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Another view........
WEDNESDAY, OCTOBER 14, 2009
| UP AND DOWN WALL STREET DAILY |
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Weak Dollar Equals Strong Stocks, For Now
By RANDALL W. FORSYTH
Obama may find it easier to bring about peace than to steady the greenback.
A PROPHET IS NOT WITHOUT HONOR, save in his own country, the Bible says. To which Barack Obama can respond, Amen.
In what appears to have been an expression of hope over lack of experience, to paraphrase Dr. Johnson, the Nobel Peace Prize has been bestowed on President Obama. Yet the cheers are loudest from afar; at home, the American public is split down the middle about their chief executive.
Growing negativity is extending to the financial sphere, with the dollar's decline being laid at the door of the White House. And it's now going past the steady drumbeat on the theme on the Drudge Report. "Obama Dollar Retreats Most Against Commodities in Wealth Shift," intoned Bloomberg News, now even more a part of the media establishment with its rescue of BusinessWeek.
But the President's fellow Nobel Laureate, Paul Krugman, blasts those who would favor policies to support the dollar, equating such notions with the backward thinking that produced the Great Depression. In his New York Times column Monday, Krugman attacks the "gold-standard mentality" that he says opposes not just a decline in the exchange rate, but also "obsessively" fears inflation in the face of deflation, easy credit even when its needed, and government job creation.
What's needed, Krugman and wide range of economists say, is to let the dollar continue to fall. That will boost U.S. exports, thus providing stimulus to the weak economy, and help right the imbalances in the global economy.
At the same time, China, Russia and members of the Organization of Petroleum Exporting Countries are not only speaking out against the continual slide in the dollar, but also are calling for alternatives to the U.S. currency as the linchpin of the global monetary system and trade.
Amid these conflicting cross-currents, only one thing is clear: just as President Obama hasn't been in office long enough to merit a Nobel Prize, neither has his policies been in effect long enough to alter the course of the dollar.
In case anybody checked, the dollar's path has been steadily downward since the early years of the administration of George W. Bush. And, notwithstanding the bleating you hear about the battered buck, that's just fine with Wall Street.
According to Barclays Capital, "since 2003, dollar weakness has gone hand-in-hand with equity rallies." The bank's economists estimate currency depreciation helped to reduce the trade deficit, which added 1.1 percentage points to gross domestic product growth in the first half of 2009 from a year earlier.
From the stock market's perspective, Barclays Capital notes in its U.S. Portfolio Strategy weekly letter that more than 30% of revenues for Standard & Poor's 500 companies come from abroad. Thus, dollar weakness boosts earnings of large, U.S. multinational corporations through increased competitiveness and positive currency translation effects, as foreign revenues are converted into a greater number of shrunken dollars.
It's no surprise that technology, energy, materials and industrial sectors benefit the most from the dollar's decline. Barclays plotted the performance of those groups (inversely) against the Fed's trade-weighted dollar index, and the lines moved in lockstep.
Barclays expects dollar weakness to persist in the months ahead, which would support the cyclical rally through year-end, it says. Bad news for the buck is good news for stocks. Booyah!
That underscores why, for all the angst the dollar's decline has produced, it has failed to upset the stock market ("October Crashes I Have Known (But Not Loved)," Oct. 9.)
Yet that only demonstrates the stock market's well-deserved reputation for looking no farther ahead than next quarter's earnings. Moreover, it appears the stock market has its own version of "money illusion," in which equities are marked up in marked-down dollars.
At the same time, notices of the dollar's demise seem premature. It's popular to compare the U.S. with post-war Britain in terms of the dollar being supplanted as the global reserve currency, as sterling was after World War II, when U.K. was all but bankrupt from fighting two world wars.
As long as there is no ready substitute for the dollar, Wall Street can celebrate the currency's steady decline. And U.S. GDP will be boosted by a cheap greenback's spur to exports and deterrent to imports.
This cannot go on forever, however. The dollar's fall may not have started on President Obama's watch, but it may become his problem. And it will take more than high-minded gestures and diplomacy to solve it.
