Tuesday, October 21, 2008

The Kirk Report

The Kirk Report

Forward Estimates Are Too High

Posted: 21 Oct 2008 05:06 PM CDT

"The numbers we're seeing are pretty scary. If there's any silver lining it may be that things won't get much worse than this." - Ashwani Kaul

Nasdaq 100

The market struggled to find its way out there today as earnings season took its toll. According to Briefing.com, of the 77 companies that reported earnings after yesterday's close and before this session's open, 52% topped estimates, 35% missed and 13% were in-line. Outlooks were also fairly cautious - of the 49 companies that issued guidance, 45% were negative, 30% were in-line, 21% were mixed and only 3% were positive. The bottom line - many analysts are finally figuring out that their forward estimates are too high given current economic conditions.

Much like yesterday, volume was on the light side and the biggest weakness could be found in the tech space. (We'll see if today's report from Apple's earnings report changes that for tomorrow.) In addition, efforts by the Fed to buy commercial paper from money market mutual funds and Billionaire investor Kirk Kerkorian's decision to pull out of Ford also drew a lot of chatter.

All in all, not a good day and as you can see from the chart above we're stuck in the middle of a relatively large trading range with all focus on the recent highs and lows. Given recent volatility, many are simply waiting for these levels to be broken before committing more capital on either side of this range which frankly makes a whole lot of sense. See you tomorrow!

Sentiment Word Clouds

Posted: 21 Oct 2008 09:35 AM CDT

Just for curiosity sake, I've been taking wordle snapshots of my link posts as kind of sentiment check upon the links I provide. Here is one of the more recent based on the past seven link posts:

word cloud

As you know, I try to present all sides and opinions of the market through those links and it is interesting to me to see which words appear the most often and how they change over time.

Which, by the way, also brings about a suggestion you may find helpful. If you have been keeping a trading diary (especially through software or online), you may want to monitor your own personal sentiment through the use of a word cloud tool. For example, if you can cut and paste your trading diary over the past few weeks in comparison with perhaps your writings a few months ago, what has changed? For example, what words appear most often in your thoughts, research, and analysis? You may be surprised to see the difference over a period of time and track the changes with market conditions.

Knowing and understanding yourself and monitoring your thoughts is important. At all times, we must understand our natural bias and how we analyze the market through that lens.

Earnings & Outlooks

Posted: 21 Oct 2008 07:41 AM CDT

Good morning. Premarket futures are pointing to a weak start this morning primarily due to the batch of earnings reports with a number of companies offering mixed results and gloomy outlooks.

Beyond earnings, retail conditions in October are as bad as they were in September according to the ICSC-Goldman report whose same-store sales tally plunged since last week. However, the good news is that the credit markets continue to show vast improvement. Oil prices are also under pressure as the U.S. dollar hits a new 52-week high.

Premarket gainers: LINE, AXP, PFE, TMA, GBL, JDAS, LGF, PTV, JAKK, ITWO, CC, NT, ROS, NKTR, MGM, HK, COH, UAUA, SGP, DDS, ELN, AKS, & ICLR

Premarket losers: LOGI, JAVA, TXN, TWIN, FITB, HSVLY, ERIC, WU, PEG, SSL, FCX, DD, NCC, F, AIG, USB, SNDK, YHOO, BBL, ALV, CE, ALU, BP, HBC, ASML, MICC, & SQM.

At 10:AM we have the State Street Investor Confidence Index and lots of earnings reports and conference calls not to mention news on the Lehman credit default swaps. Go make it a great day!

