Posts tagged ‘cnbc’

Walking Down “Money Honey” Memory Lane

Bartiromo

Don’t shoot the messenger, even if it means walking down “money-honey” memory lane.  Maria Bartiromo has been a staple for business television viewers since she joined CNBC in 1993. The broad hair-styles of Maria Bartiromo, ranging from the “Tease” and “Business Mullet” to the “Classic” and the “Librarian,” have been more volatile than the CBOE Volatility Index (VIX). Word has it that the Chicago Mercantile Exchange (CME) is working on a hair futures contract, designed to hedge against potential price spikes in the hairspray market.

 Click Here For Clusterstock’s Random Walk Through Bartiromo’s Hairstyles

To avoid any sexist comment critics, and if there are enough requests, I will submit a “dew dude” montage of Wade Slome’s past cranial mop designs. For those outraged by the hair-dew review, rest assured knowing Mrs. Bartiromo has been quoted as saying, “Frankly, I’m flattered” by the “money-honey” reference.

Like a day trader adapting to the changing markets, Mrs. Bartiromo has shown tremendous versatility in adjusting to the ever-changing business style demands. Some may debate whether her journalistic intensity has kept pace with the times. Change is a constant when considering financial markets and hairstyle trends – I’ll be watching Mrs. Bartiromo work her craft in both areas.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

August 21, 2009 at 4:00 am Leave a comment

“Bye Bye Roubini, Hello Abby”

Perma-Bull with Perma-Grin

Perma-Bull with Perma-Grin

Bye-bye” Dr. Doom” and hello “Happy Abby.”  Abby Joseph Cohen is back in the spotlight with the recent market resurgence and is calling for a sustained bull market rally. The death-like sentiment spread by NYU professor Nouriel Roubini has now swung – it’s time for CNBC to call in the bulls, much like a baseball coach calls in a fresh reliever after a starter has exhausted his strength.

Watch CNBC Interview of Cohen

Over the last year, we’ve gone from full-fledged panic, into a healthy level of fear – the decline in the CBOE Volatility Index (VIX) supports this claim. But with cash still piled to the ceiling and broad indices still  are about -35% below 2007 peaks, I wouldn’t say sentiment is wildly ebullient quite yet. The low-hanging fruit has been picked and now we need to tread lightly and delay the victory lap for a little longer. Market timing has never been my gig, so gag me any time I attempt a market prediction. Having said that, sentiment comprises the softer art aspects of investing, and therefore it can swing the markets wildly in the short-run. Ultimately in the long-run, profits and cash flows are what drive stock prices higher, and that’s what I pay attention to. Profits and cash flows are currently depressed and unemployment remains high by historical standards, but there are signs of recovery. Cohen highlights easy profit comparisons in the second half of 2009 (versus 2008), coupled with inventory replenishment, as significant factors that can lead to larger than anticipated surges in early economic cycle recoveries.  Whether the pending economic advance is sustainable is a question that Cohen would not address.

Investors are emotional creatures, and CNBC realizes this fact. Before investing in that 30-1 leveraged, long-only hedge fund, prudence should reign supreme as we start to see some of the previously bullish strategists begin crawling out of their caves – including perma-bull Abby Joseph Cohen.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

August 12, 2009 at 4:00 am 1 comment

Quarterly Earnings Avalanche – What the %&*$# is Going On?

Avalanche

Last week we received an avalanche of earnings reports (with a ton more reporting this week) and investors are now interpreting the data.

The recent stock market rally can be simply boiled down to companies releasing better than expected quarterly earnings.  As my great pal Peter Lynch says, “People may bet on hourly wiggles of the market but it’s the earnings that waggle the wiggle long term.” A whopping 77% of S&P 500 companies that have reported Q2 (June) earnings thus far have reported earnings results better than Wall Street expectations. Earnings estimates are being ratcheted up for the first time since August 2007. Intel got the party started in the technology world, trouncing both top and bottom line estimates. Certainly, overall, the top line results for corporations have been more challenging and mixed. However, with additional earnings available to companies, more resources can be plowed back into future marketing and revenue generating activities. Moreover, due to the extreme cost-cutting measures taken, once the economy recovers, corporations will be able to tap into the enormous earnings power potential created.

Profit Scorecard

Click Here for CNBC Quarterly Earnings Recap

Across all industries, whether it’s Fred Smith (CEO at FedEx) or Eric Schmidt (CEO at Google), we’re hearing a common theme that although the environment remains challenging, we have stabilized with the worst behind us. When and by what degree the economy turns around is still unclear, but all I know is that great companies don’t disappear in bear markets and as a country we have persevered through many, many recessions and financial crises in our history. In times like these, market leaders and industry innovators use their competitive advantages to step on the throats of their competitors and do whatever it takes to gain market share, so that when things actually do turn, the tide will carry them to the front of the pack.