Oct. 14, 2009, 4:50 a.m. EDT
Geithner: Confidence stabilizing dollar -- report
By William L. Watts
LONDON (MarketWatch) -- Investors are confident in the U.S. government's ability to maintain sustainable growth, which in turn has helped stabilize the value of dollar assets, U.S. Treasury Secretary Timothy Geithner told Beijing-based magazine Caijing, in an interview published Wednesday. Geithner was quoted as telling the magazine that China and the United States have a shared interest in safeguarding the value of the dollar. "Our interest is in trying to make sure both American and global investors know that U.S. markets are strong in liquidity and offer stability," he said, according to the report
| Index |
Last |
Change |
% |
High |
Low |
Time |
| Dow_Futures* |
9892.00 |
83.00 |
0.85% |
9900.00 |
9831.00 |
04:52:21 |
| NASDAQ_Futures* |
1746.25 |
19.50 |
1.13% |
1747.25 |
1737.75 |
04:52:21 |
| S&P500_Futures* |
1079.75 |
11.00 |
1.03% |
1081.50 |
1072.75 |
04:52:21 |
Ha ha, talking about DOW10k cum STI just x 2700, a not bad moment to celebrate. Below just rcv fr email, for sharing:
Chinese Value Stocks! In DOW???
China's rapid economic growth will be the global story of the foreseeable future. Like the Japanese in 1980s, the Chinese are shopping for Hummer, IBM PC division, natural resources and real estate, etc.
In addition to growth, many investors look at emerging markets such as China as potential protection against falling dollars. No one wants to lose money any more after the market crash of last year, but neither can anyone afford to miss out potential huge growth ahead. Money is flying back to Chinese stocks causing valuations to rise rapidly. Are there still windows of opportunity left?
I went though all Chinese stocks listed in U.S. stock exchanges with market cap greater than $1 billion. Below are 19 with positive P/Es (sorted by P/E):
|
Name
|
Symbol
|
P/E
|
Mkt cap
|
% Chg. From 52wk Low
|
|
Aluminum Corp of China
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(ACH)
|
7.9
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16.02B
|
410%
|
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China Petroleum &
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(SNP)
|
9.7
|
76.75B
|
191%
|
|
Yanzhou coal mining
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(YZC)
|
11.1
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7.47B
|
376%
|
|
China Mobile Ltd
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(CHL)
|
12.2
|
199.92B
|
145%
|
|
PetroChina Co Ltd
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(PTR)
|
13.6
|
221.75B
|
215%
|
|
Sohucom Inc
|
(SOHU)
|
14.6
|
2.47B
|
189%
|
|
CNOOC Limited
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(CEO)
|
15.3
|
65.35B
|
264%
|
|
Shanda Interactive
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(SNDA)
|
15.5
|
3.22B
|
243%
|
|
Guangshen Railway
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(GSH)
|
17.7
|
2.97B
|
161%
|
|
NetEasecom, Inc
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(NTES)
|
20.1
|
5.23B
|
270%
|
|
Perfect World Co, Ltd
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(PWRD)
|
20.7
|
2.15B
|
497%
|
|
Trina Solar Limited
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(TSL)
|
26.1
|
1.03B
|
618%
|
|
Mindray Medical Intl
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(MR)
|
29.0
|
3.24B
|
244%
|
|
SINA Corp(USA)
|
(SINA)
|
32.8
|
2.08B
|
216%
|
|
China Life Insurance
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(LFC)
|
40.6
|
129.73B
|
206%
|
|
New Oriental Edu
|
(EDU)
|
52.0
|
3.14B
|
217%
|
|
Ctripcom Intl, Ltd
|
(CTRP)
|
57.4
|
4.14B
|
377%
|
|
Baidu, Inc
|
(BIDU)
|
83.4
|
14.61B
|
420%
|
|
Home Inns & Hotels
|
(HMIN)
|
108.8
|
1.34B
|
483%
|
The top 9 stocks in the list have a P/E ratio of less than 18. They seem to still be reasonably priced, even though some of them have bounced back more than 400% from their 52-week-lows. These 9 inexpensive stocks are in 3 sectors: commodity, technology and railroads.
Commodity
ACH, SNP, YZC, PTR and CEO are all commodity related. Although the worst is likely behind the commodity sector, weakness might persist as long as excess supply does.
A study published in Journal of Investing, spring 2009 issue found that adding a significant allocation to commodities substantially improves portfolio performance. The performance is more dramatic for indirect investment via the equities of companies than for direct investment in the commodities themselves. Gold consistently provides a greater benefit than either platinum or silver. The findings are consistent during much of the 34-year study period.
