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Our purpose is to teach and demonstrate day trading strategies that do not require deep knowledge, vast experience, expensive software, or exotic and complicated investment instruments, and which minimize the high risk that is always involved in day trading. We believe our techniques can be mastered successfully by the average frequent-trader with the minimum $25,000 account required by SEC regulations for day trading, and for whom a day trading strategy and its attending risks are appropriate.
Earnings Kickoff
Earnings season is upon us. The companies in the S&P 500 are expected to post ‘operating’ earnings of $15.80 per share for Q4, up from $5.62 in the same quarter last year. Operating earnings do not account for one-time charges and other types of write-downs. If the figure is attained, it would bring full year earnings to just under $60, about 10% less than 2008, but 30% less than the peak posted in 2006.
Alcoa is always the first S&P 500 company to report quarterly results. The aluminum producer posted a $277 million loss for the quarter, stating that it remained focused on capital preservation. Alcoa is a bellwether for the U.S. economy, suggesting that business attitudes here are still largely defensive. Plus, autos, construction and light manufacturing are the three main drivers of aluminum demand and they are all depressed. We think Alcoa’s circumstances reflect a ‘new normal’ in manufacturing due to the forced post-bubble austerity in the West.
Things could not be more different in China. In December, China's exports rebounded by 17.7% year over year, while imports surged more than 50% compared to the terribly weak conditions a year ago. The Chinese Academy of Social Sciences reports that China's GDP growth could accelerate to 16% this year if the government continues the same level of stimulus. A moderate level of stimulus would produce 11% growth.
Stimulus was not moderating in early January, however. The country’s banks force-fed $87 billion into the economy in the first week of the new year. That figure is more than twice the lending in November, which indicates that the Chinese government is not taking its foot off the gas.
The only sector in the U.S. that can match China right now is the financial sector. Profits at financial institutions may triple by 2011, according to Bloomberg. Bank of America recently announced that it will be paying record bonuses to investment bankers. Banks repaid $165 billion in TARP funds last year, but TARP is still expected to post a net loss of $125 billion, mostly due to AIG.
Banks are going to get hit next year with a tax designed just for them. They resent it, but few have pity for the bankers at this time. Banks are not lending, so avoid banks that need to make loans to earn profits. That includes all the regional banks. Banks with brokerage services, investment banking arms and international exposure will be doing just fine this year.
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