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February 13th, 2012
Halftime in America
During the recent Super Bowl, Chrysler aired an extended 2-minute commercial starring Clint Eastwood, with the tagline “Halftime in America.” The ad paid homage to generations of resilient Americans, and drew a parallel between the U.S. auto industry’s recent resurgence and that of the broader American economy and society. Cynics saw the commercial as a form of covert electioneering by a company which benefited from a government bailout just two years ago, but recent macroeconomic data do support the case that the U.S. economy is improving.
To start with, January U.S. auto sales were up 11% over the prior year, to the highest annualized level since May 2008 (WSJ, 2/2/12). General Motors, only two years removed from bankruptcy restructuring, is expected to report 2011 net income in excess of $8 billion. The company has added 13,000 jobs since emerging from bankruptcy and now hopes to be earning as much as $10 billion annually by 2013 (WSJ, 2/6/12). Read the rest of this entry »
Tags: Chrysler, fraud, General Motors, Greece, SEC, unemployment
Posted in Monthly Digest | No Comments »
January 27th, 2012
Investors can be forgiven for wondering whether 2011 was the purest distillation yet of what has become of modern stock markets: all volatility and no return. Whether it was the wild daily 4% swings the stock market saw in August or the steep 19% drop in the S&P 500 from June through September, investors saw big changes in market prices, yet the S&P 500 ended the year practically where it began, with dividends providing a small positive total return.
Read the Full Commentary
Tags: Government bonds, Hewlett Packard, JP Morgan
Posted in Quarterly Commentary | No Comments »
January 7th, 2012
The S&P 500 index was up about 1% in December and finished the year with a return of about 2%, including dividends (total return). The 3 stocks that contributed most to the Large Cap Value model portfolio’s investment returns during the month were Vulcan Materials (VMC), Cintas (CTAS), and Apollo Group (APOL). The top detractors were Dell (DELL), NRG Energy (NRG), and Sprint (S). During the month, our only trade was to increase our investment in Hewlett Packard (HPQ). Not much has changed since we discussed our reasons for this new position back in September so we’ll refer our readers to our news archive.
The reason behind Vulcan’s positive stock performance in December was an unsolicited buy-out offer from its main competitor, Martin Marietta (MLM). The proposal currently on the table is to exchange each share of Vulcan for ½ share of Martin Marietta. Based on MLM’s current share price, VMC’s stock actually trades at a small premium, an indication that the market is anticipating that MLM might raise its offer. We do not expect submitting your shares at this point as the offering price is below our assessment of Vulcan’s value. We will keep you posted. Read the rest of this entry »
Tags: Vulcan Materials
Posted in Market Commentary | No Comments »
December 16th, 2011
One purpose of this monthly digest is to help clients better navigate the torrent of financial news, data and information thrown at them everyday by the internet, CNBC, radio, etc.
Indeed, the great challenge facing investors today is no longer how to find good information. Rather, the challenge is to filter out all the noise and put new information into a meaningful broader context. Not only is there simply too much information to digest, news is also frequently sensationalized and purposefully de-contextualized in order to grab attention. While easier access to investment information is clearly a step forward, we have little doubt it can also contribute to pervasive short-term thinking and exposes investors to behavioral pitfalls.
This month we wanted to highlight an internet site that is a good source of economic news and, just as importantly, puts that information in a helpful longer-term context. We are not economists, and we don’t expect our clients to be, but we thought you might find this site useful in understanding what you hear on the news. The site is called Calculated Risk; take a look at these two posts from this week. Read the rest of this entry »
Tags: Economic Data, Favorite Sites
Posted in Monthly Digest | No Comments »
December 5th, 2011
Is the world financial system on the brink of collapse? This question was recently raised by George Soros, the well-known hedge-fund manager and philanthropist. We don’t know, but there are certainly diverging economic signs in Europe and the U.S. While here at home, the recovery seems to be taking hold and employment numbers are slowly improving, in Europe the situation is deteriorating very fast and is reminiscent of our own banking crisis in 2008. Read the rest of this entry »
Tags: Europe, JP Morgan, JPM, Soros, Sovereign Debt, Volatility
Posted in Market Commentary | No Comments »
November 17th, 2011
Bonds Best Stocks Over Last 30 Years
Following a very good year for bond performance in general, October 31st marked a very unusual event for market historians: for the first time since before the Civil War, the trailing 30-year average annual return on long-term government bonds exceeded that of common stocks (as measured by the S&P 500). Government bonds advanced 11.5% annually during this period, versus 10.8% for the S&P 500.
