C Fund Link

[Birchtree]

Increasing demand for U.S. capital goods might illustrate a second-order effect of globalization. When 40% of SPX earnings are from foreign exports, one has to pay attention. The rise of export oriented producers in China and elsewhere created a flood of cheap consumer goods into the U.S., increasing competition for the U.S. businesses and holding prices down. Now, though, as those same foreign producers invest to boost capacity, they're also boosting demand and prices for the kind of capital goods that the U.S. makes. There is very strong demand for capital goods in Asian markets, both from Western firms building local facilities and from local firms looking to compete with the foreigners.

 

[Birchtree]

U.S. companies are spending record sums repurchasing their own stock, a move that could boost per-share earnings of many at a time when the stock market has been gyrating, often downward.

The companies in the Standard & Poor's 500 stock index - generally the biggest in the U.S. - plowed more than $100 billion into their own shares in the first quarter, up more than 22% from a year earlier. In the year ended March 31, they spent a record $367 billion on so-called stock buybacks, an amount so large it could cover this year's Medicare budget.

The cash on the books of S&P 500 companies adds up to 7.4% of their stock market value, the highest level in almost two decades. It is nearly triple the level of 1999. All that money is the product of a long-term surge in corporate profits. Companies in the S&P 500 have increased their quarterly operating profits at a double digit percentage clip for four years.

Shareholder dividends have risen 14% for S&P 500 companies since the start of 2003.

 

[Birchtree]

Who would even think it possible.
From TWSJ 6/28 by Anjali Athavaley.

Money managers have become more bullish on large-capitalization value stocks and have lost enthusiasm for small-cap shares, a shift in sentiment driven by expectations of a slowdown in the economy. Fifty-four percent of managers favored U.S. large-cap value stocks, up from 36% in the previous quarter, the largest gain for any asset class in the two-year history of the Investment Manager Outlook, a quarterly survey by Russell Investment Group. At the same time, bullishness for small-cap growth stocks declined to 27% from 57% in the preceding period - the largest quarter to quarter drop in the survey's history. Growth stocks are generally faster-growing companies with the best prospects for increasing earnings, while value stocks have prices that look cheap compared to their profits or assets.

Birchtree says use due diligence, but I expect large-cap stocks to outperform small caps in part because they are more likely to pay a dividend. That mitigates a lot of the risk because you are still getting a return on the dividend.

 

[Birchtree]

Buybacks aren't the only factor goosing earnings for the SPX; higher interest rates are also helping. The S&P 500 companies have an eye-popping $631 billion in cash. Their interest income on that cash increased 34 percent last year. This year SPX expects it to rise 60 percent. S&P expects the earnings for the S&P 500 to increase 11/1 percent this year. Of that 1.3 percent is expected to come from the companies' increase cash income yhanks to higher interest rates. There is always a silver thread.

 

[Birchtree]

Right on the money today at $13.60 - how lucky is that? My previous low purchase this year was at $13.63 so I'm very lucky indeed. The question now is how much more luck do I need - I'll take three more buys under $14.00 and be pleased.

 

[recliner]

today 2nd of Aug. C fund and S fund "come on baby come to Papa"