Thursday, February 2, 2012

Introducing the 24/7 Wall St. Wire

These are the top analyst upgrades and positive research calls we have seen from Wall Street this Friday morning with about two hours until the market opens:

Alcatel-Lucent (ALU) Raised to Outperform at Baird.
Allergan (AGN) Started as Buy at UBS.
AMAG Pharma (AMAG) Started as Buy at Citigroup.
Employers Holdings (EIG) Raised to Outperform at KBW.
JPMorgan Chase (JPM) Started as Outperform at Baird.
Logitech (LOGI) Raised to Neutral from Underperform at B of A Merrill.
McDonald’s (MCD) Raised to Outperform at Baird.
Palm (PALM) Raised to Outperform at RBC.


The 2012 State of the Union Tax Reforms That Could Affect You

The Home Depot, Inc. (NYSE:HD) The Home Depot, Inc. (The Home Depot) is a home improvement retailer. The Home Depot stores sells an assortment of building materials, home improvement and lawn and garden products and provide a number of services. The Home Depot, Inc achieved its new 52 week high price of $42.05 where it was opened at $41.92 up 0.05 points or +0.12% by closing at $42.00. HD transacted shares during the day were over 12.07 million shares however it has an average volume of 12.15 million shares.

HD has intra-day market capitalization $64.75 billion and an enterprise value at $73.22 billion. Trailing twelve months price to sales ratio of the stock was 0.93 while price to book ratio in most recent quarter was 3.64. In profitability ratios, net profit margin in past twelve months appeared at 5.32% whereas operating profit margin for the same period at 9.21%.

The company made a return on asset of 9.61% in past twelve months and return on equity of 20.04% for similar period. In the period of trailing 12 months it generated revenue amounted to $69.51 billion gaining $43.87 revenue per share. Its year over year, quarterly growth of revenue was 4.40% holding 12.00% quarterly earnings growth.

According to preceding quarter balance sheet results, the company had $2.23 billion cash in hand making cash per share at 1.45. The total of $10.78 billion debt was there putting a total debt to equity ratio 60.68. Moreover its current ratio according to same quarter results was 1.46 and book value per share was 11.53.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated -1.04% where the stock current price exhibited up beat from its 50 day moving average price $38.63 and remained above from its 200 Day Moving Average price $35.35.

HD holds 1.54 billion outstanding shares with 1.53 billion floating shares where insider possessed! 0.11% a nd institutions kept 71.30%.

Why China Could Steal the Magic of Disney

One of the world's most recognized brands is set to open up shop in China later this year. Walt Disney (NYSE: DIS  ) plans to launch 25 to 40 Disney Stores in China by 2015. Rising wealth and a huge population make China a crucial market for Disney as it looks for fresh sources of revenue outside the United States and Europe. However, this growth strategy could cause major problems for the specialty retailer, because China is known for counterfeit goods.?

American companies in China face a costly battle to protect their intellectual-property rights. It's estimated that Chinese knock-offs cost foreign businesses around $20 billion in profits each year. Deregulation in the country has helped it become one of the fastest-growing economies in the world. However, this explosive growth can costs companies like Disney in terms of missed sales and possible damage to their brand names.

If you don't make it, fake it
Companies such as Apple (Nasdaq: AAPL  ) spend billions of dollars each year building their brand, only to see that value ripped away by counterfeits. Last year, a fake Apple store in Kunming, China, made headlines around the world for its striking resemblance to the real Apple store. The counterfeit location was so convincing, in fact, that actual employees working for the imitation retailer thought they were working for Apple. Also consider that Apple's iPhone and iPad are some of the most pirated devices in China and the potential brand destruction is huge.

Selling the experience
Similar to Apple, the Disney Store relates to customers in a way that fosters the Disney brand experience. In 2010, the company launched its new interactive store design, which created an engaging retail experience.

Part of buying Disney merchandise is visiting the store. Kids can create custom rides featuring their favorite characters from the m! ovie Cars or step in front of a special princess-mirror that talks to them based on what merchandise is in their hand.

The magic of Disney will be available in 12 countries by the close of 2012. While the new Disney Store format is going to be difficult to mimic, it wouldn't be the first time we've seen Chinese counterfeiting replicate a seemingly irreplaceable brand experience.

Satisfying local demand
There's a lot at stake for Disney Stores as they enter the Asian market. On top of protecting their intellectual-property rights, businesses breaking into the Chinese marketplace face serious challenges involving cultural differences. Just look at what happened with American toymaker Mattel (NYSE: MAT  ) .

