Short Notes: 50 Day Moving Average

Market rallied hard last week, finishing up up nearly 2%.  One note of caution {I'll have a few more in a chart I'm publishing on Monday} is that according to Bespoke Investment Group there are only 10 ETFs below their 50 day moving averages.  I'm assuming they are not including inverse ETFs {those that advance when markets decline} in this analysis.

Link:  Bespoke: 50 Day Moving Average.

"Mum Would Be Proud"

Apparently the above title was the Headline in a major British paper today.  All we can say is yes she is!  Enough said.

"The cannons of his adversary were thundering in the tattered morning when the Majesty of England drew himself up to meet the future with a peaceful heart."

Explicit Liber Regis Quondam Regisque Futuri

T.H. White:  The Once & Future King.

Jury Duty

I have been called to Jury Duty!  I am out today.  Hopefully it is a one day event!

A Bearish Argument For The Rest of The Year

Doug Kass a noted Hedge Fund Manager and a contributer over at thestreet.com, posted a well reasoned and well written article earlier this week which is decidedly more negative than what most people will write . Doug is not a bear per sea.  Rather he thinks that the headwinds that could push against stocks in the 2nd half of the year could make for a more challenged environment for stocks.   

As I have discussed in past posts , I am positive for stocks through the end of the year, though it would not surprise me if stocks tread water or decline somewhat from here until the fall.  Irrespective of what might occur between now and then, I think stocks have the potential from these levels to finish the year higher.  I think they could finish somewhere between 1,350 & 1,400 on the S&P 500.  When you include dividends that's a potential increase from here of between 3-6% on that index.   

In trying to present balanced views here, I thought I would post a link to article below.  It's too long and to interesting for me to try and excerpt it here.

Link:  Kass: False Sense of Security

*Long ETFs related to the S&P 500 in client accounts.

Illinois Prepaid Tuition Problems Part II

Today we continue our short series on the College Illinois Prepaid Tuition Program.  Today we'll see from ABC Channel 7 {via the associated press} how an investment in a local bank by the program turned sour and lead to losses of over 12 million dollars.  It also illustrates how other considerations sometimes get in the way of sound investment policies in public pension plans. {Excerpt with my highlights}.

April 8, 2011 (CHICAGO) -- The agency that oversees the College Illinois prepaid tuition program didn't follow sound business practices -- or state law -- when it hired San Francisco-based Grigsby & Associates for investment advice, according to a state audit released Thursday.

The Illinois Student Assistance Commission hired the firm to advise College Illinois on debt restructuring, but it gave only one opinion to ISAC: to invest $12.8 million in ShoreBank Corp. The investment was lost last year when ShoreBank collapsed.....

....Any time you have an analysis which raises potential red flags as to the soundness of the investment, you'd hope that the entity would pay attention to those things -- that in this case, ISAC would be vigilant and prudent in their investments, particularly given the fact that they have a $338 million deficit," Illinois Auditor General William Holland told the Chicago Sun-Times......

.....The audit found that Grigsby & Associates may not have been objective when giving the investment advice because there was no way the firm could be paid if the ShoreBank investment was not made.  Auditors contend that the firm prepared its report suggesting the ShoreBank investment before ISAC signed a contract with it. Grigsby & Associates was paid $255,600 after the investment was made.....

Its founder, Calvin Grigsby, was indicted twice on federal bribery charges in Florida and acquitted both times. He was also fined by a California ethics board in 1996 for campaign contribution violations....

My Comment:  Please note that I have no opinion about the investment in Shore Bank.  While it can be made to look suspicious in light of how it turned out, I was obviously not involved in any of the discussions into the investment.  Perhaps the calculations that went into making that investment made sense at the time and satisfied both aspects of good public policy.  These are situations where the public gets a good return on its investment while also fulfilling a communty need at the same time.   I'm just stating what's in the public record and using it to illustrate the point that sometimes other considerations can get in the way of good solid investment planning & principles. 

Illinois is not the only state being confronted with problems of lax investment management standards.  Check out this story out of Louisiana involving its police pension system.  That article also mentions similar problems in both California and New York.


