Category Archives: Market Comments

Congratulations History is made; 10 Year Treasury Breaks a Record!

Posted on May 30, 2012 by | Comments Off

Today the 10 year treasury hit an all time low of 1.62% as of just a few minutes ago. Contrary to the confident headlines you may read tomorrow, the reasons for this are various, possibly cumulative,  and no one knows with certainty. We will give you our thoughts in order of our internal probability for clarity from our side of the fence. So here we go:

  • Fear from overseas issues (Money moving from other fragile economies into ours)
  • Fear of Equity markets (Fixed income has continued positive money flow)
  • Signal of a slowdown here in the US (Low rates often signal a slower economic time)
  • The FED has won – Recall the fed wants lower rates for housing and economic growth (We think this a low probability)

Again, any or all may be reasons, but when you read the possible overconfident headlines, remember no one knows for sure!

Have a Great Day, below is the last chart of the week, we promise!

Friday we will have a fun uplifting post that a fellow professional investor quoted to start your weekend happily!

JK

214-706-4300  www.jkfinancialinc.com

This is a two-day chart of the 10 year treasury yield. Lower chart means lower yield.

Courtesy, TC 2000.

 

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Posted in Interest Rates, Investing/Financial Planning, Market Comments, World Political

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When things are too good to be true; Facebook

Posted on May 29, 2012 by | Comments Off

A memory of a coach telling us as players, “If you dance in the end zone, you better be able to back it up” comes to mind with Facebook, especially given the events that have occurred over the last few business days.

While many of the stories we have seen come from a slant of “The game is rigged!” our thoughts again focus on a price or capitalization that was assumed when the Facebook IPO occurred.

Yes there were issues, GM pulled their advertising, the NASDAQ had opening problems, Morgan and Goldman (lead underwriters) have had mishaps before. While all of these items are true, in the end it appears price does matter even for an alleged very hot issue.

While there are certainly sharks swimming in the Wall Street ocean, the valuations and growth rates used to establish the price of Facebook may have been aggressive, making us feel like, for now, Wall Street is a more realistic place.

Here is a chart of the action since Facebook started trading through mid-day today.

Have a great Tuesday/Monday!

JK

214-706-4300

www.jkfinancialinc.com

We are not recommending any investment (long or short) in Facebook and do not own or have any shares short at this time.

 

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Posted in Investing/Financial Planning, Market Comments

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Facebook Proves Price Does Matter

Posted on May 21, 2012 by | Comments Off

On Friday the much awaited Facebook IPO began trading. With a storm of issues surrounded this initial offering, it appears that fundamentals overwhelmed hype, which is not always the case. I happened to be with a group of multiple professional investors on Friday, and while we all thought the price was rich, no one called the disappointing (to Wall Street) price action that has ensued.

The Facebook IPO was scheduled for a later am morning issuance so the employees and managers of the company could have a convenient 9 am pacific time viewing. While the NASDAQ made concessions and moved the original open to the west coast, they may have wished they had stayed in New York. After almost 30 minutes of unscheduled delays, trading began as orders were rushed, dumped, and what only a legal battle will soon determine, left few knowing who actually owned shares by the end of the day.

Not withstanding the bad opening and the glitches in the systems, it appears a richly valued company with extreme expectations has done the unthinkable “Broke the Offering price” in less than one day of its trading.

Here is a chart through mid morning trading:

Time will tell how this turns out, but given the questions we have heard from many, we thought it worth mentioning this Monday morning!

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in General Financial Planning, Investing/Financial Planning, Market Comments

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How A Greece Default Might Actually Work? Simon Derrick, Bank of New York Chief Strategist Explains

Posted on May 16, 2012 by | Comments Off

Yesterday (5-15-12) I had the opportunity through a CFA related event to visit with, and listen to Simon Derrick, chief strategist of Bank of New York and London resident. Simon had one of the most vivid explanations of actually how Greece may default, as such I wanted to share it with you.

In actuality, it may be a smoother transition that many thought. These are possibilities, not guarantees, but the best I have personally heard so far.

On a Friday after most market participants have headed home, sometime after the next Greek election which occurs on June 17th 2012, according to Simon, Germany could announce there is nothing they can do for Greece, but they will attempt to help the other countries as much as possible. This would set into motion a Greek announcement that their country will have a two-week bank holiday in order to keep from having a run on the bank.

