-align: justify;">Below is a chart of the CRB Spot Foodstuffs Index and the U.S. Consumer Price Index. As the 20-year chart shows, although the Foodstuffs Index is up over 40% on a YOY basis and CPI is up 3.1%, the two indexes are tracking closely. Several of the component's of the Foodstuffs Index are butter, cocoa, corn and hogs. And, although we are seeing food price inflation, it represents a smaller weighting within the CPI, for example, butter is only .067% of the consumer price index.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/uWZ1pXewSxcDTv5Y25y4l-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/-E8TZG93fQ3Q/TeT65kBoHqI/AAAAAAAAFqY/sWAl2CbmTqE/s800/foodstuffs%252520index%252520and%252520CPI.PNG" height="406" width="532" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1773810806526378719?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-51998159587356448132011-05-22T17:45:00.000-04:002011-05-22T17:45:42.051-04:00<div style="text-align: justify;">On a relative basis, small cap stock stocks are trading at near record levels from a valuation perspective since 1990.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/o5GDg4FCJi_Jt_LspFH-Ou0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/Tdl71720QVI/AAAAAAAAFpM/G_Mndp1JAA4/s800/small%20cap%20vs%20lg%20cap%20valuations.PNG" width="572" height="347" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://personal.fidelity.com/products/funds/content/pdf/2011_market_update_q1.pdf">Fidelity, pg. 29 (PDF)</a><br /></span></div><br /><div style="text-align: justify;">A part of the valuation difference is a result of the strong performance achieved by small cap stocks versus large cap stocks. As the below chart details, the 10-year return of the Russel 2000 small cap index has far outpaced the return of the S&amp;P 500 index, 70.8% versus 6.7%, respectively.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/XCP7dJKjOuC9jZQrzrX2r-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/_d4aL5xTH0xg/TdmAsmxg0mI/AAAAAAAAFpg/PYh4JpR-NI4/s800/small%20vs%20large%20chart%205%202011.PNG" width="713" height="362" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5199815958735644813?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-74184584520800710972011-05-20T10:53:00.000-04:002011-05-20T10:53:22.151-04:00<div style="text-align: justify;">In this week's sentiment survey by the <a href="http://www.aaii.com/">American Association of Individual Investors</a>, it was reported that bullish sentiment fell to 26.69%. This is the lowest level for bullish investor sentiment since August of last year, which was near the low point for the market in 2010. The bull/bear spread was reported at -14.6%. It is important to note the sentiment indicator is a contrarian one and tends to be most accurate at its extremes. As the below chart outlines, the bullish indicator is entering extreme territory.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/MLEspi1vtHOoxSbLEpvvzO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TdZ7JHYvsoI/AAAAAAAAFpA/LWDo-KEEXnw/s800/sentiment%205%2019%202011.PNG" height="364" width="587" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://www.aaii.com/SentimentSurvey">AAII</a></span></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-7418458452080071097?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-55787298088070310532011-05-17T21:00:00.001-04:002011-05-17T21:01:15.279-04:00<div style="text-align: justify;">A great deal of rhetoric is being expended on the fact consumers are paying high prices at the pump for a gallon of gasoline. Politicians are implying the oil companies are price gouging. Much of the attention is focused on the fact WTI (West Texas Intermediate) Cushing crude oil has fallen to around $97 per barrel. In September of 2008 when WTI was declining from its high of nearly $140 a bbl, a gallon of gas cost a consumer $3.70. The current price for a gallon of gas is around $4.00. So yes, pump prices do seem a little elevated on the surface. On the other hand, there is more at play than WTI crude prices.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/Fk9M-n7zgLdNjaKGBjqgw-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TdMOMeJpKEI/AAAAAAAAFoc/pU0wEaA6J7s/s800/oil%20price%20vs%20gasoline%20price%205%202011.PNG" width="710" height="440" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Since early this year, the price of Brent crude began to climb at a higher rate than WTI crude. At the moment, WTI is trading around $97 bbl and Brent is trading around $110. A week ago Brent was trading near $120 per bbl.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/ZkKlr5jQtiNxlpyS0N-a7-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TdMOWJ5aSII/AAAAAAAAFok/OoFzNQ0QBWM/s800/wti%20versus%20brent.PNG" width="511" height="443" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;"><br />Data Source: <a href="http://www.eia.doe.gov/petroleum/data.cfm">U.S. Energy Information Administration</a></span></span><a href="http://www.eia.doe.gov/petroleum/data.cfm"><br /></a></div><br /><div style="text-align: justify;">The higher Brent price is largely due to the unrest in the Middle East. This unrest has placed a higher risk premium on crude prices that are exported and created more demand by European countries for Brent crude. Additionally, since the U.S. is a large importer of crude, gasoline pump prices are likely being set more off of the Brent price versus the WTI price.<br /></div><br /><div style="text-align: justify;">Some in the media have indicated gasoline prices should be around $3.00 per gallon. However, in 2008, this was more the case when crude prices were rising than when they were falling. In a market driven economy, prices seem to always go up faster than they come down. <br /><br />The disparity in price between WTI and Brent does not appear to be narrowing much at this point in time. Given the volatile situation in the Middle East, the price disparity could continue through the summer and higher than expected gasoline prices at the pump may be a fact of life near term.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5578729808807031053?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-12122332717454456722011-05-15T13:29:00.000-04:002011-05-15T13:29:13.098-04:00<div style="text-align: justify;">It seems much that is being written of late is focused on negative data points that attempt to rationalize why a correction is just around the corner. I get the sense the stock market's (Dow Jones Industrial Average) 30+% advance since early July is weighing on strategists' and investors' minds as not being sustainable. Certainly a pullback would be healthy for the markets.<br /><br />Last week's investor <a href="http://www.aaii.com/sentimentsurvey">sentiment survey from AAII</a> certainly suggests the individual investor is not overly bullish. In fact, the bullish sentiment reading fell almost five percentage points to 30.77%. This is below the long term average of 39%.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/iuNHHhoAZOtIXkQp3WdMRu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/_d4aL5xTH0xg/Tc_zV4-ZINI/AAAAAAAAFnM/urbHScfkBfE/s800/sentiment%20short.PNG" width="588" height="363" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">In spite of the lack of enthusiasm of individual investors, and this is a bullish sign for the markets, the broader confidence and sentiment readings continue to improve. The consumer confidence index continues to trend higher along with the the University of Michigan Consumer Sentiment Index.<br /></div><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/kstK-KyIrk2Rx6UkVMwiW-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/_d4aL5xTH0xg/TdAA1SgGt6I/AAAAAAAAFnc/6OawQllBogw/s800/cons%20confidence.PNG" width="508" height="381" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: justify;">On the business front many of the data points suggest a continued improvement in the business segment of the economy.<br /></div><ul><li>Strength in industrial production.<br /></li></ul><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/gUHEqMKv1a0H0QJ2Q4lUre0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TdAA1zNjhaI/AAAAAAAAFng/EYkALv0AF2s/s800/indprod.PNG" width="619" height="374" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><ul><li>improvement in nondefense manufacturers' new orders.