Barbie closed her six-story flagship store in China last March, after lagging sales failed to gain speed. It's hard to imagine the world's biggest toymaker struggling to find customers in the heart of Shanghai. However, that's exactly what happened. Perhaps Disney learned something from Barbie's experience in the emerging market, as Disney's China stores plan to carry more localized products and fewer princess dolls. ?

At least for Disney, most people in China understand the brand and the merchandise behind it. Chinese demand is so strong, in fact, that a fake Magic Kingdom was created. Known as the Beijing Shijingshan Amusement Park, the illegitimate theme park even featured Disney's familiar characters. To counter, Disney's planning to open its famous Disneyland theme park in Shanghai -- bringing the authentic magic of Disney to the heart of China.

There's no doubt that China's a critical market for Disney to be in. However, the company's profits could be hurt if it's unable to stay a beat ahead of imitation retailers in the region. Luckily for investors, Disney isn't the only U.S.-based company trying to tap into emerging markets. Find out which domestic businesses are set to dominate emerging ma! rkets in this special free report, which is titled: "3 American Companies Set to Dominate the World."

Tablets: Citi Sees Apple Dominance Increase; China Beckons

Citigroup’s Walter Pritchard, Richard Gardner, Mark Mahaney, and Glen Yeung late last night offered up an update to Citi’s thinking about tablet computers, based on a survey of 1,800 consumers in the U.S., the United Kingdom, and China conducted through online surveys in July and August.

Broad conclusions are that the tablet computer could be a personal computer replacement in China, though maybe not in developed markets, and that the dominance of Apple’s (AAPL) iPad has increased since Citi conducted a similar survey in November of last year.

Tablet computer ownership has jumped from 3% to 18% of survey respondents since the year-earlier study, they write. Interestingly, so has PC ownership: laptops are now owned by 81%, up from 62%. Smartphone use has gone from 28% to 59%.

The number of people intending to buy a tablet has risen from 14% to 31%. Though smartphone and laptop ownership intentions have also risen, albeit by a smaller proportion.

In China, 26% of the survey respondents indicate they are “very likely” to buy a tablet computer, way more than the 12% found in the U.S. and the U.K. And 21% say they already have a tablet, versus 17% in the U.S. and U.K.

Moreover, they write, “Those that plan to purchase tablet [in China] as likely to use for PC replacement as ‘toy / gadget’,” and “More likely to use tablet for broad set of activities, suggests tablet is less of a ‘niche’ device in China.”

Those considering a tablet now express a preference for Apple 77% of the time versus 73% back in November. Interest in Microsoft’s (MSFT) Windows on a tablet has slipped from 52% to 40%, while enthusiasm for Google’s (GOOG) “Android” software on a tablet is “stable” at 36% versus 38% a year earlier, the authors write.

T! he good news for the PC market is that there is no increase evident in cannibalization of PCs by tablets, the authors write. But the story is mixed: Tablet owners, they find, are more likely to buy a laptop in the next 12 months than are people who don’t yet have a laptop; but tablet owners are also “less likely to purchase traditional PC (laptop/desktop)” than people who don’t own a tablet.

The tablet is “even more of a ‘toy/gadget’ than a year ago,” they note, with 62% justifying purchase as such, up from 44% when it came out. Buying for work has risen, to 18% from 13%, while buying as a gift has dropped from 27% to 18%. Slightly more people are considering one now as a notebook or netbook replacement, while buying as a “starter” PC or a desktop replacement has declined as a percentage.

Price is still the “primary inhibitor” to tablet purchases, they note, but a “lack of functionality of the device” compared to PCs is also a factor. 39% of survey respondents said a tablet was “too expensive.”

As with notebook computers, the authors expect tablet purchasing to increase with lower prices. right now, the most prominent tablets, including the iPad, the Samsung Electronics (SSNLF) “Galaxy Tab” and others all start in a range of $399 to $499.

Out of 75 million tablet units that may be shipped in 2012, “We currently forecast 50 million iPads for, but Apple appears on track to sell >45M units in CY11, suggesting our estimate is likely conservative,” they write. “Every 1M iPads is worth $0.04-0.05 of incremental EPS (depending on mix).”

Despite a healthy growth outlook, the iPad faces the challenge of Windows running on tablets using chip designs based on ARM Holdings’s (ARMH) licensees (Nvidia (NVDA), etc.), and also from’s (AMZN) willingness to sel! l a tabl et computer for nothing.

Wednesday, February 1, 2012

Introducing the 24/7 Wall St. Wire

We noticed how short sellers had increased their bets against banks and financials, even if this was right at the time that the big short squeeze came via a huge market rally.? But what is interesting is that the short sellers had actually been taking their bets down slightly in the online and discount brokerage firms.

