Sonoco Products (SON) 2012 Review

Sonoco Products Co (SON) is a leading producer of paper-based tubes and cores, flexible packaging, rigid plastic containers, cylinder paperboard, composite cans, protective partitions, wire and cable reels and point of purchase displays.

The company has grown profits and dividends at a 5-6% pace over the last five years earning a 13-15% return on equity. The company should continue to grow as a result of:

(1) new product innovation. SON has raised the amount of capital spending dedicated to new product opportunities,

(2) increased focus of consumer oriented businesses,

Morning Journal-Why the Germans are playing hard ball with Greece

Economics
 This Week’s Data

Other

Does a strong stock market require a strong dollar (short):
http://www.thestreet.com/story/11390256/1/kass-debunking-the-dollar-myth.html?kval=dontmiss

Real GDP versus employment (chart):
http://mjperry.blogspot.com/2012/01/chart-of-day-structural-shift-in-us.html

Net oil imports into the US (chart):
http://mjperry.blogspot.com/2012/01/chart-of-day-americas-energy-revolution.html

The Morning Call-I am continuing to Sell

The Market
Technical

The indices (DJIA 12653, S&P 1313) sold off strongly at the open yesterday, then fought back the rest of the day. They closed within their intermediate term trading ranges (10725-12919, 1101-1372) and well above the lower boundary of their recent short term up trend (1220, 1264).

Volume continues to be light; breadth was off. The VIX rose 5% but remains firmly within its current down trend.

GLD was off fractionally but maintained its short term up trend.

Morning Journal-Comparing this recovery with those of the past

Economics

This Week’s Data

December personal income rose 0.5% versus expectations of a 0.4% increase’ personal spending was flat versus estimates of up 0.1%; the personal consumption expenditure index (inflation) was up 0.2% versus forecasts of up 0.1%.
http://www.calculatedriskblog.com/2012/01/personal-income-increased-05-in.html

Other

A look at the rate of recovery following recessions in the post war period (chart):
http://www.bespokeinvest.com/thinkbig/2012/1/27/recoveries-dont-get-much-weaker-than-this.html

More on the revisions to the leading economic indicator (medium):
http://advisorperspectives.com/dshort/guest/Dwaine-van-Vuuren-120129-The-New-CB-LEI.php

Monday morning humor (3 minute video):
http://www.zerohedge.com/news/friday-tragedy-us-debt-limit-explained

Politics

Domestic

Here is a key reason our education system doesn’t work (medium):
http://mjperry.blogspot.com/2012/01/what-obama-problaby-wont-mention-today.html

US manufacturing is doing fine without Obama’s help (medium):
http://mjperry.blogspot.com/2012/01/american-manufacturing-already-has.html

News on Stocks in Our Portfolios

More earnings per share reports:

Reported Expected

Chevron $2.58 $2.96
Qualcomm .90 .88

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.

The Morning Call-Monday Morning Chartology 1/30/12

The Market

Technical

Monday Morning Chartology

There continues to be nothing in the technicals that would slow upward momentum to the 1372 level.




GLD is making a solid come back.




The VIX sustains its down trend--a positive for stocks. Note the support at around 15.5.




Three peaks and a domed house (short):
http://blog.stocktradersalmanac.com/post/Three-Peaks-Domed-House-Dj-Vu-All-Over-Again

Fundamental

A thought before viewing strategists expectations for 2012 (medium)
http://advisorperspectives.com/commentaries/dunn_12712.php

Not only is last quarter’s earnings ‘beat’ rate declining, so is the guidance (short):
http://www.bespokeinvest.com/thinkbig/2012/1/28/uh-oh-guidance-dips-too.html

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.

Schlumberger (SLB) 2012 Review

Schlumberger (SLB) is the world’s leading oilfield service company providing wireline, drilling and measurement and well testing services, completion, artificial lift, data and consulting services, land and marine seismic services and reservoir services.

Schlumberger has grown profits at a 16% pace over the past ten years; the dividend growth rate has been lower rate but management has stated that it intends to increase it in the near term. In addition, the company has earned a 11-25%+ return of equity over the last ten years. While the company experienced lower earnings in 2009, SLB profits resumed their up trend in 2011 and should continue to grow at an above average over the long term as a result of:

(1) its financial strength and technological leadership positions it to benefit from increased activity in oilfield services and simulation and completion services,

The Closing Bell--Less downside, but no more upside

Statistical Summary
Current Economic Forecast

2011

Real Growth in Gross Domestic Product: +1.5- +2.5%
Inflation: 2-3 %
Growth in Corporate Profits: 7-12%

2012

Real Growth in Gross Domestic Product (revised): +1.0- +2.0%
Inflation (revised): 2.5-3.5 %
Growth in Corporate Profits (revised): 5-10%


Current Market Forecast

Dow Jones Industrial Average

Current Trend (revised):
Intermediate Term Trading Range 10725-12919
Long Term Trading Range 7148-14180
Very LT Up Trend 4187-14789

2011 Year End Fair Value 10750-10770

2012 Year End Fair Value 11290-11310

Standard & Poor’s 500

Another reality check from Rick Santelli

Thoughts on Investing 2/27/12

Graduation season is upon us. From the next generation of Warren Buffett wannabes, I occasionally hear questions such as “What should I learn to become a great investor?”

Contrary to popular belief, investing isn’t a traditional academic discipline. Money management is hardly a typical major. There are, of course, plenty of “Business Administration” undergrads, but their focus tends to be on running companies, rather than investing in them.