<br /></li></ul><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/EmxXePmovORuirzW9S6GDe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/TdAA2DHAONI/AAAAAAAAFns/S77ZWI4NC2g/s800/newordersnondefense.PNG" width="623" height="374" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><ul style="text-align: justify;"><li>corporate profits are at record levels; however, after tax corporate profits recently turned lower.<br /></li></ul><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/yxOgPBVwiD-2zJ3H4zKdoe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/_d4aL5xTH0xg/TdAA1_mcFCI/AAAAAAAAFnk/Cmq_BLjjxBQ/s800/corp%20profits.PNG" width="621" height="371" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/0PM_Kdu5F8I3IUL4evy1ge0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TdAA1mj0PtI/AAAAAAAAFnY/gDZmfWe126w/s800/corpprofaftertax.PNG" width="617" height="371" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><ul style="text-align: justify;"><li>business inventory to sales ratio continues to decline to a record low level. If sales continue to improve, this inventory will need to be replaced and will provide support to the production side of the economy.<br /></li></ul><center><table style="width:auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/JHrVv3dhetr-Nr7xyP8sl-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TdAA1tkw9fI/AAAAAAAAFno/IAxKqe2vIoo/s800/invtosales32011.PNG" width="620" height="373" /></a></td></tr><tr><td style="font-family:arial,sans-serif; font-size:11px; text-align:right">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Now that I have noted some positives on the economic front, there are certainly factors that could derail economic growth. I think Bill Gross' April investment outlook, titled <a href="http://www.pimco.com/EN/Insights/Pages/Skunked.aspx">Skunked</a>, is a worthwhile read for all investors. The U.S. government has significant budget/structural issues that need to be dealt with by Congress. Any steps to reign in government spending will be contractionary from an economic perspective. The benefit of dealing with the deficit issue though could outweigh the short term negatives. In addition to the budget deficit, directly related is the upcoming end to the Fed's QE2 program.<br /><br />Also, an article highlight from <a href="http://abnormalreturns.com/sunday-links-trading-stress/">Abnormal Returns</a> pointed to a report in The Economist that was suggestive of the <a href="http://www.economist.com/blogs/buttonwood/2011/05/global_economy">global economy running out of steam</a>. This recovery is certainly a fragile one, but it is a recovery nonetheless.<br /><br />The equity and bond markets tend to be forward looking and from a pure technical perspective, Doug Short wrote about how <a href="http://dshort.com/articles/Kimble/2011/0514-look-alikes.html">many of the markets are currently testing key support levels</a>. The market will get a chance to digest several important economic releases this week that deal with jobless claims and existing home sales. These support levels are worthwhile factors for investors to watch.<br /><br />As Winston Churchill once said, "The pessimist sees difficulty in every opportunity. The optimist sees opportunity in every difficulty." There are certainly many factors around the globe that could derail our recovery. This does present investors with investment opportunities though.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1212233271745445672?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-14230387620372352312011-05-08T21:56:00.001-04:002011-05-08T21:56:25.989-04:00<div style="text-align: justify;">One reason we review a company's actions in regards to its dividends is these actions can provide insight into the potential direction of a company's stock price. Additionally, the broader dividend actions of companies in the S&amp;P 500 Index can provide insight into the market's future direction as well. In as much as dividends are important, it is really the insight that dividends provide into a company's future cash flow expectations and the quality of its earnings.<br /><br />The below chart graphs the S&amp;P 500 Index returns for the seven year period (2003 - 2009). Admittedly, this is a short time period and I will attempt to post an analysis of the data over a longer time period in the near future. The graph also includes the positive dividend actions within the index lagged, or pulled forward 1-year. The correlation coefficient of the two data sets is .7775. This high level of correlation suggests that an investor's ability to forecast dividend actions can have a positive impact on ones investment returns.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/rMqiHUPh9vI6byyhF95vLO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TcdFJAB2D7I/AAAAAAAAFnA/fpar9RbDrdE/s800/div%20actions%20and%20S%26P.PNG" width="418" height="394" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">We have written a number of articles on our blog that addresses the importance of dividends and the role they play in assessing the quality of a particular company's earnings.<br /></div><ul><li><a href="http://disciplinedinvesting.blogspot.com/2010/11/dividends-matter-and-more-so-during.html">Dividends Matter And More So During Inflationary Periods</a></li><li><a href="http://disciplinedinvesting.blogspot.com/2010/06/dividend-payments-likely-to-improve.html">Dividend Payments Likely To Improve?</a></li><li><a href="http://disciplinedinvesting.blogspot.com/2010/04/for-dividend-investors-it-is-all-about.html">For Dividend Investors, It Is All About The Cash</a></li><li><a href="http://disciplinedinvesting.blogspot.com/2010/01/comprehensive-review-of-dividend.html">Comprehensive Review Of The Dividend Aristocrats</a></li></ul><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1423038762037235231?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com2tag:blogger.com,1999:blog-36722043.post-68458120763436884112011-05-07T16:44:00.000-04:002011-05-07T16:44:54.605-04:00<div style="text-align: justify;">For the first four months of the year, positive dividend actions for companies in the S<a href="http://investing.money.msn.com/investments/market-index/?symbol=$US:INX">&amp;P 500 Index</a> equal levels achieved in 2006. The twelve initiated dividends this year are at their highest level during any point since 2004.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/wElRYQK0iKceRkRFdLsRH-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TcWnrYrUV7I/AAAAAAAAFmw/UlEKeAwSHzI/s800/dividend%20actions%20april%202011.PNG" width="495" height="323" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">As the below table indicates, the sector contributing the largest percentage to the <a href="http://investing.money.msn.com/investments/market-index/?symbol=$US:INX">S&amp;P 500's </a>dividend income is now the consumer staples sector at just over 16%. In 2008, the financial sector was the largest contributor at more than 20%. Financials now account for 11.9% of the index's dividend income. Many investors and strategist seem to be counting on greater dividends from banking firms. This may materialize in the second half of 2011.<br /></div><br /><center><iframe src="https://spreadsheets.google.com/spreadsheet/pub?hl=en&amp;hl=en&amp;key=0ApEoA4TOB4wPdFkwMTRQc2tCZE12ZnNmLXNxbHZFN2c&amp;single=true&amp;gid=1&amp;output=html&amp;widget=true" width="500" frameborder="0" height="300"></iframe><br /></center><br /><div style="text-align: center;"><a href="https://spreadsheets.google.com/ccc?key=0ApEoA4TOB4wPdFkwMTRQc2tCZE12ZnNmLXNxbHZFN2c&amp;hl=en">Full View</a></div><br /><br /><span style="font-size:85%;"><span style="font-style: italic;">Data Source: <a href="http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--">Standard &amp; Poor's</a></span></span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6845812076343688411?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-25123972826570847642011-05-05T22:25:00.003-04:002011-05-05T22:31:35.233-04:00<div style="text-align: justify;">This week's bullish investor sentiment level released by the American Association of Individual Investors came in at a not so bullish 35.46%. This is down from the prior week's bullishness level of 37.90%. The bull/bear spread narrowed to 3.6% versus 7.3% last week.