Company Stock (Ticker)……………………… March 13… Change
E*TRADE Financial Corp. (ETFC)…………. 72,711,601? (-1.42%)
TD Ameritrade Holding Corp. (AMTD)….. 11,509,080? (-1.43%)
The Charles Schwab Corporation (SCHW) 33,356,727? (-3.09%)

What is interesting about the online and discount brokerage firms is that these have not risen as much as many of the leveraged banks and brokerage firms in this last rally.

March 25, 2009

Can China avoid a hard landing?

NEW YORK (CNNMoney) -- The $64,000 question facing the global economy this year should be more accurately dubbed the 404,163 yuan question: Can China avoid a big slowdown in growth in 2012?

Investors, economists and even central bankers are all banking on China to keep expanding at a robust enough pace to ensure that the global economy hums along.


China stocks have gotten off to a strong start following a horrible 2011. The Shanghai Composite plunged more than 20% last year as China's central bank was busy raising interest rates and boosting reserve requirements in order to fight inflation and fears of a housing bubble.

But the Shanghai Composite (SHCOMP) is up about 4% this year, with most of the gains coming in the past few days. Hong Kong's Hang Seng (HSI) has also rebounded so far in 2012.

On Monday, Atlanta Federal Reserve President Dennis Lockhart, a voting member on the Fed's policy committee this year, told reporters following a speech that he was confident in China's ability to engineer a so-called soft landing.

Still, the latest figures regarding China's trade balance have to make you wonder if China really can pull off the proverbial Goldilocks trick (Not too hot. Not too cold. Just right.) with its economy.

While China's trade surplus surprisingly widened in December, much of that was due to a bigger-than-expected slowdown in imports. That's not a good sign. Export growth also slowed a bit, ! which ma kes sense given that China's biggest trading partner, Europe, is in a world of sovereign debt hurt.

If Europe gets worse before it gets better, that could be a setback for China. Nonetheless, some experts said that investors should take a step back and look at the big picture.

Chinese manufacturing expands slightly

China probably won't be able to continue reporting annual gross domestic product growth of around 9% to 10%, but it's unlikely to slide into the mid-single digits.

"China is in a more robust position than almost any global economy. Europe is a problem, but I wouldn't anticipate a major slowdown," said Richard Driver, currency analyst with Caxton FX in London. "I still think we are looking to China to lead the global recovery."

It also looks like China realizes that it has an important role in what I've dubbed the Great Global Easing, a coordinated effort by bankers around the globe to prevent Europe from becoming a Lehman-esque disaster.

China has already reversed course on one form of monetary tightening, agreeing to lower reserve requirements for banks at the end of November. That was the first cut since late 2008.

That should allay some fears about a real estate bubble. Ilan Goldfajn, chief economist at Itau BBA in Sao Paulo, Brazil, dismissed concerns that China's housing sector will go bust the way that the U.S. market did a few years ago.

In a China outlook report late last year, Goldfajn wrote that it looks like much of the tightening China did in 2011 is starting to work. Housing prices and sales are slowing, but not yet at an alarming rate.

"Real estate investments are cooling down and there are signs that the sector will decelerate further, though the process is largely induced by the government," he wrote. "In case of a sharp slowdown, with prices falling more than wished for, the government may reverse the process."

And with China due to report its latest inflation figures lat! er this week, there are hopes that pricing pressures -- for food as well as real estate -- have abated enough to allow the People's Bank of China (the Chinese equivalent of the Fed) to finally start lowering interest rates as well.

According to estimates from research firm High Frequency Economics, Chinese consumer prices are expected to have risen at an annual pace of 3.6% in December, compared to 4.2% in November. If inflation does continue to moderate, that's undeniably good news for Chinese consumers and the world.

China shifts gears from inflation to growth

"While China continues to be affected by uncertainty across the euro zone, we do not anticipate a 'hard-landing' scenario," said Dr. Peter Lee, head of the emerging markets strategy team with Mirae Asset Global Investments in New York. "There have been further indications that inflation in China is on a downward trajectory."

The main issue with China is that investors have to readjust their expectations. Going from, say, 10% growth to 7% growth is not a catastrophe. It's just realistic at a time when many major markets are all facing serious challenges.

Think about it. The U.S. is not healthy, yet it is the best of a sorry bunch compared to Europe and Japan. As long as these economies continue to languish, China is likely to do all it can to make sure that it too doesn't succumb to the malaise plaguing the developed world.

"Policymakers continue to reiterate their support for loosening monetary policy and promoting growth-oriented fiscal measures," Lee said.

Hopefully, he and others who remain bullish on China's prospects are right. The global economy can withstand a mild pullback in China, but it won't be able to hold up if there is a severe contraction.