Of course, the main reason for this once-in-150-years event is that yields on these bonds decreased from the mid-teens level in the early 1980s to slightly over 2% today. As yields dropped, bond prices rose and investors enjoyed significant capital appreciation in addition to their regular interest payments. Read the rest of this entry »
Tags: Derivatives, Europe, Government bonds, rebalancing, Sovereign Debt
Posted in Monthly Digest | No Comments »
November 8th, 2011
What a difference a month makes! After declining by more than 7% in September, the S&P 500 index roared back in October by almost 11% and is now up about 1% year-to-date. The index logged its best monthly gain since December 1991, and October was the first month it has gone without two consecutive days of declines since October 2006. The Large Cap Value Model portfolio was up over 10% for the same period. Read the rest of this entry »
Tags: Cemex, Sprint
Posted in Market Commentary | No Comments »
October 28th, 2011
The whiff of fear alluded to in our last commentary gained force in the third quarter, with looming worries about domestic recession and European sovereign debt woes growing. The result was a strong downdraft in equity markets, with the S&P 500 down about 14% in the quarter and most other equity categories down further. On October 3, the S&P 500 dipped below 1100, the lowest level of the year, putting the peak to trough (so far, at least) decline since April right at 20%. That is slightly worse than the downturn experienced last summer.
Read the Full Commentary
Tags: Bank of America, Buffett, Cemex, General Dynamics, Harley Davidson, Intel, Motorola Mobility, Share Repurchases
Posted in Quarterly Commentary | No Comments »
October 19th, 2011
A little more than two months ago, ideological debate over government spending reached a crescendo in Washington. A stalemate over increasing the U.S. debt ceiling left Congress and the President wrangling with the possibility of default on government obligations. Though the two parties disagreed on much, there seemed to be nearly unanimous agreement that default was to be avoided at all costs. Should the U.S. find its creditworthiness questioned—the argument went—then borrowing costs would skyrocket, creating a de-facto tax increase on all Americans. Treasury Secretary Timothy Geithner even went as far as to warn that a U.S. default would cause “catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008-2009.” Read the rest of this entry »
Tags: Fiscal Policy, freakonomics, predictions
Posted in Monthly Digest | No Comments »
October 7th, 2011
The best thing about September is that it is finally over. The S&P 500 index declined by 7.2%, and the Large Cap Value model portfolio dropped even further during the same period. Investors appeared to have a split personality throughout the month, alternatively showing signs of extreme pessimism and optimism, with the market registering frequent daily swings of 3% or more.
At the time of this writing, there does not appear to be any resolution yet of the situation in Europe. It seems that politicians across the pond are making the economic situation worse by prescribing a medicine, austerity, which keeps pushing the sickest patient, Greece, further into recession and fiscal deficits. Read the rest of this entry »
Tags: Cemex, CX, Hewlett Packard, HPQ, Market Volatility, Motorola Mobility
Posted in Market Commentary | No Comments »
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Bristlecone's Form ADV
Quarterly Commentary – Fourth Quarter 2011
January 27th, 2012Investors can be forgiven for wondering whether 2011 was the purest distillation yet of what has become of modern stock markets: all volatility and no return. Whether it was the wild daily 4% swings the stock market saw in August or the steep 19% drop in the S&P 500 from June through September, investors saw big changes in market prices, yet the S&P 500 ended the year practically where it began, with dividends providing a small positive total return.
Read the Full Commentary
Tags: Government bonds, Hewlett Packard, JP Morgan
Posted in Quarterly Commentary | No Comments »