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/oS_40P9hQ-EtFmy2-mB0We0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/TcNTjfxo4PI/AAAAAAAAFmk/qZn2Lcy4kf8/s800/sentiment%205%205%202011.PNG" width="520" height="319" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://www.aaii.com/SentimentSurvey">AAII</a></span></span><br /></div><br /><div style="text-align: justify;">The current week's bullishness reading is below the long term bullishness average of 39%. Investor should keep in mind that this one technical indicator is most accurate at extreme levels.<br /><br />The strength of the market advance so far this year makes it not surprising that the market might experience a little consolidation. Also, for those interested in the presidential cycle, the third year of a president's term tends to be the best. The <a href="http://disciplinedinvesting.blogspot.com/2010/06/presidential-election-cycle-nearing-its.html">post I wrote on the presidential cycle in June of last year</a> noted the strength of the market in Q4 of year 2, and in Q1 and Q2 of year 3. The average frequency of quarterly advances was over 80% in the three quarters noted previously.<br /><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/vwlV_pr3HcTZpSHSZPVYgO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TAp6FlW6s4I/AAAAAAAAE_Y/_IhP6Y6ggCc/s800/Presidential%20Cycle%203%202010.PNG.jpg" width="482" height="193" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />From an economic perspective, recently released data points suggest a slow growth economic picture. Friday's <a href="http://stats.bls.gov/news.release/empsit.toc.htm">non-farm payroll release</a> could provide further confirmation of this slower growth view. At <a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors</a>, we continue to believe high quality large cap U.S. equities remain attractive in this environment and attractive from a valuation perspective. So outside the speculation in the commodity sector, the equity market's recent pullback is healthy and may afford investors an opportunity to build or add to equity positions.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2512397282657084764?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-24228559619973357072011-05-04T20:59:00.001-04:002011-05-04T20:59:56.831-04:00<div style="text-align: justify;">The return for the dividend paying stocks in the S&amp;P 500 Index have trailed the return of the non payers in the index this year. However, in April the return for the dividend payers return narrowed this underperformance gap by outperforming the non payers, 3.21% versus 2.84%. Although one month does not make a trend, given the general seasonal weakness experienced in the market going into summer, maybe investors are beginning to favor the generally higher quality payers at this point in the market cycle.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/JiOPDWjXjtlCQvgU4CFvEe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/_d4aL5xTH0xg/TcH17Keu88I/AAAAAAAAFmM/TVhxtuWsv60/s800/payers%20vs%20non%20payers%204%202011.PNG" width="485" height="208" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://www.standardandpoors.com/prot/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3Dsp_500_payers_vs_non_payers.xls&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fexcel&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1243899532744&amp;blobheadervalue3=UTF-8">Standard &amp; Poor's</a></span></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2422855961997335707?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-55002092407610776082011-05-01T12:03:00.000-04:002011-05-01T12:03:44.328-04:00<div style="text-align: justify;">Strong earnings growth so far in the first quarter for companies in the <a href="http://finance.yahoo.com/q?s=%5EGSPC">S&amp;P 500 Index</a> is an important factor that explains the strength of the recent advance in the market. As the below chart shows, Q1 earnings expectations for S&amp;P 500 companies has increased significantly.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/In_3axxGzUx-1MsP5xbRa-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/Tb2BNPV7lcI/AAAAAAAAFmA/n1yaYDnseWk/s800/q1%202011%20earnings.PNG" width="615" height="392" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: justify;"><blockquote><ul style="color: rgb(51, 102, 102);"><li>The estimated growth rate for earnings in Q1 for S&amp;P 500 companies is 18%.</li></ul><ul style="color: rgb(51, 102, 102);"><li>The forward four quarter P/E ratio for the S&amp;P 500 Index stands at 12.9.</li></ul><ul style="color: rgb(51, 102, 102);"><li>Through the end of April, 324 companies have reported earnings, with 84% either exceeding or meeting expectations.</li></ul><ul style="color: rgb(51, 102, 102);"><li>Companies are reporting earnings that are 7% above estimates which is greater than the 2% longer term average surprise factor.</li></ul></blockquote></div><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://thomsonreuters.com/">Thomson Reuters</a></span></span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5500209240761077608?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-23369422177054474022011-04-26T20:55:00.000-04:002011-04-26T20:56:02.546-04:00<div style="text-align: justify;">First quarter corporate earnings results reported to date continue to be indicative of a sustained economic recovery. Our <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=xL240okVjOE%3d&amp;tabid=364">1st Quarter Investor Letter</a> provides our insight on the past quarter and a further look into 2011.<br /><br /><a href="http://www.horancapitaladvisors.com/">HORAN Capital Advisors'</a> complete Investor Letter can be accessed at the following link: <a href="http://www.horanassoc.com/LinkClick.aspx?fileticket=xL240okVjOE%3d&amp;tabid=364">1st Quarter Investor Letter</a>.</div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2336942217705447402?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-6164976538398467722011-04-24T11:49:00.001-04:002011-04-24T11:58:41.841-04:00<div style="text-align: justify;">In this week's <a href="http://www.wealthtrack.com/">WealthTrack</a> video, Consuelo Mack talks with Jason Trennert of the research firm Strategas and Chuck Lahr, manager of PIMCO's Pathfinder World Fund (<a href="http://quote.morningstar.com/fund/chart.aspx?t=PATHX&amp;region=USA&amp;culture=en-US">PATHX</a>). Both are positive on the equity markets over the next 12-18 months. Chuck says the best value is in European companies that do business in the emerging markets. Jason favors high quality U.S. multinational companies that have dividend growth characteristics.<br /></div><br /><center><embed src="http://blip.tv/play/AYK13ywC" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="480" height="294"></embed></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-616497653839846772?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-6116011583039812011-04-21T20:38:00.000-04:002011-04-21T20:39:06.503-04:00<div style="text-align: justify;">The issue of the U.S. federal government's deficit has been a front and center issue over the course of the last several months. Congress' and the Obama administration's effort to reach an agreement on the FY 2011 federal budget touted the $38 billion reduction in spending. As the below chart shows, the current deficit stands at $1.4 trillion. Cutting $38 billion will have little impact on what ultimately needs to be accomplished. Even if revenues returned to levels in early 2008 (black line in below chart), the deficit would still be equal to about $900 billion. The widening gap between spending and receipts is an unsustainable one. The second chart details the rapid increase in the governments overall debt which has ballooned along with this widening gap between receipts and outlays.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/j2HwwzhPwLUSYfvWzK9_5-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/TbDNWgR6NgI/AAAAAAAAFlk/LfxO7b_UHW0/s800/receipts%20deficit%20outlays.PNG" width="564" height="422" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/AFUupyEAwF66JaCdHB9dvO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TbDNWRp5NaI/AAAAAAAAFlg/nOkcGu4Lz4A/s800/treasury%20debt.PNG" width="558" height="413" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-611601158303981?