Tower Private Advisors
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Capital Markets Recap
Social Media, if you’ve been hiding under a rock or are over 50 and need some help, is the…uh…er…phenomenon/passing fancy whereby one thinks so highly of one’s self or accomplishments that he or she feels compelled to share them with the world (“like, last night, I, like, made these adorable Smurf cupcakes…they were to DIE for…you’ll ♥ them.”) And such selfcenteredness is made possible through social media like Facebook and LinkedIn. Speaking of Facebook, it must be the most anticipated initial public offering of all time. Well, if the actions of another social media mogul–who ought to have a pretty good view of the landscape–are any indication, then maybe FB will do a face plant. This week, according to Bloomberg, LinkedIn’s chairman sold his Facebook shares before the IPO.
The new iPad is hot–no, not that kind of hot: it’s hot. Apparently, the sucker runs at about 116 degrees hot. Speaking of Apple in a roundabout way, the company finally announced that it would pay a dividend. At $2.65/share/quarter, it’ll drain $10 billion from the company’s nearly $100 billion coffers; that’s the largest dividend initiation price tag ever. It’ll also return cash to shareholders through share buybacks. They say that Tim Cook’s a different sort of CEO than Steve Jobs, and speaking as someone who’s mid-way through the Steve Jobs biography, I say that’s a good thing. May his soul rest in peace in spite of me saying this, but he was a strange fellow. He was arrogant enough to say, in response to a question about surveying customers to see what they waynt, “they don’t know what they want until we tell them what they want.” He couldn’t have been more right. As you probably know, Apple is the largest member of the S&P 500 index, at 4.42%. It makes up 18.75% of the S&P 500 technology sector. As such, it has had a distorting effect on all things tech. With the dividend, Apple’s dividend will comprise 25% of all dividends paid by the sector, and of the 19.6% year-over-year growth in technology sector earnings, the company contributed 16.3% to it!
For some reason, Bloomberg saw fit to announce New Zealand’s Q4 GDP on its Top Stories this week. If you care, it grew by 0.3% versus an estimated 0.6%. I don’t mean to be insensitive to the Kiwis, but so what?
Here’s a little stock that got a boost this week. Since 2009 it’s traded betwen $2.50 and $4.00, then candidate Romney mentions Etch-a-Sketch, and the Ohio Art stock goes through the roof, jumping to $9.60. Undoubtedly, Mr. 1% tipped off his hedge fund cronies that he would do some name dropping so they could reap handsome profits. Saturday Night Live ought to have fun with that one.
Housing market data this week was one directional this week…down. With the exception of building permits, every single housing data point worsened versus the prior release and versus economists’ expectations. The monthly survey of homebuilder sentiment, the NAHB Housing Market Index, fell from 29 to 28, below the 30 that economists had expected. Next the paired release of Housing Starts and Building Permits was a mixed bag. Housing starts were worse than expected and worse than the prior release; building permits were just the opposite, better on both fronts. Existing Home Sales fell from February levels and were below economists’ expectations. Mortgage Applications fell by (-)7.4%, a faster pace than last week’s (-)2.4% drop. The broadest measure of home prices, the House Price Index, was flat in January, in contrast to 0.7% growth in December and an expected 0.3% increase. Finally, New Home Sales slowed from February (-1.6% v. -0.9%) and below expectations for 1.3% expected. ‘Prolly not what Barron’s had in mind when it printed its latest cover (Home Prices; Ready to Rebound.)
Initial Jobless Claims, however, continued to improve, although at a stubbornly slow pace. The indicator appears to be showing a classic case of encountering support and trying hard to go lower. I know, I know, it’s a bit whacky: it’s people lining up to file claims for unemployment insurance, but you just wait. Next target: 300,000 claims. Finally, Leading Economic Indicators were stronger than expected, coming in at 0.7% versus January’s 0.4% and the expectation of 0.6%.
Nutty week, next. A whole host of indicators is released.
Key indicators to watch
- Chicago Fed National Activity Index
- Durable Goods Orders
- 4th Quarter GDP – third iteration
- Initial Jobless Claims
- Personal Income, Spending, and Saving
- University of Michigan Consumer Confidence
- Dallas Fed Manufacturing Survey
- Richmond Fed Manufacturing Index
- Kansas City Fed Manufacturing Activity
- Chicago Purchasing Managers Index
- NAPM – Milwaukee
- Pending Home Sales
- Case Shiller Home Price Index
Graig Stettner, CFA, CMT
Chief Investment Officer
Tower Private Advisors