Morning Coffee with TradingMarkets

  • January 2, 2008
  • David Penn

Good Morning!

Stocks Cheapest in Decades…Citi May Write Off $12 Billion…GM, Ford Sales Slow…Crude Oil Rises Above $97…Amazon.com, Citigroup, Barrick Up in European Trading…Retail Sales Slip…Ratings on Tech Stocks Lowered…Japan Lower, Europe Mixed…Slowdown in Manufacturing, Construction Spending Expected…The dollar is lower against the Euro, yen. Futures are trending higher in the hour before the bell.

There are a number of ways for a market to end the year up between 4-7% and, for many investors, the market in 2007 took the road least comfortably traveled. At least that is the impression left on many investors from the rollercoaster ride that was 2007. In spite of all the drama of the fall correction season, the S&P 500 finished the year up 3.5%, the Dow Jones Industrials up 6.4% and the Nasdaq Composite ended the year up 9.8%. Clearly, this year, the financials weighed heavily on the S&P 500, just as much as technology buoyed the Nasdaq. Minutes of the December FOMC meeting will be among the chief economic attractions today, as investors and traders look to see just how worried the Fed was about the so-called credit crunch. Data from the manufacturing sector should also get some attention early.

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TradingMarkets 5 Business Stories You Need to Know

Five Reasons for Higher Prices in Stocks – Wall Street Journal

From the possibility of accelerating corporate profits to a stablizing housing market, here are five reasons to be bullish in 2008.

An Upside Surprise in Earnings for 08? – BusinessWeek

In a relative world, will earnings in 2008 benefit from comparisons to earnings in 2007? And if so, is that a a reason to buy now, or later?

Stocks Cheaper Than Ever – Bloomberg

Stock valuations are at their lowest levels in 30 years due to global market weakness in the second half of 2007. Telephone and telecom companies such as AT&T are among the most undervalued based on earnings. So-called “Fed Model” shows equity yield more than 400 basis points above yield on ten-year Treasury note–widest gap since 1974.

International Funds Predicted to Outperform U.S. Again in 08 – Marketwatch

As they did in 2007, international equity funds are among the sectors that money managers anticipate will continue to do well in 2008.
Gains for foreign stock markets outpaced gains in U.S. stocks by significant margins in many instances.

Bernstein: Citigroup to Write Off $12 Billion – Bloomberg

Note to investors suggests that Citigroup may need to write down as much as $3.3 billion in collateralized debt obligations alone for fourth quarter. Nevertheless Sanford C. Bernstein & Company maintain an “outperform” rating on the company.

» For more stories as they happen, go to our Breaking News section.

TradingMarkets 7 Stocks You Need to Know for Today

Here are 7 stocks for traders for today from TradingMarkets.com:

» For a list of today’s highest PowerRating stocks, click here.

TradingMarkets 5 Top PowerRatings Stocks for Today

Company
 Symbol PowerRatings
Quanex NX 9
TakeTwo Interactive TTWO 9
Temple Inland TIN 8
Deckers Outdoor DECK 8
Global Crossing GLBC 8

» View More Stocks

TradingMarkets Tracking the Wizards

Pzena’s Not So Easy Pieces – Barron’s

Richard Pzena of Pzena Investment Management talks about value investing and the sad state of affairs that was the financial stock sector in the second half of 2007.

New China Fund of Funds Offered – HedgeFunds Review

Magnum China Fund will invest in many of the top-performing funds with interests in China region.

Drake Suspends Redemptions – New York Times

After losing more than 23% through November, managers of Drake Management blocked most withdrawals from its largest hedge fund. The $3 billion Global Opportunities Fund looked to exploit macroeconomic trends through a combination of trading in stocks, currencies, bonds and commodities. The suspension came after voluntary withdrawal restrictions were deemed ineffective.

» View Portfolios of Prominent Investors

TradingMarkets Playbook

Investment manager Ken Fisher talks about the years in which the markets are up-a-lot, up-a-little, down-a-little, and down-a-lot. 2007 ended as a year that was a little better than up-a-little, though in the year’s final months you would have been forgiven for thinking that “down-a-lot” was 2007’s destiny. Let this be a lesson for us all in psychology. While the market is not out of the woods, we should keep in mind that selling that finished off last year come on consistently subpar volume. And while we are paid on price, the absence of strong sellers is worth noting as the first trading day of 2008 begins.

Bloomberg News reported this morning that the gap between the equity yield and the yield on the ten-year Treasury note was at its widest point since 1974. This metric, also known as the “Fed Model” suggests quite plainly that stocks are cheaper than they have been in decades. While this does not mean investors and traders should rush out and start buying stocks “hand over fist” as soon as the bell rings on the first trading day of 2008, this fact should be kept in mind as we begin thinking about what might happen in 2008 that few investors or traders dare think possible.

David Penn is Senior Editor at TradingMarkets.com.

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