Link:  ABC 7 Shore Bank.

Short Notes: Wells Fargo Preferred

A note to clients who own certain preferred stocks in some of our income strategies.  You will be receiving a confirmation on the sale of a Wells Fargo Preferred.  It was not sold yesterday but was called by the company. 

*No positions.

Short Notes: Market Close

Market closed up just shy of 1% today.  Think it was continued positive earnings and maybe a bit of rally prior to tomorrow's Federal Reserve meeting and press conference.  Will be interesting to see if there is a "sell the news" event tomorrow afternoon.

Earnings Season Report Card

Here's Bespoke Investment Group's take on earnings season so far.

"The percentage of companies that have beaten earnings estimates this earnings season currently stands at 69%. {Above Bespoke} highlights how the "beat rates" look for specific sectors. As shown, three sectors have beat rates that are better than the overall reading, while the rest have weaker beat rates.

Interestingly, it's the Financial sector that has the strongest beat rate this earnings season at 81%. On the opposite end of the spectrum, Energy has the weakest beat rate at just 39%. With Energy stocks performing so well heading into earnings season and Financial stocks doing so poorly, it looks like analysts got ahead of themselves and expected too much from Energy and too little from Financials.

Technology and Health Care -- both with beat rates of 70% -- are the other two sectors that are outperforming the overall reading. The Consumer Staples and Consumer Discretionary sectors currently have the 2nd and 3rd weakest beat rates behind Energy."

*Long ETFs that either comprise the majority of these sectors or these sectors are major components of various ETFs we manage in both client and personal accounts. 

Link: 

Short Notes: Lackluster Markets.

Markets seemed to be sleeping today.  It felt more like a Monday in the summer than April today.  Stocks are likely to tread water until after the Federal Reserve's meeting and subsequent press conference on Wednesday.

Illinois Prepaid Tuition Problems Part I

Among the State of Illinois many stuctural defict problems is the example of the state's likely mismanagement of its prepaid college program.  Today we'll run an article from Crain's.  Tomorrow or Wednesday we'll see a report from the ABC Channel 7 news blog.  Excerpts with my highlights.

Crain’s investigation: Illinois’ prepaid tuition plan struggles.

Posted on March 7, 2011 {redirected from Montgomery Real Estate Info}

Illinois’ prepaid tuition program, a 12-year-old financial plan enabling children to attend state colleges at today’s prices when they have grown up, has the deepest shortfall of any such fund in the United States and is plowing money into unconventional — and some financial experts say high-risk — investments to close the gap.  The deficit of the College Illinois Prepaid Tuition Program also is far larger than the fund is declaring. Administrators recently adopted new calculations that mask its size.

The performance of the $1.1-billion fund is crucial to ensuring that the prepaid plan’s nearly 55,000 family participants get what they have paid for. That’s because, unlike in five other states, Illinois doesn’t promise to bail out the fund if it runs short of cash, contrary to what even some savvy investors and financial planners think. Instead, state law requires only that the governor ask the Legislature for help if the program can’t meet its commitments. Lawmakers are under no obligation to act......

The Illinois program was 20% underfunded as of June 30 when assessing its assets against liabilities over the long term, according to a year-end actuary’s report. That was a turn for the better from the 32% shortfall of a year earlier, but virtually all that improvement came from an accounting change that blunted the effect of recent investment losses by spreading them out over five years.

That figure....makes Illinois the worst-funded of these 12 state programs. Investment assumptions that outsiders say are overly optimistic suggest the hole is deeper than that. Even if the fund reaps the gains its administrators count on, the program wouldn’t be fully funded until 2022.

Illinois is vexed by the same financial trends that are sabotaging these plans across the country: Public universities over the past decade have jacked up tuition at an average of 5.6 percentage points over the inflation rate — tuition at the University of Illinois at Urbana-Champaign jumped 57% to $13,508 in 2010-11 from $8,624 in 2005-06 — while investments backing the programs generally are earning much less than that. Since its inception in 1999, Illinois’ prepaid plan has earned a little over 3% on average......

