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portefeuille (99.61)

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September 30, 2009 – Comments (30)

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The Bull Market "Gets No Respect"

By Steve Leuthold | Posted: 09-22-09 | 11:43 AM

Key Points

I am very optimistic about prospects for the U.S. stock market for the remainder of 2009 and perhaps the first half of 2010. The underlying market trend is now keyed to investor perceptions of 2010. Third quarter U.S. real GDP growth will be at least 2% and perhaps 3%, and the NBER will ultimately declare the U.S. recession ended in August 2009 (a month or two earlier than I projected at the start of the year). This bull market is getting, like Rodney Dangerfield, “no respect.” Expect the underinvested to capitulate by the end of the year. I now see a major risk of monetary debasement inflation. I don’t see this as an immediate risk, but if the government does not move decisively towards fiscal responsibility its likelihood will increase. There are reasons for optimism though, as the U.S. economic system and credit markets continue their recovery from the 2008-2009 crisis conditions.
 
After Labor Day... Now What?
Some numbers crunchers tell us September is the worst performance month of the year. The media fonts of knowledge and their bearish-leaning guests have been citing this historical “fact” as a reason for stock market caution. I just heard a CNBC commentator state “Everyone knows September is a terrible month.” Should you pay attention?
Since 1900, September market performance has averaged a mere +0.2%; the worst month is October, down 0.39% (average month +0.48%). Since 1982, the S&P 500 shows both September and October have experienced miniscule average declines, –0.18% for September and –0.61% for October. By these measures October, not September, is the worst market month.
Anyway, as far as September is concerned: Up or down, it’s a coin flip. Sure, there may be some good reasons for September market caution, but the past history of September market performance is hardly one of them. In reality, I see all of this talk of a miniscule negative September performance bias as much ado about almost nothing.

September Refocus
However, for professional investors, September is a pivotal month. It is my observation that after Labor Day fundamental investment focus strongly shifts to the next year in terms of earnings and the economic outlook. With 2009 now mostly baked in the cake, the fundamental outlook for 2010 becomes the critical investment factor, except among short term traders and some technicians.
Sure, shorter term market moves during the final four months of 2009 will still react to news events, political, economic and company surprises. But the underlying market trend is now keyed to investor perceptions of economic conditions in 2010. The market looks ahead and in this respect the new year starts after Labor Day when the big investors here and abroad return from holiday.

The Tide Be With You
It is obvious the global economy is rebounding. Globally, in alphabet terms, it’s a strong “V” bottom, except for the U.S. economy where the rebound is less dynamic. At last count, ten countries show positive real GDP growth for the second quarter of 2009. And it is not just the emerging countries - Germany reported GDP growth of 0.8% in Q2. However, here in the U.S. Q2 GDP was still lagging, down 1% (revised upward from –1.5%) for the second quarter.
In the current quarter (Q3) I think it is close to a certainty that the U.S. will be participating in the global expansion thanks to the stimulus of “Cash for Clunkers,” rising home sales (new and existing), improving retail numbers, less negative employment trends, and rock bottom interest rates.
How long will today’s still cautious and bearish investors be able to stand against the increasingly obvious rising global economic tide? Some now claim the improving economic news is already discounted in the current rising U.S. stock market. I don’t think so. There is lots more good news ahead. Reported earnings in the U.S. beat expectations in Q2, perhaps the result of cost cutting, but now earnings estimates for Q3 are significantly being revised upward. Cost cutting is still a factor, but now so is revenue growth. In addition, an estimated 40% or more of the earnings for S&P 500 companies are derived from foreign operations and obviously reflecting the stronger global economic rebound.

