Wednesday, July 15, 2009 5 comments ++[ CLICK TO COMMENT ]++

Spectacular rally today

The US markets had a spectacular rally today. One can never be sure what causes any of the rallies but it seems the strong earnings outlook from Intel provided the ammunition. The graphic below, from wsj.com Market Data Center, highlights the strength of the rally, with almost every Dow Jones industry group up strongly.



The strongest industry was precious metals, with a massive 8.23% rally today. A lot of the other big gainers today were cyclicals (aluminum, tires, coal, etc) or consumer discretionary (consumer finance, recreational services, gambling, etc). The weakest were defensives, such as pharmaceuticals, healthcare providers, water, and the like.

The somewhat strong economic numbers, and more importantly, the strong profit outlooks from some companies, is enabling the market to price in a very bullish outlook. Year to date, US Tires is up 96.04% and Travel & Tourism is up 70.92%. Some analysts are suggesting that the recession has already ended. My concern is not the recession but what happens to corporate profit margins. I have no invested in anything for almost an year and a half (except special situations) because it's not clear to me how much profit margins will shrink.

As of today, the TTM P/E of Dow is 12.76 and 47.42 on the S&P 500. The forward P/Es on Dow and S&P 500 are 13 and 14.8, respectively. Dividend yield on the Dow is 3.33% and 3.08% on S&P 500. All of these numbers are close to average long-term valuations.

The greatest threat now will be rising bond yields. It also remains to be seen what happens if central banks start withdrawing liquidity.

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5 Response to Spectacular rally today

synchro
July 15, 2009 at 8:43 PM

I am saddened, just SADDENED, to be accused of being a troll....To think all the well-intentioned advice i put forth gone wasted and unappreciated!  I feel hurt.

Still, if you took offense at my comment about random buy and sell entries following your advice, you shouldn't.  Have you any idea how well you would do if you have a 50% win ratio, and when you win, your wininings is 3 times as much as your loss?  YOu'd still come out ahead.  I thought what I am offering is rather insightful, useful, well-intentioned, good-natured, valuable insights.

To be clear, I don't hate your blog, but I don't read your blog either.  I stopped reading your blog a long time ago.  But I do scan your blog entries' headings, and i have a pretty good idea what you are referring to and commenting on.  That's not to meant to be a put-down.  When I say a lot of your spewage is derivative and tedious, I mean I've already seen your links and references at other places, and knowing your thought processes from debates w/ you years ago, so I can already guess pretty well what your predictable comments and thoughts are.

So, really, it really takes very little, and I mean, extremely little time, to go thru your blog entries' heading.  So short of just banning me outright from your blog, I suggest you DON't put any headings in your blog entries -- just leave them blank.  Then I have no way of guessing what's going on in your head without actually spending time reading your blog entries.

Take care, and good luck!

Sivaram
July 15, 2009 at 9:47 PM

I'll consider leaving all my blog titles blank just to make you read ;)

I have no problem with you cutting me down--it may help other newbies who may blindly follow me into an Ambac or a Takefuji--but you are, like, literally cutting and posting the same thing over and over again.

As for trying to help, you made your case a while ago, when you were actually posting something useful, and I came to the conclusion I don't agree with your methodology or your outlook. It's also kind of hard to take someone seriously when they think Martin Whitman is an idiot or Bill Miller is the worst investor ever. That's your opinion and I know why you think they are dumb (mostly because they never sold near the top, and I think you suffered some personal financial losses too, right?). Dennis Gartman recently called Warren Buffett an idiot and that's ok. But the thing is, just like Gartman, I don't subscribe to your strategies.

If you think some specific strategy is going to be disaster, go ahead and argue against it. But otherwise, I doubt you are helping anyone.

Daniel M. Ryan
July 16, 2009 at 12:39 AM

If you don't mind me asking, how'd you get the current S&P 500 dividend yield? I've been using an inferred SPDR yield as a proxy because I didn't quite know how to track down a current [not estimated-forward] yield for the S&P.

Thanks.

Sivaram
July 16, 2009 at 11:28 AM

WSJ market data center has it...do note that the S&P numbers are updated weekly... I think a more up-to-date one may be available from the S&P website but I don't know; WSJ data is good enoug hfor my purposes... There are a ton of useful info at the WSJ site--the downside is that they are not historical (i.e. can't use them to plot charts)...


Another useful one is their bond benchmark page... lists bond yields and YTD total returns for literally the whole bond spectrum...

Jae Jun
July 19, 2009 at 2:47 AM

Read this guys comments out of curiosity and came to one conclusion. Starts with a big T and ends with a ll.

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