Although the quarterly reported earnings coming out have in general been relatively anemic, investors should not sit idle.  I continue to scour income statements, balance sheets, and cash flow statements to see who is gaining share at the expense of their peers. At the end of the day those share gainers are the ones that will be growing earnings and cash flows the fastest when the economy turns. Investors shouldn’t forget the lessons of 2008 and 2009. Although not all the economic news headlines were bad in the first half of 2008 (as the stock market began its rapid descent), the same principle applies in reverse – as the market has rebounded from the March lows, not all the economic news has been encouraging. Volatility can in fact be a beautiful thing, if you have a disciplined systematic approach in place that opportunistically takes advantage of appealing prospects as they arise. Without doubt, the relative attractiveness of the overall market is less than it was in March 2009, but let’s not forget the stock market is still more than 35% below the market highs of late 2007.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

July 27, 2009 at 4:00 am Leave a comment

Ron Baron Swinging for Long Term Home Runs

Growth Guru Ron Baron

Growth Guru Ron Baron

Click Here to Watch Ron Baron CNBC Interview

The CNBC interview is a tad long with the first eight minutes better than the last eight. I can’t say I agree with a lot of his political rants, but his long-term success (BPTRX) is difficult to argue with despite his challenging track record over the last few years.

Ron Baron is considered one of the greatest growth investors of all-time, but unlike many of his modern growth peers he chooses not to play the quick trigger, momentum-based, “buy high, sell higher” strategy that merely purchases what’s working and sells what’s not. Rather he is investing in growth businesses that create long-term value, and focusing on those securitities trading at attractive prices. Seems like a very reasonable strategy to me, and an approach other historic investors like Peter Lynch followed. Like Lynch, Baron appreciates the impact of long-term home run stocks (Lynch called them “multi-baggers”). For example, in the interview Baron talks about the 30x return he earned on his Devry (DV) investment from the early 1990s; his 50x return on Charles Schwab (SCHW) from 1990; or Manor Care, up 100x from 1969 to its acquisition. Lynch enjoyed similar successes, but had an itchier trading trigger finger – his multi “bucket” strategy was quite unique (another day, another blog post). 

When it comes to passive investing, Ron Baron like other active fund managers discredits the powers of index investing:

“With index funds, you are going to be investing in the most successful businesses at that point in time, and at the top of the market you will be massively over-weighted in those companies.”

 

Like the scarce number of .300 hitters in baseball, I believe there are a select few investment managers who can consistently outperform the market (a study in 2007 showed only 12 active career .300 hitters in Major League Baseball). I believe Baron is one of those .300 hitters in the investment world. The problems with analyzing manager performance are luck and “law of large numbers.” These phenomena wreak  havoc on the examinations of short-run performance. The wheat ultimately gets separated from the chaff over the long-haul, but with the “Great Recession” of 2008-2009, many long-term investors are still hiding or shaking in their boots.

Ultimately, I believe the horse trading game of actively managed funds is a tough game to win. Most investors end up chasing performance and rotating in and out of positions at the wrong times. Nonetheless, Ron Baron has proved his ability to generate above average returns over the long haul.  Taking a swing with Ron Baron might not be a bad idea.

Wade W. Slome, CFA, CFP

Plan. Invest. Prosper.

July 22, 2009 at 4:00 am 3 comments

Pinning Down Roubini Requires a Lasso

Lasso II

Pinning down a Nouriel Roubini forecast is like lassoing a frenzied cow. They say a broken clock is right twice a day, and maybe the same principle applies to renowned economist, Professor Roubini (NYU)? Sure, credit should be given where credit is due. He nailed the forecast relating to the housing led financial bubble and subsequent financial collapse – even if the prediction was years early.

Here’s where I have a beef. Now that Roubini has become a celebrated rock star with frequent television interviews and speaking engagements, his touring views are becoming more fluid and slippery as time progresses. Sure it’s more comfortable to ride the fence and lean in whatever direction the weekly economic winds are blowing. I suppose if you throw out enough changing viewpoints, which adjust to evolving moods, you can never be wrong.

Let’s examine some of his views:

  • Out of Context: Just last week, Mr. Roubini said the “worst is behind us,” but in order to retain his “Dr. Doom” celebrity status he felt compelled to issue a press release clarifying his statements. He noted his “views were taken out of context,” and added, “I have said on numerous occasions that the recession would last roughly 24 months.” That’s funny, because he just stated last year it would be 12-18 months (Click Here for Video).
  • Sweating Out Rebound: Maybe the 41% bounce in the S&P 500 or the 49% jump in the NASDAQ from March 9th lows compelled Roubini to make the “worst is behind us” comments, but why then at the beginning of this year did he say, “We are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst.” Hmmm…excuse me while I scratch my head.
  • Alphabet Soup Recovery: Also frustrating are the John Kerry-esque waffling comments relating to whether this economic recovery will be a U, W, or L-shaped economic recovery. Last April he was in the U-camp: “My view is closer to a U-shaped recession as I expect that the economic contraction will last at least 12 months and possibly as long as 18 months through the middle of 2009.” Now, as early as last month Roubini is warning of a double dip or “W-shaped” recovery with the rising possibility of a “perfect storm” in 2010 (Click Here for Video). He sees the expiration of tax cuts, rising oil prices, inflating debt and interest rates leading to another downturn. So is it U or W, or will we hear more about an “L” shaped recovery?  Maybe the worst is not behind us? I’m confused.
  • Doomsday Earnings Yet to Arrive: Still early in the quarterly earnings reporting season but Roubini’s call for a downside in corporate earnings has yet to materialize. As a matter of fact, Zacks Investment Research reported last week that early second quarter upside surprises are beating downside surprises by a ratio of 7 to 1. So far not too “Doom-full.”