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-62179364567772471892011-04-19T22:49:00.001-04:002011-04-20T07:30:26.037-04:00<div style="text-align: justify;">In the below video, James Grant of the <a href="http://www.grantspub.com/">Interest Rate Observer</a>, provides an interesting interview with Consuelo Mack of <a href="http://wealthtrack.com/">WealthTrack</a>. In the interview, Grant points to the dangers of even a little inflation and this policy's impact on inflating asset prices. He believes the Fed's policy of targeting a 2% inflation rate is misguided and provides his rational in the interview. Mr. Grant's views of the market come from the bearish perspective; however, investors are wise to look at the market from the perspective of both the bulls and the bears so as to have a well formulated view of the market.<br /></div><br /><center><embed src="http://blip.tv/play/AYKz7jMC" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="480" height="294"></embed></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6217936456777247189?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-13264025579735022472011-04-14T22:47:00.001-04:002011-04-14T22:50:02.862-04:00<div style="text-align: justify;">After the strong returns for the market in the first two months of the year, March appeared to served as a digestive phase for the market. Not surprisingly, since the beginning of March, the S&amp;P 500 Index seems stuck in a trading range. From a pure technical perspective, the chart pattern that appears to be unfolding is a bullish inverted head and shoulders pattern. In order to complete this pattern, formation of the right shoulder is necessary with a sell off in the S&amp;P 500 Index down to around 1,300. The market closed today at 1,314 so it is not far from this point. Additionally, a sell off with higher down volume would be positive as well. With tomorrow being an option expiration day, one could envision a higher volume down day occurring and completing the bottom of the right shoulder.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/WJXZjAlRg3wSr5CVgOml0-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TaetJUW5crI/AAAAAAAAFlU/qHAY7GV_UaE/s800/s%26p%204%2014%202011.PNG" width="606" height="507" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Individual investor sentiment does not seem overly bullish either, which is a positive contrarian indicator. This week's sentiment survey reported by the <a href="http://www.aaii.com/sentimentsurvey">American Association of Individual Investors</a> reported bullish sentiment of 42.2%. This is down 1.4% from last week's bullishness reading. As the below sentiment chart shows, individual investor bullish sentiment has not reached an extreme level. As an observation, these sentiment indicators tend to be most accurate at extreme levels.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/uOBniFtQ_CiomHslss2dTe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/Taenc83UHNI/AAAAAAAAFlI/tipxeTYTOSg/s800/sentiment%204%2014%202011.PNG" width="521" height="321" /></a></td></tr><tr align="right"><td style="font-family: arial,sans-serif; font-size: 11px;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: justify;"><br />In short, the market seems poised to move higher in a "climb the wall of worry phase". In July 2009, I discussed this wall of worry phase in a post, <a href="http://disciplinedinvesting.blogspot.com/2009/07/where-are-we-inthe-market-cycle.html">Where Are We In The Market Cycle</a> that readers may find of interest.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1326402557973502247?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-89183730142558699032011-04-09T17:12:00.001-04:002011-04-11T07:50:40.288-04:00<div style="text-align: justify;">Stock buybacks in 2010 came roaring back, increasing 117% over 2009 buybacks. According to Standard &amp; Poor's Howard Silverblatt,<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>"Approximately $299 billion was spent by S&amp;P 500 companies on share repurchases last year which represents a whopping 117% increase over the $138 billion spent in 2009. At this point the practice is not as deep as it was in the heydays of 2006-2007, but companies are certainly back in the buyback business. While 2010 expenditures are still just half of what was seen in 2007, last year’s activity resulted in a record year-over-year percentage and dollar increase for stock buybacks."<br /></blockquote></div><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/TPfYxTmIKhOxh5p_G4-NCu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TaDHQJHNLhI/AAAAAAAAFko/rHePWw1jGNE/s800/buyback%20cht%2012%202010.PNG" width="538" height="475" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />Below is a table highlighting companies that had significant buybacks last year.<br /><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/dXQbwRplLkoOFyyoC-sS7e0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/TaDHa79V8RI/AAAAAAAAFks/KZDY0Q5nFUE/s800/buyback%20highlights%2012%202010.PNG" width="257" height="122" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />Source:<br /><br /><a href="http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3D20110323_500-Buyback-PR.pdf&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fpdf&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1243873053021&amp;blobheadervalue3=UTF-8">S&amp;P 500 Stock Buybacks Up 117% in 2010;Share Repurchases<br />Increase for the 6th Quarter in a Row</a><br />Standard &amp; Poor's<br />By: Howard Silverblatt<br />March 23, 2011<br />http://tinyurl.com/3wsopb7<br /><br /><span style="font-size:85%;"><span style="font-style: italic;">Disclosure: Long MSFT, XOM</span></span><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8918373014255869903?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-18823188440731936912011-04-04T22:22:00.000-04:002011-04-04T22:22:27.928-04:00<div style="text-align: justify;">The equal weighted performance of the dividend payers in the <a href="http://finance.yahoo.com/q;_ylt=AmGUdEk9JcV8Cl3OG2.zVTS7YWsA;_ylu=X3oDMTFiZG1nMGV1BHBvcwM1BHNlYwNtYXJrZXRTdW1tYXJ5SW5kaWNlcwRzbGsDc2FtcHA1MDA-?s=%5EGSPC">S&amp;P 500 Index</a> trails the non payers through the first quarter of 2011, 6.83% versus 8.26%, respectively. For the 12-months though, the payers have a slight edge over the non payers, 17.06% versus 16.14%, respectively. The payers and non payers performance is calculated on an equal weighted basis and both are outperforming the market cap weighted S&amp;P 500 Index for each of the time periods below.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/6bYgAcM3OJ0kH8TnB25Da-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TZp01lWuJaI/AAAAAAAAFkc/phPZjXqcd6M/s800/payers%20vs%20non%20payers%203%202011.PNG" width="512" height="241" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--">Standard &amp; Poor's</a></span></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1882318844073193691?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-29706106347876976102011-03-29T12:17:00.000-04:002011-03-29T12:18:05.653-04:00<div style="text-align: justify;">Although today's <a href="http://www.conference-board.org/data/consumerdata.cfm">consumer confidence report</a> indicated a worse than expected decline to 63.4 versus the expected 65, the index remains in an uptrend. The part of the index that measures how consumers currently feel about the economy improved to 36.9 from 33.8 in February. It would be highly unusual for the index to move higher each and every month. As the below chart shows, consumer confidence and the market's performance are linked at the hip given the consumer's importance to economic growth.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/VMn4MUcUGZOVtrZFFyKvgO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TZIFBRWmi1I/AAAAAAAAFkQ/Y_iFPe0qlYE/s800/conf%20and%20sp.PNG" height="391" width="535" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2970610634787697610?