Monday, February 9, 2015

Lower markets on international tensions

Dow sank 95, decliners over decliners 4-3 & NAZ was off 18.  The MLP index slumped 5+ to 450 & the REIT index fell 2 to 340.  Junk bond funds did little & Treasuries lost more ground, taking the yield on the 10 year Treasury close to 2%.  Oil had another good day, up to near 53 from 45 just a few days ago, & gold edged higher.

AMJ (Alerian MLP Index tracking fund)

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CLH15.NYM....Crude Oil Mar 15....53.08 Up ...1.39 (2.7%)

Live 24 hours gold chart [Kitco Inc.]

US public pensions reported median returns of 6.8% last year, the 6th year in a row of gains after the financial crisis, according to Wilshire Assoc.  The gains, though, are less than the annual investment returns of 7.5-8% that many state & local govs count on to pay benefits for teachers, police & other employees.  In the 10 years thru Dec 31, public pensions had a median return of 6.6%.  “A lot of the plans can’t be satisfied with a return of less than 7 percent,” said Bob Waid, a managing director at Wilshire, adding that a portfolio containing 60% stocks & 40% bonds returned 10%.  “I’m a huge advocate of diversification, but you have to wonder sometimes when you see that the guy who did 60/40 beat you.”  While the S&P 500 returned 13.7%, public pensions were dragged down by intl investments.  Stagnation in Europe & a strong dollar led to losses of almost 4% on foreign stocks, according to Wilshire.  Assets of the 100 largest public pension funds rose to $3.31T in Q3-2014 from $3.06T in the same period of 2013, according to the US Census Bureau.  The average funding of state & local pensions has deteriorated even though investment returns have improved, partly because of inadequate contributions by govs, according to Moody’s, on the 25 largest public plans.  Unfunded liabilities tripled to almost $2T from 2004-2013.  Nationwide, state & local pensions had a median allocation of 45% in US stocks & 13% in foreign stocks.  Foundations & endowments, which allocate a greater portion of assets to hedge funds & private equity, returned 5.36% for 2014.

U.S. Public Pensions Return 6.8% in 2014 for Six Years of Gains

Hotel, energy & financial services conglomerate Loews Corp reported a 13% fall in quarterly profit from continuing operations, mainly due to lower investment income.  The company's net investment income fell 22% to $538M in Q4.  CNA Financial (CNA), the largest subsidiary, reported a 10% fall in profit due to lower net written premiums.  Loews has over the years trimmed CNA's operations to focus on property & casualty business.  The company's 2nd-biggest holding, Diamond Offshore Drilling (DO), reported a 7% drop in quarterly revenue & profit rose as the company reined in expenses.  While CNA declared a special div of $2 per share, DO said it would not be paying a special div.  The company also controls Boardwalk Pipeline Partners (BWP) & Loews Hotels & Resorts.  Overall, Loews' EPS from continuing operations fell to 57¢ in Q4 from 64¢ a year earlier.  Total revenue fell 7% to $3.52B.  The stock rose 49¢.  If you would click to learn more about Loew's, click on this link:

Loews Profit from Continuing Operations Drops

Loews (L)

It's a good thing for Apple, because otherwise the US profit picture would look a lot different.  The tech giant made an outsized contribution to Q4 earnings (so far), adding nearly double its portion of the S&P 500.  Thanks to a blockbuster qtr that included sales of nearly 75M iPhone 6 devices, the company helped boost America's bottom line in a qtr noted mostly for companies clearing a sharply lowered bar.  Ultimately, AAPL accounted for about 7% of total earnings, or $2.04 according to calculations from Goldman Sachs.  It's all the more noteworthy because AAPL comprises 3.83% of the total S&P 500 market cap, or just more than half its earnings contribution.  The contribution is significant because it exemplify the extent to which overall profit is on the decline thanks to a slump in energy profits, despite previous lofty expectations for 2015.  While Q4 has seen 72% of companies top lowered expectations, good for a 7% gain overall, projections going forward are dismal.  Where Q1 profits once were expected to jump 14.8%, they are now estimated to contract 1.48%, according to the most recent figures compiled by S&P Capital IQ.  Q2 looks bleak as well, with current forecasts calling for a 1.09% loss.  For the full year, earnings are expected to grow just 1.9%.  Even with a customary beat rate of 65-75%, that would result in earnings growth in the low single digits.  Initial full-year earnings projections were for 11.5% growth.  Most of the decline is attributable to energy, with companies hit by falling oil prices expected to post massive profit drops in the qtrs ahead, including a 61% decline in Q1, before finally leveling off in Q4.  Revenue expectations are no better, with top-line growth currently put at 0.3%.  AAPL stock was fractionally higher.  If you would click to learn more about AAPL, click on this link:

Apple basically saved this earnings season\

Apple (AAPL)

Refinancing Greek debt is getting a lot of attention by the traders & prospects are not good.  The new gov wants to reverse discipline imposed by the last gov.  The big pow-wow on Wed in Europe will prove important.  At the same time, fighting in Urkaine continues & nobody is stopping Russia from taking over the eastern portion of the country.  The MidEast is no comfort.  Now forecasts for earnings in 2015 are not pretty.  Dow is down almost 100 YTD & the bulls are losing their grip on the market after last week's big rise.

Dow Jones Industrials

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