Paul McClain's Blog

2nd quarter earnings!

apnik1 — Fri, 16 Jul 2010 08:07:52 +0000

Here we are at the cusp of another earnings season. The market has apparantly found a bottom in anticipation of the soon to be announced earnings. The anticipation is not necessarily for last quarters earnings turned out, but more of what CEOs expectations are for the upcoming quarter.

If we see a lot of positive comments early, this near term bottom will hold and we will see the one old rally pick up some steam.

One area of concern is the consumer is becoming increasingly weak. Not surprising as many people fear that they could lose their job. I think there will be some bright spots this summer, but I would error to the cautious side as we continue a moderate recovery.

Mid year report card. What to expect next!

apnik1 — Wed, 07 Jul 2010 23:26:51 +0000

We are half way through the year and it has been difficult at best. After starting the year off negatively, we had a nice run for several months, only to find another sell off.
As we stand through the first 6 months of the year the S & P 500 is down 6.65%. So what has happened to create this down turn in the market. Well as I have mentioned many times stock prices are determined by earnings and interest rates. While the markets have rallied around strong recovery in earnings it is forward looking and the expectations of future earnings are cloudy as the economy has hit a few road blocks. Some ofroad blocks include uncertainty with what is happening in Europe (we are a global economy), China is slowing (although still growing at a tremendous rate), and domestically businesses are afraid to expand due to the uncertainty with new regulations such as healthcare and Finreg. The market has repriced to reflect the uncertainties.
Going forward, we are approaching a new earnings season. I would expect that the direction of the market will not just be concerned with the latest earnings number but more importantly listening to what the companies say about expectations going forward.
I still believe we will have positive returns this year, but it will be dependant on how negative was the impact from Europe and how quickly the domestic uncertainty can be cleared up.

The fight against wealth!

apnik1 — Mon, 17 May 2010 04:24:05 +0000

It has become more appearant that we have an executive and legislative government that is going to penalize anyone that is generating too much wealth.
Last week the Senate passed a bill stating that credit card companies will be limited in what they can charge mecrchants for use of credit or debit cards. Whatever happened to a free market that determined prices.
If the merchants thought the fees were too high then they don’t have to use that card or they can go out and start a new credit company.
Goldman Sachs is another example, they made too much money now the government wants to take them down. In stead of being focused on punishing successful companies because of actions that can largely be blamed on our elected offcials, we need to find ways that can help business generate even more revenue for greater profits and then we can see themstart to hire back workers.

Time to revisit Theme investing!

apnik1 — Fri, 14 May 2010 15:07:47 +0000

Last year investing was simple, find some good names with momentum behind them and let them ride. This type of thinking led us to outperforming the S & P 500 by 13 percentage points.

This year is a different story. After months of low volatility, it has come back with a vengance, highlighted by the flash crash of last week.

So what do we do? We either need to trade more actively and be ready to take profits or make certain that the names we own are good quality names that fit into a long term investment theme.

In reality you probably will have some of each in your portfolio. The key is you need to understand which stocks are core holdings that you ride the ups and downs of the market and which stocks are short term plays that you need to respond quickly to.

The aftermath of a washout!

apnik1 — Wed, 12 May 2010 06:29:28 +0000

Last week there was definately a washout in the stock market. In a matter of minutes the Dow Jones Industrial dropped from being down 400 points to being down 1,000 and then back to down 300. Shortly after, the finger pointing began as to what caused the rapid decline. The blame for the decline will be debated for the next several weeks as to the reason.

What we do know is that there is an extreme anount of volatility and an individual that is not a seasoned investor should not be trying to attempt to trade a rapidly moving market. Instead they should focus on what their long term plan is and make sure their portfolio is meeting their needs.
An individual that is not a seasoned investor will let their emotions take over and make the trades at exactly the wrong time. I have witnessed a great deal of wealth destruction by not remaining disciplined.