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The U.S. market has performed surprisingly well in August. The global economy is strong and the U.S. economy now clearly improving, trends that are likely to continue well into 2010. Cash returns remain almost nil and longer bonds will probably be losers as rates edge up. Equity valuation benchmarks in the U.S., while no longer in undervalued territory, are well below overvalued territory. By the end of the third quarter 2009, being underinvested will become a business risk with some clients. Technical and momentum market measures remain strong and the Leuthold Major Trend Index continues to be very bullish.
The "Lehman Collapse Vacuum" 
In 2008, after the Lehman collapse, the S&P 500 fell from 1250 to 900 in a mere four weeks. The S&P 500 has now moved into what Ian McAvity refers to as “The Lehman Collapse Vacuum.”
Thus today Leuthold, The Bullish Technician, sees no overhead resistance of significance before S&P 1200-1250….. My initial upside target zone over the next six months (possibly even by year end 2009). This assumes the still cautious do capitulate and the dollar is not decimated prior to Q2 2010.

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30 Comments – Post Your Own

#1) On September 30, 2009 at 12:34 AM, portefeuille (99.61) wrote:

also have a look at this post by camistocks.

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Steve Leuthold says "short term correction, 1100 for the S&P 500 before year end."

June 24, 2009 

Steve Leuthold, who has his own version of the Coppock curve, is bullish. And as mentioned in a previous blog he is not a permabull or permabear. In fact his bearish Grizzly short fund returned more than 70% last year...!

...

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#2) On September 30, 2009 at 12:40 AM, portefeuille (99.61) wrote:

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#3) On September 30, 2009 at 12:41 AM, portefeuille (99.61) wrote:

Grizzly Short Fund

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#4) On September 30, 2009 at 1:06 AM, awallejr (79.65) wrote:

I do agree the market is looking at 2010 now.  Daily swings of course can react to immediate news, but overall it isn't.  It is looking to the future.  And revenue growth will be the kicker.  Right now companies pushed their profits through cost cutting (which is normally done during recessions).  But if revenues actually start to tick up especially by the 4th Quarter then you are looking at a much higher DOW/S&P etc. down the road.

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#5) On September 30, 2009 at 1:19 AM, checklist34 (99.71) wrote:

i like that leuthold guy, i loved it when on like march 4th he said in a televised interview that "well, i don't konw, i think the Grizzly fund is about done here, except maybe as a hedge", lol

classic.  is that in one of those?

1200 in 2010, 1100 in 2009, i'm sticking with my basic long standing targets here.

and no straight shot there, though, I think we are due for a dip... but i clearly suck at market timing and predicting.  Except maybe that 1100 and 1200 thing, which aren't looking so bad.  

In 2010 we face "lets pay the taxes now before it goes up" selling, maybe.  I will be a "lets pay the taxes now before it goes up" seller of many things...

i like that leuthold guy, he's cool. 

no tax loss selling this year...  maybe tax loss covering, lol.  like me covering my hedges at a loss if we go to 1200 this year.  yikes.

 

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#6) On September 30, 2009 at 1:26 AM, portefeuille (99.61) wrote:

is that in one of those?

It is the one I posted in comment #2 above.

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#8) On June 25, 2009 at 2:30 AM, portefeuille (99.99) wrote:

fertig!

Great video. At the end of it you could click another one. In yours he said that he had advised people not to invest in his grizzly short fund. That second video is from March 4 and what does he say there? Exactly that. Don't invest in my grizzly fund. Buy stocks. He is a good man.

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#7) On September 30, 2009 at 1:46 AM, Tastylunch (29.36) wrote:

Leuthold has been right on target so far. The guyhas a very clear mind.

pretty bold call. Aftre all the rally noone believs in measn thera er still too mnay bears (me included)

wonder what sectors he thinks will continue the meltup?

he doesn't sound terribly bullish after 1200 though.

Hey where is Camistocks anyway? I miss him and figure he would be enjoying this rally.

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#8) On September 30, 2009 at 1:51 AM, portefeuille (99.61) wrote:

Hey where is Camistocks anyway? I miss him and figure he would be enjoying this rally.

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#52) On September 08, 2009 at 4:43 AM, portefeuille (99.99) wrote:

Spot gold is at over $1000/oz today.

#53) On September 08, 2009 at 8:39 PM, camistocks (86.50) wrote:

Yes, I was even shouting out loud my joy! But aah, they managed to knock it below $1000 again. But it was a great feeling... maybe we break through at the next attempt or so?