I’m no economist or recovery expert, but what I do know is that I’m having difficulty pinning down Professor Roubini’s ever-changing views. I suppose I will just mail CNBC, Bloomberg, or the bevy of other Roubini media groupies a lasso in hopes they will pin Mr. Roubini down.

Wade W. Slome, CFA, CFP®

Wade W. Slome, CFA, CFP®  

Plan. Invest. Prosper.  

www.Sidoxia.com 

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

July 20, 2009 at 4:00 am 5 comments

Is the Recession Over?

CNBC Recession Panel

Listen to CNBC Panel

Dennis Kneale, bullish commentator on CNBC presented his case on why he thinks the recession is over:

Positive Technical Indicators: Kneale points out that in recent history when the 50-day moving price average cuts upward through the 200-day moving average there is a positive directional bias for the market in the ensuing months.

Personal Income: +1.4% in May for 2 consecutive months.

Personal Spending: Consumer spending was up again in May, and up more than in April.

University of Michigan Consumer Sentiment:  The survey rose again to a reading of 70.8 in the recent measurement period.

VIX Volatity Index: The so called “Fear Index” is down -43% in about 3 months – stabilizing to a more normalized level. He argues this should bring in some cash on the sidelines into the stock market.

Eric Schmidt Positive: CEO of search giant, Google, says the worst is behind for the U.S. economy.

Most of the guests rang a more cautious tone, not the least of which, Peter Schiff sees Armageddon ahead for the U.S. economy.  Mr. Schiff goes on to compare CNBC to the Gardening channel with all the talk about “green shoots.” Not to mention, he sees the trillions of stimulus dollars only providing a temporary, artificial boost that will eventually cause a horrible economic hangover. Lucky for Peter, he has perfectly timed the international rebound in 2009…cough, cough.

July 1, 2009 at 4:00 am 1 comment

Cap and Tax Passes in the House

Empty Wallet

The U.S. House of Representatives passed The American Clean Energy and Security Act of 2009 (ACES), also named the “Waxman- Markey” bill, by a 219-212 vote. The masses are calling it the “Cap and Trade” bill, while detractors are blasting it as the “Cap and Tax” bill.

Joe Petrowsky, CEO of Gulf Oil, sees this bill costing businesses $50-100 per ton of carbon created, which will be passed through as a tax to energy consumers in the form of an annual $1,000+ tax (about $250-$350 per individual). Robert Murray, CEO of Murray Energy Corporation, calls it a $2 trillion tax on consumers over 8 years.

Click Here for CNBC Interview

The House passed this bill just as the economy is shuttering on its knees and a rising skepticism is brewing over the validity of global warming –  see Kimberley Strassel’s, journalist at The Wall Street Journal, article entitled, The Climate Change Climate Change dated June 26, 2009. Australia is in the process of killing its “Cap and Trade” proposals and many critics point to Spain’s failing carbon initiatives and 18% unemployment as evidence for the program’s shortcomings.

Despite one’s views on the validity of global warming, what cannot be disputed is our reliance (addiction) to oil as we import 70% of our oil demand. Is the time and scope of this bill the silver bullet for our crude dependence as we try to survive through this “Great Recession?” I think not.

Billions of humans across the globe are aspiring to achieve our standard of living here in the U.S., so even those against a “Cap and Trade” system, including myself, need to appreciate the massive energy investment we need to make. The U.S. is considered the “Saudi Arabia” of coal due to our vast reserves, and therefore we must find efficient and cleaner ways to use this abundant commodity. We need to throw the kitchen sink at nuclear, wind, solar, hydrogen, bio-fuels and other alternative energy technologies, even as we look to expand our fossil fuel resources.

But rather than forming randomly created silos of hoarded research across hundreds of universities, why not create domestic centers of excellence that collaborate with both academic and private sector participants. By integrating monetary incentives (i.e., exclusive commercial patent rights), incredible advancements and breakthroughs can be achieved. Historically, when the United States has focused on a task, we’ve been able to achieve greatness – for example sending a man to the moon. Heck, recently NASA mastered the art of converting urine into water!

Bold new steps need to be taken to solve our energy crisis, but I’m afraid this “Cap and Tax” bill is not the right answer.

June 29, 2009 at 4:00 am Leave a comment

Older Posts Newer Posts


Receive Investing Caffeine blog posts by email.

Join 1,816 other followers

Meet Wade Slome, CFA, CFP®

More on Sidoxia Services

Recognition

Top Financial Advisor Blogs And Bloggers – Rankings From Nerd’s Eye View | Kitces.com

Wade on Twitter…

Share this blog

Bookmark and Share

Subscribe to Blog RSS

Monthly Archives