But Illinois is alone among states in choosing to radically revamp its investment fund and allocate nearly half the kitty to alternative investments that are seen as riskier than bonds and equities.......
....As a result, Illinois is assuming its fund will reap far higher yearly returns — 8.75% — than any of the other prepaid tuition programs.

The prepaid tuition program is the cousin of the more popular BrightStart college savings plan, which allows parents to reap tax-free returns in funds they choose. BrightStart exposes its 206,000 investors to the volatility of financial markets, potentially leaving families short of their needs if stocks plunge. But it permits them to more easily use the savings at schools all over the country.  ISAC markets its plan as a safer, more secure alternative to BrightStart, which is overseen by Illinois Treasurer Dan Rutherford.

“Your contract benefits are not dependent on the stock market’s performance because the College Illinois Prepaid Tuition Program’s actively managed fund insulates your investment from the market’s fluctuations,” reads the program’s enrollment kit. At the bottom of the page, participants are told that any shortfall in the fund would need an appropriation from state lawmakers, which is discretionary. In other words, there’s no guarantee that the fund will generate enough money to cover tuition payments.

{My comment:  There's much more to this article than I have the space to present here.  I post both it and the piece you'll see tomorrow because I think it is indicative of the pension obligation issues that most states are facing at all levels of government.  Restoring the fiscal sanity of government at all levels will be the last shoe that has to drop from the Great Recession of 2007-09.}

Link:  Illinois Prepaid Tuition Plan

Happy Easter

Cáisc shona daoibh!

Good Friday

There will be no posting today.

an tSionna {04.20.11-Earnings Pop?}

*Long ETFs related to the S&P 500 in client accounts.  Long Apple Computer in certain client accounts.  Apple is also a component of many of the ETFs that we own personally and in client accounts. 

Short Notes: Earnings

Stocks are going to fly this morning based on really good earnings issued last night.

An Update On Gold

An update on gold from Chart of the Day:

"Today's chart provides some long-term perspective in regards to the gold market. As today's chart illustrates, gold has been in an extremely strong bull market since 2001. The pace of that upward trend increased beginning in mid-2005. Following the financial crisis of late 2008, gold once again increased the pace of its ascent. Currently, gold is making new rally highs and has more than quintupled in price during its ten-year bull market. As today's chart illustrates, however, gold is approaching long-standing resistance (red line) of its accelerated trend channel."

Link:  Chart of the Day: Gold.

Capital Gains and The Budget

Interesting post over at The Big Picture regarding capital gains taxes and budget surpluses or deficits.  Here's what Barry Ritholtz says.

"Jim Bianco has an interesting thought on Cap Gains:

'Since the Tax Reform Act of 1986, capital gains taxes have been highly correlated to the budget deficit. The chart {above} shows capital gains is a driving force of revenue into the Treasury. Thanks to the recent financial crisis that affected stocks, bonds and real estate, there are fewer capital gains to tax and government revenues are suffering. State and local governments have a similar problem (but to a smaller degree) because of their reliance on real estate taxes and the inability to raise assessments because of the slump in home prices.'

This is obviously a correlation issue. The causative factor in budget deficits, at least on the income side, is impacted by the economic cycle. Recessions equal weak earning equals market sell off.

Hence, it is not cap gains, but the underlying causes. Regardless, it is interesting to see Cap Gains as indicative of economic cycles and government tax revenue."

My comment:  I first noticed back in the late 90's that capital gains seemed to be the driver of most of surplus under President Clinton.  There hasn't been much in the ways of tax gains from the stock market to be had in much of the past decade.  That's because anybody with losses from the two bear markets in the past 10 years could have pursued strategies to offset future gains.  We ran a series how to utilize capital losses back in the summer of 2009.  You can  link these articles at the end of this post.  Needless to say I think capital gains are going to be paltry for the forseeable future if investors and advisors handled portfolios correctly a few years ago.  Likely means no help for the budget from this.  

Article Link:  Capital Gains and the Deficit.

Links to our series:  Capital Gains & Losses Part I

Part II

Part III

Part IV    

Part V.1     Part V.2     Part V.3

Part VI

Part VII

Conclusion Taxable Accounts.

