October 2009 – Lighthouse Investment Management

Reporting season in full bloom: Oct 19-23

Alexander Gloy

Oct 18, 2009

We will have earnings reports from more than 400 US companies this week, among them 135 S&P 500 members. Some of the most prominent are: 3M (MMM), Amex (AXP), AT&T (T), Boeing (BA), Caterpillar (CAT), Coca-Cola (KO), DuPont (DD), McDonald’s (MCD), Merck & Co. (MRK), Microsoft (MSFT), Pfizer (PFE), Travelers (TRV) and United Technologies (UTX).…

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September car & parts sales almost back to lows of the year

Alexander Gloy

Oct 18, 2009

This was predictable: After the end of the “cash for clunkers” program (scrapping incentive) sales of vehicles and parts fell almost back to the lows of the year: Source: www.TheChartStore.com Short-term sales incentives bring nothing other than pulling future sales ahead – with a corresponding hole apprearing later. Large fluctuations in sales…

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Risk premium back to pre-Lehman levels

Alexander Gloy

Oct 18, 2009

Government bonds are considered risk-free (governments can always print money to pay off debt – this is particularily true for the US as it issues its debt in US Dollars. Countries mostly go bankrupt because they issued debt in foreign currency and then have a currency crisis – which makes their foreign debt increase in…

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Real Treasury yields higher than a year ago

Alexander Gloy

Oct 18, 2009

Here’s the current yield curve (blue) compared to 4 (black) and 52 weeks (orange) ago. Not much difference other than the short end (0-2 years): Source: www.TheChartStore.com Now let’s look at it in real terms (after subtracting inflation): Source: www.TheChartStore.com Real yields were negative a year ago (due to the still high…

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Are stocks cheap?

Alexander Gloy

Oct 17, 2009

How do we determine if stocks are over- or undervalued? Future earnings estimates are, as the name suggests, just estimates (and often wrong). On top of that they suffer from a positive bias by the analyst community. Past (reported) earnings are at least real, but they do not hold much information about the future. One…

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Technical Indicators: Bollinger Bands

Alexander Gloy

Oct 17, 2009

Bollinger Bands are a technical analysis tool invented by John Bollinger in the 1980s. How does it work? You basically take a moving average (eg 21 days) and lay around this trend a band by adding and subtracting sigma (volatility) times a konstant k. Now you get a channel. The observed stock (or index etc)…

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70% Capacity Utilization = no inflation

Alexander Gloy

Oct 16, 2009

Would you raise your prices if you had 30% idle capacities? No, since the producer next door would be more than happy to increase production and sell his stuff at the lower price.

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US Monetary Base

Alexander Gloy

Oct 16, 2009

Today we take a look at the growth of the US Monetary Base, and why inflation has not occurred. With M1 / M2 growth slowing down dramatically, and possibly turning negative, implications for the stock markets are negative.

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