There is a lot to blog about today. I won’t cover everything, but will highlight a few things.
Insider Buys: In the past few days, I have noticed a lot of insider buying in companies where the stock prices have plummeted. In the past, this has tended to be a positive signal. It is interesting that, as negative as the masses are right now, insiders, who presumably know the most about the fundamentals of their companies, are stepping in to buy stock. Some of these insiders rarely buy stock and have not done so since the debacle of 2008-09
REITs: I have noticed that REITS have been hit very hard in the past couple of weeks. This happened in 2008, during the debt crisis. In fact, a lot of the things that were hit the hardest then have been hit this time. I have noticed that the weakest stocks tend to be those with debt. It would be interesting to create stock indices based on debt ratios; I would bet some interesting correlations would surface. Also, trust preferreds that are normally very stable, have taken a big hit this week.
Dow Jones REIT Index (One Year)
Here is an example of the movement of a trust preferred issue:
BAC 6% (One Year)
Largest company in the world:
Apple is now the largest company by market capitalization, surpassing Exxon Mobil. Interestingly, Apple has enough cash on its balance sheet to buy Bank of America, and still have $7 billion left over.
Recession?: Warren Buffett said yesterday that people should “bet heavily” against a double dip recession. He mentioned there is “growth around the world, but its not mushrooming”. He also believes that unemployment will improve significantly when residential construction resumes.
S&P downgrade, and yields went down? By now, everyone knows that, in an unprecedented move, the S&P downgraded U.S. sovereign debt. This rattled markets worldwide. Interestingly, yields actually went down measurably in US treasuries. I wonder how many people bet the S&P would do that, and then yields would drop? Not many.
VIX: The VIX (Volatility Index) has continued to spike higher. It is now at the highest level since the crisis of 2008-2009. I don’t have to tell anyone this, but fear has jumped very quickly. Everyone seems to be talking about their fears of the market right now. I have been hearing from people I rarely hear from.
Yesterday: As I just typed the word “Yesterday”, I thought of the Beatles song. I have a feeling some market participants might be able to apply the lyrics of that song to their feelings about the market lately. Anyhow, yesterday was quite a day. Here are a few lowlights:
- S&P down 6.66% on the day and down 17% over eleven trading days.
- Russell 2000 down 8.88%. I believe this was the biggest point loss ever for this index, but I don’t have time to go through the data.
- The first six days of August make up the worst August start ever.
Gold: Gold experienced its biggest dollar move ever yesterday. Today, it is moving almost as much. Currently, it sits at $1,765 an ounce. Gold has now surpassed the price of Platinum. Today, Gold was up and the market was up. Those looking for a higher market might take this as a signal to be cautious.
Gold (5 years)
Dividend Yields: The dividend yield on the S&P 500 is higher than the yield on the ten-year treasury. Also, as of yesterday (its probably more now), 75% of the dow had a higher dividend yield than the ten-year.
Treasury Yields: The ten-year treasury yield hit a new all-time low today, hitting 2.03%.
FED: The media will fully cover this topic, so I can’t add much. The most interesting thing seems to be that they said rates will remain low “until at least mid-2013”. This marks the first time they have placed an actual timeframe on this. Previously, they said “extended period”. Their release caused rates to drop, particularly at the short end of the curve, caused a major “heartbeat” in stocks, and it appears there was a huge move in the US Dollar versus the Swiss Franc.
Today: It was just another normal day today. I think the following description will suffice: Up 3% followed by a drop of 4.4% followed by a rally of 6.5%. Today was characterized by huge volatility, except today, for the first time in over two weeks, stocks ended higher. In the end, the indices closed significantly higher, with the S&P 500 closing up 4.7%. The last time the S&P had a day this strong was 3/23/2009. The last two weeks have been incredibly interesting and weak. What’s next?
S&P 500 (intraday)
Have a good day! Brent
