German IFO Business Climate Index – Unexpected Improvement

December 20, 2011

  • The German IFO Business Climate Survey improved unexpectedly today
  • Germany has been able to shrug off the sovereign debt crisis better than any of the other large economies in the EU-17
  • Germany’s unemployment rate has trended lower throughout 2011 to a new low of 5.5% in October. This is clearly helping German sentiment.
  • In a world short on confidence, Germany is doing ok.
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McDonald’s Sales Continue to Exhibit Strong Momentum

December 8, 2011
  • McDonald’s reported global company SSS of +7.4% well ahead of consensus estimates.
  • US comp sales were +6.0%
  • European comp sales were +6.5%
  • Asia/African comp sales were +8.1%

McDonald’s (MCD) continues to display tremendous momentum from remodeling restaurants, improving food quality, adding new menu items, and expanding store hours. While many companies are slowing sharply in Europe, McDonald’s showed acceleration from October trends to November. The world isn’t so bad, despite Europe’s crisis, that business anywhere and everywhere is falling off a cliff. It isn’t as bad in Europe as it was in the US during Q4 2008.

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Economic Surprise Index – Has Been Improving Since June

November 30, 2011

The economic surprise index represents how macroeconomic indicators are reported relative to Wall Street economist consensus estimates. There was a big move down in April and May as estimates on the economic outlook were too high. Just the reverse has taken place since the summer. Economic forecasters have been too gloomy on the economy from August – November. Economic indicators are continuing to beat at present.

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Italian Rates Hit 7.25% – The Key For Tomorrow

November 9, 2011

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Volatility Collapse

October 27, 2011
  • The VIX peaked in early August at 47.
  • For three months the VIX has been range bound between 30-47.
  • With yesterday’s announcements in from Europe, the volatility index is down 15% to 25.5.
  • The market is back to the higher-end of what was “normal” all through September 2010 – July 2011.
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Confidence – A long-term trend lower

October 25, 2011
  • One can’t help but notice the continual disappointments in all of the consumer confidence prints
  • The disappointment du jour was from the conference board which came in at 39.8 vs. and expectation of 46.
  • Fortunately this data doesn’t correlate or generally matter with regard to actual economic activity, GDP growth, and corporate earnings.
  • Aside from the economic impact, it is interesting that consumer confidence continues to trend lower over time. An interesting philosophical question about why we are simply less confident in the future here in the US?

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Parker Hannifin (PH) – Super Solid Q3

October 18, 2011

Parker Hannifin is one of the world’s leading diversified industrial companies. Parker Hannifin (PH) has large businesses in motion control, aerospace, fluid power systems, electromechanical controls, air conditioning, industrial refrigeration and thermal products. Parker reported record third quarter earnings which grew about 20% vs. a year ago. Organic sales growth was +10% which contained 3% from FX and 1% from acquisitions. Parker Hannifin not only had strong sales but grew operating margins to new records of 16.1% with particular strength in the American industrial segment and aerospace.

Parker Hannifin raised earnings guidance from a range of $6.70-$7.50 last quarter up to a new range of $7.25-$7.85 after today’s release. This is above the Wall Street consensus which was still sub $7 going into today. Guidance was raised by 6.3% and is significantly above wall street estimates ($6.96) so this has led to a 3% rally in the shares despite some strength heading into the quarter and a tough tape.

The conference call has just started. I will listen and post some quick thoughts a little later today.

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Russell (RTY) Small Cap Index up 12% in 3 days

October 6, 2011

This is a potential sign for a change in sentiment. If investors start to react to the real economic data again, which has been much better than what has been feared, small caps stand to benefit the most from valuation re-rating as many less liquid stocks have been demolished as of three days ago. Short squeezes are more likely in this area as well – the ax swings both ways with less liquidity.

The next segment to focus on is EM which has also been crushed. Both EM and small cap rallying would be strong confirmation of the rally. Watch the H-Shares overnight.

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BUY PANIC! – The Coveted Inside Reversal Day Just Happened

October 4, 2011

DOW up 152
S&P up 25 (2.2%)
Russell up 6.5%
XRT up 5.4%
Berkshire up 4.3%

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Silver: Break in the 200-day Eliminated Support

September 26, 2011

The 200-day moving average for silver broke at $36. Since this break the metal has continued selling off sharply without support. Technical analysis is especially useful for currency and commodity markets where the idea of intrinsic value is less clear. Silver was in a long standing bull market but is now simply a market looking for support.

The 200-day in gold is: 1,528.
This level should be watched carefully.

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