Thursday, January 19, 2012

LNC - I'd be interested again below 20. I have learned today (in a form 8-K SEC filing) that Frederick Crawford, the Executive Vice President of Corporate Development at LNC, has resigned (effective Jan. 20, 2012) and will be joining CNO shortly.

Unfortunately, I have to conclude that Lincoln National will not be sold anytime soon, as Crawford would not likely forego options and/or a golden parachute (on a control change) and leave the company if a deal was imminent or in the works.

"Volatility is fairly common this time of year."

-- Labor Department

Initial jobless claims came in 50,000 lower than the prior week's report at 352,000 (and compared to 384,000 consensus).

Apparently, the Monday holiday forced municipalities to estimate the claims figure.

Smoothing out the four-week average produces 379,000 (probably a better number).

Continuing claims also fell by a greater-than-expected 215,000. By contrast, extended benefits increased by over 105,000.

BAC - One-time items suggest a loss.

A combination of non-recurring items suggest that BAC's core results were in the red, far from the $0.15 a share reported.

Indeed, including a reserve release of 7 cents on top of other non-recurring factors (securities gains, etc.) it suggests that the company, on a recurring basis, had a loss of about 10 cents a share.

Revenues were light. Investment banking and equity activity were especially weak.

Tangible book value per share dropped from $13.22 to $12.92. The stock trades below $7.....

There may be a bustle in the fund-management hedgerow.

"Does anybody remember laughter?" -- Led Zeppelin, "Stairway to Heaven"

There has been no laugher in mutual fund land over the last few years as individual investors have fled equity funds for over five years.

Individual investors have taken out $450 billion from domestic equity funds since 2007 and have added $850 billion into bonds. That swing of $1.3 trillion is unprecedented in history.

Meanwhile hedge funds, according to The ISI Group, are now at their lowest net long exposure since the Generational Low of March 2009. And large pension funds are disproportionately skewed in a flight to safety into fixed income over equities.

It is for the reasons above that I have reasoned poor investor sentiment as a foundation block for the bullish market case this year and why the weekly investor surveys are not a particularly a good gauge for evaluating investor confidence. I prefer to watch what investors do, not what they say.

That said, according to ICI after 20 weeks of consecutive outflows of equity-focused U.S. mutual funds, the latest week showed a modest $1.5 billion of inflows.

This could be the start of something far bigger, like an inflection point after five years of negative fund inflow datapoints.

So, if you are looking for a catalyst for higher stock prices in a slow-growth enivronment, I continue to see a rotation into U.S. stocks and out of bonds (of all types) as a major investment theme in 2012.

I'm looking at TROW, WDR, OZM, LM, SCHW and ETFC, who will be material beneficiaries of a gradual move back into stocks (and out of bonds).

Already, the shares of the aforementioned are starting to outperform as investors seem to be anticipating a bigger reallocation trend that might have already started.

As Zeppelin's Page and Plant went on to write:

"And it's whispered that soon if we all call the tune
Then the piper will lead us to reason.
And a new day will dawn for those who stand long
And the forests will echo with laughter."