Saturday, December 10, 2011

The one must-own sector -- that is, if interest rates start to firm up -- might be the life insurers.

Low interest rates have been value-destructive for these companies that boast excellent funds and cheap P/E multiples at large discounts to tangible book value.

GS raises European banks from Underweight to Neutral.

Tony Dwyer at Collins Stewart:

A couple of tactical stats from our pal Jason Goepfert at should be pointed out and highlight that some of the crisis environment is not historically unique but offers a glimpse to potential market intermediate-term outcomes:

* Over the past three months the median of VIX is 34%. That has been a great intermediate-term buy signal kicking off following the 1987, 1998, 2002 and 2008 lows. The average median gain 9 months out of 13.8% with no negative occurrences.

* Yesterday, the TRIN Index (ARMS Index) was 4. This is extraordinarily unusual for December. It has happened only 4 other times in 60 years (12/29/43, 12/17/45, 12/4/50 and 12/1/08). All four of them marked the exact December low for those years, with the S&P subsequently rebounding over the next week to the tune of +4.0%, +1.4%, +3.8% and +11.5%, respectively.

Imperial Capital puts a $6 price target on SHLD.

When the Street is ruled by the fear of uncertainty and wild daily price moves, isn't that precisely the time one should be seeking long-term investment opportunities?

The world's economic recovery is imperfect, and, with the U.S. economy exhibiting only moderate growth - and negative job "growth," there is little margin of safety from exogenous shocks. But imperfection and vulnerability are now universally recognized (contrasted with the optimism that existed a year, six months and three months ago) and are arguably reflected and more than discounted in reasonable/current valuations.

I continue to see the potential for a vast rotation out of bonds (which have pint-sized yields now) and into stocks (e.g., the S&P 500 yields more than the 10-year U.S. note).

Equally important, the relative economic and profit position of the U.S. and its large corporations over many other regions in the world favor buying American. And, in the fullness of time, I can see a rotation, too, out of nondomestic stocks into large-cap S&P names.