Money Links

Posted: 20 Oct 2008 10:57 AM CDT

    The Kirk Report
  • Bernanke endorses another wave of fiscal stimulus

  • World leaders to engage in series of summits

  • Rate cuts and fiscal stimulus are needed

  • Wall Street eyes earnings and looks for a bottom

  • Earnings forecasts are in upheaval

  • This week's earnings preview

  • The monster that ate Wall Street

  • "Tuesday could mark a major turning point for this dark chapter of the financial crisis. That's the date when holders of Lehman credit default swaps need to pay up, after the bankruptcy filing put those instruments into default. While Wall Street is bracing for the worst, anything less than a catastrophe may trigger a powerful wave of buying interest." - Alan Farley

  • Bank-equity program gets an accounting fix

  • The guys from Government Sachs

  • Bank of America's Ken Lewis expresses hope on bailout plan

  • Banks are braced for Lehman Brother's debt insurers' deadline

  • Prosecutors investigate trading in credit-default swaps

  • U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings

  • The CBO estimates that the deficit in the current fiscal year will reach roughly $700 billion, up more than 50% from the previous year

  • 22 states currently face tax shortfalls

  • "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered." - Thomas Jefferson

  • There is a silver lining

  • The Confidence Game

  • The Killer C's: a crisis of credit, confidence and competence

  • Memo to bankers - just say you are sorry!

  • It may feel as if the sky is falling, but things aren't as bad as they seem

  • "The meltdown will continue until it runs its course, over the next eight-nine years plus or minus, with 6-18 month 'mini bull market' rallies along the way, to allow insiders to take profits and sell short." - Harry Schultz

  • Former Vanguard guru is buying stocks

  • Is credit crisis over? Not so fast!

  • "Many investors who get out now will stay out until they've seen the market recover -- which will be too late to get back in." - Terrance Odean

  • A surprise increase in leading indicators

  • On Wall Street, eyes turn to the fear index

  • Poll finds high anxiety on economy this month

  • The art auction indicator

  • A thorough sentiment overview

  • Tech executives are feeling optimistic

  • SEMI book-to-bill slips to 0.76

  • How much is this market really worth?

  • Stock market value according to Tobin's Q

  • Still no buy signal in Bulkowski's timing indicator

  • Stocks may fall another 50%, but still time to buy!

  • "Regardless of how much further it might (or might not) drop, the stock market now abounds with so many bargains it's hard to avoid stepping on them. Out of 9,194 stocks tracked by Standard & Poor's Compustat research service, 3,518 are now trading at less than eight times their earnings over the past year – or at levels less than half the long-term average valuation of the stock market as a whole. Nearly one in 10, or 876 stocks, trade below the value of their per-share holdings of cash – an even greater proportion than Graham found in 1932." - Jeffrey Saut

  • Do you enjoy reading these links? Then consider becoming a member!

  • Analysts predict minimum 1 million barrel OPEC cut

  • Next stop for crude is $50?

  • Winds shift for renewable energy as oil price sinks

  • Against the odds, financial crisis helps stimulate the U.S. dollar

  • Young entrepreneurial Americans are doing something they have not done much before. They are leaving

  • A financial new world order?

  • How the world's most basic industries are coping with the crash

  • Brazil is bruised, but not broken

  • Don't fight the Fed in India!

  • Europe gets involved in race for OTC regulation

  • Chinese GDP growth slows!

  • A sharper than expected slowdown in China means trouble and not just for China

  • The number of distressed British businesses has more than doubled since the start of the year

  • Bleak economic outlook for Spain

  • Days of easy cash are over for private equity

  • A long-term look at 30-year mortgage rates

  • Consumer goods categories most vulnerable and immune to a recession

  • A brief look back at the 5 hottest trends of the past year

  • Chrysler/GM deal confronts obstacles

  • Microsoft expands advertising budget

  • Goldman makes bottom call on Applied Materials

  • 29 companies that sell for less than their cash

  • The best and worst earnings reports this season

  • 5 fast growers

  • Top-rated stocks that treat shareholders right

  • More moving average crossovers

  • Q&A with value investor Mohnish Pabrai

  • 4 ways to survive and thrive in these market conditions

  • Advice for fighting the herd mentality

  • The first loss is the cheapest!

  • "I am primarily a trend trader with touches of hunches based on about twenty years of experience. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in very distant fourth place are my fundamental ideas and, quite likely, on balance, they have cost me money." - Ed Seykota

  • Free mind mapping software (often a good tool for mapping trading strategies)

  • Why should investors get acquainted with bond yields

  • Bonds that protect against faster inflation may be the biggest bargain in the Treasury market

  • Understanding socially responsible investing

  • The end of buy and hold?