During the bank holiday the printers start churning, and a new currency is born. This currency is then disseminated throughout the country for use and the Euro currency is sent packing.

A second less immediate thought, but very important item is the approval of new Passports for travel between the neighboring countries. (This is interesting and speaks to the tourist and travel related importance for Greece.)

Capital markets will certainly do what they do with rates and currencies, most likely devaluing the newly minted currency. While no one knows the exact amount, 20-30% would be reasonable and could even be higher.

Here is where it gets interesting, after the dust settles, and some type of stabilization occurs (assuming it does), Greece, a tourist centric country, is sure to throw out extremely great travel deals to kick-start their newly formed country. Since their currency will most likely be valued so low, they will have a very strong advantage over their former connected countries in attracting tourists.

Maybe we will all be taking Greek vacations soon, only time will tell.

Here is a recent Bloomberg interview with Simon talking in greater details about currency and mentioning rates, which we will be speaking about soon.

 

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

 

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Posted in Economy, Investing/Financial Planning, Market Comments

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Five High Points from the Robert McTeer Private Client Event, a Party Crasher with a good Question

Posted on May 1, 2012 by | Comments Off

This most recent weekend the Robert McTeer private client event occurred. We will speak in much greater detail in our coming mid-year Newsletter but we wanted to hit a few of the high points while Mr. McTeer’s words were still fresh and the current economic situation most unchanged.

We also wanted to have a special thanks to clients, friends, and the party crasher, who actually asked a good question, but remains unidentified.  Thank you all and you too party crasher!

Donald and I compared our three high point notes, and with only one overlap, will bring you the top five with the first point being our collective overlap:

  1. The Fed’s credibility is key to holding current rates low. The natural inference would be that if the Fed lost credibility rates may move. I asked Mr. McTeer a direct question and will expand his thoughts in our Newsletter (DC & JK)
  2. Inflation in not inevitable (DC)
  3. The Tax Cliff of possible increased taxes and lowered government spending is estimated, by Mr. McTeer at a 7% GDP hit. Yes you read that correct, SEVEN PERCENT! (JK)
  4. Banks parking excess reserves at the Fed may prove a target for money supply fans. i.e. Get the money moving out of the Fed to get the economy moving (DC)
  5. “Those betting against Bernanke’s intelligence will lose!” A direct, unsolicited complimentary quote from McTeer (JK)

Great questions, great time, and great fun. We thank you all as we filled less than 90 minutes of a saturday into hard-core economic discussions.

Thanks Again to everyone !

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Economy, Education, Investing/Financial Planning, Market Comments, World Political

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Zigg Drops by with a Mcteer Question and a Few Grounding Thoughts

Posted on April 27, 2012 by | Comments Off

Zigg, making a pilgrimage from his very crowded small island, on his way to the store for supplies as many of his new fair weather friends are cramping his style and eating his food, stopped by last night to see the family and say hello. He had heard about the McTeer event and added a nice question of his own, which we will certainly ask Mr. McTeer.

For those not familiar with Zigg, he is our mythical friend who is a contrarian. He Ziggs when others Zagg, usually taking an uncomfortable position at any given time. His thoughts are always helpful in keeping things in perspective.

In addition to the McTeer question he shared the following thoughts:

  • This is an Election Year, see (Research Paper) for history
  • Tax cliff may come in the form of possible new taxes
  • Little Brother Country Issues i.e. EU
  • A years worth of market returns already

Zigg was not being negative as he never takes a harsh stance, however he did warn of becoming too optimistic and letting our guards down.

Thanks Zigg, we have missed you and glad you dropped in. It’s funny to see him move from the only positive person, to being a bit more conservative in his views, once again almost alone in voice.

Have a Great Day and a Super Weekend!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Economy, General Financial Planning, Investing/Financial Planning, Market Comments

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What are the historical odds for an Incumbent President to be Re-Elected? …..About 70%!

Posted on April 25, 2012 by | Comments Off

Given our surprise findings (76 Years of Capital Markets…) on pre- election year capital market research, which continued in form in 2011, we set off on another adventure.

In our own, overly analytical way, we wanted to find out what the historical chances for an incumbent President to be re-elected, using the history of the United States as our forecast mechanism.

