Category Archives: Stock Picks
My Comment: Okay this is not scientific, but kind of funny. Morgan Stanley created the “GE Greatometer” which basically tallied all of the times the word “great” was used during their quarterly investor call. You can see as the use of the term “great” falls so does GE share price. My question is, doesn’t Morgan Stanley have anything better to do right now? On a serious note, pay attention to GE’s earnings announcement on 4/17, this will be a big announcement for the overall market and GE. GE’s CEO has mounting pressure to deliver because large and small investors alike are losing confidence in GE.
Chart Source: www.bloomberg.com
My Comment: Q1 Earning season start tomorrow with Alcoa (AA) and will conclude with Wal-Mart on May 14. This season will be ugly. I expect both the top and botton lines to fall off a cliff. The common theme will be weak consumer demand and no cap ex spending as corporations continue to cut spending on computer upgrades and machinery. I’m on the record as saying this rally isn’t real and the next few weeks will prove it, or I could look like a donkey. Here are some of the impact earnings annoucements coming up: Alcoa (AA) 4/7, Intel (INTC) and Johnson & Johnson (JNJ) 4/17, JP Morgan (JPM) 4/16 and Citi (C) and (GE) General Electric 4/17, IBM & Bank of America 4/20. The financials component of the S&P 500 is expected to show a 40% year-over-year decline in profits. Analysts and investors are braced for crappy numbers, but what will either make this rally succeed or fail will be what companies have to say about the outlook moving ahead.
My Comment:: Watch copper and crude, they should rebound first. Two weeks ago in this blog I said I like crude for the medium to long-term in the mid-forties. Crude will bounce around on news of demand shifts, economic outlooks, etc. However, over the next couple of years, it should move higher as the global economies rebound and supply cuts from OPEC.
In theory I have always been excited about target date asset allocation funds because I have seen the bizarre and down right scary portfolios individual investors have constructed. I get asked by inexperienced investors how they should allocate their retirement accounts and usually start with telling them to take a look at target date funds.
However, I was wrong. This bear market has shown these funds to be disappointments. Target date funds providers are cheating! Shorter target date funds are much too heavily invested in stocks. For example, those retiring in 2010, which is about a 1 year time horizon have anywhere for 59% to 48% percent of their portfolio in stocks. Why would these fund families allocate so much to stocks? Mutual fund shops sell performance numbers and the marketers realize in bull markets you get better performance numbers by investing in stocks compared to boring old bonds. As a group, target date fund providers invest too much in stocks because they need competitive performance numbers. Without strong performance numbers what will those NFL halftime commercials of the guy rowing a boat, riding a bike or climbing a mountain have to tell you about how their funds?