A countdown to the opening bell, with Arthur Cashin, UBS Financial Services director, floor operations.

Airtime: Wed. Mar. 10 2010 | 8:50 AM ET

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By guruek. (GuruFocus, March 9, 2010) This much we have a consensus: The current bull market was officially born on March 9, 2009 and market has rallied about 70% since then. What we do not know and we cannot agree on whether we are in a secular bull market or a bear market rally. Read more » »
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By insider. Chairman of the Board of Tyler Technologies Inc. (TYL) John M Yeaman sells 7,000 shares of TYL on 03/09/2010 at an average price of $19.15 a share. Read more » »
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From Weather Sealed, we get this terrific map of the 8 largest American burger chains:

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click for ginormous map

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Hat tip Flowing Data

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This doesn’t sound good for those bank shareholders hoping against hope that dividend raises are just around the corner. The Financial Times is reporting that regulators are telling banks to hold onto their cash instead of returning it. FT Alphaville reports:

Some investors have argued that strong financial companies such as JPMorgan and Goldman Sachs should consider raising dividends or buying back stocks. But while executives of the two have said they are open to returning cash to investors, they say they are not in a hurry if watchdogs oppose such moves.

And Dealbook pulls this quote from the actual FT story, which abides behind a firewall:

“Regulators are gun-shy at this stage, partly because they fear that giving the green light to healthier banks to return cash to investors would prompt demands from more troubled institutions to do the same,” one senior Wall Street executive said.

While this might be disappointing for those that were hoping to see more in the way of payout boosting from financials, it was far from clear that the healthiest banks were on the verge of returning cash to shareholders in the immediate future. Even J.P. Morgan Chase, with its “fortress” balance sheet didn’t act like boosting payouts was a near-term priority. “Higher dividends remain on CEO’s (and board’s) radar,” wrote Ladenburg Thalmann analysts in late February after JPM’s investors day. “However, they prudently want to see several months of better employment and other signs of economic stabilization.”

Comment or Read More at WSJ.com: MarketBeat

With the Greece fire out for now and earnings season over, the other factor that was a catalyst for the near 10% correction in stocks late Jan into Feb, China, becomes a focus again. With speculation building that China may soon raise interest rates, they report their CPI tonight. Ahead of it, Feb exports rose 45.7% y/o/y, well above expectations of 38.3%. Import growth was also above forecasts. Also, a housing price index rose at the fastest pace since Apr ‘08. Portugal successfully sold 10 yr notes at an avg yield of 4.17%, about 65 bps below an issue sold last month and well below the 6.39% yield where Greece sold 10 yrs. ABC confidence was unchanged at -49, remaining 2 pts below the one yr avg. The MBA said purchases rose 5.7% and has now risen 15% since hitting its lowest level since 1997 two weeks ago. Refi’s fell 1.5%. Gasoline prices rose to a fresh 17 month high at $2.77. II: Bulls 44.9 v 42.1 Bears 23.6 v 22.7

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Early signs suggest we may be in for another fitful session for U.S. stocks. Apart from last Friday’s rally, it’s been an aimless wander for about three weeks now as investors wrestle with troubles in Europe, indications of improvement in a variety of US economic data and ongoing doubts about the strength of the economic recovery with unemployment still high and few signs of hiring. January wholesale trade data due at 10:00 a.m. Stocks mixed in Asia overnight, slightly higher in Europe.

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By William J. DeRosa, Jr., CFA. The following headline was taken directly from the Associated Press; Read more » »
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“People are starving for yield because rates are at zero. They’re taking more risk than they think.”

-Paul Tramontano, Constellation Wealth Advisors,

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One of the factors that caused the great credit crisis to spread far and wide was the “reach for yield.” This is one of the most expensive ways a fixed income investor can obtain a higher potential return on their bond investments.

Note that I used the term “higher,” not “better,” and the word “potential,” not “actual.”As we have seen, high yielding junk paper often goes bust, making the yield grab an exercise in foolish futility. Thank goodness bond investors learned their lesson in the credit collapse of 2008-09.

Only not so much.

In 2009, bond buyers poured $7.8 billion into higher-yielding municipal bond funds, more or less ignoring the precarious financial conditions of cities and states.

Rather than accept ultra low yields as a consequence of Federal Reserve action in 2001, bond buyers poured into various mortgage backed securities. Even though they were paying 250 to 350 basis points more than Treasuries, they were rated the same: AAA.

This time, they are eschewing the fraudulent AAA ratings from Moody’s and S&P, and instead are buying naked junk. The bet is that the cities will be bailed out, and their grab for  higher yield will be safely rewarded.

This is MORAL HAZARD writ large. Bailouts encourage irresponsible behavior, as their are no negative consequences.

Here’s Bloomberg:

“High-yield municipal bonds rated BB+ or lower by Standard & Poor’s or Ba1 by Moody’s Investors Service, 10 levels below investment-grade debt, have returned about 31 percent in the last 12 months compared with 11 percent for investment-grade municipal securities, according to the indexes from S&P/Investortools.

