Editor's Picks: Tycoon's Best of '07
Monday, December 31, 2007 | Ben SchottRating:
The last day of the year is upon us, and it's time to reflect.At least that's what I'm told.
So here is a lightning round re-cap of what's been quite a year ...
Personally
Equal parts horrible (having watched my mom bravely battle and then lose to cancer), and special (watching my daughter turn two and blossom into a little person. In her words, "I not baby, I a little gurrr!").
At Tycoon
This has been an important year in the evolution of our company as an advocate for the individual investor, as we've released two of the best investing education courses on the market: ETF Master Trader, and Chris Rowe's Internal Strength System.
The Markets
Right now it's hard to keep a level head, with talk of a recession, the housing mess, the sub-prime disaster, oil flirting with $100 per barrel, and an extremely weak U.S. dollar (that was a mouthful).
But pulling back the camera for a wider view, there are a few things to be happy about (or at least less depressed) ...
* The S&P 500 gained about 4%, the Nasdaq about 10%.
* China was the place to be, with the Shanghai Composite index gaining nearly 97%.
* Interestingly, the total volume of options contracts traded, according to the Options Clearing Corporation, rose by nearly one third to around 3 billion.
The Tycoon Report
We made quite a few changes this year to The Tycoon Report, which we feel -- despite the fact that it doesn't make us any money -- is the most important thing we produce here at Tycoon.
We reinvented the Tycoon Report website, redesigned the daily email, made it easier for you to share your comments and rate our articles, and opened up the stage to allow Tycoon Report READERS to write your own articles for publication on our website and in the email newsletter.
In looking back through the stats and perusing the archives for 2007, I'm thrilled to announce a few unofficial awards:
The Stick-In-The-Hornet-Nest Award, which is given to the writer whose articles generated the highest volume of reader comments over the course of the year, goes to Dylan Jovine. This one comes as no surprise: with titles like "Mortgage Idiocracy", "Why Moody's and S & P Should Be Taken Out and Shot", and "Would You Let a PEZ Dispenser Manage Your Money", people usually have something to say.
The Highest Rated Article Award is a tough one, and a little less precise than I would have liked. Having switched our back-end technology mid-year, and since I don't think it's fair to give the award to an article that rated extremely high on a very low number of votes, this one is admittedly subjective ... so I'm going to choose three. (Articles rated by fewer than 100 readers aren't eligible.)
In no particular order, they are:
"WAMU WA-BUSTED" by Teeka Tiwari - 202 Votes, 4.302 average rating (out of 5 possible stars).
"How to Rob an Individual Investor" by Dylan Jovine - 100 Votes, 4.62 average rating.
"3 Winning Stocks... To Avoid!" by Chris Rowe - 192 Votes, 4.3021 average rating.
Finally, the Rodney Dangerfield Back To School Award for Exemplary Schooling Week In And Week Out goes to Chris Rowe. Anybody who's read even one of his articles knows that Chris is deeply and personally committed to helping people improve their trading.
A few of his most helpful articles -- that you might want to resolve this evening to re-reading again and again next year -- are ...
"These Simple Market Indicators Clarify this Market"
"Why This Market Isn't Rocket Science"
"Profit from Options"
"Finding Entry Points in an Uptrend. Buying on a Pullback..."
A Happy and Healthy New Year to You
As interesting and productive as this year has been, we're committed to helping you make 2008 even better. Enjoy the parties tonight, drive safely, and we'll be back with you on Wednesday morning to kick off another profitable investing year!
(Please let us know what you think about Ben Schott's article.)
Rate his article here »
Rate his article here »
Ben Schott
Editor in Chief
The Tycoon Report
Mark Your Economic Calendar: What's ahead for the week of December 31, 2007
Monday, December 31
10:00 - Existing Home Sales (for November): Consensus 5.00M
Big Picture: Pending sales argue for a small rise after eight consecutive declines summing to -26% since February, while pending resales rose in both September and October, suggesting a break in the sales plunge. Inventories have shot to a multi-decade high of 10.8 months, but despite the massive bleeding, prices have been slow to respond. Prices may have to fall 10% - 15% from their peak to clear the huge supply of inventories.
Implications: The name speaks for itself -- this report provides a measure of the level of sales of existing homes. The report is considered a decent indicator of activity in the housing sector. Housing starts precede this report each month, but starts are a supply rather than demand-side indicator. Existing home sales precede the other key demand-side indicator of housing -- new home sales -- thus boosting the visibility of this report. Sales are highly dependent on mortgage rates, and will tend to react with a few month's lag to changes in rates. Sales are also determined by the level of pent-up demand for housing -- immediately after a recession, sales are typically quite strong due to the demand which accumulated through the recession.
Wednesday, January 2
10:00 - Construction Spending (for November): Consensus 0.4%
Big Picture: Vastly different factors drive the 3 components of construction spending: residential, business and public spending. Business structural investment has surged over the last year and a half. The plunge in residential spending continues. Public spending is motoring along at 15% yoy. Residential provides about half the weight in the index and leaves the overall measure in decline at -0.6% yoy.
Implications: The construction spending report is broken down between residential, non-residential, and public expenditures on new construction. The monthly changes are both volatile and subject to huge revisions, so this report rarely has any market impact. Only trends extending over three months or more can be viewed as significant.
10:00 - ISM Index (for December): Consensus 50.5
Big Picture: The index has fallen from the 14-month high of June to just 50.8 in November -- back near the contractionary levels seen at the beginning of 2007. Inventory draw down left weak early year levels, as order demand returned in the Spring/Summer. Since then production has slowed given the fall off in orders as the forward view depends on business investment given the weaker growth outlook. Despite the supportive fundamentals -- large profits, cash loaded balance sheets and a high capacity utilization rate urging continued labor saving investment -- business could delay new investment and help stall manufacturing output and possibly the economy.