We churn out MBAs like made-in-China widgets, yet few ever become outstanding investors. And don’t even ask about economists — the profession that missed the housing boom and bust, the Great Recession, the credit crisis and the market collapse.

Great investors are savvy generalists. I can think of five fields that are hugely helpful to asset management. If you were to study these disciplines, your understanding of how markets work would greatly improve. And you would be a better investor.

@AllAmerInvest, The Trend of the Market Remains UP, Chart

The uptrend in the S & P 500 continues.

All American Investor

One thing you should notice when you look at the SP 500 chart below is the slope of the 40 day moving average (green line). The slope is trending up. It is the slope that is most important, not the absolute value of the moving average.

The market should now be able to take downside attacks. Expect the market to find good support if the market comes back to, or near the 40 day moving average. This is where you want to consider buying the market.

Obviously, the market is still vulnerable to event risk from Europe.

Morning Journal-Another government 'investment' bites the dust

Economics
This Week’s Data

December new home sales fell 2.5% versus expectations of an increase of 1.5%.
http://www.calculatedriskblog.com/2012/01/2011-record-low-new-home-sales-and.html

The December leading economic indicators rose 0.4% versus estimates of a 0.7% advance.

Initial fourth quarter GDP was reported up 2.8% versus forecasts of up 3.0%; the GDP deflator came in at +0.4% versus expectations of +2.0%
http://www.calculatedriskblog.com/2012/01/real-gdp-increased-28-annual-rate-in-q4.html

The Morning Call-I'm lightening up

The Market
Technical

I was little surprised by the down draft in the indices (DJIA 12734, S&P 1318) yesterday. Nonetheless, they still closed near the upper boundaries of their intermediate term trading ranges (10725-12919, 1101-1372) and well above the lower boundaries of their short term up trends (12181, 1260). Furthermore the S&P’s 50 day moving average (1253) continues to move up toward its 200 day moving average (1256). A ‘cross’ would be a significant positive.

Volume declined, as did breadth. The VIX rose but remains in a marked down trend.

GLD (167) rose again. The next resistance level is circa 175. Any weakness from current levels will prompt the purchase of additional shares.

Intel INTC) 2012 Review

Intel Corporation (INTC)is a leading manufacturer of integrated circuits (microprocessors, notably Pentium, microcontrollers, memory chips) and computer modules and boards to personal computer, communications, industrial automation, military and electronic equipment markets. 

While profits are somewhat cyclical, the company has grown its dividend at a 28% annual rate over the past ten years earning a 10-20% return on equity. Despite the adverse Market conditions in 2008/2009, Intel should continue to lead the rapid growth in the semiconductor industry because:

(1) its processors are characterized by greater functionality and lower cost than its competition,

(2) expected acceleration in server demand,

Morning Journal-Fact checking the SOTU

Economics

This Week’s Data

December pending home sales index fell 3.5% versus expectations of a 1.0% decline and the November reading of +7.3%.

Weekly jobless claims rose 25,000 versus estimates of an 18,000 increase.
http://www.calculatedriskblog.com/2012/01/weekly-initial-unemployment-claims_26.html

December durable goods orders advanced 3.0% versus forecasts of +2.0%; ex autos, it was up 2.1% versus expectations of up 0.7%.

The Morning Call--We are Adding to GLD

The Market
Technical

The indices (DJIA 12758, S&P 1326) picked up momentum to the upside yesterday, closing within their intermediate term trading ranges (10725-12919, 1101-1372) and above the lower boundary of their short term up trends (12155, 1255). The 12919, 1372 level is clearly within striking distance; and as I have said repeatedly, prices are likely to get there.

Volume was up marginally; breadth improved. The VIX declined and remains within a firm down trend.

GLD soared, rebounding off its 50 day moving average and finished decidedly above the down trend off its September highs. At the Market open, our Portfolios will Add to their positions, taking them above 5%.

Morning Journal-The US inches closer to a European moment

Economics
This Week’s Data

The International Council of Shopping Centers reported weekly sales of major retailer fell 1.4% versus the prior week but rose 2.8% versus the comparable period in 2011; Redbook Research reported month to date retail chain store sales dropped 1.6% versus the similar time frame in December but increased 2.5% on a year over year basis.

Weekly mortgage applications fell 5.0% while purchase applications dropped 5.4%.

The Morning Call-What did He just say?

The Market
Technical

The indices (DJIA 12675, S&P 1314) had a mildly negative day, closing within their intermediate term trading ranges (10725-12919, 1101-1372) and above the lower boundary of their short term up trends (12145, 1253).

There is no resistance between current levels and the 12919, 1372 level; and both of the Averages have multiple support levels, including the neckline of the reverse head and shoulders pattern (12287, 1266), their 200 day moving averages (11967, 1257), the lower boundary of their short term up trends (12145, 1253) and the old resistance/support level (11741, 1230). In addition, the S&P 50 day moving average (1250) continues to close on the 200 day moving average [1257] for a possible ‘golden cross’.
http://advisorperspectives.com/dshort/guest/Chris-Kimble-120124-NYSE-at-Resistance.php

Finally, I ran a check of our internal indicator, comparing individual stock current levels with the comparable 12919, 1372 boundaries; out of a Universe of 158 stocks, 52 were above the 12919, 1372 level, 78 were not and 28 were too close to call. That is actually a much stronger reading than I had expected; however, it is not strong enough at the moment to have predictive value. I will be monitoring this indicator closely if prices continue to advance.