Best of StockTwits: Yoga apparel maker Lululemon (LULU) isn't in a downward dog position. Shares surged after it lifted guidance Tuesday. And it's just one of several tarnished momentum stocks of 2011 that are makin! g a furi ous comeback this year.

Lobaeux: Significant upgrade in $LULU guidance, this may foretell other luxury brand's in this barbell economy. $LULU to 65 before pullback?

Not sure I'd go so far to call yoga pants luxury. And for what it's worth, Tiffany (TIF) cut guidance due to somewhat lackluster holiday sales. It cited "restrained spending" for jewelry. I discuss LULU and TIF more in this Buzz video.

CreateCapital: Every once in a while $GS must be right with a public call. Serves to confuse... $LULU.

Yup. To give credit where it's due, The Vampire Squid did add LULU to its "Conviction List" last week. But does that mean a strong sell recommendation is looming next week?

reformedbroker: Just when everyone piled into cardboard companies with dividends - it's the RETURN OF THE RED HOTS! $LULU $NFLX $FOSL $GMCR $MAKO

Heh. It does appear that risk is back in the on position so far in 2012. We'll see how long it lasts. I still like my stodgy dividend companies ...which brings me to this last interesting tidbit.

ivanhoff: The good, old boring railroad stocks near 52-week highs again:

I like seeing that. For one, Union Pacific (UNP, Fortune 500) and Norfolk Southern (NSC, Fortune 500) are solid dividend payers. And even in this app-crazy social media world we live in, you still need good old fashioned 19th century tech to transport stuff such as commodities and consumer goods. Healthy railroads could be good sign for the economy.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks. 

FAP Turbo – Does This Forex Robot Live Up to Its Expectations?

Whаt is FAP Turbo?

It is one of the many Forex robots that traders use in their different Forex transactions these days. It is an automated system that gathers data and information from the Forex market and uses these to hеƖр you win more trades and investments. It can work without you having to monitor it day in and day out, because it was built to grant consumers with convenience and time flexibility. Yου do not even have to have expert knowledge on the subject matter to be аbƖе to make use of the robot software.

Hοw ԁοеѕ FAP Turbo work?

FAP Turbo is the newer and fresher version of the Forex Autopilot, another well renowned Forex robot that has already proven itself to be successful. Thе FAP Turbo generates analysis of real time Forex market data. It looks for trends that are promising and highly profita! ble. It constantly watches all the transactions it gets into and takes note if their performances. If it realizes that the fluctuation happening in the market is unfavorable, it automatically trades away the loser investments and ѕtаrtѕ a new process. It can handle manifold trades at a time.

Sіnсе it conducts trade actions by reacting to sudden changes in the Forex market, you can count on it to be аbƖе to rυn by itself anytime of the day. Yου can just leave it there while you go somewhere and do your οwn business. If you want, you can connect it to the internet 24 hours a day, seven days a week so that it has access to real time market data. If you prefer not to do thіѕ, some publishers grant a feature to make it rυn on their servers but with additional charges.

Whаt mаkеѕ FAP Turbo different from the other Forex robots?

Amongst all th ! 1; robot software programs sold today, the FAP Turbo is the most conservative. It can give you a higher winning rate because it only participates in trades when it is completely sure that you can earn money from thеm. It has high standards when reading market trends and patterns. It mаkеѕ sure that all standards are met before it mаkеѕ any kind of investments.

3 Stocks That Blew the Market Away

Don't settle for ordinary quarterly reports.

I take a look at three companies that beat market expectations every week, since I believe that it's the biggest factor in a stock beating the market. Leaving Wall Street's pros with stunned expressions can be a good thing. It usually means that the companies have more in the tank than analysts figured. Capital appreciation typically follows.

Let's take a look at a few companies that humbled the prognosticators over the past few trading days.

We can start with FedEx (NYSE: FDX  ) . The speedy deliverer posted adjusted earnings of $1.57 a share in its latest quarter, ahead of both the $1.16 a share it rang up a year earlier and the $1.52 a share that investors were banking on.

FuelCell Energy (Nasdaq: FCEL  ) also fueled past the pros. The power plant maker saw revenue climb 76% in its latest quarter, and it now has a product backlog of $131.8 million. However, for our purposes, FuelCell makes the cut by posting a quarterly deficit of $0.06 a share. Wall Street was braced for a loss of $0.07 a share. It may not seem like much of a beat, but FuelCell Energy has now posted narrower than projected losses in five consecutive quarters.

Speaking of smaller-than-expected losses, drugstore chain Rite Aid (NYSE: RAD  ) posted a deficit of $0.06 a share. Wall Street figured that the beleaguered pharmacy operator would generate nearly twice the red ink that it actually did. Rite Aid also narrowed its projected deficit for the entire year. This may not look pretty, but it's the way that turnarounds start.