U.S. state and local government tax revenue fell 6.7 percent as of September from a year earlier, marking the fourth consecutive quarter of decline, according to a December Census Bureau report. That may drive defaults higher this year and next, according to Moody’s, which didn’t provide a number. The New York-based company also said it expects “somewhat higher rates of default” among bonds not rated and those below investment-grade.”

Investors in these funds would do well to remember that Return OF Capital is more important than Return ON Capital.

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Source:
Defaults Signal Bursting Muni Junk Bubble on High-Yield Surge
Margaret Collins
Bloomberg, March 10 2010  
http://www.bloomberg.com/apps/news?pid=20603037&sid=a.5zaTTL2AMs

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Evidence from simple tests of available data indicates that VT26 may be a good strategy for fairly high-frequency trading in some futures markets, better for short trades than long trades, with effectiveness perhaps dependent on market volatility state.
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Speculation about the damaging effects of “speculative” derivatives trading has become de rigueur for European politicians lately. One thing to keep in mind is that we’ve seen regulators make this move before – when they temporarily banned negative bets against financial shares.

In the throes of the banking crisis in the fall of 2008, regulators in the U.K. and U.S. moved to ban the practice of short-selling financial stocks out of concern this was exacerbating market volatility, facilitating rumor-mongering and generally contributing to a sense of fatalism among investors. In short selling, investors borrow shares and sell them, hoping they can buy the shares later at a lower price and replace them, turning a profit.

It seemed prudent at the time to limit risks given that investors across the globe were worried about entire banks keeling over and the financial system freezing. The U.K.’s markets regulator, the Financial Services Authority, later said that the fact that markets were more orderly and there were fewer rumors circulating showed that the ban had helped counter abuse and calm markets.

Hedge funds and others argued they were being scape-goated. In the U.S., the Securities and Exchange Commission was accused of adding to market confusion with actions that didn’t do much to halt the fall in financial stocks.

A similar drama is unfolding now with respect to derivative contracts called credit-default swaps that investors can buy to insure themselves against the risk of a corporate or sovereign debt default.

Officials in Germany, France and Greece worry that credit-default swap traders are betting against countries and worrying the market unnecessarily at a time when countries need to raise huge amounts of cash in the capital markets to finance their deficits. No one knows who exactly is doing the trading – just as no one initially knew whose mortgage bonds ill-fated American International Group had insured using similar swaps. Moreover, there seems to be little need, according to some regulators, for “naked” trading, where an investor isn’t buying insurance for an asset he holds but simply making a cheap and easy bet.

And yet, it’s hard to find concrete evidence that such trading is contributing markedly to Greece’s woes. A study released Monday by Germany’s financial regulator, BaFin, found no evidence that CDS have been used to speculate against Greek national debt. Indeed, one could make the same accusation against the European government bond market, where prices of Greek bonds have tanked.

Market players, meanwhile, seem to be betting that all this sound and fury will pass, though they’re not entirely sure. One possibility is that regulators, as they did with short-selling of bank stocks, ultimately don’t go as far as investors feared. In Europe, that would mean sticking with planned measures to push more trading into so-called clearing-houses and beefing up transparency requirements. After all, markets are starting to calm a little bit – Greek insurance protection now costs about  $274,000 a year compared with over $400,000 in early February – and much is accomplished simply be saber-rattling.

Comment or Read More at WSJ.com: MarketBeat

Official intervention by the Swiss National Bank is once again suspected Wednesday after the Swiss franc dropped sharply against the euro.

The euro jumped from a one-month low of 1.4612 francs to 1.4631 francs in European trading hours, but there was no similar movement against the dollar.

In line with its usual policy, the Swiss National Bank declined to comment. It is thought to have intervened on a small scale several times this year, preventing the euro from falling below current levels.

At this point, it is unclear whether the SNB is behind the move, or whether it has been driven by other traders anticipating an official sting after an earlier appreciation in the Swiss currency.

Comment or Read More at WSJ.com: MarketBeat

The pound took a hit after weaker-than-expected U.K. manufacturing and industrial output data. U.K. manufacturing output fell sharply in January as severe weather crimped activity, and in comparison with unusually strong production in December, Office for National Statistics data showed Wednesday.

Manufacturing output fell 0.9% in the first month of the year, reflecting a broad-based weakening, with 11 out of 13 subsectors posting on-the-month declines. The pound dropped half a cent to $1.4910, while the euro hit the day’s  high of 0.9114 pound.

The U.K. FTSE 100 traded up 0.2%, ticking higher and showing little reaction to the data.

Comment or Read More at WSJ.com: MarketBeat

Sold all 1,200 shares at $5.72 per my post last night.

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Comment or Read More at Carl Futia

March S&P E-mini Futures: Today's range estimate is 1136-1150. I expect the market to reach 1200 over the next three months. Remember that activity will begin to move into the June contract at tomorrow's pit opening.

QQQ: A rally to 50.00 is underway.

TYX (thirty year bond yield): I think this market is headed for 5.00%.

TNX (ten year note yield): I think that the market has begun a swing up to 4.30%.

Euro-US Dollar: This market is now headed for support near 131.00. Resistance above the market is at 141.00. Looking further ahead I think that a drop to 125 is likely over the coming months.