Conclusion Tax Deferred Accounts

Disclaimer:  If you actually take the time to go back and read through all of these old articles please remember a few things.  I am not an accountant and certain aspects of these rules may have changed since these articles were written.  Also some of this is my opinion on how losses should be treated.  Not all investment professionals may agree with my approach.  You should consult your own tax adviser or investment professional before taking any action that my be based on what you read here!

Short Notes: Tax Day.

It's tax day today!  Tell me if you feel rich?

an tSionna 04.15.11 {No Man's Land}

Not much to say.  Nothing to see here folks so move along!

*Long ETFs related to the S&P 500 in client accounts.

Age And Asset Allocation

Great article about age and asset allocation from Smart Money.  This is a subject I plan to visit again in the future.  Excerpt with my highlights.

A time-honored investment adage is that your asset allocation should mirror your age: 60/40 stocks and bonds at age 40; 50/50 at fifty; 40/60 at sixty and so on.....So what's wrong with the allocation adage and the many funds based on it?  Plenty. Like many adages, this one strikes {the author} as grossly simplistic at best, and dangerous at worst.

......The age/allocation rule {must have originated at} a time when bonds were yielding considerably more than the near-zero investors are facing today....... The adage also fails to consider that as investors age and their life expectancies decline, so do their long-term financial needs. It also seems to assume that stocks are really high-risk assets that aging investors should steadily cut back on.

There's no question that returns are correlated with risk, and that stocks are more risky (and volatile) than bonds over most periods. But as long as your time horizon is ten years or longer (which should include everyone up to age 75 based on life expectancies) the risk in owning stocks seems exaggerated. The worst ten-year period for owning stocks since 1926 (1929-1938) produced an annualized loss of just -0.9, adjusted for inflation. By contrast the average return for all ten-year periods was an annualized gain of nearly 10% and the best returns were over 18%. 

Even in the last decade, with two market crashes, returns on stocks were essentially flat. In other words, the percentage of savings in stocks isn't likely to decline by much, let alone vanish, over ten years or more.{My Comment here:  The author might want to check his data because I've seen data that argues that the 2000's were the worst decade.  Certainly an index like the Nasdaq is nowhere near its 2000 level.  Irrespective of that point, his reasoning is basically sound regarding the data in my opinion.}

Investors should recognize that the adage is very conservative and risk-averse even for people age 60 and over. This may be appropriate for some investors who are close to retirement and haven't saved enough for a comfortable retirement and thus can't tolerate even the modestly higher risk of loss associated with long-term ownership of stocks......

By embracing policies that encourage risk taking, the Federal Reserve has helped ensure generous returns for shareholders, but correspondingly paltry returns for those who can't afford the greater risk. But the Fed's job is to promote economic growth and monitor inflation, not worry about the needs of retirees living on fixed incomes. The best solution is to never be in this plight in the first place, by saving and investing from a young age.....

....Like so many aspects of investing, simplicity is appealing but rarely effective. No matter what a person's age, an asset allocation plan has to start with an investor's net worth; balance expected returns with expected needs; and take into account risk tolerance. Everyone's circumstances will be different. Some people simply can't stomach volatility. But {the author's} hunch is that the age/allocation adage makes little sense for most people, and that many aging investors can and should allocate more to stocks than they do.

Link:  Why Age Alone Shouldn't Drive Asset Allocation.

*Long ETFs related to the NASDAQ 100 in client and personal accounts.

What Is This?

The internet is a great communications tool.  It has also become the preferred way for mutual funds and other investment companies to pitch products to money managers.  I probably get 2-3 such e-mails everyday.  Most of the time they're not worth mentioning but this one caught my eye.  Basically I don't know what investment philosophy they're trying to pitch!  I've been doing this for over 24 years and I don't even understand what it is they're trying to say except that they can basically invest using any method they want. I've included the main pitch below.  Almost every investment buzzword known to man is highlighted in Green below.  .  I've taken the name out of the pitch for safety reasons.

