Market Stages a Powerful Recovery

Market Stages a Powerful Recovery after a Major “Capitulation” Day

by Louis Navellier

September 1, 2015

*All content in the Marketmail Introduction is the opinion of Louis Navellier of Navellier & Associates, Inc.*

Last Monday will go down in history as a major “capitulation day,” when the panic selling at the market opening pushed the Dow Jones Industrial Average (“DJIA”) down 1089 points before a recovery and another test of the lows on Tuesday.

Last week’s volatility exposed the fact that ETFs are illiquid in fast-moving market conditions like last Monday’s “flash crash,” when many ETFs traded well below their underlying net asset values. According to a Wall Street Journal study (“Stock-Market Tumult Exposes Flaws in Modern Markets,” August 25, 2015), market “circuit breakers” in individual stocks were triggered almost 1,300 times in individual stocks, which makes pricing ETFs very difficult, so specialists were often forced to drop their bids.

The equally-weighted ETFs seem to have been hit the hardest. For example, the Journal cited two big Vanguard ETFs gapped down 32% during last Monday’s opening, so there was clearly a big execution problem. The Vanguard Consumer Staples ETF was halted six times over the course of 37 minutes early last Monday, while its healthcare ETF was halted eight times shortly after the market opening. (My management firm and I do not trade Vanguard ETFs, but we have our own stories about folks that were impatient and sold ETFs during last Monday’s opening, only to get “picked off” by the specialists that trade ETFs.)

Hopefully after last week’s market action, more investors and financial advisors will realize that ETFs can occasionally act like closed-end funds and trade at deep discounts to their underlying net asset values.  As a result, investors must be patient when trading ETFs and wait to sell when their discounts relative to their intrinsic value are minimal. One way to do that is to check the Intraday Indicative Value on Morningstar.

Vacation Hotspot ImageOkay, so with my investor ETF education comments out of the way, let’s dig into what is really happening to the stock market.  First, I must remind you that in August many Wall Street professionals are on vacation, as are many Europeans, so August creates notoriously thin market conditions.  Second, unscrupulous short sellers love to hit the market in August with all kinds of rumors about “death crosses” (when the 50-day moving average crosses back below the 200-day moving average) and other purposely planted articles, plus blog posts that are designed to hit stocks that these short sellers like to sell short.

This August may go down as the most volatile month in 25 years.  The good news is that we finally got the inevitable correction out of the way with panic selling and a big capitulation day.  The bad news is that the stock market often likes to “retest” it recent lows, so we could see a retest in the second or third week of September.  As long as the trading volume on the retest is not as high as last Monday’s panic selling, then the stock market will likely settle down and focus on the upcoming third-quarter earnings announcement season. I expect a big “flight to quality” in late September from quarter-end window dressing as professional money managers realign their portfolios to look good to their respective clients.

In This Issue

In Income Mail, Ivan Martchev will look closely at the China market, including his three “canaries in the coal mine” there.  Gary Alexander’s Growth Mail will dissect last week’s market swings and the outlook for the rest of the year. Then, I will examine the uniformly upbeat economic indicators released last week.

Income Mail:
2015 China Prediction Update
by Ivan Martchev
Balkanized Time Travel, Seriously

Growth Mail:
A Week of Sound and Fury, Signifying Nothing
by Gary Alexander
The Fed to the Rescue – Once Again
September 1 (1939) in Market History

Stat of the Week:
Second-Quarter GDP Revised up to +3.7%
by Louis Navellier
Crude Oil Prices Rise, but Inflation Remains Low

Income Mail:

*All content in Income Mail is the opinion of Navellier and Associates and Ivan Martchev*

2015 China Prediction Update

by Ivan Martchev

For the past two years I have submitted annual financial markets predictions to Marketwatch. For 2014, I made a prediction about a massive bull run in the dollar (see my December 27, 2013 Marketwatch article, “2014: The Year of the Dollar”) and for 2015 it was the Chinese economic unraveling (see my January 23, 2015 Marketwatch article,“Why 2015 Could be Rough for China”). I feel the Chinese prediction needs an update as a lot of the indicators that were mentioned in the article have made some gigantic moves that have profound implications for the global economy.

As mentioned in January, since China is the #1 or #2 consumer of most major commodities, a hard landing could create the kind of deflationary shock that the world has not seen since the 1930s.