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-60641736734978707542011-03-27T10:35:00.000-04:002011-03-27T10:35:00.309-04:00<div style="text-align: justify;">The below chart analysis by <a href="http://www.chartoftheday.com/">Chart of the Day</a> shows the inflation adjusted Dow remains in a long term uptrend. Will it continue to advance to the upside?<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>For some long-term perspective, today's chart illustrates the Dow adjusted for inflation since 1900. Of interest is that the inflation-adjusted Dow has traded within the confines of an extremely long-term upward sloping trend channel over the past 111 years. It is also of interest that the secular bear market that concluded in the early 1980s was almost as severe as the one that concluded in the early 1930s. Also, while the market action from the inflation-adjusted record high of 1999 to the financial crisis lows of 2009 was severe, the magnitude of this decline was much less than what occurred with the bear markets that concluded in the early 1930s and early 1980s. More recently, the Dow has retraced 74% of the financial crisis bear market with the inflation-adjusted Dow currently trading 19% off its 1999 record high -- a rather dramatic turnaround considering the magnitude of the recent financial crisis.<br /></blockquote></div><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/e-q9b1Q09IG1y_h2D-BPuu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TY9Jgxk4IcI/AAAAAAAAFkE/dfdh2q2E_TY/s800/dow%203252011.PNG" height="330" width="447" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;">Source: <a href="http://www.chartoftheday.com/">Chart of the Day</a><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6064173673497870754?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-55561780528252758742011-03-20T22:31:00.001-04:002011-03-20T22:34:27.952-04:00<div style="text-align: justify;">The recent decline in the <a href="http://finance.yahoo.com/q?s=%5EGSPC">S&amp;P 500 Index</a> has resulted in the percentage of stocks trading above their 50-day moving average to decline to 38%. This is down from over 85% just a few months ago. The percentage trading above their 150-day moving still remains elevated at 80%: however, the market's recovery on Thursday and Friday last week pulled these percentages higher and could be indicative of a continued recovery in the market.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/y1wrGRKjed748mb7KJd4ee0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/_d4aL5xTH0xg/TYa3bLCNE-I/AAAAAAAAFj4/VhFNdWJ1q6w/s800/S%26P%20%25%20above%2050%203%2018%202011.PNG" height="377" width="610" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/CXqJcIEyudKtPKjNi61ebe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TYa3bI4AV0I/AAAAAAAAFj0/jymlCueVIts/s800/S%26P%20%25%20above%20150%203%2018%202011.PNG" height="372" width="611" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Investors need to be mindful that these are simply technical indicators and support for the market is around 1,230 for the <a href="http://finance.yahoo.com/q?s=%5EGSPC">S&amp;P 500 Index</a>.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/CvVSI6bjXEC_nCUCVuwdbO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TYa3ayKtYYI/AAAAAAAAFjw/vnMMwJ4Am-4/s800/s%26p%20500%203%2018%202011.PNG" height="505" width="606" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5556178052825275874?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-62214737718780686222011-03-18T20:00:00.000-04:002011-03-18T20:00:24.228-04:00<div style="text-align: justify;">One aspect of the individual investor sentiment reading is it tends to be more predictive at extreme reading levels. In that regarding the <a href="http://www.aaii.com/sentimentsurvey">American Association of Individual Investors</a> reported that this week's individual investor bullish sentiment reading was 28.49%. This is the lowest bullish sentiment level since August of last year when the bullish sentiment level was reported at 20.74%.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/dzUTp0TAk0Y4j3R_FvBuiO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/TYPvDTZkWJI/AAAAAAAAFjY/rvydbxGMqQk/s800/sentiment%208%20period%20average%20short.PNG" height="320" width="569" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Several external factors are undoubtedly impacting investor sentiment at this point in time, i.e., instability in the Middle East and fallout from the earthquake in Japan. <a href="http://disciplinedinvesting.blogspot.com/2011/03/market-and-nuclear-crises.html">The issues in Japan, especially the nuclear crisis, will likely be resolved one way or another</a> within several weeks. The instability in the Middle East will most likely be an ongoing factor that influences market volatility.<br /><br />At the end of the day, company fundamentals continue to remain attractive. Attractive valuations and low levels of bullish sentiment are suggestive of a market rebound near term.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-6221473771878068622?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-70091512848215450132011-03-15T21:11:00.000-04:002011-03-15T21:11:13.480-04:00<div style="text-align: justify;">The tragic events in Japan are having an impact on market activity over the past several days. The issues surrounding the reactors at the Fukushima Daiichi power plant make new headlines throughout the day. As the below graphic shows, the S&amp;P 500 index has contracted during past nuclear crises. The largest impact was Chernobyl in 1986 and the trough was reached 14 days after the Chernobyl event. The market recovered its losses within 20 days of the Chernobyl accident.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/g0LobTchwWXe05RHlVevIe0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TYAKSw2vSDI/AAAAAAAAFjE/TznvPc3SKLU/s800/s%26p%20and%20crisis.PNG" height="395" width="623" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://graphics.thomsonreuters.com/11/03/GLB_NUKESP0311_SC.gif">Reuters, by author Ben Berkowitz</a><br /></span><div style="text-align: left;"><br /></div></div><div style="text-align: justify;">The nuclear crises events in Japan are certainly far from over; however, history seems to indicate the market has a tendency to overreact to these events in the short run. </div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-7009151284821545013?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-59594798601971746212011-03-12T15:47:00.000-05:002011-03-12T15:48:16.178-05:00<div style="text-align: justify;">Given what seems like a parabolic increase in gold and silver prices, many investors are attracted to these metals as investment opportunities. At <a href="http://www.horancapitaladvisors.com">HORAN Capital Advisors</a>, we have a difficult time evaluating whether these metals are overvalued or undervalued. The difficulty arises from the fact these metals do not generate any cash flow. At HORAN, we value investments we make for our client accounts based in large part on the cash flows generated by particular investments. Consequently, at this point in time we do not have a direct allocation to either gold or silver for our client accounts.<br /><br />On the other hand, we do evaluate gold and silver prices as they are an important input into our analysis of the future direction of economic growth. Gold tends to be a safe haven investment for investors with events like those occurring in the Middle East impacting the price of gold. During times of improving economic activity though, silver tends to outperform gold due to silver's wider industrial use compared to gold; hence, driving up the price of silver. Since mid-2010 silver has outperformed gold. The first chart below shows gold and silver prices along with the gold/silver ratio. In the second chart, the gold/silver ratio is plotted with U.S. industrial production.