GDP增势迅猛 股市倦意连连
As GDP Booms, the Market Yawns
The large numbers came in the form of the gaudy 7.2% jump in annualized gross domestic product growth reported for last quarter and Bank of America's $47 billion deal to buy FleetBoston Financial, both of which lent power to stock-market bulls' insistence that the economic expansion and animal spirits were strengthening in tandem.
The round numbers, trivial as they may appear, were 1050 for the Standard & Poor's 500 and, to a lesser degree, 9800 for the Dow Jones Industrials. These levels, particularly 1050 on the S&P, have acted as areas of friction for the market's advance in the past.
Petty stuff, it might seem. But with the overall forward thrust of the market slowing as indicated by ebbing upside volume, the numbers became a short-term fixation of traders as the indexes failed to tack on much additional upside following the blowout GDP data reported Thursday.
In the end, the S&P 500 gained 21 points, or 2.1%, for the week, but stalled precisely at the 1050 mark, which also represents the closing high for the index during this rally phase, set Oct. 16. The Dow added 218 points, or 2.3%, to nose above 9800 to 9801. The Nasdaq breezed to another leading performance, climbing 66 points, or 3.6%, to 1932.
Nearly all of those gains were in place prior to the GDP numbers, an indication that the market has priced itself for a certain measure of economic cheer, much of it reflected in the earnings season now winding down.
That feisty GDP growth rate was already manifest in the 5.6% revenue increase and 17% operating earnings advance indicated by the three quarters of S&P 500 companies that have reported results thus far. The market awaits the earnings encore, which will have to come in a world of somewhat lower GDP expansion and, most likely, lower productivity growth.
The Nasdaq persists in confounding widespread calls (some of them aired here) that it should soon cede leadership to less racy, more traditional segments of the market. But the prospects for that happening without the overall market first suffering a serious setback are pretty scant, given the forces driving both the Nasdaq and the broad market itself.
Stocks have been rising because sentiment has brightened, liquidity is overflowing, earnings have rebounded from depressed levels and momentum is again addictive. On every score, the high-test tech stocks of the Nasdaq benefit disproportionately from such conditions. So, for the entire market to stay strong without the Nasdaq leading, or at least participating fully, would be akin to laughing without smiling.
The strong GDP numbers and the flurry of merger deals that fortified the market last week aid another factor that helps the Nasdaq disproportionately: They make investors more comfortable rationalizing full-to-expensive stock valuations. As long as investors can lean on the "things are getting better" line to keep stock prices aloft, the fancy multiples they carry won't matter. Until they do.
With Halloween passed, the market has made it through its toughest seasonal period unscathed. September and October are historically the worst for stock returns, but since the end of August the Dow is up 4.1% and the Nasdaq ahead by 6.7%.
The market's impressive year-to-date run has prompted some talk about how the seasonal patterns are now shifting to act as tailwinds. For instance, in years when stocks were up through the first 10 months, there's virtually no precedent for a substantial decline through November and December. And, of course, the needle has been stuck on the part of the bulls' record that expounds on the historical market strength in an election year.
All true. But note that this year the old, dog-eared seasonal patterns haven't exactly worked too well. Not only did September and October fail to put a scare into investors, but those who heeded the famous advice to "Sell in May and go away," is now returning to find they have forgone some nice profits.
So, if the market continues to plow ahead without regard for stout valuations and decelerating growth, it'll be because of late-arriving cash comes from fresh buyers and the widespread willingness to believe -- not because of the calendar.
THE MUTUAL-FUND MARKET-TIMING scandal that's hit Marsh & McLellan's Putnam division is prompting plenty of questions. How could a fiduciary have tolerated fund managers flipping their own funds? Why weren't they dismissed when the issue surfaced three years ago? And will the expected securities fraud charges stick?
Among stock watchers, the question is appropriately a more mercenary one: At what point is Marsh Mac a buy?
It's a good question to ask when a company is being pelted daily by nasty headlines, sinking both its reputation and its share price. Think back to the summer of 2002 when Citigroup was fending off regulatory attacks on its research practices. What resonates now isn't so much the details of that scandal as what a nifty buying opportunity it created for Citi at 27, $20 below the current price. The lesson there is to be a buyer of a stock when the "headline risk" seems most severe.
It's not yet clear that point has been reached for Putnam and Marsh. The stock is down 16% since Sept. 2 to a recent 42.75, with the overall market up a bit. Putnam represents about 19% of the company's expected pretax earnings for this year and next, according to Morgan Stanley. The rest is insurance brokerage (67%) and Mercer consulting (14%).
By that extremely rough measure, the market has already severely discounted the earnings power of Putnam. Excluding Putnam's contribution entirely, Marsh is now valued around 16.5-times expected 2004 earnings from the other businesses, below the market's multiple.
Of course, all of Putnam's earnings power and all of its $270 billion in managed assets aren't going away. But billions are, as the steady beat of announcements from pension funds withdrawing money attest. Outflows were steady even before the scandal, for performance reasons.