  • Strategies for harvesting tax losses in a highly volatile market

  • 4 smart money moves for a down economy

  • San Diego high school students must now take a crash course in financial literacy

  • How to tell if you're rich

  • Only 8% of millionaires consider themselves wealthy

  • StockTwits

  • Ticker Rain

  • Trading hand signals!

  • "Market bottoms are like recessions. You never know if you've seen one until you read about it in a history book. And by then, you've missed the battle anyway." - George Winter

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Credit Markets, Earnings, & M&A

Posted: 20 Oct 2008 07:46 AM CDT

Good morning. Markets are in rally mode as credit markets continue to improve and business on Wall Street starts to show signs of stability following some Monday morning M&A activity after Exelon made a $6.2 billion dollar bid for NRG. Rest assure, nothing restores confidence on Wall Street other than some M&A activity.

Premarket gainers: PSUN, NRG, ING, EMKR, CC, YGE, ABK, RBS, LAB, CTX, CHTR, AIG, HAL, MOS, MS, ERIC, DRYS, JASO, MTL, BP, TOT, SWC, SNE, SNCR, BCS, & TCK.

Premarket losers: ELOS, AMAG, SSCC, PRU, VE, AMAG, BGH, FRE, JLL, MAT, NTY, AMR, HRL, & AMX.

At 10:AM we have the Leading Indicators report and Bernanke is due to testify before the House Budget Committee on the economic outlook and financial markets. Then at 11:30AM Paulson will talk about the government's plan to buy bank capital and at 12:45PM we have Fed Reserve Governor Kroszner speaking about risk management at Maryland.

This week will be a big one for earnings reports and this morning we have mixed batch of reports and cautious guidance, which is expected. Needless to say, everyone will be watching to see how the market reacts to negative reports hoping that the bad news is already priced in along with any signs that the credit markets are really improving.

Let's go make it a great week!

Whipsawed!

Posted: 17 Oct 2008 09:43 PM CDT

The market soared on Monday, dropped both Tuesday and Wednesday, rallied back on Thursday and chopped around on Friday. But, in spite of the whipsaws, it was still the first positive week in the fourth quarter and in several weeks.

S&P 500: This Week

For the week, the S&P 500 rallied +4.60, Dow +4.75%, Nasdaq +3.75%, and the Russell 2000 +0.76%.

The best performing ETFs since last Friday were focused on preferred stocks (PGX, PFF, PGF), energy (FXN, RYE), utilities (UPW), global infrastructure (GII), dividends (IRO), healthcare (RXL), and overseas markets (ECH, DXJ, DNH, DGS). The worst performers where those ultrashort (DUG, TLL, SDP, RXD, SJF), gold (GDX), and homebuilders (SAW).

Next week we have lots more earnings reports, Bernanke will speak, and more data on the jobs market housing, and leading indicators. As market conditions hopefully start to settle down a bit, I'll also try to make room for some chart requests among other things.

I hope you enjoy your weekend!

Mailbag

Posted: 17 Oct 2008 04:16 PM CDT

It's time to open up the mailbag and answer some questions. Topics covered in this mailbag include:

  • The Folly Of Using Historical Chart Patterns In Today's Environment

  • Using MACD & The Stock Trader's Almanac

  • Book Recommendation On Options

  • Tools I Use For Creating Link Posts

  • Hedge Funds Using Extreme Leverage

  • On Waiting For Safer Waters

  • Opportunities On Long-Term Stock Screens

  • Thoughts On Purchasing A Home In This Market

  • Holding Overnight & Positioning Ahead Of Gap Opens

  • Trending Patterns In Oil

  • Paying Off Debt First Or Investing

  • Why Not Move To Cash Instead Of Shorting Against Longs

  • Going Long Financials After The Bounce

  • Catching Falling Knives & Panic Buying

  • Financial Weapon Of Mass Destruction

  • Market Psychology & Prioritization In The Aftermath

  • Measuring Success As A Trader

  • Screening For 50/200 Moving Average Crossovers

  • Keeping Motivated During Tough Times

  • Sectors With The Most Attractive Pure Valuations

  • Is This The Bottom Or Bear Market Rally?