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(from here)

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#9) On September 30, 2009 at 1:56 AM, checklist34 (99.71) wrote:

it remains true that a great many of the cheapest stocks on the market today are financials, tasty. 

oh, oh, oh, but the bears would hate it if they had another significant leg up...

 

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#10) On September 30, 2009 at 2:06 AM, portefeuille (99.61) wrote:

(something obvious: read the entire article, it is great!)

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#11) On September 30, 2009 at 2:15 AM, portefeuille (99.61) wrote:

a much nicer version of the article (pdf).



enlarge

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#12) On September 30, 2009 at 2:19 AM, portefeuille (99.61) wrote:

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#13) On September 30, 2009 at 2:41 AM, portefeuille (99.61) wrote:

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...

Admittedly this is a wish list, but assuming it becomes a reality a run on the dollar may not be in prospect as foreign confidence in the dollar will gradually be reconstructed. While this may be a slow U.S. growth recovery from 2008 crisis conditions, it would nevertheless be a recovery… And my 18 month target for the S&P 500 would be the 1500 level (challenging the old highs), if global confidence in the dollar returned.

...

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#14) On September 30, 2009 at 2:53 AM, awallejr (79.65) wrote:

"While this may be a slow U.S. growth recovery from 2008 crisis conditions, it would nevertheless be a recovery."

This point simply can't be stated enough times.  A recovery is still a recovery.  While a V shaped recovery would be great, personally I don't see it happening, but nevertheless even a slow recovery (which I think more likely) is still a good thing.

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#15) On September 30, 2009 at 9:39 AM, checklist34 (99.71) wrote:

that is an excellent charicature

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#16) On September 30, 2009 at 9:41 AM, checklist34 (99.71) wrote:

that S&P 1500 statement is pretty bold.  that would move us well above historical average multiples on the S&P...

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#17) On September 30, 2009 at 2:46 PM, portefeuille (99.61) wrote:

my list of calls

my "less research" or "more risk" list of calls

recommendations are welcome!

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#18) On September 30, 2009 at 2:48 PM, portefeuille (99.61) wrote:

that second list is doing alright lately ...

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#19) On September 30, 2009 at 3:16 PM, Tastylunch (29.36) wrote:

1500?!!!

holy potatoes.

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#20) On September 30, 2009 at 3:38 PM, portefeuille (99.61) wrote:

 

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Commtouch Software (CTCH)

By Ken Nagy
On Tuesday September 29, 2009, 1:00 am EDT

Commtouch Software (NasdaqCM: CTCH) a provider of email defense and URL filtering solutions to enterprise customers and OEM distribution partners. The firm is in the cloud technology and has the ability to analyzes 2.5 billion messages a day, which is far superior to the competition's static solutions which have little chance of catching new outbreaks.

During late 2008, the company released its URL filtering services. The web has more than double the revenue potential of the messaging market. The firm's OEM business model gives Commtouch the advantage of recurring revenue, higher margins and less exposure to the end markets.

We see value in the shares of Commtouch and rate it an Outperform. Our six-month target price is $4.00 per share.

...

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(from here)

 

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#250) On March 17, 2009 at 8:47 PM, portefeuille (99.99) wrote: CTCH - 1.85 - outperform

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(from here)

CTCH is currently at ca. $3.22.

 



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#21) On September 30, 2009 at 5:10 PM, MattH42004 (29.91) wrote:

Here's some more Leuthold for you, from earlier today...

 

 

 

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#22) On September 30, 2009 at 5:21 PM, MattH42004 (29.91) wrote:

Dammit, just go HERE 

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#23) On October 01, 2009 at 12:51 PM, portefeuille (99.61) wrote:



enlarge

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#24) On October 01, 2009 at 4:07 PM, portefeuille (99.61) wrote:



enlarge

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#25) On October 01, 2009 at 5:50 PM, rexlove (99.55) wrote:

S&P 1500? - I never knew you were so bullish port. And here I was thinking you had no opinion on the direction of the market.

