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Sorry as there were techncial difficulties in publishing this post last night. (Actually we stayed up watching Dancing With The Stars with the wife and got too tired to wrap it up. |
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The percentage of companies in the S&P 500 that beat expected earnings is an interesting metric to watch. In the third quarter of 09 we had hit a record 79%. Briefly, partially through 2010 we had hit 81%, but that was not for a full quarter. Since then, this metric had been steadily sliding down. Here are a couple of reasons. Analysts were forecasting off the basement bottoms of year ending 2008 and first quarter 2009. Remember those days? We were all drinking Old Smuggler Scotch (Rated the worlds worst several years ago.) So by the time companies had laid everyone off and sold their private jets and quit having million dollar parties, it was relatively easy to make a profit. Many of those profits were underestimated by the analysts of the day. We are now seeing this beat ratio head below 70%, still healthy but definitely trending the wrong way. As we enter this new earning season, we may see a score of disappointments and this could be one more anchor (110 dollar oil, social unrest in the MENA,-Middle East North Africa-, thermo nuclear power plants, euro zone sovereign debt issues, a continually devalued dollar, to name a few) to bring this market back to a not so hot trading range. |
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Tough Day In The Market Today.
We had some good calls last night as Alcoa did suffer a bit because top line sales disappointed. We also came close to calling the International trade balance. It came in above like we suggested but as bad as we thought to 45.8 Billion. We were suggesting 47. Rightly or wrongly the Bank of Canada left good enough alone as we suggested. Not that it mattered the monthly federal budget came in just about where it was expected to be.
The real jitters this morning came from comments by George Sorros and some of the Chinese central bank holders over concerns about the falling dollar. The Chinese hold 1.2 trillion in green back and have all but said they do not want to see the dollar devalue anymore or they will rebalance their dollar holdings. This probably influenced Soros to say the dollar is no longer the world currency. It is also worth noting that PIMCO was selling US treasury short today which is definitely not a vote of confidence. Remember that we were running around saying the sky is falling the sky is falling as a result of our concern about the dollar loosing its world currency status. That underlying fear kept the market down most of the morning, almost 150 points down at one point. Of course there was the Japanese decision to declare a threat alert 7 on their nuclear power plant forcing comparisons to the Chernobyl incident. Then the market recovered a bit just as the Import Export Price figures were being digested and as we suggested yesterday they were above, dare I say significantly above expectations, but no one noticed. It was interesting to see commodities slide a bit today?
Foot note, keep an eye on the S&P as it tickled its way through the 50 day average of 1315. Next resistance, if I am reading the tea leaves correct is 1,290. |
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Fly The Friendly Skies of ?
One of our regular readers (Hutch) sent in a note about our comments regarding Airbus and Boeing. He has in interest in BA Boeing and floated a couple of questions. I am going to be lazy and use it for our e-mail fodder tonight. He had asked questions about the order cancelations and some questions about DAL and ALK. You might benefit from the response we sent.
"No these were recent orders in the pipeline at airbus. My suggestion was to watch BA to see if it got sucked down by the Airbus news. It is down about 1% today but so is the overall market. Just keep an eye on it. I just looked at DAL and ALK and can't excited about either. The are down for a reason. Soros is buying some Delta, but I will bet he has those bets wrapped with some interesting put option insurance. It could be a win win for because he is betting (like he always does) on volatility. There is an interesting Bureau of Transportation stat you might follow and it is cost of fuel by the airlines. February came down about 8%. At face value that sounds like a good thing until you look at the coast per gallon which went from 2.62 to 2.78. If cost of fuel went down and the cost per gallon went up, that means they are flying less, or being unusually efficient in their fuels usage. Wanna guess which it might be. Flying less means lower revenue. Lower revenue with higher fewer fuel cost is not a good thing unless you are shooting the stock.
Since most of making money in the market is about avoiding a loss, we would stay clear of the airlines until we see some stability in oil and global economies."
Salve Lucrum |
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