United Parcel Service (UPS) 2012 Review

United Parcel Service (UPS) is the world’s largest integrated air and ground package delivery service, operating in over 200 countries.

The company also offers specialized transportation and logistics services. UPS had grown its earnings at a 5% pace in the last ten years though dividends have increased at a 12% annual rate. It has a 30%+ return on equity. UPS suffered a slowdown in growth as a result of the 2009 recession; however, it has recovered and should return to above earnings growth as a result of:

(1) as the economy improves, the company should experience operating leverage with improved pricing and volume,

Morning Journal-Debt matters

Economics
This Week’s Data

Other

Greg Mankiw on taxes (medium):
http://www.nytimes.com/2012/01/22/business/four-keys-to-a-better-tax-system-economic-view.html?_r=1

More shenanigans between the administration and the banks (medium):
http://www.nakedcapitalism.com/2012/01/obama-to-give-banks-mortgage-get-out-of-jail-almost-free-card-pressures-state-attorneys-generals-to-capitulate.html

The Morning Call-The narrative is too positive

The Market
Technical

The indices (DJIA 12708, S&P 1316) finished the day flattish and mixed (S&P up, DJIA down) though there was some volatility intraday. At the close, they were within their intermediate term trading ranges (10725-12919, 1101-1372) and well above the lower boundaries of their recent short term up trends (12099, 1251).

Volume fell; breadth was flat. The VIX rose but remains in solid down trend.

GLD (163) rose, breaking above its 50 day moving average. The last remaining resistance level is the down trend off the September high (circa 164). A move above this boundary will prompt additional buying.

@AllAmerinvest Stock Futures Down Early, Chart

U.S. stock-index futures are slipping after a meeting of euro-area finance chiefs finished without making progress on a debt-swap deal for Greece.

All American Investor

Thoughts on Investing--from Jeffrey Hirsch

9% DJIA Gains In Election Years When Sitting President Runs

By Jeffrey A. Hirsch

Since the inception of the Dow Jones Industrial Average in 1896 there have been 19 presidential elections that a sitting president was running for reelection. DJIA posted gains in 14 of these 19 election years. There were only two losses greater than 5%. In 1932 as the Great Depression took hold, the DJIA fell 23.1% and President Hoover lost his reelection bid during the worst bear market in DJIA history that brought the blue chip average down 86% from April 1930 to July 1932. This was also the only incumbent to lose the office when the market was down.

The Morning Call--Monday Morning Chartology 1/23/12

The Market

Technical

Monday Morning Chartology

You can’t argue with the strength displayed by the S&P in this chart.




Short term, GLD is clearly acting better. It does, however, have resistance at the 50 day moving average (the red wiggly line) and the down trend off the September 2011 highs.

The Closing Bell--Can this rally last?

Statistical Summary
Current Economic Forecast

2011

Real Growth in Gross Domestic Product: +1.5- +2.5%
Inflation: 2-3 %
Growth in Corporate Profits: 7-12%

2012

Real Growth in Gross Domestic Product (revised): +1.0- +2.0%
Inflation (revised): 2.5-3.5 %
Growth in Corporate Profits (revised): 5-10%

Subscriber Alert

SUBSCRIBER ALERT
1/20/12

Our Portfolios are going to continue to chip away at stocks that are near the Sell Half Range or major resistance levels. Accordingly, a small portion of the following holdings are being Sold.

In the Dividend Growth Portfolio: Paychex, Nucor

In the High Yield Portfolio: Kinder Morgan Energy Ptrs

In the Aggressive Growth Portfolio: Medivation, Suncor, Reliance Steel

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.

Morning Journal-More on the Keystone Pipeline decision

Economics
This Week’s Data

The January Philadelphia Fed manufacturing index came in at 7.3 versus expectations of 10.0 and the December reading of 10.3.
http://advisorperspectives.com/dshort/updates/Philly-Fed-Business-Outlook.php

Other

Greg Mankiw on the progressivity of the US tax code (short):
http://gregmankiw.blogspot.com/2012/01/five-observations-about-progressivity.html

@AllAmerInvest Global Recession, Retirement Havens, Google Down Ten Percent, Malcolm X

Shilling says new global recession is here

And here’s the really bad news: He thinks Europe will experience a recession as deep as ours was from 2007-2009 — enough to tip the U.S.’s relatively better economy into recession, too, during the first quarter of 2012.
Read More

Google
Shares fell as much as 10 percent in extended trading yesterday after Google reported fourth-quarter sales, excluding revenue passed on to partner sites, of $8.13 billion, falling short of the $8.41 billion average estimate of analysts surveyed by Bloomberg. Profit before certain costs was $9.50 a share, missing the $10.50 average estimate.

All American Investor

The Morning Call--Upside is limited

The Market
Technical

The indices (DJIA 12623, S&P 1314) had another quietly up day closing within their intermediate term trading ranges (10725-12919, 1101-1372) and above the lower boundary of their short term up trends (12056, 1244).

Volume was flat; breadth down. The VIX fell 5%, finishing (1) within the current down trend and (2) below the developing base that I mentioned previously--a positive for stocks.

GLD was off fractionally, but remains within its short term up trend.

A long term perspective on gold (medium):
http://www.zerohedge.com/news/longer-term-perspective-gold-and-more-nomura

Morning Journal A big day for economic data

Economics
This Week’s Data

The International Council of Shopping Centers reported weekly sales of major retailer up 0.1% versus last week and up 3.3% versus the comparable period a year ago; Redbook Research reported month to date retail chain store sales up 2.8% on a year over year basis.

