Stocks and Sectors

Tom Lydon (ETF Trends) submits:

The financial sector is on many investors’ radar, as the lows seen last year have to get better. What does the recent performance of the biggest financial exchange traded fund indicate about the health of the sector?

The ETF Financial Select Sector SPDR (XLF) indicates a financial rally of some sort, as the ETF set a new 52-week high of $15.97 a share on Wednesday. One year ago, on March 17, 2009, the fund touched a session low of $7.87, reports Market Pulse for MarketWatch. [Financial ETFs Struggling, but Improving.]

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Wendy Fried submits:

In the final season of Lost, the main characters live in two universes and, for some reason, frequently gaze in mirrors. One guy saw his reflection in a glass microwave door, which made me wonder what Lewis Carroll might have dreamed up if he’d had a microwave.

At least we know that Lost will soon be over so we can resume our normal lives. Not so for financial reform, although we now have both an actual House bill (passed back in December) and Chris Dodd’s newly proposed Senate bill. And according to Barney Frank, the two bills are “more alike than they are different,” something we can’t yet say about the parallel lives of Sawyer, Jack and the other Losties. So who knows, maybe the big regulatory do-over will come to pass this year. (If you’re one of the three people who still has patience for the political stuff, a great source is Politico’s Morning Money.)

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Zacks.com submits:

In an attempt to strengthen its power and carbon derivatives offering, on Wednesday, Nasdaq OMX Inc. (NDAQ) announced the acquisition of Nordic power bourse, Nord Pool ASA. Although the terms and value of the deal remains undisclosed, the transaction awaits regulatory approvals.

In all, Nasdaq OMX Commodities and Nord Pool ASA will have more than 390 members from 22 countries across a wide range of energy producers, consumers as well as financial institutions.

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Michael Shedlock submits:

Is money supply soaring or not? If it is, to what extent? Once again this is the question many grapple with. The answer depends on the definition of money supply.

How Does One Measure Money?

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Zacks.com submits:

In an effort to shed its non-core operations, Citigroup Inc.’s (C) wholly-owned subsidiary and life-insurance unit, Primerica Inc., has filed for an initial public offering (IPO) of 18 million shares.

The offering, which is expected to be priced in the range of $12 to $14 per share, would raise up to $252 million. Additionally, the underwriters have also been granted an option to purchase up to 2.7 million shares. This would result in total proceeds of $290 million, considering the higher price. The shares sold in the offering will be offered by Citi, who will receive all its proceeds.

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Zacks.com submits:

Auto insurer Progressive Corporation’s (PGR) earnings for February fell to 15 cents per share from 19 cents in the year-ago period. The decline reflects a decrease in realized gains on securities in the reported month compared with the prior-year period.

The company, which reports earnings on a monthly basis, disclosed an income of $98.1 million, down 22% from $125.7 million in the prior-year period. However, net premiums written were up 11% to $1.2 billion while net premiums earned increased 3% year-over-year to $1.1 billion. Realized gains on securities were $11.9 million, down from $43.2 million in the prior-year period.

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Nathan Kawaguchi submits:

Value investors typically look for bargains in either cheap assets or cheap cash flows. Stocks are rarely bargains when a company is prosperous and everyone loves it. Bargains are most often found under a cloud. And there are certainly clouds hanging over H&R Block (HRB) these days. Because investment returns are simply a function of what you pay versus what you receive, the drop in price at the end of February prompted another look.

Like many investors, I followed H&R Block for years as their network of company-owned and franchised locations grew across the U.S. Block’s leading market position, strong brand name and low capital requirements made it an attractive free cash flow generator with high returns on capital. Unfortunately, Block became heavily involved in subprime mortgage lending through its Option One subsidiary at exactly the wrong time. The mortgage losses began eating up all of the free cash flow from the core tax preparation business. Within the past couple years, Block has discontinued the mortgage origination business and sold its financial advisory business in order to return focus to its core tax prep business.

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A few weeks ago we wrote about the true cause of hyperinflation, which is a major break or failure in the bond market. It has nothing to do with demand, bank lending or the velocity of money as many have suggested. It is a confidence issue. It is not a rise in inflationary expectations but a loss of confidence in a country being able to repay its debts. As confidence is lost, interest rates rise. Monetization occurs when the cost of servicing the debt consumes too much of the overall budget, so that the government can’t provide basic services or loses its ability to function on a day-to-day basis.

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James Picerno submits:

"All bubbles burst when risk aversion reaches its irreducible minimum," former Fed chairman Alan Greenspan writes in a new paper—"The Crisis"—for the Brookings Institution. That minimum, he advises, arrives with "credit spreads approaching zero, though analysts’ ability to time the onset of deflation has proved illusive."

Is the maestro rethinking his long-held stance that central banks shouldn’t try to address bubbles? Not necessarily, although he leaves room for debate. "Some bubbles burst without severe economic consequences, the dotcom boom and the rapid run-up of stock prices in the spring of 1987, for example," he advises, adding:

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Trader Mark submits:

This is not so much "funny" as it is sad and probably "educational" to the masses who don’t keep up with Wall Street’s doings on a regular basis. Luckily, Jon Stewart’s research staff seems to have a pretty good handle on the wonderful state of affairs. Judging from the quiet laughter in the crowd, it’s either still above their heads or all new information to them.

I have not even bothered to detail the Lehman Brother findings, but basically it exposes the Sarbanes-Oxley legislation – especially the part where C-level executives must sign off on financial documents and hence be RESPONSIBLE for them – as a complete joke. It also speaks to our complaints about the pathetic oversight of corporate boards in America. If you have not looked up who was on Lehman’s board, it’s worth the Google search. Thankfully, NO ONE appears to be in trouble… even though corporations now have the same rights as humans in Cramerica.

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