Commodity Research Bureau Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The CRB commodity index fell as low as 185 last week. It has rebounded some as there has been a relief rally in most economically-sensitive assets – be they stocks, junk bonds, or commodities – after the Dow Industrials saw its biggest intraday point range in history, opening more than 1000 points lower. I think whether it is commodities, credit markets, or stocks, way too many people put way too many stops under those markets. As they panicked, this resulted in a stampede that ran through all of those stop orders. Those executed stop orders created an air pocket under those markets, resulting in an unprecedented daily range in the case of the DJIA. This is basically what happens when too many people try to sell at the same time.

Be that as it may, I think there is a better-than-even chance that commodities will take out the 40-year support that lies in the 180-200 area in the CRB Index, which has been violated only once in a weekly close at 175.90 back in the mid-1970s. This is because China faces a bad recession or a real depression courtesy of years of misallocation of capital via ever rising levels of debt, which should now act as a stone around the neck of the Chinese economy, now that both the real estate and stock markets have crashed.

Shanghai Stock Exchange Composite Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The Shanghai Composite suffered a rather significant leg lower last week, declining as low as 2850. This is about 850 points away from my target of 1000-2000, where the index will likely find its ultimate low. This is because the previous bubble run began from just under 1000 in 2005 and this latest bubble run began from just under 2000. Since there were no profits to support either bubble run, I figure the ultimate low is somewhere in there (see April 7 Bloomberg article “U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices” and June 15 article”Real Cost of Chinese Stocks Dwarfs 2007 Bubble”). The trouble is that the economy is decelerating with record indebtedness this time, so the profit shrinkage in the Chinese economy should be more dramatic than previous downturns.

In January, I suggested three companies leveraged to the domestic Chinese economy to act as leading indicators of what is going on in China. Just as ancient miners went down in their mines carrying a cage of canaries to warn them of the odorless, but poisonous, carbon monoxide gas, those three canary indicators would do the same. Here is a recap of what happened to these “canaries” since January.

Soufun Holdings New York Stock Exchange Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

SouFun Holdings (SFUN) is weak as it is a real-estate listing portal, and the Chinese real estate market is busted and gathering momentum to the downside. The stock rebounded in the first half, dragged by the momentum in the Chinese market, but has recently made fresh 52-week lows as its business deteriorates. Ivan Martchev does not currently own a position in SFUN. Navellier & Associates, Inc. does not currently hold a position in SFUN for client portfolios.

Bitauto Holdings New York Stock Exchange Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Bitauto(BITA) does online marketing for cars. It had a strong start to the year and then a series of profit warnings caused the shares to get cut in half, twice. Trading at nearly a quarter of its 52-week high, it is fair to say that as the Chinese economy deteriorates, car sales will deteriorate and so will Bitauto shares. Ivan Martchev does not currently own a position in BITA. Navellier & Associates, Inc. does not currently hold a position in BITA for client portfolios.

Noah Holdings New York Stock Exchange Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Finally, Noah Holdings (NOAH) repackages shadow-banking-system loans into wealth-management products that have higher yields. Given the size of the unregulated shadow-banking system, which at its height may have been as large at 100% of Chinese GDP (using estimates from multiple sources compiled by Brookings and explained in Income Mail), I have to say that the downside for Noah may be rather large. When non-performing-loan ratios surge as the economy goes into recession, those wealth management products will be hard to sell and those that were sold have yet to pass the coming “stress test.” I expect that Noah will get cut in half at least twice from present levels, provided it survives the coming shakeout in such “wealth management” products. Ivan Martchev does not currently own a position in NOAH. Navellier & Associates, Inc. does not currently hold a position in NOAH for client portfolios.

Among the three canary stock indicators, two are dead while NOAH is on the floor of the cage with one eye open and still breathing. The countdown to the coming serious Chinese recession has now started. The only unknowable is if it will turn out to be a depression, which should be cleared up towards the end of 2016 or early 2017.

Balkanized Time Travel, Seriously

The earth rotates from west towards east. That means that if you were to step right on top of the earth’s rotational axis at the North Pole, the Earth will be rotating counterclockwise. So every time you fly east, you lose hours. The further you fly, the more hours you lose. Every time you fly west, you gain the hours back. Theoretically, if you can fly fast enough, you should be able to go back and forth in time.

Regrettably, or luckily some might say, such speeds are beyond present-day human technology. It sure felt surreal, though, as I landed on the East Coast at 3:30 pm last Friday, when the place I had left in the morning was showing 11:30 pm local time. I guess the closest we’ll get to time travel is overseas jet lag.

