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The Wall Street Greek blog is the sexy & syndicated financial securities markets publication of former Senior Equity Analyst Markos N. Kaminis. Our stock market blog reaches reputable publishers & private networks and is an unbiased, independent Wall Street research resource on the economy, stocks, gold & currency, energy & oil, real estate and more. Wall Street & Greece should be as honest, dependable and passionate as The Greek.



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Tuesday, September 24, 2013

THIS WEEK: October Lurks

jackolantern
Just when we thought we might enjoy a few weeks of post-Fed folly, the media has to go and remind us of all things scary in October. Whether it be government shutdown or Obamacare, or even that old September favorite, Iran and its dark nuclear program, they are trying to spook us again. It’s working though, because people know very well that malevolent ghosts do walk the Congressional halls in D.C. town and that skeletons can be found around the U.N. this time of year.

This Week


Index ETF
Year-to-Date
SPDR S&P 500 (NYSE: SPY)
+19.1%
SPDR Dow Jones (NYSE: DIA)
+17.7%
PowerShares QQQ (Nasdaq: QQQ)
+21.1%

Stocks may have a tough time ahead, as the media is already focusing investors on the next fear factor at hand, government shutdown. October is a tough month to begin with historically speaking, but this year it brings with it the ominous threat of a Washington stalemate driving government shutdown. And did I mention that October also offers the start of many new healthcare processes that threaten to shake things up? Fines will start to be issued for noncompliant businesses and doctors, at least as far as I hear from my local political punks on the Upper East Side. What’s a political punk look like on the Upper East Side? Just like a man anywhere else, but a fuming one in a cheap suit, speaking passionately on the street corner with a supermarket delivery boy about Obamacare. It’s that guy!

Economic Events

THIS WEEK’S ECONOMIC REPORT SCHEDULE
Economic Data Point
Prior
Expected
MONDAY


-0.43 (R)
+0.14 (A)
53.9
54.0






TUESDAY


+0.9%
+0.8%
+0.7%
+0.7%
-1.6%

-Year-to-Year Pace
+3.2%

+3.4%

81.5
80.0
105.1

14.0
10.5




WEDNESDAY


-7.3%
-0.5%
-Orders Ex-Transportation
-0.6%
+1.0%
394K
425K
+11.2%



-Crude Oil Inventory
-4.4 M

-Gasoline Inventory
-1.6 M

THURSDAY


+2.5%
+2.7%
-1.3%
-1.0%
-29.4 (+2.7)

309K
330K
46 Bcf

8.0
9.0






FRIDAY




-Income
+0.1%
+0.4%
-Spending
+0.1%
+0.3%
-Core PCE Price Index
+0.1%
+0.1%
76.8
78.0









The economic schedule is like most others, colored with updates on all fronts: from the consumer mood, with two such reports due this week along with an investor sentiment measure and personal spending data; housing reports, with several index updates this week on the state of real estate; manufacturing data, with news arriving on durable goods orders, along with a slew of PMI and regional measures; and a mix of some irregulars, including another revision of GDP data. You’ll also note that the Fed is on tour again, with regional bank presidents and governors speaking about the latest Fed policy issued last week.

Corporate Events

Approaching third quarter earnings season, the schedule is light here except for a good number of homebuilders coming to the fore. Otherwise, the market is talking Apple (Nasdaq: AAPL), Blackberry (Nasdaq: BBRY) and the rest of the usual suspects.

HIGHLIGHTED EPS REPORTS
Company
Ticker
MONDAY

Ennis
NYSE: EBF
S&W Seed
Nasdaq: SANW
Park City Group
NYSE: PCYG
Red Hat
NYSE: RHT
TUESDAY

Carnival
NYSE: CCL
Neogen
Nasdaq: NEOG
Lennar
NYSE: LEN
K.B. Home
NYSE: KBH
Ascena Retail Group
Nasdaq: ASNA
Copart
Nasdaq: CPRT
Landec
Nasdaq: LNDC
Misonix
Nasdaq: MSON
AAR Corp.
NYSE: AIR
WEDNESDAY

Autozone
NYSE: AZO
H.B. Fuller
NYSE: FUL
Pro-Dex
Nasdaq: PDEX
SYNNEX
NYSE: SNX
Progress Software
Nasdaq: PRGS
THURSDAY