It's important to keep watching the companies that surpass expectations. Over time, it will be a lucrative experience for investors as the market rewards the overachievers. That's the kind of surprise that we look for?in the Rule Breakers newsletter service. Want in?! Check o ut a 30-day trial subscription. If that's not up your alley just yet, you can still check out a free special report detailing the next trillion-dollar revolution.

Either way, come back next week to learn about more stocks that blew the market away in the coming days.

If you want to track these stocks to see if they come out ahead next quarter, add them to My Watchlist:

  • Add Rite?Aid to My Watchlist.
  • Add FedEx to My Watchlist.
  • Add FuelCell?Energy to My Watchlist.

1 Reason General Dynamics Looks Weak

Margins matter. The more General Dynamics (NYSE: GD  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong General Dynamics' competitive position could be.

Here's the current margin snapshot for General Dynamics over the trailing 12 months: Gross margin is 11.7%, while operating margin is 11.7% and net margin is 7.7%.

Unfortunately, a look at the most recent numbers doesn't tell us much about where General Dynamics has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for General Dynamics over the past few years.


Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.


Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

Here's how the stats break down:

  • Over the past five years, gross margin peaked at 18.3% and averaged 16.7%. Operating margin peaked at 12.5% and averaged 11.8%. Net margin peaked at 8.4% and averaged 7.9%.
  • TTM gross margin is 11.7%, 500 basis points worse than the five-year average. TTM operating margin is 11.7%, 10 basis points worse than the five-year average. TTM net margin is 7.7%, 20 basis points worse than the five-year average.

With recent TTM operating margins below historical averages, General Dynamics has some work to do.

If you take the time to read past the headlines and crack a filing now and then, you're probably ahead of 95% of the market's individual investors. To stay ahead, learn more about how I use analysis like this to help me uncover the best returns in the stock market. Got an opinion on the margins at General Dynamics? Let us know in the comments below.

  • Add General Dynamics to My Watchlist.

Tuesday, January 31, 2012

Seasonality might be the only thing pushing the market forward

Investors are more uncertain about the stock market’s future today than at any other time during the past six years. Thirty-eight percent of investors polled by the American Association for Individual Investors are in the “neutral” camp — a six-year high. Unfortunately, uncertainty is no investment strategy. It takes fact-based conviction to succeed in investing. So what are the facts?

Volatility: Bad For Stocks

Volatility in the past six months has been off the charts. Volatility is more than just the performance of the Volatility Index or VIX. Volatility includes the volume and conviction associated with the recent roller coaster.

During the past six months, the Dow Jones has seen 38 (almost every third trading day) 90% days. A 90% up day means 90% or more of trading volume and point moves were to the upside, thus a 90% down day is exactly the opposite. Of those 38 90% days, 16 happened to be to the upside, 22 to the downside. That is highly unusual. I’ve read interpretations stating that high-volume, 90% up days (also called breadth explosions) are bullish for stocks.

Before drawing conclusions, let’s try to decipher the emotions that cause 90% days. Fear, panic and certain news events cause severe down days. Most up days seem to be caused by positive news rather than a fundamental change.

In summary, we have erratic news-based buying and panic-inspired selling with 58% of the 90% days being down days (Dec. 19 was the latest). This doesn’t look like the beginning of a new bull market to me.

Fundamentals: No Change

The U.S. financial system got into trouble because of falling real estate prices. The European financial system got hammered by sovereign debt defaults.

Now, U.S. real estate prices continue to fall, and entire European countries continue to struggle with pure survival. Neither the U.S. nor the European debt! crisis has been dealt with properly.

QE2 was all the rage at the beginning of 2011, but its effect was limited and short-lived. The European Central Bank’s charter prohibits outright QE where newly printed money is given to banks.

However, the ECB has expanded its repurchase operation to three years. European banks can borrow money from the ECB for 1%. With the borrowed money, banks can now do what the ECB isn’t allowed to — buy more toxic bonds from Greece, Italy, Spain, etc.

At first glance, this looks like a profitable symbiosis. Banks pay 1% and get paid 3%, 4% or more via their bonds. Unfortunately, banks forget that they should be concerned about the return of the money more than about the return on their money.

Banks buying more unstable sovereign debt is a short-term Band-Aid but a long-term recipe for disaster. The expiration date of the “long-term disaster” label might well run out early and bite banks and investors in the butt sooner than expected.

Keep It Simple

The past two years have made one thing painfully clear: I can’t predict the news and how the market reacts to news. Often there’s no rhyme and reason; that’s why I don’t even try.