The December producer price index fell 0.1% versus expectations of a 0.3% increase; core PPI was up 0.3% versus estimates of up 0.1%.
http://scottgrannis.blogspot.com/2012/01/thoughts-on-producer-inflation.html

December industrial production increased by 0.4% versus forecasts of a rise of 0.5%; capacity utilization came in at 78.1 as anticipated.
http://www.calculatedriskblog.com/2012/01/industrial-production-increased-04-in.html

Weekly jobless claims plummeted 47,000 versus expectations of a 9,000 drop.
http://www.calculatedriskblog.com/2012/01/weekly-initial-unemployment-claims_19.html

The Morning Call Big changes potentially coming to the leading economic indicators

The Market
Technical

The indices (DJIA 12578, S&P 1308) had a great day, leaving them within their intermediate term trading ranges (10725-12919, 1101-1372) and above the lower boundary of a short term up trends (12026, 1242). Both of the Averages have multiple support levels that are close in. Furthermore, the S&P 50 day moving average continues to close the gap with the 200 day moving average; if that ‘cross’ is made, then the technical picture will improve even more.

Volume was flat; breadth improved. The VIX got whacked by 6% and closed near the developing base which I mentioned yesterday. If this level holds, that could potentially become a mild negative for stocks.

GLD (161) rose again and continues its short term recovery. However, resistance exists at the down trend off its September 2011 high (164.8).

@AllAmerInvest Get Rich, Piracy, Cheaters, Surprise, Nutty Cramer

Questions and answers about the issues behind the controversial Internet anti-piracy bills

Online piracy costs U.S. copyright owners and producers billions of dollars every year, but legislation in Congress to block foreign Internet thieves and swindlers has met strong resistance from high-tech companies, spotlighted by Wikipedia’s protest blackout Wednesday, warning of a threat to Internet freedom.
Read More

What the Top 1% of Earners Majored In -- How to Get Rich
We got an interesting question from an academic adviser at a Texas university: could we tell what the top 1 percent of earners majored in?

U.S. Vows to Expand Insider Trading Probe as Fourth Ring Charged
The U.S. government vowed to continue its five-year investigation into insider trading on Wall Street as it charged a fourth ring of hedge-fund traders with using illegal information to make millions of dollars.

All American Investor

Johnson & Johnson (JNJ) 2012 Review

Johnson & Johnson (JNJ) is a major developer, manufacturer and marketer of health care products. 

Its major divisions are: Consumer (baby care, oral care, non-prescription drugs, wound care and skin care), Medical Devices (electrophysiology, circulatory disease management and orthopedic joint reconstruction) and Pharmaceuticals (contraceptives, psychiatric, anti-infective, gastrointestinal and dermatological).

Over the past ten years, the company has earned a 20-30% return on equity while growing its earnings and dividend at a 12-14% annual rate. While profit and dividend growth may slow somewhat short term, its strong, well diversified product line should continue to grow rapidly longer term as a result of:

@AllAmerInvest Bull Sentiment, Wholesale Prices Fall, Euro Collateral, MIT Running the Show,

Wholesale Prices in U.S. Unexpectedly Fall

Wholesale prices in the U.S. unexpectedly dropped in December, consistent with the Federal Reserve’s assessment that inflation remains tame.
Read More

Bullish Signals May Mean a Need to Pull Back


Stocks have rallied 20% since October lows, based on intraday levels. But investor sentiment also has gained, and that's a bad sign for contrarian investors. Mark Hulbert looks at past bull markets to glean some answers.

If you don't see the video go here.

All American Investor

Morning Journal-The latest from John Hussman

Economics
This Week’s Data

Weekly mortgage applications soared 23.1% while purchase applications rose 26.4%; seasonal factors weighed heavily in this report.
http://www.calculatedriskblog.com/2012/01/mba-mortgage-refinance-applications.html

Other

An update on the trade data with China (short):
http://mjperry.blogspot.com/2012/01/us-exports-to-china-have-increased-by.html

The argument against inflation (medium):
http://pragcap.com/where-is-inflation-headed-2

The latest from John Hussman (medium and today’s must read):
http://advisorperspectives.com/commentaries/hussman_11612.php

The World Bank reduces its forecast for growth in 2012 (medium):
http://www.reuters.com/article/2012/01/18/us-worldbank-outlook-idUSTRE80H04S20120118?feedType=RSS&feedName=topNews&rpc=71

Update on money supply/demand (short):
http://scottgrannis.blogspot.com/2012/01/money-demand-is-key-monetary-variable.html

The Morning Call--Adding to GLD

Technical

The indices (DJIA 12482, S&P 1293) had a volatile day, though they closed within their intermediate term trading ranges (10725-12919, 1101-1372) and above the lower boundaries of their short term up trends (12052, 1240). Both also have other multiple support levels including the neckline of the recent reverse head and shoulders, the 200 day moving average and the old 11741, 1230 resistance/support level.

As an aside, if the 200 day moving doesn’t soon retreat dramatically, then we will get a ‘golden cross’ (when the 50 day moving average trades up through the 200 day moving average) in short order. Historically, this is a very strong positive for stock prices.

The latest from "Trader Vic' Sperandeo

Medivation (MDVN) and Pfizer (PFE) Announce Results from Phase 3 Concert Trial of Dimebon in Alzheimer’s Disease

Medivation (MDVN) and Pfizer (PFE) will discontinue development of dimebon for all indications and will terminate the ongoing open label extension study in Alzheimer’s disease. The companies also announce that they will terminate their collaboration to co-develop and market dimebon pursuant to the terms of their Collaboration Agreement.