McCormick & Co.
NYSE: MKC
Cantel Medical
NYSE: CMN
Worthington Industries
NYSE: WOR
Nike
NYSE: NKE
Authentidate
Nasdaq: ADAT
AEHR Test Systems
Nasdaq: AEHR
JTH Holding
Nasdaq: TAX
FRIDAY

AZZ Inc.
NYSE: AZZ
USA Technologies
Nasdaq: USAT
Finish Line
Nasdaq: FINL
Vail Resorts
NYSE: MTN
Cubic Energy
NYSE: QBC

Recent reports you might find interesting:

LinkedIn (Nasdaq: LNKD) Valuation Threatened by Facebook (NYSE: FB) and Twitter
McDonald’s (NYSE: MCD) Innovation is Key for Shareholder Return
Taperless Fed Favors American Capital (Nasdaq: AGNC)
With Annaly (NYSE: NLY) Settled, Why the Next Leg is Higher

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Friday, September 20, 2013

Why War with Syria Would Benefit Annaly Capital and Real Estate

US Navy Syria
It sounds wacky I know, but bear with me, because war with Syria really would serve Annaly Capital (NYSE: NLY) shareholders and the entire real estate market in my estimation, and for a very tangible reason. If the U.S. were to eventually take military action against Syria, it would drive a “flight to quality,” and despite U.S. involvement, that means increased buying of U.S. treasury securities. Increased demand for U.S. debt would drive up the price of that debt and lower the cost of debt for the U.S. When U.S. treasury yields fall, longer term interest rates decline including mortgage rates. Just as higher mortgage rates have hurt the real estate market and NLY shares, lower mortgage rates serves the housing market and Annaly.

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Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Annaly NLY stock chart



Annaly Capital (NYSE: NLY) shares have been especially impacted by rising mortgage rates since speculation began about Fed tapering in early May. The situation was only exacerbated when the Fed Chairman actually suggested tapering would likely start this year. This week, the Fed backed down from its prior warnings and held off the tapering of its asset purchases. That supported Annaly Capital, American Capital Agency (Nasdaq: AGNC) and the rest of the real estate sector. Still, the threat of near-term tapering remains, and that was priced back into long interest rates and mortgage rates yesterday a bit, and served to sink Annaly shares again.

Now, you might think a U.S. war or strike against Syria would drive capital out of the U.S., but the opposite is actually more likely. Given the distance between the U.S. and Syria, and the immense difference in military might between the two nations, any injury to the U.S. would be unlikely in such a conflict. Obviously, if something significant did occur on U.S. soil, the argument would not hold and interest rates would not decline, but instead increase. Despite the threats often made against the United States when it threatens nations in the Middle East and North Africa, history has shown a lack of follow through against the blitz of power the U.S. has displayed. More often, serious threat is directed toward Israel, Europe and western allies in the Middle East. So on a relative basis, the United States has tended to be the destination in flights to quality. In the future, someday, that may change, but today it remains likely.

You might ask how sustainable a change in interest rate trends might be in such a scenario. While a military strike might only last a few days, the concern and worry about the region would last longer. Also, the U.S. Federal Reserve would be expected to favor accommodation in such a time, which further serves lower interest rates. And the dependence of the entire globe on Middle Eastern oil, and the importance of the U.S. strategic oil reserve and new status of the U.S. as a net exporter of energy, only solidifies the U.S. status as destination in flights to quality.

As interest rates have increased, investors and pundits have expressed concern about the structure of mREIT asset portfolios and their exposure to rising interest rates. Annaly shares are down in price by 22% since May 1st, even after adjusting for dividends. The SPDR S&P 500 (NYSE: SPY) is up by 8.2% over the same span.

Security
05/01 – 09/16
Annaly Capital (NLY)
-22%
SPDR S&P 500 (SPY)
+8.2%
iShares US Real Estate (NYSE: IYR)
-10.4%
SPDR S&P Homebuilders (NYSE: XHB)
+0.2%
American Capital Agency (AGNC)
-26%

The entire group of real estate relative stocks sensitive to changes in interest rates has underperformed the broader market since May, but the mortgage REITs, including Annaly’s peer American Capital Agency (AGNC), have done the worst. Thus, they should also outperform if rates were to change direction and turn lower. While none of us would like to see war or conflict of any sort, it is interesting to note and perhaps prepare for the possibility that some stocks might benefit from the effects of a flight to quality. Among those, I find real estate relatives and especially Annaly Capital (NLY) of special interest for capital resting on the sidelines.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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