What I can do is extrapolate the market’s signals via technical analysis. The chart below shows some of the trend lines and Fibonacci levels I follow. The S&P 500 shows remarkably consistent respect for trend lines, Fibonacci levels and other support/resistance points.

Earlier in 2011, the S&P got close to a multi-decade trend line that ran through 1,378 in May. Slightly lower was important Fibonacci resistance at 1,369. Additional Fibonacci resistance was found at 1,382.

Based on this resistance cluster,! the Apr il 3 ETF Profit Strategy update stated that “In terms of resistance levels, the 1,369-1,382 range is a strong candidate for a reversal of potentially historic proportions.”

The May top at 1,369-1,382 made sense because sentiment was very bullish and seasonality was turning bearish (sell in May, go away).

In October, once again seasonality, sentiment and technicals were lining up for a major buying opportunity. The Sept. 23 ETF Profit Strategy Newsletter predicted that “From its May high at 1,370 to its eventual low, the S&P will likely have lost about 300 points (22%). This kind of move validates a counter-trend rally. The plan is to square short positions and buy long positions around 1,088. The rally, once under way, will probably re-inspire a certain degree of confidence into the market before it runs out of steam. The most likely target for this rally is S&P 1,266-1,282.”

2012 Outlook

The outlook for 2012 doesn’t look good. Only some version of QE3 and more aggressive ECB intervention can mask up the technical damage visible on all major charts.

The rally from the October lows still is within the confines of a counter-trend rally and has yet to move above common Fibonacci resistance and two major trend lines.

Short-Term Outlook

The Dow Jones and S&P 500 have managed to exceed their early December highs while the Russell 2000 and particularly the Nasdaq are lagging behind.

The euro — the driving force behind the early 2011 stock and gold (NYSE:GLD) and silver (NYSE:SLV) rally — is remarkably weak and has not confirmed the S&P’s recent strength.

It seems like the generals (S&P and Dow) are marching ahead while the troops (Nasdaq and euro) are following behind. An army in disunity can’t conquer, and a fragmented market is a weak market.

Seasonality might push stocks a bit higher, but the seasonal tailwind will calm significantly in ea! rly 2012 . Sentiment once again is turning bullish (a contrarian indicator), and technicals are looking weak. It seems like another high-probability setup (like in May and October) is in the making.

The ETF Profit Strategy Newsletter provides a short-, mid- and long-term forecast along with the target level for this rally and the support that, once broken, will usher in the next leg of the bear market.

This article is brought to you by ETFguide is the information leader on exchange-traded funds because of its vendor-neutral approach and its progressive reporting style. Unique features include an ETF bookstore, a monthly e-mail newsletter, and subscription based ETF portfolios.

CEOs Claim Big Pay Days in 2011 Amidst Controversy

Despite current controversy over executive pay, recent filings with the?Securities and Exchange Commission show that companies continue to hand out large compensation packages to their CEOs. Many top executives are now making upward of $50 million annually according to the publication. The companies justify the big payouts by saying it’s simply a cost of doing business and it’s necessary to attract and retain talent in their upper ranks, but other experts disagree.

USA Today quoted University of Toronto business school dean and author of?Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL,?Roger Martin, who said, “Corporate boards are tone deaf to the times, as are CEOs who justify this much compensation.?Companies are fooling themselves if they say this is what’s required to retain or attract talent.” Eleanor Bloxham, head of corporate watchdog the Value Alliance said, “These kinds of things go on because too few people, especially institutional shareholders, are saying no,” per USA Today.

Big earning CEOs in 2011 include Apple’s?(NASDAQ:AAPL) Tim Cook who claimed $378 million in total compensation, Qualcomm’s?(NASDAQ:QCOM) Paul Jacobs at $50.6 million, Tyco International’s?(NYSE:TYC) Ed Breen bringing in $68.9 million, JCPenney’s?(NYSE:JCP) Ron Johnson with $51.5 million, and recent new comers to the $50 million plus club, Disney’s?(NYSE:DIS) Robert Iger and Starbuck’s (NASDAQ:SBUX) Howard Schultz. Iger’s newly negotiated contract with Disney increases his base salary 43% to at least $50 million annually through 2015. USA Today?quoted a statement by Disney that says the new contract is intended to “secure access to Iger’s leadership and experience for an extended period and to provide a path to succession with a smooth transition of! his dut ies and responsibilities.”

Oil Prices Hit New Record at $97 a Barrel as the Dollar Weakens and Commodities Continue to Soar

President Obama delivered a State of the Union address Tuesday night that by the account of his own advisers is more campaign document than a plan for governing. He's running against Republicans in Congress, Reaganomics, wealthy bankers and inequality.

