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Sunday links: flipping a switch
?Tis the season. In a world full of noise, a great gift is noise-cancelling headphones. The Wirecutter recommends the Bose QC20 Acoustic Noise Cancelling Headphones for the in-ear crowd.
Quote of the day
Monish Pabrai, ?When we look to make an investment, the greed part of the brain is turned on?A checklist is like a circuit breaker that helps prevent the brain from being able to flip that switch.? (WSJ)
Chart of the day
Top clicks this week on Abnormal Returns
Thanks for checking in with us this weekend. Here are the items our readers clicked most frequently on Abnormal Returns for the week ended Saturday, December 14th, 2013. The description reads as it does in the relevant linkfest:
A good list of 15 financial sites and apps. (CNNMoney)
Three bearish charts. (Pragmatic Capitalism)
The Value Line Median Appreciation Potential is at historic lows. (Mark Hulbert)
Why Warren Buffett?s bet against hedge funds is working out. (Rekenthaler Report)
Jeff Gundlach is in no hurry to buy mortgage REITs. (Income Investing)
How much in assets does a typical hedge fund need to break even? (WSJ)
Nuts are a super food. (Well)
Why do professor pitch buy-and-hold even though valuation measures work? (Morningstar)
On the downfall of John Taylor?s FX Concepts hedge fund. (aiCIO)
A dozen things learned from Jason Zweig on investing. (25iq)
What other stuff you may have missed on the site this week:
Beware backtests built to anchor expectations. (Abnormal Returns)
Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.
Q4 Earnings Guidance Deteriorates by One Third
At the end of Q3 on September 30th, consensus estimates for S&P 500 earnings growth in Q4 stood at 9.5%. It is down by 1/3rd since then to just 6.5% ? and falling.
The bears will point to this latest data point from FactSet Research and say ?Told ya so!?
The bulls will say ?Big deal, this trend has been happening all year ? Beat-and-Lower is the best strategy for corporate management, why would they stop? David Einhorn flagged the beat-and-lower game over the summer, it?s pretty well-understood at this point (see David Einhorn: The New Game is ?Beat and Lower?)
Anyway, here?s FactSet (emphasis daddy?s):
The estimated earnings growth rate for the S&P 500 for Q4 2013 is 6.5% this week, unchanged from last week?s growth rate of 6.5%. On September 30, the Q4 earnings growth rate for the index was 9.5%. All ten sectors have witnessed a decline in earnings growth rates since that date, led by the Energy sector.
Part of the reason for the drop in expected earnings growth is the high percentage of negative guidance issued by S&P 500 companies for Q4. Overall, 94 companies have issued negative EPS guidance for Q4 2013, while 12 companies have issued positive EPS guidance. Thus, 89% of the companies in the index that have issued EPS guidance have issued negative guidance. This percentage is well above the 5-year average of 63%.
At the sector level, eight of the ten sectors are projected to report a year-over-year increase in earnings for the quarter, led by the Financials (24.9%), Industrials (14.2%), and Telecom Services (14.0%) sectors. The Energy sector is expected to see the lowest earnings growth rate (-7.2%).
How much longer can beat-and-lower continue? How much lower can Q4′s estimates sink before reporting time circa late January before it erodes confidence in the stock market?
This Week on TRB
Here were the most read posts on TRB this week, in case you missed them:
?Why Bother?? Will investors take the wrong lessons from 2013?
US Stocks Cheap on 12 of 15 Historical Valuation Measures
Bullish Sentiment is Now Officially Embarrassing
Twitter?s New Coke Moment
Investment Fads and Themes, 1996-2013
Saturday links: selling out economics
In a time of plenty it is worth considering the downside of scarcity. Farnam Street looks at Mullainathan and Shafir?s Scarcity: Why Having Too Little Means So Much.