XXXXXX LAUNCHES  ABSOLUTE RETURN LONG-SHORT FIXED INCOME MUTUAL FUND

· Potential Solution for Rising Interest Rates

· Possible Alpha Solution for Alpha Beta Separation Advisors

· Two Institutional Specialist Sub-Advisors

SOME CITY, USA,  April 12, 2011 - XXXXXX, LLC, a SOME CITY based investment management firm focused on the Democratization of Alternative Investment Strategies, is pleased to announce the launch of the XXXXX Isolated Alpha Fixed Income Fund, a global absolute return-oriented fixed income strategy. The fund, sub-advised by two highly regarded institutional specialist investment managers, is intended to be an “all season” strategy for investors seeking consistent returns through all market environments. In the pursuit of its objectives the fund has the flexibility to invest in an unconstrained fashion across global fixed income securities and sectors including strategies that go both long and short in an attempt to capitalize on market opportunities in both directions.

The philosophy underlying the strategy is to incorporate an absolute return approach in the management of the two principal risk/return drivers for fixed income investing - interest rates and credit – within predefined exposure bands and a rigorous, quantitative risk management framework.

XXXXXZ Partners, LP, ....institutional, credit specialist fixed income manager, and a wholly owned subsidiary of .....ZXZZZ, LLC  The manager follows a bottom up, research driven, duration neutral, global unconstrained multi-sector absolute return credit strategy comprised of their best ideas across liquid credit markets.  {My Comment:  If this fund is going to get their best ideas, then who gets the worst ones?}

XXXXYZ  Partners, LLC, is a ...New York based, institutional alternative investment manager focused on active duration strategies in developed sovereign markets. The manager follows a fundamentally based, systematized, credit neutral (excluding sovereign credit risk), directional active duration strategy focused on the US, UK, German and Japanese markets.

The XXXXXXX name was chosen to highlight several important themes, primarily the concept of “active decision making” within an asset class. By selecting an absolute return approach the strategy becomes unconstrained relative to a benchmark, thereby enabling tactical responsiveness to changing market environments with greater potential for risk managed results.

REALLY?  You can't make this up!!!

Gasoline

Bespoke Investment Group published this chart and comment on their public website the other day:

"{Above} is a chart showing the distance that both gas prices and oil are currently trading from their 2008 highs. As shown, the price of oil is still 22% from its 2008 high, while the price at the pump is just 10% from its high. 

During the huge oil price run-up in 2008, refiners got squeezed as gas prices rose at a slower rate than the price of oil.......(Most consumers didn't realize they were actually getting a relatively good deal when they were paying over $4/gallon back then!) This time around, consumers aren't getting as good of a deal, and it's becoming more and more painful to fill up."

My comment:  It's beginning to feel to me like there is a real possibility that President Obama will be a "One-Termer".  He may catch a break if the Republicans nominate a regional candidate like Mike Huckabee. But for him to have a real chance, the American public is going to have to start seeing noticeable improvement in their own economic reality.  I think he has to next summer to get the economy moving so that most voters don't blame him.  Right now the President is vulnerable to a challenger looking into a camera in the fall 2012 debates and asking the question that President Reagan used to KO President Carter; "Are you better off today than you were four years ago?"  $4.00 and up gasoline doesn't seem to work in his favor.

Link:  Gasoline

an tSionna {04.11.11}

*Long ETFs related to the S&P 500 in client accounts.

Short Notes: Net Market Negative

To reflect the fact that we have made small sales over the past several days we will lower our shortest term rating once again to NET MARKET NEGATIVE.  You can click here for a defnintion of that term.  That does not necessarily mean that we have become much more negative on the market.  We laid out our view most recently here, here  and here.  It does reflect that on balance we have taken some profits in our more aggressive strategies over the past several days.

Samuelson: We've Promised More Than We Can Deliver

Excellent Newsweek Article by Robert Samuelson analysing our national budgetary quagmire.  Excerpt with my highlights:

We in America have created suicidal government; the threatened federal shutdown and stubborn budget deficits are but symptoms. By suicidal, I mean that government has promised more than it can realistically deliver and, as a result, repeatedly disappoints by providing less than people expect or jeopardizing what they already have.  But government can't easily correct its excesses, because Americans depend on it for so much that any effort to change the status arouses a firestorm of opposition that virtually ensures defeat. Government's very expansion has brought it into disrepute, paralyzed politics and impeded it from acting in the national interest.