Dollar-Yen: A rally to 100.00 is underway. Support is at 90.00.

April Crude: I think the market is headed for 50.00. Resistance is in the 81-83 range.

GLD – April Gold: The longer term trend has turned downward. I expect gold to drop to 875 over the next few months.

SLV - May Silver: I now think silver has started a down move that will carry it to 10.00 over the next few months. Resistance above the market is now 18.30.

Google: A move that should take GOOG above 700 is underway.

Comment or Read More at Carl Futia

By EconGrapher. China surprised to the upside again when it reported its trade figures on Wednesday. Exports were up 46% year over year to US$94.8 billion against consensus estimates for a 38% rise. Imports rose 45% year on year to US$87.2 billion against consensus forecasts, also for 38%. Read more » »
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You have to be amused by the clowns geniuses who run the SEC. ZeroHedge is spot on here, when an SEC employee blogs that gold is in a bubble.

the most recent point-and-figure of the Gold contract shows gold in a pullback after a bullish column of Xs move. If Gold has a following, is it 'mad' or simply a rational alternative (capital flowing to rational alternatives) to global competitive devaluation of currency. After all, in a world driven by debt (credit), debasing your currency diminishes the impact of your debt.
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In "pole-axed" position (potential), the alpha dog by stochastics is Worden T2108 at 82 percent. If you're a contrarian, T2108 spells risk (high percentage of stocks above the 40 period moving average)
RSI divergence stocks from the 100 MUST series. Just sayin'.
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Miscellaneous:
For the Bulls: New Highs keep on trucking
Stochastics oversold: SPX stocks (8)
Stochastics oversold among the SP500.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.
Comment or Read More at Technically Speaking, Market Analysis and Theory

A site called Simolean Sense posted a lengthy interview with James Montier who of course now works at GMO. Montier's comments were really a smorgasbord behavioral observations, assessments of psychological obstacles and other useful nuggets.

First up was that while he does a lot of reading he said most of what he reads is more about studying human behavior the specific market information. I would characterize this in part as benefiting from other people's mistakes. While this is useful I might fine tune it some to each person needing understand what they are vulnerable to. There are plenty of fallacies and other types unproductive behaviors that impede investment success and no one has all of them. This requires introspection.

He also talked about information overload. This contrasts nicely with the quote yesterday from Jim Rogers who believes in watching everything. I probably fall closer to Rogers but what I would add is that I like to read people that I know I will disagree with.

Coincidentally I exchanged emails with a buddy who asked me what I thought of a particular blogger. The blogger in question does a great job with isolating relevant issues and then asking the right questions but he often answers those questions incorrectly or does not seem to read the data correctly with some of his opinions. He is not always wrong obviously and not wrong even half the time but even though he is obviously wrong some portion of the time there is value in the issues he isolates so I read him. The need to sort out and even dismiss is handy skill to have in trying to study markets.

Montier said people focus too much on the outcome not the process in a sort of live in the moment comment. But then a few sentences later he said;

It appears as if investors have a chronic case of attention deficit hyperactivity disorder. The average holding period for a stock on the New York Stock Exchange is just 6 months! This has nothing to do with investment, and everything to do with speculation. Having a longer time horizon than these speculators appears to be one of the most enduring edges an investor can possess.

In a way each sentiment could be saying two different things. I would tie them together by noting that there is no single process that can be the best every day, quarter or year. Hopefully whatever your process is you have reason to believe it gives you a chance to get the job done in the long term, whatever that means to you. Focusing on process could mean not losing faith in a reasonable method during one of those periods where that method is not the best.

The idea of a longer time horizon being an enduring edge is similar to Hussman's thinking in terms of measuring the result over an entire stock market cycle which has been a big influence on me. I know plenty of people view portfolio construction and cycle navigation differently than how I do but the task is much easier when you embrace the fact that big declines happen every so often, you will not "outperform" the market every year and a simple yet reliable defensive trigger point for defense can go a long way to enduring through with less emotion and less emotion should result in fewer mistakes.

One last item was a quote that Montier cited from Paul Samuelson “Investing should be dull, like watching paint dry or grass grow.” Personally I find the work exciting and interesting but I do spend a lot of time trying to make the portfolio dull.
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By romario. Your website is called Magic Diligence. Tell us about it and why you started it. What does Magic Diligence represent? Read more » »
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By insider. CFO of Gran Tierra Energy Inc (GTE) Martin H Eden sells 50,000 shares of GTE on 03/08/2010 at an average price of $5.93 a share. Read more » »
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By insider. COO of The Providence Service Corp. (PRSC) Craig A Norris sells 5,000 shares of PRSC on 03/08/2010 at an average price of $13.49 a share. Read more » »
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By insider. EVP & CFO of Sotheby's (BID) William S Sheridan sells 13,103 shares of BID on 03/08/2010 at an average price of $30.4 a share. Read more » »
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By insider. President and CEO, 10% Owner of City National Corp. (CYN) Russell D Goldsmith sells 2,000 shares of CYN on 03/09/2010 at an average price of $51 a share. Read more » »
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