Below are comparisons between Chinese oil & gas stocks to Exxon Mobil Corp (XOM). As you can see, Chinese oil giants don’t have a clear advantage over Exxon Mobil:
|
Metric
|
SNP
|
PTR
|
CEO
|
XOM
|
|
P/E
|
9.74
|
13.6
|
15.2
|
11.2
|
|
Operating Margin
|
5%
|
15%
|
40%
|
15%
|
|
Debt/Operating Cash Flow
|
3.1
|
1.0
|
0.3
|
0.2
|
Technology
China Mobile Ltd (CHL) is a Chinese mobile-phone providers that has a huge cash stockpile it can use to continue expand. Below are comparisons between CHL and AT&T (T):
|
Metric
|
CHL
|
T
|
|
P/E
|
12.2
|
12.7
|
|
Operating Margin
|
33%
|
18%
|
|
Debt/Operating Cash Flow
|
0.1
|
2.1
|
With a higher operating margin and a much lower debt load, CHL is clearly in a much better position. Also, it doesn’t have huge goodwill sitting in its balance sheet, like AT&T does. The Goodwill results in AT&T’s negative
Net Tangible Assets.
SOHU and SNDA both have much higher growth rates than CHL, though they also have higher short ratios.
Railroads
Below is a comparison between Guangshen Railway (GSH) and Burlington Northern Santa Fe Corp. (BNI). No wonder Warren Buffett prefers BNI.
|
Metric
|
GSH
|
BNI
|
|
P/E
|
17.6
|
14.0
|
|
Operating Margin
|
14%
|
24%
|
|
Debt/Operating Cash Flow
|
2.4
|
2.6
|
ETFs
The followings are mainly China related ETFs/ETNs, including short and currency:
|
Fund Name
|
Ticker
|
Net Assets
|
Portfolio P/E
|
|
iShares FTSE/Xinhua China 25 Index
|
FXI
|
11.30B
|
14.6
|
|
SPDR S&P China
|
GXC
|
455.46M
|
17.0
|
|
PowerShares Gldn Dragon
|
PGJ
|
439.50M
|
16.1
|
|
UltraShort FTSE/Xinhua China25
|
FXP
|
269.93M
|
|
Claymore/AlphaShares China Small Cap
|
HAO
|
182.13M
|
15.4
|
|
WisdomTree Dreyfus Chinese Yuan
|
CYB
|
136.81M
|
|
Claymore China Real Estate
|
TAO
|
79.43M
|
16.0
|
The most popular one is FXI, which owns 25 mature, state-owned and too-big-to-fail Chinese companies listed in Hong Kong.
Small Cap
Superior growth usually comes from small to mid-cap stocks. I lowered the criteria to include any profitable Chinese stocks with a market cap greater than $100 million. Jinpan International Ltd. (JST) engages in the design and manufacture of cast resin transformers for voltage distribution equipment in China. Its P/E is 9, PEG is 0.56, debt/operation cash flow is less than 1, and short ratio is very low. However, the market cap is only $250M.
Conclusion
Investors usually have short-term memories. We seem to be driven by the most recent market rally, conveniently forgetting the lessons of last year. Hot markets eventually cool, and most investors don't catch on until it's too late.
Investors do have a habit of buying hot stocks. If a stock can be up 400% over the last 12 months, it could also be down 75% in the next 52 weeks. However, if you can tolerate this kind of risk, and have a very long invest horizon, you might want to consider these profitable and still relatively inexpensive Chinese companies presented above.
I expect DJ will be testing 10,000 mark tonight :)
Megamoney causing the Dow to cheong to positive territory!...
You think the mega funds buy for fun ? lol not easy to get in and get out all at once "with this kind of volume" :) U need time ... Enjoy this ride while you can.
lookcc ( Date: 13-Oct-2009 23:54) Posted:
| 4 d grand finale 'pump n dump'????
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4 d grand finale 'pump n dump'????
Some more I shouldnt disclose this "HUGE Funds coming in already since yesterday" They will not let DJ fall.
risktaker ( Date: 13-Oct-2009 23:36) Posted:
why worry DJ tonight ? STI already took the hit for tonight. Tomorrow STI will rise :)
iPunter ( Date: 13-Oct-2009 22:24) Posted:
If the Dow is down 200 pts tonight, then it is really 'pengsan!'... hehehe...