The brand has no doubt been damaged, but it's perhaps less likely that the retail funds, sold via brokers, will experience mass flight. It's worth asking, as some investors reflexively pull assets from Putnam, where will they go? What fund companies will end up untouched by this broadening regulatory sweep?
Brian Meredith, analyst at Banc of America Securities, calculates that for every $5 billion in net outflows this quarter from Putnam, Marsh's 2004 projected earnings of $3.20 a share fall by one cent. Applying the depressed multiple of Janus Capital (another timing scandal player) to Putnam, Meredith reached a sum-of-the-parts valuation of 49 for Marsh shares -- almost 15% above the current level, but not yet compelling enough to jump at, in his view.
In a worst-case scenario, Meredith figures that if Putnam is worth zero (which it most definitely is not) then the fair value for the rest of Marsh is "at least $38 or $39 per share."
Headline risk may continue to knock the stock lower still. But if it trades with a "three handle," no doubt the smart money would be on the bid side.
ALMOST FROM THE MOMENT AOL acquired Time Warner, for the New Economy equivalent of some overpriced magic beans, the AOL name has been a reminder of all that investors had to regret about that pairing.
But, in fitting irony, now that the company has excised AOL and once again become Time Warner, an underappreciated turnaround at the AOL division could make the stock an interesting bet.
Start with the fact that AOL's $1 billion in current-year free cash flow is almost certainly the most undervalued pool of Internet earnings in the market today. Look at any other candidate -- InterActiveCorp, Yahoo!, United Online or even cable companies -- and you find that the market is willing to put a 10-20-times multiple on free cash flow, says Kaufman Brothers analyst Mark May.
With a current share price of 15.25 for Time Warner, the market is ascribing very little or no value to AOL's business.
The bearish retort, of course, is that subscribers to AOL's dial-up service are stampeding to broadband and that cash flow will only decline. Yes and no. It's true that subscriber losses probably will continue, but because of the division's variable costs, the service can remain quite profitable while they leave. And a Time Warner shareholder, who met with company executives recently, believes that within 18-to-24 months, the number of new digital subscribers will begin to outnumber the defecting dial-up customers. That's the crucial challenge.
Meanwhile, this investor notes, online advertising continues to bustle along at a nice growth clip and the core Time Warner media divisions are finally working closely with the humbled AOL folks to create more attractive online content. Also important is the change in tone from above. Under CEO Richard Parsons, Time Warner seems fixated on delivering for the Street and shedding the old image of over-promising.
May, who had a Buy on the stock while it went from 11 to 16 this year, before switching to a Hold, just recently recommended that clients buy it again. He figures that several factors could make the stock a better risk-reward bet. These include a possible advantageous cable asset swap with Comcast and a sale of the music division. It's not entirely a tidy story, given uncertain old-media advertising trends, a continuing SEC probe into old AOL accounting and attendant shareholder lawsuits. But those risks, and more, are arguably well-embedded in the stock price.
WITH SO MANY OF THE OBVIOUS PLAYS played out after the market's long-running revival, traders' attention has turned to some apparent mispricings in obscure securities. But even with little-known arbitrage situations, sometimes an anomaly can come to be the norm.
Take the Cablevision-linked securities known under the symbol XCT. These shares, which were issued by a trust in October 2001, pay $2.34 in annual dividends. And, just over a year, each share will be exchanged for a share of Cablevision class A.
On first glance and at a recent price of 21.74, the shares look like a neat Cablevision proxy with an 11% yield. For anyone interested in betting against the crowd that the controlling Dolan family might build some value with its announced spinoff of the satellite business, this might seem the shrewd way to do it.
But according to folks who study such situations, the premium of XCT to Cablevision common, now just about $2, pretty much exactly accounts for the added cash income that will be collected. Chalk another one up for the efficient-market hypothesis.
Another situation that's traveling the chatter wire involves the two share classes of homebuilder Lennar. The class B shares, with 10 votes each, trade around 86.50, $5 less than the class A, which carry just one vote each. They're otherwise identical.
Some traders have been eyeing the Lennar relationship and playing the arbitrage, owning the B and shorting the A.
But the circumstances don't seem to support an immediate closure of that gap. For one thing, the B shares were issued just six months ago as a way to allow members of Lennar's controlling family to sell shares if they wished. They're far less liquid.
Lennar is a heavily traded name, owing to the momentum-riding long traders and legions of short players focused on the controversial housing sector. Those traders need the more liquid stock. Also, the A shares are in the S&P 400 Mid Cap index, meaning that index funds and others benchmarked to it will own them.
There's no visible catalyst to eliminate the gap, meaning the spread players may not be paid soon. But for any bold investors who want to own a little bit of Lennar, already up 75% this year, the B shares are the slightly better bet.
THAT'S NOT TO SAY THAT THERE'S NO value in obvious investment vehicles. Investors have been busily grabbing the more intuitive plays on gold -- futures and mining stocks -- now that the metal has surged toward $400.