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/kU7oayovOrl9kUWDTLXujO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/_d4aL5xTH0xg/TXvSInWWoXI/AAAAAAAAFi4/o6_CUtxIJE8/s800/gold%20silver%20ratio.PNG" height="393" width="594" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/z8utuB9lAyTr1i5cOd39re0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/TXvSGA6dmvI/AAAAAAAAFi0/ZK668wj02so/s800/ind%20prod%20and%20gold%20silver%20ratio.PNG" height="395" width="591" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">As of March 11, the gold/silver ratio stood at 39.3 and this is below the support level of 43 that has held since February 1998. Additionally, the above chart that includes industrial production shows a declining ratio along with improved industrial production activity. For investors then, if they want to use gold and silver prices as an input in their economic forecast, evaluating the gold/silver ratio can be a useful indicator to track.<br /><br />Source:<br /><a href="http://www.trpropresearch.com/archive/file/952/">Gold and Silver: What a Pair! ($)</a><br />Thomson Reuters<br />By: Radhika Kamath<br />March 10, 2011<br />http://www.trpropresearch.com/archive/file/952/<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5959479860197174621?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-80779444030449567492011-03-06T14:26:00.000-05:002011-03-06T14:26:42.303-05:00<div style="text-align: justify;">Reuters has produced an interactive calculator showing the impact on global GDP of oil prices at various levels. Click the below chart for the link to the calculator.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="http://static.reuters.com/resources/media/global/editorial/interactives/oil_price_calculator/oil_price_calculator.html"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TXPfYCIGxFI/AAAAAAAAFiU/1NfIXRqoEAg/s800/oil%20and%20gdp.PNG" width="618" height="372" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8077944403044956749?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com1tag:blogger.com,1999:blog-36722043.post-27562184520158302052011-03-04T20:58:00.001-05:002011-03-04T21:01:12.913-05:00<div style="text-align: justify;">Today's <a href="http://www.bls.gov/news.release/empsit.nr0.htm">Bureau of Labor Statistics</a> release of the employment situation report saw the unemployment rate decline to 8.9%. This rate was better than the consensus expectation of 9.1%. Today's stock market reaction to this supposedly improved report was less than positive. Aside from the heightened <a href="http://disciplinedinvesting.blogspot.com/2011/03/oil-price-spikes-often-preceded-or.html">focus on oil prices</a>, the report was not as positive as it may have seemed on the surface.<br /><br />One factor in the report worth watching is the participation rate. As the below chart shows, the participation rate has been on a steady decline since the end of the recession in early 2009. This rate has fallen to 63.9% and is below the 66.8% just prior to the beginning of the recession. An improvement in the unemployment rate could be the result of more individuals not pursuing jobs and dropping out of the labor force since they are unable to find employment.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/nyFFYAIRH472of-w4EDgXu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TXGWolE2i3I/AAAAAAAAFhs/Q5UX11KBkwY/s800/participation%20rate.PNG" height="394" width="521" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br />h/t: <a href="http://www.cnbc.com/id/41911006">CNBC</a><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2756218452015830205?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-1387950436322928392011-03-04T20:01:00.001-05:002011-03-04T20:02:23.281-05:00According to <a href="http://www.chartoftheday.com/">Chart of the Day</a>:<br /><div style="text-align: justify;"><blockquote style="color: rgb(51, 102, 102);">"The decline in crude oil prices that began in mid-2008 was historic -- plunging over $90 per barrel in just eight months. Over the past two years, however, crude oil prices have increased by over $60 per barrel. Today's chart provides some perspective on the historic decline and recent spike with a long-term view of inflation-adjusted West Texas Intermediate Crude. Today's chart illustrates that most oil price spikes were a result of Middle East crises and often preceded or coincided with a US recession. It is also interesting to note that the recent spike in oil prices has brought the price of oil back to a historically high level -- a level that was surpassed only briefly during the tail-end of the major price spikes of 1980 and 2008."<br /></blockquote></div><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/iQ72bBGQb1CFyrNMZZf7du0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/TXGKFMk_P9I/AAAAAAAAFhc/6VFceVci0tw/s800/oil%20price%20spike.PNG" height="340" width="454" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-style: italic;font-size:85%;" >Source: <a href="http://www.chartoftheday.com/">Chart of the Day</a></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-138795043632292839?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-86700276358463841662011-03-04T15:52:00.000-05:002011-03-04T15:52:20.251-05:00<div style="text-align: justify;">Feb. 28 (Bloomberg) -- T. Boone Pickens, the billionaire chairman of BP Capital LLC, talks about <a href="http://bloom.bg/f6hEK3#ooid=F4MHk0MjpT_VrmjNb4XXcdhnfJp4bRMd">the impact of turmoil in the Middle East on oil prices</a> and the need for new U.S. energy policy. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="http://www.bloomberg.com/video/67137202/"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TXFQOjEz04I/AAAAAAAAFhM/sTSx1xUmQzI/s800/pickens.PNG" width="640" height="399" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8670027635846384166?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-52355611485101252642011-02-27T20:34:00.001-05:002011-02-27T20:50:35.854-05:00<div style="TEXT-ALIGN: justify">Several weeks ago Consuelo Mack of <a href="http://wealthtrack.com/">WealthTrack</a> featured an interview with Francois Trahan, Vice Chairman, Head of Portfolio Strategy and Quantitative Research at Wolf Trahan. Francois has been selected as the #1 portfolio strategist for the last three years by Institutional Investor Magazine.<br /><br />In the below video Francois states his views on the equity markets, gold and commodities more broadly. He notes the dollar's influence on equities and commodities and likens the current environment to the the 2006 - 2008 time period. In '06 - '08 he notes the price of a barrel of oil at $95 per barrel was a key inflection point for the markets and could be an important one in this market cycle.<br /></div><br /><center><embed height="294" type="application/x-shockwave-flash" width="480" src="http://blip.tv/play/AYKd8HoC" allowfullscreen="true" allowscriptaccess="always"></embed></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5235561148510125264?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-51559980964906986562011-02-26T19:10:00.001-05:002011-02-27T09:03:38.748-05:00<div style="text-align: justify;">Berkshire Hathaway (<a href="http://finance.yahoo.com/q/pr?s=BRK-A+Profile">BRK.A</a>) turned in nice results for the year ending 2010, but, on an apples to apples basis, organic results are not as strong as many in the media are reporting. Even in <a href="http://www.berkshirehathaway.com/letters/2010ltr.pdf">Warren Buffett's must read annual shareholder letter</a> he warns the media not to focus on net income due to the ease in which it can be manipulated. Mr. Buffett notes on page 20 of his annual letter:<br /></div><div style="text-align: justify; color: rgb(51, 102, 102);"><blockquote>"Let’s focus here on a number we omitted, but which many in the media feature above all others: net income. Important though that number may be at most companies, it is almost always meaningless at Berkshire. Regardless of how our businesses might be doing, Charlie and I could – quite legally – cause net income in any given period to be almost any number we would like...We have that flexibility because <span style="font-style: italic;">realized</span> gains or losses on investments go into the net income figure, whereas <span style="font-style: italic;">unrealized</span> gains (and, in most cases, losses) are excluded."</blockquote></div><div style="text-align: justify;">In fact, these realized investment gains did inflate net income for 2010 by nearly $1.5 billion (net of est. taxes). Below is a summary of some key items in Berkshire's <a href="http://www.berkshirehathaway.com/2010ar/2010ar.pdf">cash flow statement</a>.