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or some other well-known analyst????
why worry DJ tonight ? STI already took the hit for tonight. Tomorrow STI will rise :)
iPunter ( Date: 13-Oct-2009 22:24) Posted:
If the Dow is down 200 pts tonight, then it is really 'pengsan!'... hehehe...
cheongwee ( Date: 13-Oct-2009 22:18) Posted:
becos one analyst have a neutral rating on Goldman..that is why dow down...but i thk later market will be up...alot of liquidity..i hearsay some 2t..!!!.i forgot where i read it...but it is...
then how the hell makret still rallying till now fr March!!!!... |
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is d analyst meredith whitney???
cheongwee ( Date: 13-Oct-2009 22:18) Posted:
becos one analyst have a neutral rating on Goldman..that is why dow down...but i thk later market will be up...alot of liquidity..i hearsay some 2t..!!!.i forgot where i read it...but it is...
then how the hell makret still rallying till now fr March!!!!... |
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one very important reason why Dow is continuing to rally is weak US dollars. because weak US dollars make foreign investors can buy American stocks at more cheaper price!
Thought at 1.30pm US time ? webcast at 2.30pm ?
SANTA CLARA, Calif., Oct. 12, 2009 ? As a supplement to its earnings report, Intel Corporation will publish a commentary about its quarterly results by Stacy J. Smith, vice president and chief financial officer.
The commentary will provide detail that has previously been disclosed during the conference call, reducing the time spent on prepared remarks and allowing for more interactive questions and answers with senior management.
The commentary will be posted at 1:30 p.m. PDT on Oct. 13, after the earnings press release, and will be available at www.intc.com. Intel抯 earnings conference call will be publicly webcast at 2:30 p.m. PDT on Oct. 13 and can be viewed at www.intc.com.
intel result only after dj mkt closes.
If the Dow is down
200 pts tonight, then it is really '
pengsan!'... hehehe...
cheongwee ( Date: 13-Oct-2009 22:18) Posted:
becos one analyst have a neutral rating on Goldman..that is why dow down...but i thk later market will be up...alot of liquidity..i hearsay some 2t..!!!.i forgot where i read it...but it is...
then how the hell makret still rallying till now fr March!!!!... |
|
First two hours correction is good... Goldman should see earning per share between $4.30 to $4.50 - to be announced on Thurs.. Google should be $4.50 to $5.00 per share. Only Citgroup will annouce drop in profits (but market will take it as good news as it is less steep).
If Intel's profit guidance later is optimistic, it will close positive.
becos one analyst have a neutral rating on Goldman..that is why dow down...but i thk later market will be up...alot of liquidity..i hearsay some 2t..!!!.i forgot where i read it...but it is...
then how the hell makret still rallying till now fr March!!!!...
New Brunswick, NJ (October 13, 2009) – Johnson & Johnson today announced sales of $15.1 billion for the third quarter of 2009, a decrease of 5.3% as compared to the third quarter of 2008. Operational results declined 2.8% and the negative impact of currency was 2.5%. Domestic sales declined 8.1%, while international sales declined 2.5%, reflecting operational growth of 2.4% and a negative currency impact of 4.9%.
Net earnings and diluted earnings per share for the third quarter of 2009 were $3.3 billion and $1.20, respectively, representing increases of 1.1% and 2.6%, as compared to the same period in 2008. The Company raised its earnings guidance for full-year 2009 to $4.54 - $4.59 per share, which excludes the impact of special items.
“We continue to successfully manage our broad base of businesses and deliver solid earnings despite the impact of patent expirations and the challenges posed by the current economic environment,” said William C. Weldon, Chairman and Chief Executive Officer. “We completed multiple acquisitions and strategic collaborations and received several new product approvals in the quarter that will benefit patients worldwide and drive future growth.”
Worldwide Consumer sales of $4.0 billion for the third quarter represented a decrease of 2.7% versus the prior year with an increase of 1.1% operationally and a negative impact from currency of 3.8%. Domestic sales decreased 4.4%; international sales decreased 1.4%, which reflected an operational increase of 5.2% and a negative currency impact of 6.6%.