Read More on the Alzheimer's Reading Room -- Alzheimer's Drug Dimebon (Medivation) Fails, Sad Day

This brings the number of consecutive failed clinical trials for Alzheimer's medications to 15.

Morning Journal-Germany says no to more money printing

Economics
This Week’s Data

The January Empire State Manufacturing Index came in at 13.48 versus expectations of 10.5 and December’s reading of 9.53.
http://www.calculatedriskblog.com/2012/01/ny-fed-survey-manufacturing-activity.html

Other

More on the private equity capital model (medium):
http://www.nationalreview.com/articles/288023/turnaround-capitalism-rich-lowry

Update on the Baltic Dry Index (short):
http://www.bespokeinvest.com/thinkbig/2012/1/15/baltic-dry-index-collapses.html

The Morning Call-Tuesday Morning Chartology + The problem with demographics

The Market
Technical

Tuesday Morning Chartology

As you can see, there is little resistance between current levels and 1372. Also note the following support levels: (1) the neckline of the reverse head and shoulders pattern [12287, 1266], (2) their 200 day moving averages [11995, 1257], (3) the aforementioned lower boundary of their short term up trends [11977, 1238] and the old resistance/support level [11741, 1230].




GLD broke above the 200 day moving average. Then on the final day of its confirmation period under our time and distance discipline, it was sold down to close right on the average. In the interest of conservatism, I am extending our discipline for at least one more day.

@AllAmerInvest China Reserves, Facebook Ad Revenue, Low Volatility, Euro Currency Crumble, Natural Gas Price Plunge

China’s foreign reserves not so hot

After the first fall in China’s foreign reserves in 14 years raised fears of capital flight, this week investors will be watching for a policy response from Beijing.
Read More

Here's Facebook's Q4 Ad Performance In A Set Of Delightful Charts

Euro Leaders Race to Salvage Rescue Plans
European leaders will this week try to rescue under-fire efforts to deliver new fiscal rules and cut Greece’s debt burden as investors ignore Standard & Poor’s euro- region downgrades.

Wall Street Strategists Are Freaking Out About Low Volatility
"It's a little too calm," says the usually unflappable Jim Paulsen of Wells Fargo Management, a bullish stock strategist not easily spooked. "Maybe we're setting up for a break."

All American Investor

The Closing Bell-No improvement in Europe; but then no one cares

Statistical Summary
Current Economic Forecast

2011

Real Growth in Gross Domestic Product: +1.5- +2.5%
Inflation: 2-3 %
Growth in Corporate Profits: 7-12%

2012

Real Growth in Gross Domestic Product (revised): +1.0- +2.0%
Inflation (revised): 2.5-3.5 %
Growth in Corporate Profits (revised): 5-10%

The latest from Marc Faber (1/13/12)

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.

Thoughts on Investing from Ed Easterling

12 Rules of Market Cycles:

1. Secular cycles are driven by the inflation rate (deflation, price stability, and higher inflation)

2. Secular bulls occur when P/E starts low and ends high over an extended period

3. Secular bears occur when P/E starts high and ends low over an extended period

Morning Journal-Unbelievable ending to a football game

Economics
This Week’s Data

November business inventories rose 0.3% versus expectations of a 0.5% increase; business sales also advanced 0.3%.

Other

Credit card delinquencies are down (short):
http://mjperry.blogspot.com/2012/01/personal-bankruptcy-filings-decline-by.html

If you are a football fan, this 1 minute video is a must see:
http://mjperry.blogspot.com/2012/01/most-incredible-ending-to-college.html

Foreigners are selling Treasuries--that can’t be good (short):
http://www.zerohedge.com/news/foreigners-sell-record-85-billion-treasurys-6-consecutive-weeks-time-get-concerned

The Morning Call-A new beginning or is everybody smoking dope?

The Market
Technical

The indices (DJIA 12471, S&P 1295) were up modestly yesterday, closing within their intermediate term trading ranges (10725-12919, 1101-1372). Technically speaking, there is little to stop the move to the 12919, 1372 level. Support exists at 11741, 1230 as well as the lower boundary of the short term up trend off the October 2011 lows (11923, 1236).

Volume remains light; breadth was mixed. The VIX was down again and continues to point to calmer days and higher prices.

GLD was up for the day, but finished well off its intraday high. A close tonight above the 200 day moving average will confirm the break above that indicator under our time and distance discipline.

Coca Cola (KO) 2012 Review

Coca Cola (KO) is the world’s largest beverage company marketing through a network of company owned and independent bottlers over 500 nonalcoholic beverages worldwide including Coca Cola, Sprite, Barq’s, Mr. Pibb, Xtra, Fanta, Fresca, Dasani, Evian, Danone, Powerade and Minute Maid.

The company has grown profits and dividends 8-10% for the past 10 years earning a 27-30% return on equity. We expect the company to continue to do well as a result of:

(1) its incomparable portfolio of sparkling and still beverages as well as juices,

(2) the operating synergies resulting from the recent acquisition of Coca Cola Enterprises,

(3) management aggressive effort to improve productivity,

(4) geographic expansion especially in emerging market countries [Russia, Brazil, China].

Negatives:

(1) it is in a highly competitive industry,

(2) its sensitivity to volatile commodity prices,

(3) its international operations expose it to the risks of currency fluctuations,

(4) the increased consumer preference for ‘healthy’ foods could negatively impact its carbonated beverage products.

