…today is Bernanke Day, Ben Bernanke…faster than a speeding bullet (TB’s daughter used to say “faster than a rolling speedit”), more powerful than a locomotive, able to reach tall buildings in a single bound…and who, disguised as Big Ben, a mild-mannered Fed Chairman, fights a never-ending battle for truth, justice, and the American way! …on the other hand a fellow writer of daily commentaries has dubbed him ‘Bambi.’ Yesterday, mistakenly said FOMC was Monday/Tuesday but it begins today with the announcement around 2:10pm tomorrow (2:10 to Yuma?).
Not much in the mood to write as TB is feeling an ennui from 26 days of below average stock trading volume save for one: April Fool’s…you do recall that big meaningless rally don’t you? We have also twice set the low volume for the year and that is not a common occurrence in April…but rest assured that will not be the case much longer.
Focus remains on earnings whatever they mean with all the accounting gimmickry. Visa announced their earnings after the close as 39 cents a share vs consensus of 45 cents…but then ex-items, which for them was a plus, they came in at 52 cents…but since the ‘ex’ items can’t be expected to repeat themselves the shares sold off. Visa (V)…vis a vis?, and Mastercard (MA) are interesting in that they do not rely on credit merely transactions which someone was touting just as the earnings came out as being expected to increase as people run out of money…cash…but that would not seem to have been the case. Furthermore, at 38x projected earnings and with a long term growth rate of 21.6% that puts the P/E to growth rate at 1.77x which is rich by any standard and ripe for disappointment…MA is similar…way to similar. Now should we expect the number of transactions to grow at a rate equals or exceeds that in a huge growth spurt in credit?…one that supports the same P/E ratio? TB feels both are priced to fail, but then he missed on these stocks so let’s wait and see…furthermore V trades at $75 a share and MA at $242. MA just announced with Q1 earnings of $3.01 ex-items…$3.38 including. Consensus was for $2 however…so will it offset MA’s disappointment? Both look rich to TB.
The funny season is here too as CNBC has just announced its Million Dollar Challenge stock picking contest. TB entered the last time when the first prize was a new Maserati. You are allowed to have as many as FIVE portfolios…currencies have been added as sectors…and of course the usual gimmicky prizes for trivia questions, etc. If you decide to enter be advised that to do it right it requires a lot of time and it is not investing by any stretch of the imagination but trading…after all isn’t that what CNBC is all about? So good luck if you want to try to manage five portfolios in that matter and remember it isn’t about picking good stocks only picking the ones with the biggest potential percentage gains and then getting out of them when they plateau and finding new ones…a daunting challenge for a month or more. You can register at www.cnbc.com and contest begins on May 12…oh and be ready for playoffs!
Trying to avoid writing about the stock market so will make one last ditch effort…bonds…TB was about to buy some TIPs yesterday but the long guy looked about to break 2.10%…should have done it as for a second day it bounced back from the lows…but after Friday when it headed south again wasn’t about to make that move ahead of the FOMC…shudda, wudda, cudda…
OK, back to stocks…yesterday John Mauldin’s Outside the Box featured to essays on why the bottom isn’t in for stocks and TB wholeheartedly concurs. The first is by PIMCO’s Mohamed El-Erian…who is now being forced to sue to get his visa…if this guy is a terrorist so is TB! The second is by David Kotok. How can a bottom be in when banks and other financial institutions continue to tap the capital markets? Bulls aver that the mere existence of this capital means there is value in stocks…which are considered a screaming buy…except to TB apparently…gee, the p/e on the S&P 500 sans financials is just 15x…whatever happened to the single digit levels that normally signal a bottom? Remember this: how a large manager with billions under their control thinks is not how you want to think…you can’t invest that money except by scaling in all the way down…fail to do so and you will not only miss the bottom but be a cause for it to rally even faster than it otherwise would. Smaller investors however have more of a luxury…the ability to pick and choose and not to move markets…use that ability wisely.
There have been some interesting articles out recently that Sequoia funds that did well during the tech era are reopening after being closed to new money for years…but with that comes a warning that more than 50% of the asset value is in capital gains and mutual fund investors know what that means…you could be subject to taxes as they restructure the portfolio and all those gains are realized…so as Barron’s Michael Santoli writes it would be best to use them in a tax-free or tax-sheltered account (IRA/401(k). Just be sure to look before you leap…and kick those tires hard…which you should do with any mutual fund, or ETF for that matter…it’s your money and that is what matters.
Watched the second two hours of Carriers last night. While TB has long felt that women do not belong on ships…for morale reasons…and if that sounds sexist it isn’t…but his concerns were made evident in this series. The Captain and other officers are reduced to chaperones and dealing with affairs, “rapes,” and sexual harassment cases…as if it wasn’t enough they had a self-proclaimed racist on board who did manage to finally work his way out. Look…30 to 45 days at sea is a long time and even on that big building they were having fights after only a week. Give TB the good old destroyer he served on…and guys with a lot more maturity than what he saw last night…very reminiscent of high school. The stories of backgrounds told by several of the crew were sad and disturbing. While the job these ‘kids’ are doing is a good one, it is scary to see the lack of professionalism on the part of some of them while the officers and chiefs…especially the Command Master Chief…was remarkable…how things have changed. Two more hours a night thru Thursday…TB wants to go back to sleep!
Have a good day!
TB
Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries…as he sees it…and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Hope you find it useful.
Copyright TBD Capital LLC April 29, 2008