Contributing to operational sales growth during the quarter were sales of Dabao skin care products; AVEENO® skin care products; SPLENDA® No Calorie Sweetener; Le Petit Marseillais® beauty care products; and LISTERINE® antiseptic mouthrinse. Other growth drivers were sales from the acquisition of Vania Expansion SNC.
Worldwide Pharmaceutical sales of $5.3 billion for the third quarter represented a decrease of 14.1% versus the prior year with an operational decline of 11.9% and a negative impact from currency of 2.2%. Domestic sales decreased 19.2%; international sales decreased 7.1%, which reflected an operational decrease of 1.9% and a negative currency impact of 5.2%.
REMICADE® (infliximab), a biologic approved for the treatment of a number of immune mediated inflammatory diseases, demonstrated solid sales performance during the quarter. Several other pharmaceutical products had strong growth including PREZISTA® (darunavir), a treatment for HIV; VELCADE® (bortezomib), a treatment for multiple myeloma; and RISPERDAL® CONSTA® (risperidone) Long-Acting Treatment, an antipsychotic medication. Sales results of TOPAMAX® (topiramate), an antiepileptic and a treatment for migraine, and RISPERDAL® (risperidone), an antipsychotic medication, were negatively impacted by generic competition.
During the quarter, the U.S. Food and Drug Administration (FDA) approved STELARA
TM (ustekinumab) for the treatment of adult patients (18 years or older) with moderate to severe plaque psoriasis who are candidates for phototherapy or systemic therapy. The FDA also approved INVEGA® SUSTENNA™ (paliperidone palmitate) extended-release injectable suspension for the acute and maintenance treatment of schizophrenia in adults; the first once-monthly, long-acting, injectable atypical antipsychotic approved in the U.S. for this use. In addition, the FDA approved the Supplemental New Drug Application for INVEGA® (paliperidone) extended-release tablets for the acute treatment of schizoaffective disorder either as monotherapy or adjunctive therapy to mood stabilizers and/or antidepressants.
On Oct. 6, the European Commission approved SIMPONI™ (golimumab) as a once-monthly, subcutaneous therapy for the treatment of moderate-to-severe, active rheumatoid arthritis, active and progressive psoriatic arthritis and severe, active ankylosing spondylitis.
During the quarter, the Company completed the acquisition of substantially all of the assets and rights of Elan related to its Alzheimer's Immunotherapy Program as well as an equity investment in Elan. Additionally, the Company announced that it had entered into a licensing and collaboration agreement with Gilead Sciences, Inc., for the development and commercialization of a new fixed dose combination of investigational compound TMC278 (rilpivirine hydrochloride 25 mg) and Gilead’s TRUVADA® (emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg) for treatment-naïve adult patients with HIV-1.
Early in the fourth quarter, the Company announced that it had entered into a strategic collaboration with Crucell, N.V., focusing on the discovery, development and commercialization of monoclonal antibodies and vaccines for the treatment and prevention of influenza and other infectious and non-infectious diseases. The agreement also included an 18% equity investment in Crucell, N.V.
Worldwide Medical Devices and Diagnostics sales of $5.8 billion for the third quarter represented an increase of 2.3% versus the prior year with an operational increase of 4.1% and a negative currency impact of 1.8%.
Domestic sales increased 4.5%; international sales increased 0.5%, which reflected an operational increase of 3.8% and a negative currency impact of 3.3%.Primary contributors to the operational growth included Ethicon’s surgical care and aesthetics products; Ethicon Endo-Surgery’s minimally invasive products; DePuy’s orthopaedic joint reconstruction, spine, and sports medicine businesses; and Ortho-Clinical Diagnostics’ professional products. This growth was partially offset by lower sales in the Cordis franchise, reflecting strong competition in the drug-eluting stent market, and the 2008 divestiture of the Professional Wound Care products in our Ethicon business.
Have you all forgotten the change to accounting rule...i thk Goldman will be profitable...
how to lose when you revalue at current low...but if you value at pre crises you lose big times..
so i thk shd be fine...pls dyodd.
smartrader ( Date: 13-Oct-2009 21:03) Posted:
if dow still cannot stay at 9900 after J&J and Intel results tonight, it shoots all the way 10000k when Goldman Saach and Google announce their results on Thurs/Fri..
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