Oil Prices Seem Headed South

| June 23, 2011

Several data points combine to convince me that oil prices are probably headed lower – perhaps by a lot – but certainly not up.  They include 1) the Saudi’s increasing daily production to 10 million bpd (the highest level in nearly 30 years!) 2) the IEA releasing 30 million barrels from its strategic reserves and 3) the U.S. releasing […]

Concerns over economic “soft patch” appear overblown

| June 14, 2011

Data displayed by Prieur du Plessis on his excellent website (here) does a good job tracking the global trend in the purchasing managers’ index for the major countries.  The slowdown in the U.S. PMI number early this month has fueled concerns of economic weakness and contributed to the recent stock market correction.  As can be […]

The Put/Call ratio is indicating the stock market is materially oversold – primed for a bounce.

| June 14, 2011

Merrill Lynch reported yesterday that the ratio of puts to calls on the CBOE is approaching extremes last seen in May 2010 and late 2008.  The hedgies have been busy!  While this ratio can be “noisy” it is a pretty good indicator at extremes – like now.  The Q2 earnings season is fast approaching.  Stronger […]

The press has focused on weak job growth and largely ignored growth in hours worked.

| June 14, 2011

A recent report by David Malpass of Encima Global had a good chart illustrating the trend and relationship of aggregate weekly hours worked (a combination of the # of workers and hours worked) and GDP growth.  The red line in the following chart shows that hours worked is growing at the best rate in 5 […]

If the economy is slowing down it’s not reflected in earnings estimates.

| June 14, 2011

The most recent published earnings estimates by S&P show no meaningful slowdown in 2011 earnings estimates.  The value of the S&P 500 is up only 16% from December 2003.  Earnings for the S&P 500 are up 52% since 2003!  Ten year Treasury rates are down 28% in the same time frame.  Rising earnings and falling […]

Yet another signal the market is oversold to a degree consistent with prior lows.

| June 7, 2011

Bespoke Investment Group has published another compelling chart (here) displaying the relationship of the percentage of stocks trading 1 std. deviation below their 50 day moving average stock price relative to the S&P 500 price index.  It should be no surprise that the present condition where over 50% of S&P 500 stocks are trading substantially […]

The amount of money of zero maturity remains at a staggeringly high level – big sign of fear, sign of disengaged investment potential, near historic high percentage of GDP.

| June 3, 2011

Investors remain extremely cautious if MZM is a guide.  There is over $10 trillion of money held in cash and securities of zero maturity.  It’s no wonder economic growth is sluggish.  The good news is this condition is not common at market or economic tops.  A decline in the amount of money sitting idle back […]

Forget the backward looking government jobs data – look at job advertising for a view of what’s ahead.

| June 3, 2011

While the market reacted negatively to the government jobs report today people ignored a positive signal arising from the level of online help wanted ads reported by the Conference Board on June1 and commented on by Mark Perry on his blog here.  The signal is straightforward.  The level of help wanted ads have returned to […]

The spread between the S&P 500 earnings yield and the 10 year Treasury rate is near a historic high – history implies stocks will rise soon.

| June 3, 2011

The current earnings yield for the S&P 500 is 6.8%.  The recent 10 year Treasury rate is 2.97%.  There have only been 14 quarters since 1970 (20% of the time) when the earnings yield has been 150% or greater than the 10 year Treasury rate.  In 79% of the cases when this condition existed, the […]

Recent market correction has stocks testing near record undervaluation

| June 3, 2011

I have updated my data series that calculates a fair value for the S&P 500 relative to the 10 year Treasury rate.  We are at a level in the S&P 500 that implies a 56% UNDER valuation.  This is highly unusual.  An undervaluation in excess of 50% has only occurred in 5 quarters prior to […]