Investing
A dozen things learned from Jason Zweig on investing. (25iq)
Some notes from a Warren Buffett talk with Univ. of Maryland MBA students. (David Kass)
A history of John Burbank?s Passport Capital. (Institutional Investor)
How online investment managers add value. (smithy Salmon)
Dividends as a value-centric approach. (Morningstar)
Personal finance
Five years in for Madoff victims. (WSJ)
Are we overestimating spending in retirement? (Morningstar via Total Return)
Economics
On the economics of selling out. (Priceonomics Blog)
Some favorite charts from 2013. (Quartz)
The best economic stories of 2013, told in graphic form. (The Atlantic)
Startups
The case for Uber to become even bigger than Facebook ($FB). (Kevin Roose)
Fred Wilson talks about the future on LeWeb. (A VC)
Why maps are so important for mobile. (NYTimes)
MOOCs are in need of a pivot. (NYTimes)
Health
Tropical diseases have come to America. (New Scientist)
Do not hit that snooze button! (New Yorker)
Sponges have an image problem. (WSJ)
Society
The value in music education for children. (Harvard Gazette)
Why cul-de-sacs are bad for your health. (Slate)
Food
Diet soda consumption is in decline. (WSJ)
Eat more fat. (The Daily Beast)
The UK is following in the footsteps of the US when it comes to craft brewing. (Telegraph)
Sriracha is not all that. (Pando Daily)
In food cravings sugar trumps fat. (Well)
Sports
Why are ACL tears on the rise? (Grantland)
D-I men?s track and cross country teams are getting whacked: the counterreaction. (Runner?s World)
Books
On the economics of publishing a book from an author?s perspective. (Priceonomics Blog)
Adults are increasingly reading kid?s books. (WSJ)
How to make better decisions. A talk with Noreena Hertz author of Eyes Wide Open: How to Make Smart Decisions in a Confusing World. (Daily Ticker)
Earlier on Abnormal Returns
What you may have missed in our Friday linkfest. (Abnormal Returns)
Productivity
How technology can make business meetings (slightly) more productive. (Farhad Manjoo)
Busy colleagues spread their anxiety to others. (WSJ)
How to stay awake at work without caffeine. (Quartz)
An introvert?s guide to giving better presentations. (Medium)
Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.
Dave Landry's Market in a Minute - Friday, 12/13/13
Random Thoughts
The Ps continued their slide but with less vigor. They lost just over 1/3 %. The good news is that they stopped promptly at support, circa 1775.
The Quack also ended lower but not by much. Markets sometimes implode on one day like the sky is falling and then the next day have a shoulder shrug. So, is the slide one and done? I dunno. As usual, take things one day at a time. It too also stopped at support, in this case, circa 4,000.
The Rusty actually ended a tad higher.
One thing that does concern me is that in spite of the market being generally soft, Bonds, Silver, and Gold all ended lower. This suggests that there is some liquidation taking place and no flight to safety. See Thursday's baby with the bathwater comments.
The market feels a little sold out in here.
So what do we do? Again and as usual, take things one day at a time. The market had a really ugly day on Wednesday and then was generally soft but did stabilize on Thursday. Continue to be very selective on new trades. I just fielded an email from a client who told me that they liked a certain stock but went on to say that it does have some issues. You should have no "buts" based on current conditions. You need to be in the best of the best setups. As yourself, is the setup really that great? Yes? Then take it. Otherwise, pass and let things shake out. Jeez Dave, where can we learn about how to pick the best setups? Regardless of what you do-warning, sermon ahead-make sure you want for entries and honor your stops once triggered.
Futures are flat to firm pre-market.
Click here to watch today's Market in a Minute.
Best of luck with your trading today!
Dave
P.S. Only a few slots left for Saturday's webinar. I can't wait!
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Expert swing trader Dave Landry comments on the charts for the major markets, indexes and sectors for the upcoming trading day in his daily one-minute video.
Make sure your sound is turned up. A new browser window will open and the video will begin playing within a few seconds.
Barchart.com's Chart of the Day - Arabian American Development (ARSD) for Dec 13, 20
The Chart of the Day is Arabian American Development (ARSD). I found the stock by sorting the New High List for frequency then used the Flipchart feature to review the charts. Since the Trend Spotter signaled a buy on 11/22 the stock is up 15.92%
Its principal business activities include refining petrochemical products and developing mineral properties in Saudi Arabia and the United States. All of its mineral properties are presently undeveloped and require capital expenditures before beginning any commercial operations. Their undeveloped mineral interests are primarily located in Saudi Arabia.