Bulgaria Street ImageYears ago, that same strange jet lag feeling had gotten much stranger when I returned back home to Bulgaria in 2007, nine years after leaving in 1998. I could not recognize the place. I was like one of those spaceship captains that has lost all communication and jetted out into outer space at light speed, only to find his way home by sheer stroke of luck and discover that whatever he had left in 1998 was long gone. The place looked unrecognizable.

 

Bulgaria Stock Market Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The local stock market had gone parabolic. The shares that were trading at 0.5 times book value five years earlier were now trading at 5 times book value. To the locals, it all seemed normal. Local GDP had tripled in a decade and a lot of people had a lot more money. Unfortunately for the locals, a huge part of the economy was speculative real estate development, in which entrepreneurs were selling overpriced beach condos to West European condo flippers. Then the Great Financial Crisis of 2008 came. The speculative real estate business crashed and so did the local economy and stock market.

I had to deal with the repercussions of the same crisis on my side of the pond, but when I went back to the motherland in 2013, five years later, it was like I had flown west at unimaginable speeds, multiple times around the globe, as what I found on the ground felt like going back in time. I saw multiple unfinished empty apartment buildings, empty stores with “FOR RENT” signs (that no one wanted to rent), and the occasional “FOR SALE” sign by a home that no one wanted to buy.

Someone was finishing a new apartment building in my neighborhood right there in 2013 in the middle of the economic malaise.

“This looks expensive,” I noted to one of my old neighbors.

“The guy swears it will sell out as it is new-style of development,” meaning “modern.”

It is now 2015. I went by the same apartment building and it looked like no one had moved in. I asked the cab driver what is going on: “Did the bank take the building away from the developer?”

“Nope. He built it using only equity capital. No one is buying as it’s two times more expensive than anything else in the neighborhood and he is not lowering the price. It has been sitting empty for 2 years.”

Growth Mail:

*All content in Growth Mail is the opinion of Navellier and Associates and Gary Alexander*

A Week of Sound and Fury, Signifying Nothing

by Gary Alexander

“The S&P 500 has now closed at 1893, which is 4.96 standard deviations below its 50-day moving average. A negative move of this magnitude has only been seen on two prior occasions since 1900 – on October 19, 1987 (Black Monday) and on May 13-14, 1940, when Germany invaded France (WWII).”

– JPMorgan Global Equity Strategy, “Equities Sell Off…Deep Correction Unlikely” (August 25, 2015)

Last Monday, as the market opened 1089 DJIA points down – then recovered and then fell again – I had the option (all day long) of changing a lot of numbers in Growth Mail or just simply adding a disclaimer, “Data Current Through Friday, August 21.”  I chose the latter.  If there’s anything more dangerous than trying to catch a falling knife, it’s trying to stand your ground when the blade is falling rapidly toward your feet.

In August of 2011, as I have shown in recent columns here, we had five of six consecutive days with a 420 (or larger) DJIA point move.  In a similar fashion, we had five of six consecutive days in the last two weeks (August 20 to 27) with a 358-point (or more) daily DJIA move.  Here’s what happened in those days, along with the top-of-page-1 Wall Street Journal headline about the market’s actions of the previous day.

 Source: The Wall Street Journal
  August 2015    DJIA Change   Next Day’s Top-of-Page-1 Wall Street Journal Market Headline 
20 -358.04 (Friday, August 21) “Growth Fears Send Stocks into Skid”
21 -530.94 (Weekend edition) “Stock Plunge Picks Up Speed”
24 -588.40 (Tuesday) “Markets Reel in Global Selloff”
25 -204.91 (Wednesday) “Late Tumble Dashes Hope for Rebound”
26 +619.07 (Thursday) “U.S. Stocks Come Charging Back”
27 +369.26 (Friday) (Silence: Nothing on the Markets!)

 

On the seventh day, the Journal rested.  Friday was a ho-hum day, with the DJIA falling 11 points, but after a two-day 988-point rise, the only top-of-page-1 Wall Street Journal headlines on Friday, August 28 covered Hurricane Katrina and the economy: “A President Stops By to Celebrate the Resilience of New Orleans” and “Economy Shows Glimmers, Strains.”  A third big story covered a labor ruling.  There was NOTHING about the stock market after a shockingly strong recovery. (Amazingly enough, the major indexes were up for the week: The DJIA rose 1.1%, the S&P 500 rose 0.9%, and NASDAQ rose 2.6%.)