KO is rated A++ by Value Line, has a 31% debt to equity ratio and its stock yields 2.8% which has been raised for 47 consecutive years.

Statistical Summary

	Stock Yield	Dividend Growth Rate	Payout Ratio	# Increases Since 2002
KO	2.8%	10%	47%	10
IND	2.2	5*	45	NA

	Debt/Equity	ROE	EPS Down Since 2002	Net Margin	Value Line Rating
KO	31%	27%	1	19%	A++
IND	53	21	NA	14	NA

*many companies in KO industry do not pay dividends

Chart

Note: KO stock made great progress off its March 2009 lows, quickly surpassing the down trend off its January 2008 high (straight red line) and the November 2008 trading high (green line). Long term, KO is in an up trend (blue lines); intermediate term, it is also in an up trend (purple lines). The wiggly red line is the 200 day moving average. The Dividend Growth and High Yield Portfolios own a one half position in KO by virtue of having Sold Half in early 2011 at $65. At that point, the stock was at the upper boundary of a 13 year trading range and it prompted a trading sale. Since then the stock broke out of that trading range. The upper boundary of KO’s Buy Value Range is $53; the lower boundary of its Sell Half Range is $95.




http://finance.yahoo.com/q?s=KO

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.

Morning Journal, A lesson on private equity investment

Economics
This Week’s Data

The Fed released its most recent Beige Book. The tone of this latest report was noticeably more upbeat than its recent additions with positive narratives on the consumer, autos and manufacturing. Housing, it notes, is still sluggish; but inflationary pressures remain under control.

Weekly jobless claims rose 27,000 versus expectations of an increase of 3,000.
http://www.calculatedriskblog.com/2012/01/weekly-initial-unemployment-claims_12.html

December retail sales advanced 0.1% versus estimates of up 0.2%; ex autos, sales fell 0.2% versus forecasts of up 0.2%.

The Morning Call + Subscriber Alert

The Market
Technical

The indices (DJIA 12249, S&P 1292) were directionless yesterday (DJIA down, S&P up), closing within their intermediate term trading ranges (10725-12919, 1101-1372). Little resistance exists between current levels and 12919, 1372; support is found at 11741, 1230.

Volume was down slightly; breadth deteriorated. The VIX rose but it is still trending down.

Conoco Phillips (COP) 2012 Review

Conoco Phillips (COP)  is an integrated oil and petrochemicals company which focuses primarily on exploration and production (E&P) and refining and marketing. 

Profits and dividends have grown approximately 11-13% annually over the last 10 years. In the same time frame, COP has earned between a 10-20% return on equity. The company should continue to make progress as a result of:

Draft Framework of the National Plan to Address Alzheimer's Disease

The Draft Framework for the National Plan to Address Alzheimer's Disease.

The draft framework is structured around five ambitious goals:

• Prevent and Effectively Treat Alzheimer's Disease by 2025.
• Optimize Care Quality and Efficiency.
• Expand Patient and Family Support.
• Enhance Public Awareness and Engagement.
• Track Progress and Drive Improvement.

Read More

@AmerInvest, Stocks a Bit Lower on Euro, Chart

Stocks are a bit lower this morning on worries about the Euro

All American Investor

Morning Journal, Club for Growth looks at GOP candidates

Economics
This Week’s Data

The International Council of Shopping Centers reported weekly sales of major retailers fell 5.4% versus the prior week but up 2.8% versus the comparable period last year; Redbook Research reported month to date retail chain store sales down versus the similar timeframe a month ago but up 2.2% on a year over year basis.

November wholesale inventories grew a paltry 0.1% versus expectations of up 0.5%; however, wholesale sales were up 0.6%.

After a couple of rough weeks, mortgage applications rose 4.5% while purchase applications were up 8.1%.
http://www.calculatedriskblog.com/2012/01/mba-mortgage-purchase-application-index_11.html

The Morning Call, The Market may be going higher; but without me

The Market
Technical

The indices (DJIA 12462, S&P 1292) were up nicely yesterday, closing within their intermediate term trading ranges (10725-12919, 1101-1372). I continue to think that the upper boundaries of those ranges will be challenged sooner probably than later. Support exists at 11741, 1230.

Volume rose; breadth improved. The VIX fell again and remains in a solid down trend.

GLD rose and closed just slightly above its 200 day moving average. Our time and distance discipline kicks in now; if the break is confirmed, our Portfolios will Add to their holdings.

Bottom line: investors are positive and stocks are lifting. But I think that the upside is limited. Aggressive investors could buy for a trade to the 12919, 1372 level and will likely make money. However, I am not an adroit trader, so I am await cheaper prices to Buy.

@AllAmerInvest, Obama’s Revolution, Voice Operated Smart TVs, Consumer Electronics Show, Stocks Up Size

Obama’s revolution in American strategy

While the media has focused on the Republican presidential primaries, offstage the greatest revolution in American foreign policy in a generation has occurred, with little discussion or debate surrounding its announcement last week by President Obama.
Read More

Voice-Operated Smart TVs May Spur Tech Profits
At the Consumer Electronics Show in Las Vegas opening today, LG and Lenovo will show TVs that allow users to search for shows and Web applications with natural-sounding voice commands. Samsung introduced three high-end models with so- called Smart Interaction technology, which builds in motion- sensing and voice-command software similar to Microsoft Corp. (MSFT)’s Kinect peripheral for the Xbox 360 video-game console.

The Consumer Electronics Show in Las Vegas opening today.


