• "Bull markets don't go wrinkle free," says Hugh Johnson, chairman & CIO of Hugh Johnson Advisors. "They get a bit overvalued and a little undervalued. Right now, if anything, we're a little overvalued."

    Not wanting his observation to be construed as a trading call, Johnson says no one has a timing edge, even if they claim otherwise. The prudent thing to do as he sees it isn't to jump in or out of stocks entirely, but simply to "drag your feet when it comes to making new commitments to the equity markets."

    While not a trader per se Johnson does have his timing "tells," one of which is to take money off the table when a stock or sector's price starts to lag that of the market as a whole. Trim a little to stay ahead of a real pull back that tends to shake investors out at the lows.

    On a 5 to 8% pullback, Johnson is a huge buyer. He sees no evidence whatsoever that the bull cycle is coming to an end (fits and starts on the economy aside).

    Johnson's biggest contrarian play is a whopper.

    Read More »

  • One of the big problems in the U.S. economy right now is that big corporations are generating record profits not by growing revenues but by cutting costs.

    "Costs," as everyone who works for a big corporation knows, are a synonym for employees, employee wages, employee perks, capital investment, and research and development.

    As a result, we have reached a point where corporate profit margins are at all-time highs and corporate wages are at all-time lows as a percent of the economy. (See charts here.)

    That's not sustainable, says economist Gary Shilling of A. Gary Shilling & Co.

    The employees whose collective wages are stagnant or dropping account for most of the spending that drives the economy. So if employees aren't getting paid well, and corporations aren't spending, the economy can't grow quickly.

    Shilling observes that, from a philosophical perspective, what is happening is that "capital" (the owners of corporations) are dominating "labor" (the rank and file employees who make and

    Read More »

  • The NY Post is reporting that "at least two major hedge funds" have amassed significant stakes in troubled, near dead, strategically challenged retailer JC Penney. The news comes on the heels of last week's SEC filing from George Soros revealing a 7.9% stake in JC Penney (JCP) stock.

    Adding to the JC Penney positive news from earlier this morning, the company confirms it secured a $1.75 billion financing package from Goldman Sachs (GS). The terms have been rumored to be a remarkably generous 7%.  [JC Penney has now confirmed the financing from Goldman; demand is rumored to be strong suggesting a yield between 5 and 6%]

    A whopping 36.8% of JC Penney's float was short as of April 15th. A big part of the short thesis had been the very real possibility that the company wouldn't have the liquidity to make it to the Christmas buying season.

    Between the Post's unnamed funds and Soros, the timing of the stock purchases are curious if not flat out suspicious. JC Penney had been known to be looking for loans for months, and Goldman no doubt shopped the deal around the Street to find indications of interest.

    JC Penney stock has been locked in the mid-teens for almost two months. So much smart money jumping in all at once is curious if not a smoking gun. Knowing the deal was likely to get done would have made the $15 area a low-risk entry point.

    The company still has a laundry list of problems, but at least for the moment liquidity isn't one of them. "This company obviously has a lifeline now," says Yahoo Senior Columnist Michael Santoli in the attached clip. "You can kind of make the case that if JCPenney can at all stop the bleeding, maybe there's value there." Nothing beats a couple billion dollars at favorable rates when it comes to stanching a cash bleed.

    Read More »

  • Stocks are starting the week near all-time highs despite an earnings season that has been filled with revenue misses.

    “The reality is that investors are only enamored with what the Fed and other central banks are doing. They’re shoveling money out the door,” says Gary Shilling, president of A. Shilling & Co., an economic consulting firm. Investors, in turn, have adopted a “don’t fight the Fed," attitude Shilling tells The Daily Ticker.

    What that approach is missing, says Shilling, is an understanding of what the economies in the U.S. and overseas are doing, which isn’t much.

    The U.S economy grew at a 2.5% in the first quarter-- well below expectations of 3.2% growth though much better than the 0.4% reported for the fourth quarter. “Europe is in recession, Japan is barely growing and China is slowing,” says Shilling.

    Related: Long-Term Bear Sees One Economic Bright Spot: Jobs

    This gap—what Shilling calls the “great disconnect”--between a strong stock market and a weak global economy

    Read More »

Pagination

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