Implications: The ISM report is a national survey of purchasing managers which covers such indicators as new orders, production, employment, inventories, delivery times, prices, export orders, and import orders. Diffusion indexes are produced for each of these categories, with a reading over 50% indicating expansion relative to the prior month, and a sub-50% reading indicating contraction. The total index is calculated based on a weighted average of the following five sub-indexes, with weights in parentheses: new orders (30%), production (25%), employment (20%), deliveries (15%), and inventories (10%).
Thursday, January 3
8:30 - Auto Sales (for December): Consensus 5.5M, Truck Sales (for December): Consensus 6.8M
Big Picture: Buying incentives have provided a bouncy path for vehicle sales over the last few years and drive the monthly pace of domestic sales. High gasoline prices provide the advantage to fuel efficient imports and domestic autos, but SUV sales have not shown a strong decline given the larger discounts awarded and domestic preferences. Foreign market share is growing at the expense of U.S. manufacturers. Reduced discounting softened the pace of 2006 sales to a 12.8 mln average pace from 13.4 mln in 2005. With a 20% weight in retail sales, autos provide the monthly swing to consumer spending.
Implications: Auto and Truck Sales measure the monthly sales of all domestically produced vehicles. They are considered an important indicator of consumer demand, accounting for roughly 25% of total retail sales. Demand for big ticket items such as autos and trucks tends to be interest rate sensitive, making the motor vehicle sector a leading indicator of business cycles.
8:30 - Initial Claims (for 12/29): Consensus NA
Big Picture: Weekly initial claims can be volatile, as recent movement reflects increased loosening in the labor market. Layoffs (seen in initial claims) have been rising, and reached above 350K in late November and returned near that level over the last two weeks. Hiring (seen in continued claims) showed a sharp rise to leave the largest level in over two years. Claims provide a nearly real time read on layoffs and the labor market, as the unemployment rate reflects the broader combined read of layoffs and hiring. The 350K for claims is worrisome as a 360 K level for the 4 week average has been consistent with recession -- 362K in 1990 and 373K in 2001.
Implications: Initial jobless claims measure the number of filings for state jobless benefits. This report provides a timely, but often misleading, indicator of the direction of the economy, with increases (decreases) in claims potential signaling slowing (accelerating) job growth. On a week-to-week basis, claims are quite volatile, and many analysts therefore track a four week moving average to get a better sense of the underlying trend. It typically takes a sustained move of at least 30K in claims to signal a meaningful change in job growth.
10:00 - Factory Orders (for November): Consensus 1.0%
Big Picture: Volatile factory orders finally topped the September 2006 record level in July, but then fell off. The late 2006 stall was followed by stronger Spring/Summer gains as recent gains have been disappointing. Factory orders are stronger than a year ago but tied to the weak levels in late 2006. Core capital goods (the proxy for business investment) are lower over the last 6 months and a year ago. The bottom line is the risk ahead if business investment shows another stall, given the expected slowing in economic growth. Core capital goods orders -- the proxy for business capital investment -- have been largely running flat over the last half year.
Implications: Factory orders consist of the earlier announced durable goods report plus non-durable goods orders. The report is very predictable with nondurables the only new component. Nondurables consist of such items as food and tobacco products, which grow at a fairly consistent monthly rate, so that market forecasts for this report are far more accurate than for the durable orders report. In addition to seeing nondurables for the first time, the market also watches for revisions to the durable orders data, which can be significant. At present, durable goods orders sum to about 54% of total orders.
Friday, January 4
(For December) Nonfarm Payrolls: Consensus 70K, Unemployment Rate: Consensus 4.8%, Hourly Earnings: Consensus 0.3%, Average Workweek: Consensus 33.8
Big Picture: The year-to-date payroll growth average of 118K compares to a 189K average in 2006. The average has slowed to 103K over the last 3 months. Unemployment is slowly rising from the March low of 4.4% and stands at 4.7% in November. The relatively low labor participation rate continues to leave lean worker availability. Employment trends lag the economy as final demand -- in excess of labor productivity -- feeds in to labor demand. Earnings growth is holding steady just below a 4% yoy rate -- off the 4.3% yoy high of December. The slowly loosening labor market hasn't shown signs of unraveling.
Implications: The employment report is actually two separate reports which are the results of two separate surveys. The household survey is a survey of roughly 60,000 households. This survey produces the unemployment rate. The establishment survey is a survey of 375,000 businesses. This survey produces the nonfarm payrolls, average workweek, and average hourly earnings figures, to name a few. Both surveys cover the payroll period which includes the 12th of each month. The reports both measure employment levels, just from different angles.
10:00 - ISM Services (for December): Consensus 53.5
Big Picture: The services sector is expected to soften up a bit in December, as the 3-month trailing average suggests the index is trending lower in line with weaker home prices and consumer confidence. New orders have taken a turn for the worse, and inventories continue to bubble around the contractionary 50 level. Prices paid can be summed in one word: Ouch, and can be expected to remain lofty. Employment (seasonally adjusted) is also flirting with below 50 territory. Exports have perked up, as the cheaper buck helps out, while imports sub-50 is another reminder of the slowing growth in the US.
Implications: The non-manufacturing ISM report is a national survey of purchasing managers which covers new orders, employment, inventories, supplier delivery times, prices, backlog orders, export orders, and import orders. Diffusion indexes are produced for each of these categories, with a reading over 50% indicating expansion relative to the prior month, and a sub-50% reading indicating contraction. The index should be far more indicative of the broader economy given its inclusion of service-producing as well as good-producing sectors outside of manufacturing. However, the short history of the index dates to only July 1997 and doesn't provide the insight of a longer period inclusive of varied economic climates.
Source: www.Briefing.com
