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Beware the Dangers in This Move to Safety
By Rev Shark
RealMoney.com Contributor
3/13/2006 9:08 AM EST
"To be really great in little things, to be truly noble and heroic in the insipid details of everyday life, is a virtue so rare as to be worthy of canonization."
-- Harriet Beecher StoweThere are times when close analysis of the major indices is of great help in positioning yourself appropriately. If you are in tune with the DJIA, S&P 500 and Nasdaq then you should be able to come up with a good strategy for how to proceed. This is not one of those times when the indices are of great help.
The action last week is a good illustration. If you simply looked at the DJIA or the S&P 500 you would think that the market is in pretty darn good shape. Both of the major indices have their beady little eyes focused on recent highs and haven't even pulled back enough to warrant being called a pullback.
If you formulate your overall view of the market by simply considering the technical conditions of the S&P 500 or the DJIA you would most likely maintain a bullish bias. But as the saying goes, the devil is in the details. The action in many of the stocks that have been the strongest over the past three to six months was very poor. Many of these high-beta, momentum and small-cap stocks were aggressively sold. In addition, commodity and energy-related stocks that had the best relative strength for some time were pummeled.
What exactly is going on here? The major indices look pretty darn good but an analysis of the action under the surface exposes some cracks. The most logical explanation is that the market is undergoing some sort of rotation or change of character. There is reshuffling taking place that you can't see unless you go beyond the big indices.
One of the most obvious changes is the move to safety. The stodgy big-caps with lower volatility are what drive the major indices and they are obviously attracting some of the money that is coming out of the more volatile, high-growth names. The problem with this movement to safety and security means that the speculative forces that produce strong market action are weak. People who are heavily bullish don't flock to Johnson & Johnson (JNJ:NYSE) and General Electric (GE:NYSE) instead of high-beta technology stocks. A move to "safety" can pull the big indices up but as we've seen, it means that breadth is likely to narrow and that smaller, more speculative stocks will be punished.
Many on Wall Street are very attached to the idea of a rotation into blue chip stocks -- which they have been predicting for the last eight or so years without success. Many of the Wall Street Whales have no choice but to buy the stodgy behemoths, and the idea that they may finally see some relative strength is of great appeal to the big brokers, funds and analysts.
Transitions of this sort are never easy and in many cases the market has already gone too far in dumping old leaders and moving into new ones. Apple (AAPL:Nasdaq), for example, has been badly hit on no significant fundamental news and is seeing some upgrades this morning as a result.
Whether this move to safety will continue or whether this pessimism will eventually lead to a broader market decline is certainly not clear. Negativity remains quite high but many folks don't see it because of the effect the move to safety has had on the big indices. How can we say there is negativity if the DJIA is heading for highs? Just dig in a bit deeper and you will see it.
I'm somewhat of a market agnostic now. Enough technical damage was done to temper my bullishness but the negativity and the degree of the punishment that has already been done is keeping me from embracing the ursine side of things. I'm staying focused on the details of my individual positions and will formulate my approach based on that.
We have an upbeat start to the day after some merger-and-acquisition news over the weekend. The thinking is that if companies are willing to buy other companies, then valuations can't be that bad. Both Europe and Asia were strong overnight, oil is down and the dollar is strong.
No positions in stocks mentioned.
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päris naljakas lugu ja omapärane mõttekäik!
Will flat-screen TVs save Pier 1?
At least one analyst says hot electronic gear -- more than the housing slowdown -- will help home furnishings sizzle in 2006.
By Parija Bhatnagar, CNNMoney.com staff writer
March 10, 2006: 3:26 PM EST
NEW YORK (CNNMoney.com) - 2006 could be the year that style wins over economics to boost the fortunes of flagging home furnishing chains like Pier 1 Imports, Bombay Co. and other chains, according to one industry analyst.
In a recent note, Pipar Jaffray analyst Neely Tamminga said the entire sector deserves another look. Most shockingly, she's even bullish on longtime industry laggard Pier 1.
Despite the past three record-breaking years for the housing market, home decor and home furnishing chains for the most part haven't been able to capitalize on the boom.
Among the casualties, Pier 1 (Research)'s sales at stores open at least a year -- a key retail measure known as same-store sales -- were negative for most of 2005. Bombay Co. (Research) has logged same-store sales declines for seven of the last 12 months.
Cost Plus (Research)' sales fell 2.6 percent last year while Kirkland (Research) saw its sales tumbled 7 percent in its last fiscal year.
Moreover, the stocks of all four companies have suffered over the past 12 months, led by a 46 percent drop for Pier 1 and 48 percent for both Bombay and Kirkland.
So why is Tamminga positive on the sector?
Two reasons -- the growing popularity of flat-screen TVs and an anticipated slowdown in spending on clothes.
Tamminga disagrees with some who say that in a housing slowdown, consumers typically shift attention to sprucing up their homes, boosting spending on renovation and home decor.
"We think 'home' fundamentals are tied to product cycles and not the housing cycles," Tamminga said. As prices keep dropping and flat-screen TVs become affordable to more households, consumers are making them the focal point of their homes, she said.
"When you put a brand new flat-screen in your living room or bedroom, the old furniture becomes outdated," Tamminga said. "A lot of people are updating their furniture and decor to match the TV itself. We think is helping to fuel home furnishing sales."