Few Americans realize the extent of their dependency. The Census Bureau reports that in 2009 almost half (46.2 percent) of the 300 million Americans received at least one federal benefit: 46.5 million......The census list doesn't include tax breaks. Counting those, perhaps three-quarters or more of Americans receive some sizable government benefit.......

"Once politics was about only a few things; today, it is about nearly everything," writes the eminent political scientist James Q. Wilson in a recent collection of essays ("American Politics, Then and Now"). The concept of "vital national interest" is stretched. We deploy government casually to satisfy any mass desire, correct any perceived social shortcoming or remedy any market deficiency.......

The consequence is political overload: The system can no longer make choices, especially unpleasant choices, for the good of the nation as a whole......The trouble is that, despite superficial support for "deficit reduction" or "tax reform," few Americans would surrender their own benefits, subsidies and tax breaks - a precondition for success. As a practical matter, most federal programs and tax breaks fall into one of two categories, each resistant to change.

The first includes big items (Social Security, the mortgage interest deduction) whose benefits are so large that any hint of cuts prompts massive opposition - or its specter. Practical politicians retreat. The second encompasses smaller programs (Amtrak, ethanol subsidies) that, though having a tiny budget effect, inspire fanatical devotion from their supporters......

 

If deficits were temporary - they were certainly justified to temper the recession - or small, they would be less worrisome. That was true for many years. No more. An aging population and uncontrolled health costs now create an ongoing and massive mismatch between spending and revenue, even at "full employment."..... So President Obama and Congress face a dilemma: The more they seek to defuse the economic problem of too much debt, the greater the political risks they assume by cutting spending or raising taxes.

The package to prevent a shutdown barely touches the prevailing stalemate.....Government is suicidal because it breeds expectations that cannot be met. All the partisan skirmishing over who gets credit for averting a shutdown misses the larger issue: whether we can restore government as an instrument of progress or whether it remains - as it is now - a threat.

Link:  We've Promised More Than We Can Deliver.

Short Notes: Budget Compromise

Cartoon via The Big Picture. and originally from IBD.com..  It vividly shows what crumbs our latest budget debate fought over.

an tSionna {Earnings}

From Chart of the Day: 

"With first-quarter earnings season set to officially kick-off on Monday when Alcoa reports first-quarter earnings, today's chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today's chart illustrates how earnings declined over 92% from its Q3 2007 peak to Q1 2009 low which brought inflation-adjusted earnings to near Great Depression lows. Since its Q1 2009 low, S&P 500 earnings have surged (up an inflation-adjusted 994%) and currently come in at a level that is greater than what occurred at the peak of the dot-com bubble and not far from its credit bubble peak. It is interesting to note that the original run up in real earnings from Great Depression lows to dot-com highs took over 67 years. The current spike has taken 20 months."

Link:  Earnings.

*Long ETFs related in the S&P 500 in client and personal accounts.

Happy Birthday!

Happy Birthday Dad.  God Bless!

Link:  Stardust

Short Notes: 1st Quarter 2011 Market Returns

According to Barron's* here's the rundown of our major markets in 1st Quarter of 2011.

Dow Jones Industrials.  6.4%
S&P 500                      5.4%
Nasdaq                        4.8%
Russell 2000                 7.6%

*Is This As Good As It Gets?  Barron's, Tan, Kopin, April 4, 2011. p. M3.

* Long ETFs related to the S&P 500 and Nasdaq in client and personal accounts.  Long ETFs related to the Dow Jones Industrial Average and the Russell 2000 in client accounts. 

Saut: 5 Things That Makes America Great!

Jeffrey Saut is the investment strategist over at Raymond James.  In his weekly commentary he often serves up what I think are insightful views of the markets, stocks and the economy.  This week he discusses five factors that makes our economy great and offers up six definitions of what makes a company great.  Some of these factors are now being replicated in other places now in the world but I still think we're one of the few places that has them all.  {Excerpt}

1) The United States is the home of the entrepreneur.

