There are no shortcuts to easy profits in the global economy, but at least there’s perspective. That includes freshly minted number crunching from Zacks this week that deconstructs S&P 500 earnings by sector. As we fade into our final remarks for 2005 and prepare for some year-end revelry, we leave you with best wishes for 2006 and a few market tidbits from the Zacks analysis to chew on as you sip grog over the holiday and ponder what comes next.
* S&P 500’s total earnings are predicted to rise 10.8% for 2005 and 13.3% in 2006.
* Materials and consumer Staples are the only two of the S&P 500’s ten sectors that are expected to post a higher pace of increase in median earnings in 2006 vs. 2005.
Monthly Archives: December 2005
(MAL)INVESTMENT MANAGEMENT
Widely anticipated by some, it’s at once feared, dismissed, worshipped and condemned in the multipolar world of money management. But no matter your view on the advent of the inverted yield curve, it’s here (or, at least it was), and has spawned fresh debate about what awaits in 2006.
But for all the deliberation on what it does or doesn’t mean, there are but two basic paths of reaction to an inverted yield curve. One, ignore the event, which paid an ignominious visit yesterday to the Treasury market for the first time in five years. Or, for those with darker inclinations, there is the traditional conclusion, namely, that a recession will soon follow.
IN GIANTS WE TRUST
The official word from the two behemoths of oil supply runs something like this: Don’t worry, be happy. But when Opec and Russia starting talking of cooperative agreements, the consuming world may want to consider the implications of what, on paper at least, could be the foundation for the new super cartel of the 21st century.
AND TO ALL A GOOD NIGHT…
‘Twas the night before Christmas,
when along Wall Street
Not a trader was speaking,
even short sellers were discreet;
The last transactions were dispatched with care,
In hopes of creating one more billionaire;
Strategists were nestled deep in their beds,
While visions of higher trading volume danced in their heads;
And Spitzer with his phone calls, and
Whitehead’s reply rap
Had frightened the smart money into a long winter’s nap.
But over at the ECNs there arose a clatter;
Forcing specialists to ask, What the heck is the matter?
And away to the Big Board they flew like a flash,
And screamed that their monopoly soon would crash.
The brand was sagging from new competition,
Giving momentum and power and threatening attrition;
But in truth the real change to appear,
Was a fresh choice of venue, for which investors did cheer,
With digital trading, so lively and quick,
They knew in a moment that this was no schtick.
So they sprang to their computers, and mice did click,
To trade on systems where commissions don’t prick.
They sang to accountants, to daughters and sons,
All’s not lost, save maybe a bank run.
But then one finally proclaimed, ere the trading finally ceased,
Maybe this time, just once, we won’t get fleeced.
ASSET CLASS SCORECARD
(Year to date through Dec. 21)
Russell Capitalization/Style (total return)
Russell 1000 Value 8.0% <--The rebound rolls on
Russell 1000 7.3
Russell 1000 Growth 6.5
Russell 2000 Value 5.5
Russell 2000 5.5
Russell 2000 Growth 5.2
Russell Microcap 3.0
International Equities (price change, US$)
MSCI Emerging Markets 28.9% <--Still sizzling
MSCI EAFE (Developed Markets) 10.9
Bonds (total return)
10-year Treasury 3.9% <--The one to beat
Lehman Bros. Municipal Bond 3.0
Lehman Bros. Aggregate Bond 1.9
ML High Yield Master II (junk bonds) 1.8
Commodities (price change)
Oil 34.3% <--Momentum leader
Commodities (CRB) 15.0
Gold 12.9
U.S. Dollar Index 12.5
S&P 500 Sectors (total return)
Energy 32.1%
Utilities 13.5 <--Energy's coattails?
Healthcare 6.0
Financials 4.6
Consumer Staples 3.2 <--Forget discretionary
Information Tech 2.0
Materials 1.8
Industrials 0.9
Consumer Disc -6.4
Telecom Svcs -8.1 <--The big stumble
EVO’S BIG ADVENTURE
How do you know there’s a bull market in energy? Governments are salivating over domestic oil and gas supplies.
Straight-out nationalization a la the Mideast in the 1970s is a bit too blunt a tool in a media-savvy world of the 21st century. That forces states to employ a bit more finesse in their “acquisitions.” The Kremlin’s been a master at this, managing to take control of large chunks of formerly private energy properties in recent years.
TOTAL RECALL
Western music was banned in Iran yesterday, AP reports via Chron.com. “Blocking indecent and Western music from the Islamic Republic of Iran Broadcasting is required,” according to a statement on the council’s official Web site.
YOUR TAX DOLLARS AT WORK
Gold isn’t money, we’re incessantly told. To which we reply, “Oh, yeah?”
But the argument keeps coming back, unchanging, unwavering. It’s a metal, and a barbaric one at that, reason the commodity’s adversaries. Yes, they concede, it was once used as a medium of exchange, but those days are gone. We know better now. This is the age of fiat money, which has more or less prevailed for more than three decades since the Nixon administration completely severed the dollar’s link with gold.
Source: Barchart.com
IT’S ALL ABOUT CORE AFTER ALL
Pointing out headline inflation’s ascent of recent years has been a fruitless exercise in swaying opinion. The rise of annualized rate of increase in the monthly consumer price index had in September and October climbed above 4% for the first time in more than a decade. But the jump was effectively dismissed as largely irrelevant, the byproduct of the energy bull market of late and therefore unworthy of serious consideration as a sign that inflation threatened. Or so many reasoned.
IT’S BEGINNING TO LOOK A LOT LIKE CHRISTMAS
The economy giveth, and the economy taketh away. Today’s update on consumer prices for November showed it clearly in the giveth mode, offering a refreshing volte-face from yesterday’s disappointing news on the trade deficit.