This is a members' only post. To read, please login.

Earnings, Data, & Warren Buffett

Posted: 17 Oct 2008 07:59 AM CDT

Good morning. Premarket futures are lower as the market sorts through the latest earnings reports from Google among others, another large drop in housing starts and building permits for September, and merger discussions between General Motors and Chrysler.

On the credit market front, Libor fell to its lowest level in four years while the Fed makes a strong push to set up a clearinghouse for those infamous credit default swaps.

Premarket gainers: AMD, GOOG, GILD, CEGE, CMCSA, CIT, SKS, IAG, BX, NDAQ, GM, BX, D, & SII.

Premarket losers: ING, ESLR, ACGY, ALD, RRI, GLBL, SIG, CRBC, BHP, RTP, BBL, TPX, LAB, CGV, FRO, LYG, QGEN, BCS, MT, SI, TTM, MT, IBN, TIE, AAUK, AIG, & CBI.

After the opening bell, at 10:AM we'll take another look at the latest reading on consumer sentiment. Like we've seen this week, not much is expected from any of these economic reports and the market doesn't seem to be reacting much to poor data in hope that the bad news has already been priced in. Speaking of which, Warren Buffett is out with bullish comments on American stocks and you're likely to hear a lot of discussion over his comments today.

All in all, unless we have a very poor day in the market we should close out the week with some nice gains (i.e. both the Dow & S&P 500 are currently up over +5% on the week). This would be the first positive week since the first week of September. Go make a great day!

Bear Market Blues

Posted: 16 Oct 2008 10:20 AM CDT

Hope The Lows Will Hold

Posted: 16 Oct 2008 07:59 AM CDT

Good morning. Investors are hoping that last week's lows are going to hold and premarket futures are pointing to a positive open.

A large batch of earnings reports (see MER, C, & NOK, UNH, BAX, UTX, EBAY), a better than expected CPI reading and falling jobless claims have set the positive tone in addition to rumors that we're going to see more global rate cuts and more interventions sooner rather than later. The credit markets are showing further signs of improvement and oil prices remain under heavy pressure and are set to test the low $70s in today's trade.

Premarket gainers: DFR, BTU, CNTF, SIGM, CCK, UAUA, SPWRA, STLD, CAL, NOK, CS, UBS, PCX, LVS, CHTR, ACI, MEE, IFX, UBS, UNH, AU, ABK, PCX, IPI, CAR, BLK, GPS, & TRN.

Premarket losers: CEGE, CIT, AIG, EBAY, HOG, PUK, BCS, HLX, TTM, VSH, TLM, RRI, ACGY, GSS, & FLEX.

Much like yesterday, we have a number of economic reports due out including Treasury International Capital (9:AM), Industrial Production (9:15AM), Philadelphia Fed Survey (10:35AM), EIA Petroleum Status Report (10:35AM), and the Housing Market Index (1:PM). Fed members Gary Stern and Eric Rosengren will also be giving speeches. Beyond today's data and Fedspeak, rumors of more hedge fund failures and forced liquidations are going to make the rounds and frankly many believe were the source of yesterday's nasty sell off.

So, on one hand you have a great deal of hope that the lows we set last week will hold while at the same time you have forced liquidations and continued volatility that will scare even the most battle-hardened trader. I personally would like to see the market break last week's lows and clear out all hope and trap the bottom callers which were out in full force last week so we can set up for another rally once those people throw in the towel, but what I want and what the market will do is probably an entirely different thing. The best we can do is to simply listen to the market itself, put our expectations and hopes aside, preserve capital and stay focused amid some very challenging conditions. I know that's easier said than done, but that's the only game plan that will work for this market.