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#26) On October 01, 2009 at 5:57 PM, portefeuille (99.61) wrote:

And here I was thinking you had no opinion on the direction of the market.

I don't. That is from page 6 of the article by Leuthold (pdf).

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#27) On October 02, 2009 at 4:08 PM, portefeuille (99.61) wrote:

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Broadpoint.Amtech Reiterates a 'Buy' on EMC Corporation (EMC); Raises Estimates & PT

October 2, 2009 11:41 AM EDT
Broadpoint.Amtech reiterates a 'Buy' rating on EMC Corporation (NYSE: EMC), raises price target from $19 to $21. 

Broadpoint analyst says, "Due to increased order visibility, we are raising our December '09 estimates to the following: $4,032mil in revenue (up 16% Q/Q), a 57.4% gross margin and pro forma EPS of $0.32 (vs. our old estimates of $3,919mil, 57.5% gross margin and EPS of $0.30). Raising CY10 EPS by 5%: Our CY10 EPS is increasing by ~5% to $1.15 (vs. $1.10) on our new revenue estimate of $15,512mil (up roughly $300mil from our old estimate of $15,194mil). Our current EPS assumption is 10%+ above the Street's estimate of $1.04...We continue to believe material upside exists in shares of EMC from current levels (~25%+). In our view, the company has definitely turned the corner and has the opportunity to start posting Y/Y revenue growth once again in the December '09 quarter. We believe the strategic nature of the VMW asset cannot be overstated as it represents the single most compelling story in the context of our "three-legged stool" analogy of enterprise infrastructure."

...

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#7) On February 24, 2009 at 1:51 PM, portefeuille (99.99) wrote: EMC - 10.78 - outperform

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EMC is currently at ca. $16.77.

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#28) On October 02, 2009 at 6:14 PM, portefeuille (99.61) wrote:



enlarge

(from here (pdf))

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#29) On October 03, 2009 at 12:10 PM, portefeuille (99.61) wrote:

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FRIDAY, OCTOBER 2, 2009
HOT RESEARCH AM  

Biogen Should Bid Near $25 Per Facet Share

Facet Biotech (FACT: Nasdaq) By Merriman Curhan Ford ($17.38, Oct. 1, 2009)
WE WHOLEHEARTEDLY agree with Facet Biotech (ticker: FACT) management that the offer from Biogen Idec (BIIB) is inadequate and not in the best interest of shareholders.
Thursday morning, Facet Biotech issued a Schedule 14D-9 in which it put forth its recommendation to shareholders not to tender their shares to Biogen, referring to the offer by Biogen as "opportunistic."
While the decision is a relatively easy one (given the fact that the offer was barely above the cash Facet holds on its balance sheet), and therefore not surprising, there

...

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#30) On October 03, 2009 at 12:21 PM, portefeuille (99.61) wrote:

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Merriman Curhan Pounds The Table On Facet Biotechnology (FACT) After Board Formally Rejects Biogen Offer

October 1, 2009 1:34 PM EDT
Analysts at Merriman Curhan Ford are making positive comments on Facet Biotechnology (Nasdaq: FACT) after the company filed its Schedule 14D-9, in which it put forth its recommendation to shareholders not to tender their shares to Biogen Idec (Nasdaq: BIIB). The firm said this is the right move and are sticking with their $25 sum-of-parts valuation on FACT, saying Biogen will have to pay an amount close to this value if it truly desires to win over FACT shareholders.

Analyst Michael G. King, Jr. said, "No matter how one slices it, FACT shares remain significantly undervalued despite their recent run-up, in our view."

The firm notes the company is in discussions with multiple parties for the licensing of its drug discovery platform. Other highlights the firm cited include:

Facet is in discussion with parties that may have an interest in subleasing some of the company’s excess real estate.

Biogen’s offer for Facet suggests there is a high likelihood of success for the use of daclizumab in the treatment of multiple sclerosis.

Pipeline has substantial value.

More convinced than ever that the shares of Facet Biotech are fundamentally undervalued, and would continue to be buyers of the stock.

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