2) The U.S. is the most open/flexible society the world has ever seen.

3) The brightest minds from around the world dream of coming to the U.S.  {My note:  This may not be so true anymore.}

4) English is the universal language.

5) Americanization remains a powerful and growing – though resented – economic and social trend throughout the world. (To quote the advertising/marketing giant WPP Group’s CEO, Sir Martin Sorrell, “Globalization is a misnomer. The better word is Americanization.”)

....“Subscribing as I do to the Charlie Munger dictum that a great business at a fair price is superior to a fair business at a great price, we buy shares in what we believe are ‘Great Companies.’ Since the stock market currently makes little distinction in valuation between fair and great companies, the normal dilemma – Do I pay up for quality? – does not exist.....

....“First,...what makes a company ‘Great.’

1) A great company brings value to its customers, its suppliers, its shareholders, and a culture of fulfillment to its employees.

2) As a customer, you can’t beat it and what the company sells is good for its customers.

3) A great business generates a lot of free cash for reinvestment and is able to reinvest at high rates of return.

4) The chief executive does not ‘alternate between smart and dumb.’ He/She is smart all the time and demonstrates respect for shareholders, first because it is right and second because the CEO is a significant owner.

5) The socio/economic wind is at the back of the company.

6) Ideally, there is a ‘moat’ around the business that Buffett and Munger define as a sustainable competitive advantage. ‘Moats’ are problematic in practice because the world changes so fast that most of them are not sustainable. My concept of a ‘moat’ is superior management with superior brains fixated on adjusting to and capitalizing on rapid change.”

Link:  Saut: Market Commentary.

Short Notes: An Introduction.

I'm introducing a new section which I'll call short notes.  I'm going to use it when I have a few thoughts that I'd like to share but which don't really need a longer explanation.  I'll also this section when I want to put something out quickly on the blog.  Sometimes I might even use it when I'm pressed for time {like today!}.

Here goes:

-Huge tech deal last night.  Texas Instruments {TXN} paying a very large premium for National Semiconductor {NSM}.  Underscores the thought that market assets are still cheap.

-Nasdaq 100 {QQQ} will be rebalanced on May 2nd. Apple {AAPL} will see its share of the index lowered.  Right now it's somewhere near 20% of the QQQ's and it looks like its new weighting will be somewhere around 12% of the index.  Probably is a good thing longer term.

-Earnings yield {the inverse of the P/E Ratio} of the S&P 500 currently stands at just around 7%.  That is a number that is still compelling for stocks.

-Butler couldn't get it done last night.  All us Hoosier natives a bit down today.  12-64 shooting from the field doesn't get it done!  Butler could have used Gordon Hayward in Houston yesterday!!  Irish ladies play for their title tonight so there's still hope for us!

*Long AAPL  in certain client accounts.  Long ETFs related to the Nasdaq 100 & the S&P 500 in client and personal accounts.  TXN & NSM are components of several indices owned by client of our firm and in my personal accounts.

Jobs In This Recession

From Chart of the Day: 

{On Friday}, the Labor Department reported that nonfarm payrolls (jobs) increased by 216,000 in March. Today's chart puts the latest data into perspective by comparing nonfarm payrolls following the the end of the latest economic recession (i.e. the Great Recession -- solid red line) to that of the prior recession (i.e. 2001 recession -- dashed gold line) to that of the average post-recession from 1954-2000 (dashed blue line). As today's chart illustrates, the current jobs recovery is much weaker than the average jobs recovery that follows the end of a recession. Today's chart also illustrates that the current jobs recovery is slightly stronger than what occurred following the recession of 2001 and that the trend is up.

Link:  Jobs Data.

an tSionna 04.01.11 {April Fool's Day}

Stocks certainly fooled all those folks that thought the world was coming to an end mid-month. Nice rally since the bottom on March 16th. We'll have to see if there's enough gas now to power to new highs. I still think the most likely scenario is a trading range of some sort but we'll have to see if that hypothesis holds.

*Long ETFs related to the S&P 500 in client and certain personal accounts.