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/v0wvtynmFMbmhJgRTn-CHu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh4.googleusercontent.com/_d4aL5xTH0xg/TWmI7N36eiI/AAAAAAAAFgw/L5gBDaHuQEM/s800/brk%20cash%20flow%20summary%202010.PNG" height="141" width="451" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The other item investors need to factor into the company's earnings is the contribution of the Burlington Northern (BNSF) acquisition. In the company's full financial statement, it is noted on page 75 that BNSF contributed $2.2 billion to consolidated earnings in 2010, not an insignificant amount. From a cash flow growth perspective then, BRK saw cash operating flow increase 12.9% ($17,895 versus $15,846).<br /><br />An important point for investors is the cash flow statement offers important insights into a firm's operations that sometimes are hidden in the income statement. It is important for investors to understand from where the company is achieving its cash flow growth. For the year, BRK saw its cash increase to $38 billion from $30 billion. New borrowings of $8 billion accounted for all of the increase.<br /><br />For future growth at Berkshire, Mr. Buffett indicates in his letter, <span style="color: rgb(51, 102, 102);">"...We will need both good performance from our</span><span style="color: rgb(51, 102, 102);"> current businesses and more </span><span style="font-style: italic; color: rgb(51, 102, 102);">major</span><span style="color: rgb(51, 102, 102);"> acquisitions. We’re prepared. Our elephant gun has been reloaded, and my trigger finger is itchy."</span><br /><br />From an investment perspective, Berkshire anticipates future growth to come from future "major" acquisitions, likely not to dissimilar to the BNSF transaction. For BRK, growth by acquisition has become a mainstay of its operation and investors historically have been rewarded with strong stock price performance. As Mr. Buffett warns, don't look at net income or earnings per share in a vacuum.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-5155998096490698656?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com2tag:blogger.com,1999:blog-36722043.post-72051470558394018892011-02-20T16:34:00.000-05:002011-02-20T16:34:40.687-05:00<div style="text-align: justify;"><a href="http://www.foxnews.com/politics/2011/02/20/12g-state-workers-fired-budget-deal-wisconsin-governor-warns/">Wisconsin seems to be ground zero</a> in the debate on <a href="http://www.cnsnews.com/node/70781">public employee cost versus private sector employees</a>. The issue has moved to the forefront due to most states needing to deal with significant budget deficits. And these deficits have been magnified due to the persistently high unemployment rate experienced even as the economy has come out of the last recession.<br /><br />As the below chart shows, the salaries of state and local government workers, as well as benefits, have grown out a faster pace than for the private sector.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/4IzwnLgfnQ5hRRSHbMT2be0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TWGEQg93EwI/AAAAAAAAFgA/cPBpIPHmgvk/s800/wages%20benefits.PNG" width="527" height="396" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">In a severe economic slowdown like recently experienced, the rate of growth in government sector pay and benefits is not sustainable; hence, the debates taking place in many states like Wisconsin. Additionally, the unemployment rate differential between the public and government sector continues to remain wide. The issue then becomes, who pays for the government sector employees if private sector employment levels remain stubbornly low. At the federal level, the government can print more currency (not without risk however), but at the state and local level, currency printing is not a viable option.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/zK_QAYtzv_gZSL4RpmUJAO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TWGFyF_BOTI/AAAAAAAAFgE/AKnyJK-aWoQ/s800/unemployemnt%20rate%20g%20vs%20p.PNG" width="485" height="380" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: justify;"><br />At the end of the day, the issue of public employee cost versus the private sector will need to be addressed. Also, this is not simply a short term problem between public and private sector wages/benefits. As more and more baby boomers enter retirement, the cost associated with entitlements as currently structured, like social security and Medicare, is not sustainable and will need to be adjusted. This will likely put an additional spotlight on the benefit differences between the public and private sector.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-7205147055839401889?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com2tag:blogger.com,1999:blog-36722043.post-84105149482676705952011-02-17T22:08:00.001-05:002011-02-17T22:08:23.354-05:00<div style="text-align: justify;">The recent financial actions by companies provide verification that corporate fundamentals have continued to strengthen. Howard Silverblatt of Standard &amp; Poor's notes on his Bloomberg BusinessWeek blog, <a href="http://www.businessweek.com/investing/insights/blog/">Investing Insights</a>, that:<br /></div><blockquote><ul style="color: rgb(51, 102, 102); text-align: justify;"><li>Dividend increases so far in Q1 2011 are very strong with the average increase equaling 22.65% and the median increase totaling 12.20%.</li></ul><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/7p50H1WKI8JQJVEELa4pj-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh5.googleusercontent.com/_d4aL5xTH0xg/TV3gj6SwRnI/AAAAAAAAFfs/oZLle81YMLw/s800/div%20rate%202%202011.PNG" height="284" width="286" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><ul style="color: rgb(51, 102, 102); text-align: justify;"><li>Cash has set 8 consecutive quarters of record cash levels: Q4 2008 – Q3 2010. Cash in Q4 2010 is coming in 3.6% ahead of Q3 2010.</li></ul><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/MudU7CG-IaiT-LqtjPsaD-0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TV3esOiNdtI/AAAAAAAAFfo/MBQiP_YVvOE/s800/corp%20cash%202%202011.PNG" height="288" width="404" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><ul style="color: rgb(51, 102, 102); text-align: justify;"><li>2011 sales estimates have been increasing over the past three weeks, with 2011 estimated to post a 12.1% gain 2010.</li></ul><ul style="text-align: justify;"><li><span style="color: rgb(51, 102, 102);">Earnings per share in Q4 shows a 29.5% gain over Q4 20’09. On a sequential basis Q4 EPS is only up 2.5% versus Q3 2010.</span></li></ul></blockquote>Source:<br /><br /><a href="http://www.businessweek.com/investing/insights/blog/archives/2011/02/a_few_preliminary_q4_stats_and_observations.html">A Few Preliminary Q4 Stats, And Observations</a><br />Investing Insights Blog<br />By: Howard Silverblatt<br />February 12, 2011<br />http://www.businessweek.com/investing/insights/blog/archives/2011/02/a_few_preliminary_q4_stats_and_observations.html<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8410514948267670595?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-83157748985925749432011-02-12T20:14:00.002-05:002011-02-12T20:57:34.948-05:00Many segments of the U.S. stock market have retraced a large portion of the losses that occurred from October 2007 through March 2009. <a href="http://www.chartoftheday.com/">Chart of the Day</a> provides the below detail on this recovery.<br /><div style="TEXT-ALIGN: justify; COLOR: rgb(51,102,102)"><blockquote>"For some perspective on the post-financial crisis rally, today's chart illustrates how much of the downturn that occurred as a result of the financial crisis has been retraced by each of the five major stock market indexes. For example, the Dow peaked at 14,164.53 back in October 9, 2007 and troughed at 6547.05 back on March 9, 2009. The Dow currently trades at 12,229.29 -- it has retraced 74.6% of its financial crisis bear market decline. As today's chart illustrates, each of these five major stock market indices have retraced over 70% of their financial crisis decline. However, it is the Russell 2000 (small-cap stocks), the tech-laden Nasdaq, and the S&amp;P 400 (mid-cap stocks) that have recouped nearly all or (in the case of the S&amp;P 400) more than all of the losses incurred during the financial crisis."