Investing Internationally!

apnik1 — Fri, 15 Jan 2010 14:56:55 +0000

In todays global economy it makes even more sense to be invested in other markets. I ran across some interest points that high light that.
In 2004 advanced economies represented 78.6% of the world economic activity with the US coming in at 28.3% while emerging markets came in at 21.4%. In 2009 advanced economies came in at 69.3% the US at 24.9% and they are projected for 2014 to be 63.7% for the advanced economies with US at 23.3%.
It is clear the increasing importance of emerging markets and emerging frontier markets.
Also, just an FYI – the emerging frontier markets acronym for countries representing it is MAVINS – Mexico, Austrailia, Venezuela, Indonesia, Nigeria and South Africa. There is lots of potential but with it comes a great deal of risk.

Calm before the earnings storm!

apnik1 — Thu, 14 Jan 2010 21:31:07 +0000

Just as was the case at the end of last year the volume and volatility of stocks has been extremely low. Last year many traders were off for the holiday and I think that this year we are waiting for the highly anticipated earnings season.

It was kicked off with a disappointment with Alcoa earlier in the week, but I am not too concerned about that particular company as there problems appear to be company specific.
Today Intel reported earnings and they were nothing short of spectacular. They beat on the top line, bottom line and had far better margins than expected.
Of course this is just one of manmy companies to report, but I believe good earnings along with good revenue growth are needed for the market to take the next leg up!

Stay tuned….

Whats in store for Equities in 2010!

apnik1 — Tue, 12 Jan 2010 19:40:11 +0000

I remember last year at this time it was an anxious time for most. Nothing was working, wealth was being destroyed rapidly as equities were rapidly selling off, real estate was plummeting and interest rates were next to nothing.
As usual when times are scary and no one wanted anything to do with stocks, it was one of the great buying opportunities we will see in our lifetime. Now that stocks have rebounded some 50% – 60% off the bottom we need to ask ourselves where do we go from here?

I heard an interesting comment from Legendary Investor Bill Miller,this morning on the radio, “I do not know which direction the next 1,000 points will go, but I do believe the next 10,000 point move will be to the upside”.

There is a lot to be said about this. In the short run we could see a minor correction in the stock market indices. However, if we sit around on the sidelines waiting for a correction we can miss a significant amount of opportunity on the upside. This doesn’t mean that we wildly throw money into the market, but if we wisely invest in areas that fit into a positive long term theme we will be handsomely rewarded for having discipline and patience to ride out the volatile markets.

I do not expect this year to repeat the amazing returns that last year brought, but I do believe that the disciplined investor that is willing to do their homework on finding quality stocks to invest in, will do well this year. Areas that look promising to me are Technology and Healthcare.

Santa Claus Rally!

apnik1 — Tue, 22 Dec 2009 13:38:40 +0000

The anticipated Santa Claus Rally kicked in full gear yesterday! This is something that happens around Christmas time, where the market rallies but not necessarily on fundamentals. As we know short term buying of stocks can be done on emotions, as we get close to Christmas peoples emotions are generally positive. Add the positive attitude to light volume due to everyone taking off for the holidays and moves can be exaggerated.

Regardless, it has been a great year and in a little over a week, we start all over again.

Have a Merry Christmas everyone!

The Vote for Ben as Chairman of the FED!

apnik1 — Thu, 17 Dec 2009 16:36:53 +0000

Today the Senate Banking Committee voted to approve Ben Bernanke for a second term as chairman of the Federal Reserve. The vote was 16 – 7 so it wasn’t a clean sweep. I think the bigger story is the fact that several Congressman would like to reduce the power of the Fed and basically give themselves more power. They basically blame the fed for the weakness in the value of the dollar along with a host of other problems. For starters congress is the core reason for the weak dollar. Because of fiscal irresponsibility and massive borrowing we have a problem with the dollar. As we all should know, Congress approves the budget. Most people or businesses would be forced to declare bankruptcy if their books looked like the governments. Why would we give even more control??
My thoughts are that I never complain when power is reduced for a government beaurocrat, however, to give more control to Congress would be a huge mistake.