Go make it a great day!

Give Up The Ghost

Posted: 15 Oct 2008 04:20 PM CDT

"I don't just think we're going to test the lows. I think we're going to violate them and break lower in a big way." - Kent Engelke

Such is the way of today's sentiment as we continue to see the market give up the ghost.

Dow Jones

Along with a plethora of disappointing data on the economy, Bernanke's speech sure didn't impress anyone as the market now wants much less talk, and far more action especially on the upside which was completely absent from today's trading session. Interestingly enough, the earnings reports so far haven't been all that bad unless you actually took time to listen to some conference calls today.

The only positive takeaway from today's session is that we won't have to wait very long for that "market has already bottomed, but we will have to retest the lows before moving higher again" theory to pan out.

HSH Associates

Posted: 15 Oct 2008 12:06 PM CDT

HSH Associates
Another resource I've been finding helpful these days to monitor the consumer loan market and interest rates is HSH Associates. In fact, their free market trends newsletter is something I look forward to reading each and every week.

Just you know, I recently added their blog to the news I read page and I encourage you to visit it frequently to get a good understanding on what is happening in this key part of the economy right now. For example, if you've wondered why mortgage rates are going up as interest rates go down (this morning they are above 7% for a 30 year mortgage), you'll find a quick explanation that will help you understand why. In a credit-focused economy, websites like this can prove very helpful to sort through all of the noise.

Keeping Tabs On Insider Buying

Posted: 15 Oct 2008 11:39 AM CDT

J3
Over the past few days I've been looking over my trading notes from the last bear market to understand what I should be doing with my money right now. In doing so, I noticed the following statement that I wrote back in 2002:

"After major market corrections/bear markets, keep close tabs on insider buying activity especially among stocks that have really been beaten up and which future prospects look dim. Stock screens that utilize insider buying activity as a criteria have outperformed significantly especially over six month time frames."

I recently discovered a very helpful website that allows me to track insider activity with ease. J3 offers excellent insider screening tools, up-to-date insider info, key ratio analysis, and even sends daily insider activity summaries directly to my email. The cost? Right now it is completely free for nonprofessionals and, based on what I've seen so far, I really like what they provide. Check it out!

Recession Risk

Posted: 15 Oct 2008 07:57 AM CDT

Good morning. Premarket futures are lower this morning as the market tries to figure out how deep and long the recession will be.

To answer that question, investors are sorting thorugh a number of mixed earnings reports (see KO, CSX, ABT, INTC, JPM, WFC) and some relatively dismal economic data. For example, September retail sales came in well below expectations (-1.2% vs -0.7% consensus) and the Empire Manufacturing report dropped -24.6 vs -10.0 consensus. As for inflation, the Price Producer Index fell 0.4% while the core prices rose 0.4%.

Along with watching the credit markets and seeing signs of easing, several Fed officials are making headlines this morning that they recognize recession risk but no rate cut is needed. Meanwhile, Meredith Whitney was out with cautious comments on banks even in spite of the latest rescue efforts.

Premarket gainers: EPIC, KO, ALTR, TSL, DNA, TLB, EXC, WB, WFC, INTC, AAPL, AMSC, UAUA, APWR, DISH, WIT, PPC, TSL, DTG, ECLP, CSH, MYL, & LUFK.

Premarket losers: LLTC, EBAY, CHT, AAUK, ACGY, ING, RTP, BBL, EXM, KEY, SWN, C, DELL, JPM, ASML, DRYS, KWR, PCU, AIG, AIB, CIT, SI, MT, & GGP.

In addition to this morning's data, we have business inventories at 10:AM, the EIA petroleum status report at 10:35AM, and the Beige Book at 2PM. We also have more Fedspeak from Bernanke around noon.

Needless to say, the market needs to show some signs that Monday's rally was not a fluke and that, even in spite of recession worries, buyers remain and the bad news has already been priced in.

Have a wonderful Wednesday!

Hope & Fear

Posted: 14 Oct 2008 12:19 PM CDT

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