All American Investor

Morning Journal-the new authoritarianism

Economics
This Week’s Data

November consumer credit rose $20.4 billion versus expectations of a $7.6 billion increase.
http://www.zerohedge.com/news/consumer-credit-jumps-most-10-years-surge-car-loans

Other

Some perspective on employment (charts):
http://www.ritholtz.com/blog/2012/01/nonfarm-payrolls/

Global PMI improving (medium):
http://www.ritholtz.com/blog/2012/01/global-pmi-scorecard-a-turn-for-the-better-led-by-the-u-s-and-china/

Why Bernanke has failed (medium and another must read):
http://www.zerohedge.com/news/guest-post-why-bernanke-has-failed-and-will-continue-fail

The Morning Call, Awaiting earnings season

The Market
Technical

The indices (DJIA 12392, S&P 1280) had another quietly up day, remaining well within their intermediate term trading ranges (10725-12919, 1101-1372). There is not much resistance between current levels and the upper boundaries of the trading ranges. Support exists at 11741, 1230.

Volume fell; breadth rose modestly. The VIX jumped 3% but remains in a solidly defined down trend.

GLD declined, having unsuccessfully challenged its 200 day moving average. As you know, our Portfolios Bought a one third position back last week; but no further additions will be made until the 200 day moving average is penetrated and that break is confirmed.

@AllAmerInvest Stock Market Trend, Chart, Video Is The Bull Market Over for Stocks?, Corporate Profits Slow

Stock market trend continues slightly positive as the S&P 500 approaches the critical 1290 area. 

Still watching the slope of the 40 and 200 day averages closely. Any sharp upturn would indicate that the sideways consolidation is over, and that, the market is ready to move sharply higher. A close below the 40 day would be a red flag.

Morning Journal-the latest from Italy + Monday Morning humor

Economics
This Week’s Data
Other

Rail traffic ends 2011 strong (short):
http://mjperry.blogspot.com/2012/01/rail-traffic-shows-strong-gains-in-2011.html

More on last week’s employment stats (medium):
http://scottgrannis.blogspot.com/2012/01/5-million-discouraged-workers.html

Politics

The Morning Call-Monday Morning Chartology + Subscriber Alert

The Market
Technical
Monday Morning Chartology

It sure looks like the S&P can go higher.

The Closing Bell-Beneath this week's calm is a lot of turmoil

Statistical Summary
Current Economic Forecast

2011

Real Growth in Gross Domestic Product: +1.5- +2.5%
Inflation: 2-3 %
Growth in Corporate Profits: 7-12%

2012

Real Growth in Gross Domestic Product (revised): +1.0- +2.0%
Inflation (revised): 2.5-3.5 %
Growth in Corporate Profits (revised): 5-10%

Thoughts on Investing from Peter Lynch

Every year I talk to the executives of a thousand companies, and I can’t avoid hearing from the various gold bugs, interest rate disciples, Federal Reserve watchers, and fiscal mystics quoted in the newspapers.

Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.

Mohamed El Erian on the latest jobs numbers

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.

THE EMPLOYMENT SITUATION -- DECEMBER 2011

Nonfarm payroll employment rose by 200,000 in December, and the unemployment rate, at 8.5 percent, continued to trend down, the U.S. Bureau of Labor Statistics reported today.

Job gains occurred in transportation and warehousing, retail trade, manufacturing, health care, and mining.

All American Investor

@AllAmerInvest, Affordable Care, China Social Unrest, JobsUP, Ron Paul, MF, Homeless Celebrity

The Affordable Care Act, helping Americans curb health-care costs
The Affordable Care Act is putting consumers back in charge with two new rules that shine much-needed light on the health insurance market.

The first requires insurers to justify premium increases of more than 10 percent and to post that information online.

The second is the “80-20 rule,” which requires insurers to spend at least 80 percent of premium dollars on health care, rather than on advertising or executive pay. If they don’t, you get a rebate. Together, these changes are creating a health insurance market where premiums stay in check and Americans get their money’s worth.

U.S. economy created 200,000 jobs in December
The U.S. economy gained 200,000 jobs in December and the unemployment rate fell to 8.5%, the Labor Department said Friday. Economists surveyed by MarketWatch had forecast the U.S. would add 150,000 jobs last month, with the jobless rate edging up to 8.7% from an initially reported 8.6% in November. Subtracting another decline in government jobs, the private sector boosted payrolls by 212,000. Average hourly earnings rose 0.2% last month to $23.24 and hours worked edged up to 34.4. Job gains for November and October were little changed. The U.S. created 1.64 million jobs in 2011.

All American Investor

Morning Journal, Lies about deficits

Economics
This Week’s Data

December retail chain store sales, ex auto and ex gasoline, rose 0.2%.

The December Institute for Supply Management nonmanufacturing index came in at 52.6 versus expectations of 53.0 and November’s reading of 52.0.

December nonfarm payrolls grew 200,000 versus forecasts of a 150,000 increase; unemployment came in at 8.5 versus estimates of 8.7% and November’ reading of 8.6%.
http://www.calculatedriskblog.com/2012/01/december-employment-report-200000-jobs.html

The lies about budget deficits (medium and today’s must read):
http://www.realclearmarkets.com/articles/2012/01/05/the_lies_they_tell_us_about_budget_deficits_99443.html

The Morning Call-Employment data points to a better economy and Market

The Market
Technical

Two quiet trading days in a row. What a concept! The indices (DJIA 12415, S&P 1281) finished well within their intermediate term trading ranges (10725-12919, 1101-1372) and completed their third day in a row above the neckline (12287, 1266) of the much discussed reverse head and shoulders pattern. Barring a swift decline today, the Averages will confirm the break out above the aforementioned neckline and that should set them up for a move toward the upper boundaries of the current trading ranges.