Turtle ImageThe Journal’s weekend headline was positive, but far from accurate: “Swings Don’t Shake Investors.” Unfortunately, that’s not true: A record number of investors were “shaken” last week. The exodus from stocks started two weeks ago. For the week ending August 20, the August 21 Journal reported that “global equities suffered $8.3 billion of outflows in the week ended Thursday, representing the worst week in almost four months, according to data from Bank of America Merrill Lynch.”  But that was just the start.

The sell-off grew far worse last week: $29.5 billion in equity funds were sold, according to Marketwatch (See “Total Risk Surrender,” August 28).  The greatest volume of fund sales came on the day the market bottomed out: “Investors pulled more money out of stocks funds in one day during the past week – Tuesday – than they did in any day in roughly the last eight years…. Tuesday’s outflow was $19 billion, according to the latest ‘Flow Show’ note dated Thursday from the Bank of American Merrill Lynch.”

The Journal’s headline would have been more accurate to read: “Investors Bail out at Market Bottom.”

S&P’s Sam Stovall said last Wednesday morning that “advances typically take the stairs, while declines take the elevator.”  However, soon after he posted that note in S&P Capital IQ, the bulk of last week’s recovery came – between 12:30 Wednesday and 1:05 Thursday, when the DJIA rose almost 1000 points. (That sounds like an elevator ride to me!)  Alas, Tuesday was the peak day of massive stock sales – the day the elevator stopped at the mezzanine, let off a crowd of panicky investors, and began to rise again.

Standard and Poors 500 Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The S&P 500’s low came at Tuesday’s close at 1867.6, followed by a quick rise to the 1980s on Friday.

The Fed to the Rescue – Once Again

Last week, I opined that the Fed’s meeting in Jackson Hole might supercharge the market’s recovery.  Sure enough, a Fed official came to the market’s rescue, but sooner than I expected.  According to the Tuesday New York Times (“Soothing Talk by Federal Reserve Official Buoys Wall Street,” August 25), “the Federal Reserve helped save the day for investors.” Markets were buoyed by William C. Dudley, president of the New York Fed, who “said that the recent turmoil in the financial markets was a risk to the U.S. economy.”  He also said the prospect of raising interest rates in September is now “less compelling.”

Last week’s down-and-up (and down and up again) action was one for the history books.  In their August 28 “Bespoke Report,” Bespoke Investment Group wrote that “stocks slid into their biggest slump since 2011 and indices reached their most oversold condition since the German Blitzkrieg rolled into northern France….the 3-day sum of S&P prices’ distance from its 50-DMA at each close reached -14.07 standard deviations…an astounding reading bested only by May 15th, 1940, when the Blitzkrieg pointed itself at France.  While the current geopolitical backdrop is hardly sublime, it’s hardly the start of a World War.”

India Central Bank ImageMost pundits are saying that fears over China spurred this latest bout of panic among investors.  But why are there no headlines about the increasing GDP in a nearby nation with a nearly-equivalent population, India! According to the August 27 Wall Street Journal (“India’s Central Bank Predicts Economic Growth Will Accelerate”), “India’s economic growth is likely to accelerate, helped along by lower inflation and improving government finances and business confidence.”  In its annual report, the Reserve Bank of India forecast GDP growth of “7.6% for the year ending March 31, up from 7.2% the year before. With fiscal consolidation firmly underway and with buoyant business optimism, the stage is now set for unshackling stalled investments and for boosting new capital spending in order to accelerate the pace of growth.”

This might come as a surprise, but the emerging economies of East Asia are still strongly positive in GDP growth for 2015.   According to the latest issue of The Economist (August 29), the fastest growth rates in the world in 2015 are in Asia: India (+7.6%), China (+6.9%), the Philippines (+6.6%), Pakistan (+5.7%), Malaysia (+5.5%), and Indonesia (+4.9%), according to the Economist Intelligence Unit data projections.