Here are the facts, many of which you may not remember from your American History Classes:

  • There have been 56 elections in the United States Prior to the November 2012 elections
  • In total there were 25 chances for an incumbent to be re-elected. (Death, and an elective no second try, are the main reasons for not having a second term)
  • In total only 8 out of 25 incumbent presidents were ousted for a 68% pass rate, including FDR’s near two decade run
  • Modern day (aligning with our prior research of 76 years) there were 11 chances for an incumbent to be re-elected
  •  In Modern day times, only Hoover, Carter and Bush Sr were willing to go a second, but “one time” presidents, making for a 73% chance pass rate

From our perch, whether the full enchilada history of the US, or the “Modern Day” incumbent president, we call it a 70% historical chance of being re-elected!

So there you have it, the facts are what they are. As you know we are not allowed to have comments due to the compliance issues. Knowing this might be an interesting issue, we are once happy for compliance!

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Market Comments, World Political

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Watching Spain for Possible Pain, A 4 am Alarm Clock CST

Posted on April 18, 2012 by | Comments Off

Often times market conclusions are drawn, if for no other reason, just to have an explanation. The thinking goes, capital markets are doing this, so there must be a reason.

The recent movements and concerns of Spain do not fall in this category. Spain, unlike Greece is a larger and a more important participant of the EU.  It’s faltering would have major impact. As such, as Spain’s bond yield and CDS (insurance on the credit quality) have risen, capital markets have taken notice.

This chart from Bloomberg shows the Spanish general government 10 year bond yield and the SPY (S&P 500).

As the orange line (Spanish debt yields),  rise above 6% (a pseudo threshold level), market participants have, and are, taking notice. At 4 AM Thursday  (4-19-12) a large new debt auction will transpire in Spain. The demand of this auction will be interesting and will give us, as well as other market participants, a good read of confidence moving forward.  (Earlier this week, similar auctions went well.)

I will try not to wake the rest of the Kvale family!

We will update you with any surprises.

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, Market Comments, World Political

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90 Day Treadmill Under Way !

Posted on April 13, 2012 by | Comments Off

For those new to our writings and as a short refresher to regular’s, we monitor quarterly earnings expectations and results as a way to gauge the health of the current economy as well as the capital markets. Our pseudo negative term, “90 Day Treadmill” comes from the constant push from wall street to meet expectations on a quarterly basis, which is somewhat short-sighted but constant.

At the commencement of earnings season, according to Thomson Reuters here are the expected numbers:

Overall for Q1 2012, earnings for the S&P 500 are expected to grow a meager 3%, much slower than the last several quarters.

Top 3 Expected Growth Sectors:

  • Industrials  10.8%
  • Financials  8%
  • Technology  7.8%

Bottom 3 Expectations:

  • Telcom  -14.4%
  • Materials -12.9%
  • Utilities  -9.3%

The S&P 500, according to Thomson Reuters is currently trading at a 15.1 P/E which is near the long-term average. Given the slow growth expectations and an election year, this may be a stretch in valuation unless earnings surprise.

Have a Great Day and a Super Weekend!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Earnings Season, Investing/Financial Planning, Market Comments

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Fastest Quarter In A While, NBA Market (Nothing But Apple), Good Friday with The Masters

Posted on April 5, 2012 by | Comments Off

Take a deep breath, the first quarter of 2012 is in the books in what seems like a flash!

Domestic Indexes performances were dominated by one stock, Apple! In what a contrarian investor we like and follow regularly, Doug Kass calls “NBA” markets, “Nothing But Apple” Quarter.  It has been some time since we have seen such a large company dominate the indexes; flashback to 99? In what have you done for me lately fashion, time will tell what the future brings.

As you read this, I am out-of-state today for a quick turn around trip.  Tomorrow brings a rest for domestic capital markets as Good Friday is honored and we will be out of the office as well. As a former collegiate golfer (helped pay my way through college) having Good Friday and The Masters synched is terrific.

Speaking of sporting events, our Q2 2012 Newsletter is on the press and turned out very well, with a light-hearted first pitch baseball theme. We compare and contrast the famous sport to investing, building a portfolio, and the psychology needed to be a good long-term investor. We think you will like it and even updated our market thoughts with greater detail than normal.

Lastly, we are super pleased with the Robert McTeer responses and look forward to seeing all of you at the April 28th event. (Don’t forget to RSVP to cathy@jkfinancialinc.com as we need a firm headcount.)

Have a Great Day and a Super Extra Loooong Weekend!

JK

214-706-4300

www.jkfinancialinc.com

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Posted in Investing/Financial Planning, John Kvale, Market Comments, Personal

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