Soos Global Market Musings: June 2014

Monday, June 30, 2014

"CHITS" Charts In The Spotlight: Google (GOOGL)...will the upturn hold?

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"CHITS": Charts in the Spotlight: Google ($GOOGL)...will the upturn hold?. pic.twitter.com/gUgR1EgLsN

We currently have no position in GOOGL, but we're watching it. GOOGL's diversification into all kinds of businesses from semiconductor manufacturers to alternative energy companies is compelling. Valuation, however, needs to be considered on an ex-emotional-market-hype basis! Tough assignment....

Will keep you posted.

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M&A and Buybacks: Two fuels to the market fire that may be drying up....

Something to think about as we’re counting down to the upcoming fireworks: Buybacks and M&A.

Noteworthy: Global M&A at seven-year high as big corporate deals return: Thomson Reuters http://t.co/Pg3r8jLrDR via @MSN_Money
— Ed L (@SoosGlobal) June 30, 2014

Noteworthy: Buybacks grow 50% year-over-year; near pre-recession highs — FactSet Research Systems http://t.co/EkDE08XIdq
— Ed L (@SoosGlobal) June 30, 2014

In truth, “dry up” is a bit strong, especially for the M&A driver of markets, since large deals continue apace and until the ‘inversion’ motivation is mitigated, one would expect more and more companies to find ways to seize the tax advantage (US labor/economy disadvantage) of acquiring and domiciling overseas. The slowing is more likely to come from valuations that are making deals less compelling.

But the Buyback craze is seemingly slowing, certainly as judged by rhetoric from CEOs.

Both articles below are a worthy reads on the respective subjects, and ought to raise a caution flag at a time when markets are still at/close to all-time highs! (See chart below…a little reminder of where S&P has been over the past 20 years!)

Fyi….

Thursday, June 26, 2014

"CHITS": Charts in the Spotlight: DuPont (DD). Market anticipates well....

I tweeted the chart below as today’s “CHITS” (Charts in the Spotlight).

We don’t own DD, but on a pullback, it could be interesting.

What was noteworthy about today’s after-hours disappointing announcement by the company was how well, in the weeks preceding today, the market anticipated trouble!

Take a look at the relative price performance in the lower parts of the the chart above to see how DD performed relative to the S&P and to its sector ETF, XLB. In both cases, significant under-performance, far more than the sector itself vs the S&P (seen in the lowest section of the chart).

Evidence of good Street analysts? Or coincidence? Or something more insidious, like someone knew something?

You’ve got to wonder!

Just a thought…..

Wednesday, June 25, 2014

Time To Put "Inflation" Back Into the Dialogue???

fyi….I’d encourage a read of the following link.

http://alphanow.thomsonreuters.com/2014/06/chart-week-oil-market-wobbles/

It’s an interesting assessment of oil price hikes and their impact on GDP depending on whether the hike comes from demand vs supply considerations.

Furthermore, take a look at the chart below showing commodity price action YTD. Energy is not alone in its price spike; livestock, the overall CRB, precious metals, all have had meaningful climbs this year.

In a world where final demand for all kinds of goods and services is far less than robust, those higher cost pressures could potentially cause stress to margins and profits in coming quarterly earnings. It’s worth considering that while this is happening, equity markets are at or near all-time highs! And valuations on a P/E basis (both on a trailing 12-month basis and on a forward-12mth basis), while not at ‘bubble-esque’ levels, are in fact above historical averages.

Just a sobering word of defensive caution…..

Fyi.