Whether this rise is attributable to the sinking dollar, a surge in nominal economic growth, percolating inflation risks or a repatriation of Middle Eastern wealth, there's a growing sense that gold is re-emerging as a crucial asset class. Newmont Mining's spurt to a 52-week high last week on fevered volume is only one recent indicator of this shift.
A forthcoming instrument from Merrill Lynch will make it substantially easier for investors to get exposure to gold, without the need for a futures account or space in a warehouse.
Called Trakrs, the product is technically a cash-settled futures contract. But the important details for investors are that it can be bought in a regular securities account and will deliver the exact economics of owning gold outright.
Due to begin trading Dec. 1 on the Chicago Mercantile Exchange, the Trakrs will follow the spot price of gold while delivering an added return to match the lease rate, collected by gold owners who "rent" out the metal. Though no physical delivery of gold will come to Trakrs holders, the underlying futures will involve the responsibility for delivery. More information is available at
www.trakrs.com.SCOTT PETTIT, WHOSE COMMENTS ON Tractor Supply were cited here last week, is an analyst for Avondale Partners in Nashville. His firm was incorrectly referred to as Avalon Partners.
GDP增势迅猛 股市倦意连连
对上周的股市来说，基本面上重大数据带来的动力显然遭遇到技术面的整数关口阻力。
上周的重大数据表现在：第三季度国内生产总值(GDP)折合年率增幅高达7.2%，美国银行(Bank of America)斥资470亿美元收购FleetBoston Financial。这两个数字为股市看涨派人士提供了理由，他们坚持认为经济的快速扩张与股市人气的高涨是一致的。
这里所指的整数似乎不太重要：标准普尔500指数的1050点及道琼斯工业股票平均价格指数的9800点关口，后者的重要性更低。特别是标准普尔500指数的1050点关口，过去一直是该指数攀升过程中的阻力区域。
尽管上述股指点位的重要性似乎有限，但上涨股成交量的减少显示股市总体涨势有所放缓，鉴于上周四公布强劲的GDP数据后，相关股指未能大幅走高，因此它们成了交易员们的短期关注目标。
标准普尔500指数上周涨21点，正好止步于1050点这一关口，涨幅2.1%，这一点位也是股市此轮上涨过程中的最高收盘点位之一，相当于10月16日收盘水平。道琼斯指数上周涨218点，突破9800点后收于9801点，涨幅2.3%。那斯达克综合指数则再次领涨，该股指攀升66点，收于1932点，涨幅达3.6%。
不过，这些涨幅在GDP数据公布前几乎已全部实现，这表明股市已在一定程度上将经济数据的好转考虑在内，经济状况的好转大多已在收益季节中得到体现。 第三季度GDP的强劲增长可从标准普尔500指数成份股公司今年头三个季度公布的业绩报告中明显看出：这些公司的收入增长了5.6%，营运利润增幅达17%。市场等待上市公司再现新一轮强劲的收益报告。在GDP增幅较低，尤其是在生产力增幅较低的情况下，强劲的公司业绩报告就愈发显得重要。
尽管有传言称，那斯达克指数引领市场走高的主导地位将很快让位于更具传统经济意义的主要指数，但那斯达克指数还是保住了上涨势头。不过，鉴于积极因素对那斯达克和整个市场均产生推动作用，因此，除非整体股市大幅下挫，否则所谓传统经济的主要指数的表现强于那斯达克的机会相当渺茫。 在人气改善、流动资金充足、公司收益反弹，以及市场上涨动力再度活跃等因素的支持下，股市近来持续走高。而那斯达克市场每一次都能从这些正面消息中获得更大的上涨动力。有鉴于此，股市总体走强，而领涨的不是那斯达克市场（或表现不充分）的情况不会出现。
强劲的GDP数据和上周的数桩并购交易使得投资者在高价位买进股票时更加心安理得，只要投资者认为情况正在好转，并继续推升股价，那么所持股票的本益比再高也不足为忧。而投资者的乐观情绪对那斯达克市场的推动作用更为显著。
随著万圣节的过去，股市也得以安然度过最为艰难的时期。9月与10月份通常是美国股市表现最差的阶段，但今年的情况发生了变化，道琼斯指数自8月底以来已上涨了4.1%，而那斯达克综合指数同期则飙升了6.7%。
股市今年迄今走势强劲，这促使部分市场人士认为，与以往周期性的走势不同，股市今年可望持续走高。例如，在以往股市于前10个月走高的年度，还没有出现过后2个月大幅下挫的情况。
上述情况均属实。但应当注意的是，往年的周期性因素并未在今年完全发挥作用。非但9月与10月份没有出现往常的下跌走势，甚至于连那些采纳"在5月份抛售股票，此后离场观望"的投资者目前也重返了股市，这些投资者发现自己已错过一些获利良机。
因此，如果股市不顾估价较高以及指数涨势放缓的事实而继续大幅上扬，那么这将表明，促使股市上涨的原因在于新买家所带来的资金以及投资者普遍看好后市的信念。