In addition, the U.S. GDP was just revised up to a 3.7% annual rate last quarter from 2.3% in the first estimate.  That’s a massive move up, showing there is little likelihood of a recession any time soon in the U.S.  GDP is the most important overall number, but even before GDP was revised, Bespoke recited this positive litany:

“Today, existing home sales hit their highest level since 2007. The same goes for housing starts, out earlier this week. Jobless claims are near 40-year lows, even without adjusting for a drastically larger population and labor force. 2.9 million jobs have been added in the last year, at a growth rate of 2%. Workers are receiving raises as measured by median wage trackers or our analysis of what the Employment Cost Index says about blue collar workers. Auto sales are sitting near all-time highs. Consumer debt is falling as a percentage of income and debt service payments as a percentage of disposable incomes are at all-time lows. The government deficit is narrowing, banks have been recapitalized and deleveraged (and are lending at robust rates), and consumer confidence sits near post-recession highs. All of this has come, once again and we emphasize, with declining debt loads for the households that create 70% of US GDP through consumption.” – Bespoke Investment Group, “Two Lies and a Truth,” August 20, 2015

In addition, see Louis Navellier’s “Stat of the Week” column (below) for some uniformly positive data.

September 1 (1939) in Market History

Bespoke and JPMorgan referred to last week’s market as the most oversold condition since Hitler invaded Western Europe in May of 1940.  But World War II began earlier, when Germany invaded Poland on September 1, 1939.  This brings up an interesting question: Why was the stock market positive after the invasion of Poland and extremely negative following the Blitzkrieg into Belgium, Holland, and France?

After Hitler’s surprise invasion of Poland on Friday, September 1, the DJIA gained almost 20% in two weeks, rising from a low of 131 in late August to a peak of 155 on Tuesday, September 12.

Nazis ImageIt’s hard to understand this short-term market euphoria. One theory is that the U.S. market rose in early September of 1939 because the U.S. was firmly isolationist in sentiment at the time. Most Americans favored sitting out the looming European war, but the invasion of France changed all that.  We moved from “neutral” to “non-belligerent” and became the “arsenal of democracy” in the Lend-Lease program.

In this chart, you can see the initial sharp rise in September 1939 and the sharp fall in May of 1940.  The Dow began falling again in late 1941, but the DJIA bottom came early in World War II, in April of 1942.

Dow Jones Industrial Average Chart

Source: FiendBear.com blue line = Dow; red line = 50-DMA; green line = 200-DMA

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

According to data from Bespoke (“September Seasonality,” August 31), September is the worst market month over the past 50 and 100 years, but August is the worst month in the last 20 years (September comes in at fourth worst in the last 20 years).  In the last decade, September has risen more often (seven times) than not (three times) with an average gain of 0.67%, despite a catastrophic 2008 and a weak 2011.

 Source: Yahoo! Finance.
  Year    S&P 500 September Change 
2005 +0.69%
2006 +2.46%
2007 +3.58%
2008 -9.08%
2009 +3.57%
2010 +8.76%
2011 -7.18%
2012 +2.42%
2013 +2.97%
2014 -1.55%

 

Longer-term, here is the S&P 500’s performance during the last four months of the year, since 2009:

 Market Performance, September to December, 2009-14 
 Source: Yahoo! Finance, as measured by the S&P 500
 Year   August 31   December 31   4-Month Gain 
2009 1020.62 1115.10 +9.26%
2010 1049.33 1257.64 19.85%
2011 1218.99 1257.60 3.17%
2012 1406.58 1426.19 1.39%
2013 1632.97 1848.36 13.19%
2014 2003.37 2058.90 2.78%
Average 4-Month Gain: +8.26%

 

Past performance is no guarantee, of course, but since the market finally suffered its long-awaited 10% correction, I would not be surprised to see a recovery on the order of 8%-10% for the remainder of 2015.

Stat of the Week:

*All content in this "Stat of the Week" section of Market Mail represents the opinion of Louis Navellier & Associates, Inc.*

Second-Quarter GDP Revised up to +3.7%

by Louis Navellier

The economic news last week was very positive and helped the stock market to rebound in the second half of the week. Specifically, last Thursday, the Commerce Department revised second-quarter GDP growth to a 3.7% annual pace, up from its previous estimate of 2.3%. Economists were expecting an upward revision to a 3.3% annual growth rate for the second quarter, so this was truly a big surprise.

According to the same Commerce Department report, the GDP increase was due largely to higher-than-anticipated business investment, which was revised up to a 3.2% annual pace (from an annual decline of -0.6%).  Government spending also grew at a 4% annual pace in the second quarter (up from an initial estimate of 2%).  Inventories also expanded by $121 billion in the second quarter (up 10% from an annual estimate of $110 billion).  These higher inventories, however, may actually cause economists to revise their third-quarter GDP estimates down a bit.

