Posts by Michael Santoli
- Michael Santoli at Yahoo Finance1 day ago
In the past two days, three companies comprising one-tenth of the Dow Jones Industrial Average have been run through a cycle of disappointment, blame-casting and pining for a tough-love savior.
This is the market we inhabit now:
-A corporate titan with a venerated old American brand reports lousy results first thing in the morning.
-Wall Street awakens to the fact the businesses have been stagnant for years, the stocks kept afloat by financial maneuvers and halfhearted cost-cutting programs. The share price is hammered before the opening bell.
-Commentators tut-tut about the decline of stalwart brands in a fast-changing culture, or the squandering by poor CEOs of so much accumulated customer loyalty.
-Before noon, investors start asking whether an activist investor is marshaling his resources and a sense of righteous capitalist outrage to make a run at shaking up these cozy blue-chip companies.
Yesterday it was International Business Machines Corp. (IBM), falling far short on revenue and profit forecasts while paying another company $1.5 billion to take its chip-manufacturing business off its hands.
- Michael Santoli at Yahoo Finance2 days ago
You can’t sit in the ER and wager on cardiac patients’ chances, hang around the airport laying odds on emergency landings or stand on the beach and bet on a hurricane's windspeed.
But on Wall Street, buying or selling the probability of market morbidity and mayhem in real time is fair game – and this month’s mini-panic in stocks propelled this so-called volatility trading to new heights of popularity.
This isn’t about the trading in volatile stocks or commodities, but in funds, futures and options whose value is linked solely to a statistical measure of expected market jumpiness, known as the VIX.
From Oct. 10 through the 16 th, the Standard & Poor’s 500 index went from 1928 down to 1820 and back up to 1868, while the VIX popped from 15 to 31 back to 25, in the most severe market storm to hit in around three years.
During those five trading days, more than $100 billion changed hands in instruments based solely on the VIX -- a statistical measure at least three steps removed from any corporate security or economic entity.
- Michael Santoli at Yahoo Finance8 days ago
Janet Yellen was a stellar student, named valedictorian and “class scholar" at her Brooklyn high school before studying under Nobel laureates for her economics doctorate.
Today, the Federal Reserve chair is facing her first daunting test on a world scale, as financial markets grow alarmed over slowing economic growth and an approaching shift in the Fed policy that she largely controls.
The Dow Jones Industrial Average shed nearly 1,000 points in less than three weeks while sustaining its worst three-day loss since the European debt crisis and U.S. debt-ceiling showdown of 2011. The Dow fell 5.5% from its Sept. 19 peak to 16,321 Monday, leaving it down for the year, before bouncing modestly on Tuesday.
- Michael Santoli at Yahoo Finance9 days ago
The next-generation of name-brand investors wants what Warren Buffett has, but they’re unlikely to get it.
Buffett, of course, has plenty for an ambitious investing titan to envy. There’s the $63 billion net worth, a first look at most every attractive acquisition opportunity, and the ability to generate awe and adulation with even mundane utterances about the economy and business. He’s a ruthless financial assassin and corny, unthreatening business Grandpa at once.
Today we’re hearing about how Buffett is deploying all the goodwill and high regard he has accumulated by rebranding more of his ventures with the Berkshire Hathaway Inc. (BRK-A, BRK-B) name. Expect to see it on foreign real estate agencies, domestic utilities and car dealerships.
But the particular thing that Buffett enjoys that hedge fund managers like Bill Ackman seem to covet is not Buffett’s brand. It’s a trove of “permanent capital” that can be wielded any which way without concern that fickle investing clients will yank it away.
- Michael Santoli at Yahoo Finance9 days ago
We’re going to bounce.
Whether Monday or later in the week, stocks should gather themselves for a powerful spurt. This likelihood is mostly a function of how stretched to the downside they’ve gotten under the heavy, erratic selling of recent weeks.
More than 60% of big stocks are way below their 50-day average, the S&P 500 itself is at a widely watched crux siting on its 200-day average and we’ve just seen a clustering of extreme selling days in which 90% of all trading volume was in falling stocks - something that, historically, raises the odds of decent gains in the days and months ahead.
This chart shows the Daily Sentiment Index of pro traders (blue line) looking washed out, even as the S&P 500 is only around 5% below an all-time high.
