That Was The Week That Was-2nd Week April

 

 

Earnings Season… Once again upon us. What is it and why is it so important? Earnings Season is a reporting month for most public corporations. It begins a month after the quarter ends. For example December is the end of the 4th quarter so January is the reporting month, then 30 days after April, July and October you have the reporting month for that ending quarter. Investors and investment managers listen and read carefully when these companies report. They look for what the company did, but also at what the company announces what it‘expects’ to do. A company that had a great quarter but announces that looking ahead things don’t look so good is likely to see its share price go down. Not only is the company’s forward ‘guidance’ an important factor in the reporting company’s business but the ‘guidance’ also gives investors, and economists, a clue as to what the overall domestic or global economy is doing. This past week started the 1st quarter Earnings Season. Expectations are for lower earnings. A strong dollar has hit multi-nationals bottom line. Also a harsh winter and an energy sector that has seen a huge decline in the price of oil, are two  other significant reasons in that we can expect modest, if not overall, negative numbers for the quarter.

 

Option Buying During Earnings Season is Sporty. Without getting into a lesson on options, some traders look to Earnings Season to find those ‘mispriced’ option prices on certain stocks. There is software that will do this heavy lifting for you. Once you find your stock you have to decide whether to buy out of the money or in the money calls or puts. Steven Sears at Barrons.com had an excellent article in ‘The Striking Zone’, published 4/10/2015. If you are thinking of trading options you better know exactly what you are doing.

 

The Retail Investor Remains Missing. I read somewhere that the retail investor, that was ga-ga over stocks in the 90s, is MIA. That ultra-conservative mindset, that came out of the Great Depression almost a century ago, has been renewed with those investors that experienced the Market Crash of 2008-2009. The idea that lightening strikes twice seems to be the concern of people that should be investing, and are not. Even those that are invested have the urge to sell on the most banal of negative economic news. North Korea is at odds with the movie industry. The Federal Reserve plans a rate hike. They ignore the most fundamental and basic investment concepts that should keep them satisfied. There is a deep seated fear in some retail investors, after experiencing the recent global market depression, that another global economic crash is imminent and every public company will go out of business at the very same time. There is little to change that emotional fear. One way to alleviate it is to spend more time educating investors. This will not get rid of the emotional desire to sell every time the markets hit some economic turbulence but could slow down the ‘flee’ process and allow common sense to enter the equation.  Here are a few ways to minimize investment portfolio risk, and allow investors to sleep better at night:

• Invest in mutual funds or ETFs rather than individual common stocks.
• Choose funds/ETFs that have a history of paying dividends.
• Compare fund/ETF Beta’s and choose those that have less than market risk but still have a history of providing solid returns.
• Keep a set percentage of your portfolio in cash. 10%-15%.
• Do not concentrate in one particular investment sector.

 

Global Economic Risks Remain but Appear to Be Diminishing. –Robert C. Doll, CFA, Nuveen Asset Management. Were it not for the strong dollar and the fall in the price of oil corporate earnings would be 8%-10% in 2015, Doll goes on to report that both the dollar and the price of oil may start to fade. Don’t expect the dollar to weaken but likely to continue to strengthen at a weaker pace. Also expect a rate hike later this year and that the equity technicals appear supportive of further price gains. Weekly Investment Commentary 4-14-2015.

 

Eurozone earnings per share revisions have broken into positive territory for the first time in four years, according to analysts at J.P. Morgan Cazenove. On a sector basis the analysts expect banks, energy, industrials, steel and construction materials to offer the most upside. MarketWatch.com 4/14/2015

 

A Rocky Road For Domestic Equity Markets Monday- Off at the Bell, Up by Noon and Down at the Close.

In the short term the markets are about as rational as a March Hare.

 

 

LifeLine Response. I saw this on cable Fox and went to the website. LifeLine Response is an app that you can have on your phone that if you are in trouble, unable to speak, will get help to you no matter where you are. Dialing 911 doesn’t always tell help where you are. It seems that this would be a great app for both young and older people. I can see the benefit if someone attacks you and you need immediate help. It also would be an excellent app in case of a serious health issue such as a stroke and you cannot speak. Check it out yourself. Go to www.llresponse.com 

 

Markets Up on Oil Wednesday

The WSJ reported Wednesday that oil prices surged to their highest point of the year on signs that crude production could be peaking. This was the biggest one-day dollar gain for U.S. oil prices in 2 months. DJIA up 75.91 for the session. WSJ 4/15/2015

Thursday markets closed off a tad.

THE FEDERAL RESERVE SHIES FROM JUNE RATE HIKE –WSJ 4/16/2015.

Soft economic data has created ‘uncertainty’ inside the Federal Reserve, dimming the chance as early as June for the expected rate hike. March slowdown in hiring numbers, tepid consumer spending, weaker than expected home sales and a drop in industrial output has given impetus to the view the economy doesn’t have the momentum moving into the second quarter. WSJ – Central Banks 4/16 

 

‘Laissez les bons temps roulez!’

After Wednesday’s gains BP CEO Bon Dudley warned that oil prices could stay low for several years, and he isn’t optimistic that they will bounce back soon. In a MarketWatch.com report Dudley explained, ‘We got to plan in BP for a lower for longer world.’ For the rest of us tired of $4 a gallon gasoline this can only mean, ‘Let the good times roll!’ More money for other stuff rather than seeing it burn out our tailpipe.

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