Secondly, she expects a drop in spending on clothing to mean more dollars for electronics and other home goods.
"Part of this is cyclical. Apparel spending has been strong for the past three years. As we head into spring, apparel sales could be hurt by the lack of strong trends," she said.
Pier 1 shares are off 17 percent so far this year but Tamminga upgraded the stock late last month to "outperform" from "market perform."
"This spring will be a genesis for Pier 1. They'll have 80 percent new products in their stores and I do believe there's less wicker. Pier 1 will also debut its new TV ad and catalog mid-March," she said.
Meanwhile, the rising tide in home decor should also benefit non-traditional "home" retailers like Target (Research) and Wal-Mart (Research), both of which have made an aggressive push into the home area, usually at the expense of Pier 1 and other chains.
"In terms of market dynamics, there are many hands in the market share grab," Tamminga said. "Wal-Mart, Target and department store chains like J.C. Penney and Kohl's will see incremental dollars coming into home furnishing as well."
Kids getting into decorating?
Marshal Cohen, an industry expert and chief retail analyst with market research firm NPD Group, said he's been aware of the trend toward "accessorizing the home" for some time.
"There's no question that the dynamics of the house are very different today," said Cohen. "People who are buying plasma TVs want to add a surround-sound system next, then they want to upgrade to theater seating. In some instances, people aren't even putting in dining rooms anymore but replacing them with media rooms."
At the same time, he identified one more area that could be contributing to growth in home furnishing sales this year -- kids.
"Kids as young as age six are influencing their parents about decorating decisions," he said. "This used to happen when they were more like 16. But now they're telling their parents that they want their room to be renovated for their birthday."
Wal-Mart and Target have cleverly ratcheted up their room decor products geared toward young kids and even college students. On the other hand, Cohen said, he's still not convinced that Pier 1 is a turnaround story.
"It's a two-tier problem for Pier 1," he said.
"Younger customers are migrating to Wal-Mart and Target because the prices are better. Pier 1 has already lost the mid-tier customers who want to upgrade to chains like Ethan Allen. (And) if that's not enough, retailers like Costco, Home Depot and Lowe's are squeezing these traditional chains too in both indoor and outdoor furniture.
"I agree that this will be a better year for home furnishings but I'm not sure about Pier 1's performance," he said. -
Statin drug shown to reverse plaque in arteries
Monday March 13, 1:23 pm ET
By Deena Beasley and Lisa Richwine
ATLANTA (Reuters) - The cholesterol treatment Crestor has been shown to partially reverse the build-up of plaque in coronary arteries, the first time a statin drug has proved effective in treating the condition, which can lead to a heart attack or stroke, researchers said on Monday.
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AstraZeneca Plc's (London:AZN.L - News) Crestor, in a two-year study of 507 patients, showed that intensive treatment reduced plaque volume by 7 percent to 9 percent. The drug also reduced levels of LDL, or "bad," cholesterol by more than 53 percent and raised levels of HDL, or "good," cholesterol nearly 15 percent.
The changes in cholesterol levels were the largest ever seen in a major trial of statin drugs, said researchers, who presented the results at a meeting of the American College of Cardiology in Atlanta.
"The results were shockingly positive," said Dr. Steve Nissen, interim director of the department of cardiovascular medicine at the Cleveland Clinic and the study's lead author.
He did note the trial did not answer the question of whether the plaque reduction results in fewer heart attacks and strokes. But he said the study does indicate very low LDL levels accompanied by raised HDL, can regress, or partially reverse, the plaque buildup in the coronary arteries.
Other statin drugs might lead to similar plaque regression, Nissen said.
"If you achieve these (cholesterol) levels by other means, I would probably expect similar results," he said.
Atherosclerosis results when a build-up of cholesterol, inflammatory cells and fibrous tissue form areas in the artery wall called plaques.
If these plaques rupture, they can block blood flow to critical organs, such as the heart or brain, and can lead to heart attack or stroke.
Nissen said he doubted plaque could be reduced by much more than the levels seen in the Crestor trial, which used the highest approved dose for the drug.
With the statin, "I think you get rid of the lipid, and what's now left is the fibrous material, which won't rupture," he explained. "It's a stable scar ... there is nothing to cause morbidity or mortality."
Dr. Roger Blumenthal, an associate professor at Johns Hopkins University, said the findings were "intriguing," but more study was needed. He said lifestyle changes, such as eating a better diet, still were "the cornerstone of managing cardiovascular disease."
AstraZeneca shares rose 2.5 percent in afternoon trading on the New York Stock Exchange.
Crestor, a key growth driver for the company, was initially estimated by industry analysts to have potential sales of $3 billion to $4 billion a year. But sales, which totaled $1.27 billion last year, have not taken off as fast as hoped, and the drug has failed to win significant share from Pfizer Inc.'s (NYSE:PFE - News) $12 billion blockbuster cholesterol treatment Lipitor following controversy over its safety.
The U.S. Food and Drug Administration last year threw out a petition by consumer group Public Citizen to have Crestor banned.
Nissen said he did not see any unusual safety issues in his study, although he acknowledged the study might not have been long enough to catch some problems.
"From my perspective there is no obvious safety disadvantage," he said.
The latest figures show Crestor has a 7.6 percent share of new prescriptions in the U.S. market, up from 6.9 percent in early February.
(Additional reporting by Ben Hirschler in London)