If we don’t get bounce quite soon, or at least some days of stability, it will represent a failure of the market’s homeostasis - the offsetting processes that restore some sort of internal equilibrium when it’s gone to extremes. If we fail to bounce, we’ll be hearing about waterfalls and cascades and whirlpools and all manner of imagery meant to evoke liquidity in the irresistible grip of gravity.
- Michael Santoli at Yahoo Finance13 days ago
Stock buybacks and bumptious activist investors have been a potent cocktail for the market in the past few years - generating particularly euphoric reactions when blended for use on the same stock.
Yet Wall Street’s unenthusiastic response to activist Carl Icahn’s latest loud request for Apple Inc. (AAPL) CEO Tim Cook to repurchase shares even more voraciously suggests investors’ tolerance has risen and such tactics no longer prompt the same reliable high.
With Apple shares about flat on Thursday after Icahn's 4,600-word message of buyback-supportive bullishness. That was a relative victory in a very weak tape – but hardly the kind of reflex celebration typically triggered by Icahn’s bullish words and buyback demands on one of his big stock holdings.
More broadly, stocks of companies that are executing heavy buybacks have been trailing headline market indexes in 2014, in a sharp reversal from their status as a leading group of the past four years.
- Michael Santoli at Yahoo Finance13 days ago
Carl Icahn thinks Apple Inc. (AAPL) is worth twice its current market value, and is pressing his good pal Tim Cook to buy back shares even more aggressively to seize on this “undervaluation” and help the stock reach his lofty target.
In a long letter to the Apple CEO published on Icahn’s Yahoo Finance Contributors Network Tumblr page, the often coarse but sometimes cuddly activist investor lays out an audaciously optimistic outlook for Apple’s new-product sales and profit growth far brighter than Wall Street’s current expectations. And he’s urging Cook to accelerate the already-rapid buyback pace to use excess cash for the benefit of long-term shareholders. Some choice excerpts:
Icahn writes: “Given the persistently excessive liquidity of $133 billion net cash on Apple’s balance sheet, we ask you to present to the rest of the Board our request for the company to make a tender offer, which would meaningfully accelerate and increase the magnitude of share repurchases.
- Michael Santoli at Yahoo Finance15 days ago
Run a finger down the list of Dow Jones Industrial Average members and you’ll hit several corporate empires that appear ripe for a breakup in the vein of Hewlett-Packard Co.’s (HPQ) recent split.
Yet there isn’t much talk of breaking apart perhaps the quintessential multi-industry blue chip, 3M Co. (MMM), even though at first look the company famous for Post It notes and Scotch tape would appear to be ripe for such treatment.
- Michael Santoli at Yahoo Finance16 days ago
As the stock market was skidding to the end of September, one of the blows to investor confidence came from challenges to some aggressive financial-engineering efforts.
The Obama administration set new rules intended to thwart some “tax inversion” cross-border mergers. And a federal court ruled against a hunting party of hedge funds who were seeking to force bigger payouts from Fannie Mae (FNMA) and Freddie Mac.
Yet while these particular regulation-hopping maneuvers have met some resistance, Corporate America remains firmly in financial engineering mode – and will probably stay in it until this bull market ends.
With Hewlett-Packard Co. (HPQ) moving to cleave itself in two less than a week after eBay Inc. (EBAY) announced it would spin off PayPal to shareholders, it’s clear that CEOs and their investment bankers are hot for reorganizing themselves in a way that pleases a hard-to-impress market five-plus years into a steep ascent.
- Michael Santoli at Yahoo Finance20 days ago
Almost as soon as “bond king” Bill Gross fled the $2 trillion Pimco empire and sought exile at a firm one-tenth the size, the commentariat converged on the same theme: This signals the welcome demise of the star fund manager phenomenon.
Hours after Gross shocked the Street with the news he was heading to run an infant bond fund at Janus Capital Group (JNS), Bloomberg held forth on “Bill Gross and the Dying Breed of Mutual Fund Superstars.” The New York Times’ Upshot blog sought to punctuate an era by connecting “Bill Gross, Calpers and the End of the Investment Guru.” Reuters followed by suggesting, “As PIMCO bleeds assets, Gross shows risk of star culture.”