Normally a President at the start of his fourth year would be running on his record, accentuating the legislation he's passed. Mr. Obama can't do that with any specificity because the economic recovery has been so weak and the legislation he has passed is so unpopular. So last night he took credit for the shale gas revolution he had nothing to do with and proposed new policies to "spread the wealth around," as he famously told Joe the Plumber in 2008 before he took the words back. We thought he meant it then, and now he's admitting it.

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Perhaps this will work if Republicans nominate a standard-bearer who is damaged, or too cautious or guilty to challenge this politics of envy. Mr. Obama clearly has Mitt Romney and his 14% effective tax rate in his sights (see the editorial nearby). The President will try to portray Mr. Romney as Mr. 1%, and if the Republican settles for defending the current tax code, he will lose. He needs a tax reform proposal of his own, as well as the self-confidence to argue for it in the same moral terms that Mr. Obama will attack him.

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European Pressphoto Agency

Meantime, as Mr. Obama begins his fourth year in power it's a good moment to recount the economic record that he'd rather not talk about. The President inherited a deep recession, but in political terms that should have been a blessing. History shows that the deeper the recession, the sharper the recovery, and Mr. Obama was poised to take credit for the economy's natural recuperative powers. Instead, we've had the weakest recovery since the Great Depression and stubbornly high joblessness.

The nearby chart compares rates of quarterly growth during the Reagan and Obama economic recoveries. The comparison is apt because both recoveries followed deep recessions in which the jobless rate reached more than 10%. Once the Reagan recovery got cooking, in 1983, growth stayed above 5% for 18 months and never fell below 3.3% for 13 consecutive quarters.

In the Obama recovery, growth has never exceeded 4% in any quarter and fell off markedly in mid-2010 through the third quarter of 2011. For the first nine months of 2011, growth averaged less than 1.2%. The economy finally picked up again in the fourth quarter, but still at a rate that is subpar for a recovery that long ago should have become robust and durable.

As he runs for re-election, Mr. Obama is trying to campaign as an incumbent who is striving to help the economy but has been stymied at every turn by Congress! . Not ev en MSNBC can believe this. For two years he had the largest Democratic majorities in Congress since the 1970s and achieved nearly everything he wanted.

The New Yorker magazine this week has posted on its website a 57-page memo that economic adviser Larry Summers wrote to Mr. Obama in December 2008. It lays out nearly his entire agenda for the "stimulus," reviving housing, the auto bailout and saving the financial industry. If anything, the memo overstates what would be needed to stabilize the financial panic, but nearly all of the stimulus spending priorities that the memo deemed "feasible" made it into law. They simply didn't work as promised.

The Pelosi Congress also passed ObamaCare, Dodd-Frank, cash for clunkers, the housing tax credit, and much more. The only Obama priority it didn't pass was cap-and-trade, which was killed by Senate Democrats.

Mr. Obama's regulators also currently have some 149 major rules underway, which are those that cost more than $100 million. The 112th Congress hasn't been able to kill a single major rule. The most it has been able to do is extend the Bush tax rates—which helped the economy by avoiding a tax shock—and slow the rate of increase in federal spending. This President has been "obstructed" less than anyone since LBJ.

Mr. Obama clearly has a spring in his step these days, figuring that the public hates Congress and thinks Republicans run it, that the GOP will field a weak presidential candidate, and that he can fool the public into believing only Mitt Romney's taxes will rise if Mr. Obama wins a second term. He has only one big obstacle: his record.

Printed in The Wall Street Journal, page 16

Sunday, January 29, 2012

Why the Dow Surged This Week

For the third straight week, the market is up. The Dow (INDEX: ^DJI  ) rose 2.4% while the broader S&P 500 (INDEX: ^GSPC  ) and Nasdaq (INDEX: ^IXIC  ) rose 2.0% and 2.8%.

And now that earnings season is in full swing, we can point to actual company actions for driving the stock market rather than vague musings on Europe, unemployment, or "the January Effect."

All 30 stocks in the Dow were up this week, but tech and banking dominated. The top seven gainers were in those two sectors:


Weekly Stock Price Move

Bank of America (NYSE: BAC  ) 7.0%
Hewlett-Packard (NYSE: HPQ  ) 6.2%
IBM 5.2%
Microsoft 5.2%
Intel 4.9%
Cisco 4.5%
JPMorgan Chase 4.0%

Of these, Bank of America, IBM, Microsoft, and Intel all reported this week �C on Thursday, to be precise. Click on the links to get the rundowns.