Consumer Goods ImageEarlier in the week, on Tuesday, the Conference Board announced that its consumer confidence index soared to 101.5 in August, up from a revised 91 in July.  This was well above economists’ consensus expectation of 94.  The components within the consumer confidence index that really drove the surge were the present situation (115.1 in August, up from 104 in July) and future expectations (92.5 in August, up from 82.3 in July).  So overall, consumers are happy campers, which bodes well for consumer sales.

On Wednesday, the Commerce Department announced that durable goods orders rose 2% in July and surged a revised 4.1% (up from 3.4%) in June.  Orders for automotive durable goods rose 4%, while defensive orders surged 22.3% in July.  Interestingly, orders for commercial aircraft declined 6% in July.  Overall, excluding the volatile transportation component, durable goods orders rose 0.6% in July.  What really got economists excited about the report is that business investment, based on core orders, rose 2.2% in July, the largest monthly increase in 14 months.  In the past 12 months, business investment is still down 3.8% and had been worrying many economists. However, business investment has risen in the past two months.

Crude Oil Prices Rise, but Inflation Remains Low

Crude oil futures rose 10% on Thursday and another 6.5% on Friday, despite the fact that Venezuela asked OPEC to hold an emergency meeting.  The lines for food in Venezuela are now up to six hours long for beans and rice. Algeria and Ecuador have also requested OPEC meet due to growing social problems caused by low crude oil prices.  If anything, the surge in crude oil seems to be mostly short covering and since worldwide demand ebbs in the fall, I suspect that crude oil will be lower several weeks from now.

Speaking of inflation, at last weekend’s Kansas City Fed Conference in beautiful Jackson Hole, Wyoming, the overwhelming topic seems to have been why inflation has failed to materialize as the Fed anticipated it would with the improving economic growth in the second quarter.  Vice Chairman Stanley Fischer has repeatedly said that the Fed should not raise key interest rate until inflation materializes.

Chinese Port ImageIn his Saturday talk, Fischer said that the Fed is now watching development in China closely, but the fact of the matter is that the Fed should look in the mirror for the cause of low inflation.  Due to their 0% interest rate policy, the Fed helped create asset bubbles, such as an energy boom financed by high yield debt.  Furthermore, money pumping at other central banks, especially the European Central Bank (ECB) and Japan’s central bank, caused capital flight to Britain and the U.S., which strengthened their currencies and helped to lower the cost of imported goods.  Furthermore, now that China has joined the ECB and Japan in purposely weakening its currency the price of import goods may fall further.  Finally, since commodities are priced in U.S. dollars, virtually all commodity prices are now under pressure.  In the end, the financial engineering by the Fed and other central banks has caused the current deflationary environment; since they have no one to blame but themselves, they might want to look in the mirror.

I must reiterate that in the current low interest rate environment, I expect companies to continue to borrow in the bond market and buy back their shares, simply because so many companies can borrow well below their underlying Return on Equity (ROE) and such buy-backs help boost their underlying earnings per share.  This “financial engineering” is taught in Finance 101 at every major business school around the country.  Essentially, low interest rate environments combined with low-to-moderate price/earnings ratios are fueling stock buybacks.  The folks that underwrite bonds are also telling CFOs that they can bolster their underlying earnings per share via borrowing in the bond market, so Wall Street is selling a tremendous amount of corporate debt.  In fact, I suspect that much of last week’s big stock rebound was fueled by aggressive stock buy-back programs by the companies themselves.


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Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier's composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

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It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. Click here to see the preceding 12 month trade report.

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier's judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report.

Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation of any offer to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for you. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor's holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Results presented include the reinvestment of all dividends and other earnings.

Past performance is no indication of future results.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not intended or written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE: The performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier's Growth Investor, Louis Navellier's Breakthrough Stocks, Louis Navellier's Accelerated Profits, and Louis Navellier's Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters' reported performances should be considered mere "paper" or proforma performance results. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier & Associates' Investment Products and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters and advertising materials authored by Louis Navellier typically contain performance claims that do not include transaction costs, advisory fees, or other fees a client may incur. As a result, newsletter performance should not be used to evaluate Navellier Investment Products. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or performance claims, should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier's composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report. Request here a list of recommendations made by Navellier & Associates, Inc. for the preceding twelve months, please contact Tim Hope at (775) 785-9416.

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