Volume picked up a little while breadth also improved. The VIX was down again and continues to be a plus for stocks.

EOG Resources (EOG) 2012 Review

EOG Resources Inc (eog) engages in the exploration, development and production of natural gas and crude oil primarily in the US and Canada. The company has grown profits and dividends at a 20%+ rate over the last ten years while earning a 7-20% return on equity. EOG suffered along with most energy related companies in the recent economic downturn. However, management expects results in 2011 to improve and put the company back on a course of rising profits and dividends as a result of:

(1) a huge inventory of drilling opportunities [Barnett, East Texas, South Texas, Trinidad and the North Sea],

(2) growing emphasis on crude oil production, now growing at a 30-50% annually rate,

(3) strong technical competence,

(4) solid growth in production.

@AllAmerInvest, ADP Report, Jobs up 325,000, Job Cuts Decline,

Planned job cuts announced by U.S. employers declined in December to 41,785, the lowest monthly total since June, according to the latest report on downsizing activity from global outplacement firm Challenger, Gray & Christmas, Inc.

http://read.bi/zTD5nH

Read More

Morning Journal-Waving the white flag in Afghanistan

Economics
This Week’s Data

December auto sales improved modestly.

The International Council of Shopping Centers reported weekly sales of major retailers up 1.2% versus last week and up 5.3% versus the comparable period a year ago; Redbook Research reported month to date retail chain store sales down 2.1 versus the similar timeframe last month but up 4.9% on a year over year basis.

November factory orders rose 1.8% versus expectations of +1.9% and -0.4% in October.

Weekly jobless claims fell 9,000 versus estimates of a 6,000 decline.

The Morning Call, More stocks are hitting their highs

The Market
Technical

The Market (DJIA 12418, S&P 1277) was quiet yesterday with the indices remaining above the neckline of the reverse head and shoulders (12287, 1266) for the second day. Should our time and distance discipline confirm this break, it likely opens the door for an assault on the upper boundaries of their current trading ranges (10725-12919, 1101-1372).

Volume was off; breadth also deteriorated. The VIX fell leaving it in a down trend--a positive for stocks.

GLD (157) was up but still hasn’t busted through the 200 day moving average (158). As you know, our Portfolios re-established a one third position yesterday; if and when, GLD confirms a break above the 158 level, they will add more shares.

Abbott Labs (ABT) 2012 Review

Abbott Labs (ABT) develops, manufactures and markets a diversified line of healthcare products including pharmaceuticals, diagnostic systems and tests and pediatric nutritional products.

ABT has grown profits and dividends between 8-9% over the last 10 years earning in excess of a 25% return on equity. Expectations are for an even better performance over the next five years making it one of the fastest growing major US pharmaceutical/medical device companies. The primary components of future growth are:

(1) strong revenue increases from several major drugs including Humeria, an anti-inflammatory whose sales are growing in excess of 20% a year, TriCor, a powerful triglyceride lowering agent and XIENCE V, a drug eluding stent which offers superior differentiating characteristics to those of its competitors,

Morning Journal-US debt now equals GDP

Economics

This Week’s Data

The Institute for Supply Management released its December index for manufacturing at 53.9 versus expectations of 53.2 and November reading of 52.7.
http://www.calculatedriskblog.com/2012/01/ism-manufacturing-index-indicates.html

November construction spending rose 1.2% versus estimates of a 0.5% increase and October report of up 0.8%.
http://www.calculatedriskblog.com/2012/01/construction-spending-increased-in.html

Weekly mortgage applications declined 3.7% while purchase applications fell 1.9%. Seasonal factors played a definite role in this poor performance.
http://www.calculatedriskblog.com/2012/01/mba-mortgage-purchase-application-index.html

The Morning Call-I am nibbling at GLD again

The Market

Technical

The indices (DJIA 12397, S&P 1277) had a great first day of the year, closing within their intermediate term trading ranges (10725-12919, 1101-1372). Both of the Averages (1) broke the necklines of their reverse head and shoulders, as well as (2) their 200 day moving averages and (3) the down trends off the October 2011 highs. Of course, our time and distance discipline is now operative; however, the percentage change yesterday (distance) was of sufficient magnitude that any follow through will confirm the break outs quickly.

Volume rose; breadth improved. The VIX continued to fall suggesting more upside for stocks.

@AllAmerInvest Stocks Up Big, Trend Flat UP, Chart and Graph

U.S. stock futures are rising after solid economic news, notably out of China, helped mute concerns over the European debt crisis.

All American Investor

Morning Journal, Why deficit spending hurts wage earners and favors capital

Economics
This Week’s Data

Other

I found this surprising. The US’s number one export--energy:
http://mjperry.blogspot.com/2011/12/new-age-of-americas-energy-abundance-no.html

Still no signs of inflation in the macro numbers (short):
http://mjperry.blogspot.com/2011/12/bpp-data-shows-inflation-trending.html

The Morning Call, Tuesday Morning Chartology + Year end performanc numbers

The Market
Technical
Tuesday Morning Chartology

The S&P closed Friday below the neckline of the reverse head and shoulders and slightly below its 200 day moving average (wiggly red line). This suggests a negative trend; but I wouldn’t bet money until there is some clear follow through.