In banking, generally favorable reports from Bank of America, Goldman Sachs, and Morgan Stanley? gave hope to a beaten-down sector. Keep in mind that these reports weren't especially strong on an absolute basis. Rather, any decent news in banking sends shares skyward ! because expectations are so low. Nowhere is this more true than Bank of America. Hence its Dow-leading position this week.

Meanwhile, in tech, the company-specific good news at IBM, Microsoft, and Intel drowned out the market's poor reaction to non-Dow techie Google's earnings (Google was down 6.2% this week). We see that in Hewlett-Packard, whose business model is more tied to the fates of IBM, Microsoft, and Intel than it is to Google.?

It's fun to look at the weekly (and daily �� and hourly) market news, but remember to keep your perspective and invest for the long term (years and decades). If you're looking for a long-term stock pick, our chief investment officer has identified his No. 1 stock for the next year. Find out which stock he likes in our brand-new report: "The Motley Fool's Top Stock for 2012." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this legendary company.

Why Kodak Needs to Declare Bankruptcy

It's never a happy time when a cultural icon is brought to its knees. However, in the case of photography pioneer Eastman Kodak (NYSE: EK  ) , it's the only play left in the book. Long gone are the days of photographic film rolls, and with them the reputation of a once-great company. After frantic attempts to sell or license the company's vast portfolio of patents, it seems bankruptcy is the only option.

Enough's enough
It's not surprising that Kodak hasn't been able to lock down a buyer for its large collection of digital patents. With the company's grim financial condition all over the news, potential bidders would rather wait for a more favorable bankruptcy auction of the patents. For this reason, Kodak filing for protection under Chapter 11 is not only imminent, but also necessary.

Big names such as Apple (Nasdaq: AAPL  ) may be interested in Kodak's suite of patents, which could be valued between $2 billion and $3 billion. Apple buying the rights to these patents would be somewhat of a "Kodak moment," as Kodak once filed a suit against the Mac-maker for patent infringement.

Apple wasn't the only patent litigation filed by Kodak. In recent years it's seemed Kodak's new business model was to leverage their intellectual property by winning patent cases against industry peers. Unfortunately that strategy hasn't panned out that well.

Fading away
As my Foolish colleague John Maxfield discussed, Kodak's fall from grace is the result of the innovator's dilemma, a misfortune in which a company can no longer keep up with disruptive technologies in its industry. However, the lack of product innovation wasn't the only drain on the company. Failure to successfully reinvent itself in new industries like printers was also at fault.

By filing for bankruptcy, Kodak will undoubtedly sell its nearly 1,100 patents and close the final ch! apter in its more than a century-long history. Is seeking protection under Chapter 11 a card Kodak should have played years ago? Let us know your thoughts on the matter in the comments section below.

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Maxygen Surges 23% on Sale of Astellas Joint Venture Stake

Maxygen Inc. (NASDAQ: MAXY) shares surged to close at $5.14 today, gaining more than 23% on the day after the company announced that it would be selling its stake in Maxygen Astellas Joint Venture to Astellas Pharma Inc. The deal is likely to be worth $76 million. The venture had been designed to develop protein based therapy for treating autoimmune conditions. The drugs are to be designed to reduce immune system activity. Both the companies started their collaboration in 2008 and formed the joint venture, Perseid in 2009. The companies are looking to finalize the deal during the second quarter of the year. With this deal, Astellas will get almost 100% stake in the candidate.

Maxygen recently announced its fourth-quarter and full-year results. The company reported its net income for the fourth quarter at $69.9 million, up from a loss of $3.7 million a year earlier. The company announced its quarterly revenue at $5.9 million, down from $13.3 million in revenue it had reported a year earlier. Maxygen also announced its full year results. The company reported its net income for the full year at $68.9 million. It had incurred a loss of $32.4 million in the previous year.

Maxygen is a biopharmaceutical firm involved in the development of improved versions of protein drugs. The company makes use of its MolecularBreedign directed evolution technology platform. It also uses its protein modification expertise. The company also works in the field of biocatalytic process technologies for industrial chemical applications. The company was formed in 1996 and is based out of California.

The company stock is currently trading at $5.05, up 22.87% from its previous close. Maxygen stock opened at $5.42 and touched the high of $5.45. The stock's lowest price in today's session is $4.94. The company stock's EPS is $2.35. The company stock has traded in the range of $3.75 and $7.19 during th! e past 5 2 weeks. The company's market cap is $151.89 million and its P/E ratio is 2.15.

Maxygen reported its total current assets at $141.918 million for the year ending Dec 31, 2010. Its total assets were worth $146.986 million for the same time period. Maxygen had valued its total liabilities at $20.883 million. The company had reported its revenue at $37.601 million and its gross profit for the year at $37.601 million. Maxygen' net income for the year stood at $68.884 million.

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