<br /></blockquote></div><center><table style="WIDTH: auto"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/QSVgepygzU3UpaeC8uqUxO0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TVcvlP43eHI/AAAAAAAAFfQ/fsNyuMSiSi8/s800/financial%20crisis%20recovery.PNG" width="440" height="318" /></a></td></tr><tr><td style="TEXT-ALIGN: right; FONT-FAMILY: arial,sans-serif; FONT-SIZE: 11px">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><span style="font-size:85%;"><br /></span><div style="TEXT-ALIGN: center"><span style="font-size:85%;"><span style="FONT-STYLE: italic">Source: </span><a style="FONT-STYLE: italic" href="http://www.chartoftheday.com/">Chart of the Day</a></span> </div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8315774898592574943?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-88407619727063665712011-02-12T19:55:00.000-05:002011-02-12T19:55:37.417-05:00<div style="text-align: justify;">In a severe stock bear market it is often said that the market can remain irrational longer than an investor can remain solvent. In a market like investors are experiencing at this moment, some believe the market is being irrational on the upside. At what point in time will we see investors react by jumping in because they fear being left behind and missing out on significant upside gains? Year to date through February 11, 2011 the S&amp;P 500 Index is up 5.9%. On a 12-month basis the S&amp;P is up over 22%.<br /><br />As the below chart of the S&amp;P 500 Index shows, the market has almost steadily moved higher since the end of March last year. In the last half of 2009 the market's increase occurred on steadily declining volume on both up and down days. A similar pattern seems to be repeating itself this year. In other words, a spike in volume on up days does not seem evident; thus, suggesting the individual investor has not capitulated from sitting on the sidelines. The one spike in volume on an up day occurred in early December when the chart pattern <a href="http://disciplinedinvesting.blogspot.com/2010/12/s-cup-handle-breakout.html">completed its cup and handle pattern</a>.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/2oeesUoFhb2I1Zj4sATUEu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TVco03w8AJI/AAAAAAAAFfM/-58pJbXYhKQ/s800/s%26p%20w%20150%20day%202112011.PNG" height="375" width="605" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">Additionally, the solid green line in the above chart shows 93% of S&amp;P 500 company stock prices are trading above their 150 day moving average. Strategist often cite this as a sign the market is overbought. Keep in mind though, as highlighted in the chart, this variable can stay elevated for an extended period of time as it did in late 2009 into early 2010.<br /><br />Certainly the market is not likely to advance at a 6% pace every succeeding six weeks. However, from a valuation perspective, many high quality large cap U.S. stocks are trading at attractive valuations. There are challenges ahead for a number of firms, like the need to pass on higher commodity prices. A pullback in the market would be healthy, and many investors seem to be waiting for that to occur. In the end, the market will trade on fundamentals.<br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8840761972706366571?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-13517150636667108742011-02-09T12:59:00.000-05:002011-02-09T12:59:46.279-05:00<div style="text-align: justify;">Investors are speaking with their feet as municipal bond fund flows are strongly negative. The below chart includes flow data through December. Updated data for January is available at the <a href="http://www.ici.org/research/stats/flows/flows_02_02_11">Investment Company Institute's website</a>. January fund flow data shows strong negative flows continued for municipal investments at the start of this year.<br /><br /></div><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/o66zWj5ld6530yiKvqHlve0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TVLVA4tkHiI/AAAAAAAAFe8/CosNHnzXRss/s800/muni%20fund%20flows.PNG" width="496" height="368" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-1351715063666710874?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-27261465820137375092011-02-08T21:54:00.000-05:002011-02-08T21:55:04.504-05:00<div style="text-align: justify;">The below chart shows the unemployment level in the U.S. by an individual's education level. Individuals that have obtained a college degree find themselves less likely to be unemployed.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/cCzLINY-A0d5FVHB0U6r0e0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TVH9ny6hniI/AAAAAAAAFes/B905iVIWrxI/s800/unemployment%20by%20education.PNG" height="386" width="508" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><br /><div style="text-align: justify;">The higher rate of unemployment for those with less than a bachelors degree may be the result of a structural shift in the composition of the type of jobs now available to individuals. As the following chart details, the steady decline in the number of people employed in manufacturing jobs provides some evidence of this structural shift in the U.S. job market. The Reuters report, <a href="http://graphics.thomsonreuters.com/F/12/ManufacturingJobs.pdf">Is America the Sick Man of the Globe?</a>, provides more insight into this structural change.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/W267UH7__OMOL1zoRu3Flu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh6.googleusercontent.com/_d4aL5xTH0xg/TVH9nl4CeeI/AAAAAAAAFeo/zt674O0PY94/s800/mfg%20and%20unemployment.PNG" height="343" width="553" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center; font-style: italic;"><span style="font-size:85%;">Source: <a href="http://graphics.thomsonreuters.com/F/12/ManufacturingJobs.pdf">Reuters (PDF)</a><br /></span></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-2726146582013737509?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0tag:blogger.com,1999:blog-36722043.post-86831640450899633352011-02-04T20:31:00.000-05:002011-02-04T20:32:02.724-05:00<div style="text-align: justify;">For the month of January, the average return for the dividend payers in the <a href="http://finance.yahoo.com/q?s=%5EGSPC">S&amp;P 500 Index </a>slightly underperformed the non-payers, 2.08% versus 2.10%, respectively. On a weighted basis the S&amp;P 500 Index total return equaled 2.37% while the equal weighted return for the index was 2.22%. This is an indication that the larger capitalization stocks may be gaining favor with investors. On a 5 and 10 year basis, the S&amp;P 500 Index has lagged the performance of the midcap and small cap indices.<br /></div><br /><center><table style="width: auto;"><tbody><tr><td><a href="https://picasaweb.google.com/lh/photo/wp8_eukVVr3w_vDOxfXpZu0_CGsvdTD5waOAPOACieI?feat=embedwebsite"><img src="https://lh3.googleusercontent.com/_d4aL5xTH0xg/TUynb8ubraI/AAAAAAAAFeY/mj85t-WUD1I/s800/payers%20vs%20non%20payers%201%202011.PNG" height="176" width="406" /></a></td></tr><tr><td style="font-family: arial,sans-serif; font-size: 11px; text-align: right;">From <a href="https://picasaweb.google.com/disciplinedapproach/TheBlogOfHORANCapitalAdvisors?authkey=Gv1sRgCM3YotbqpefzTQ&amp;feat=embedwebsite">The Blog of HORAN Capital Advisors</a></td></tr></tbody></table></center><div style="text-align: center;"><span style="font-size:85%;"><span style="font-style: italic;">Source: <a href="http://www.standardandpoors.com/prot/servlet/BlobServer?blobheadername3=MDT-Type&amp;blobcol=urldata&amp;blobtable=MungoBlobs&amp;blobheadervalue2=inline%3B+filename%3Dsp_500_payers_vs_non_payers.xls&amp;blobheadername2=Content-Disposition&amp;blobheadervalue1=application%2Fexcel&amp;blobkey=id&amp;blobheadername1=content-type&amp;blobwhere=1243847668418&amp;blobheadervalue3=UTF-8">Standard &amp; Poor's</a></span></span><br /></div><div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/36722043-8683164045089963335?l=disciplinedinvesting.blogspot.com' alt='' /></div>David Templeton, CFAhttp://www.blogger.com/profile/08782216535717865701noreply@blogger.com0