What’s Wrong with Exxon Mobil (XOM)?

After suffering through a brutal July and August in which it experienced an eleven day losing streak and a nine day losing streak, Exxon Mobil (XOM) is back to its losing ways by closing out September on an eight day losing streak.  Over the last 50 days, XOM has been down 38 times!

Below is a chart showing the rolling number of down days over a 50 trading day period for Exxon Mobil going back to 1980.  As shown, the stock has just had by far its worst 50 day period over the last 30+ years in terms of down days.  Even during the Financial Crisis, the stock peaked out with 34 down days over a 50 day period.

Given the struggles that the two largest stocks in the world -- Apple (AAPL) and Exxon Mobil (XOM) -- have had over the last nine months, it's pretty remarkable that the S&P 500 is sitting on year-to-date gains of nearly 20%.

Preparing for the Partial Shutdown

From the WSJ: Agencies Prepare to Send Workers Home as Shutdown Looms
With the clock ticking and no budget deal in sight, federal agencies prepared to send more than 800,000 workers home without pay, and large swaths of the government were set to temporarily close.
Absent an agreement, workers who are furloughed will have to report to their agencies Tuesday morning for a half-day of preparations for the shutdown. Most will have up to four hours to wrap things up, and then be sent home until further notice.

Those who are deemed essential, or—in the language of government, "excepted"—will be guaranteed back pay after the fact. In past shutdowns, Congress has agreed to pay those furloughed as well, but given the cost-cutting zeitgeist of 2013, that was hardly guaranteed this time.
A Wall Street Journal review of agencies' shutdown plans found that more than 800,000 workers would be furloughed. In all, the federal government employs just under 2.9 million civilian employees.
Bad policy, but the impact on the economy will be minimal if the shutdown is short.

As we've discussed for some time, the deficit is declining rapidly (more short term cuts are bad policy right now) and public employment has fallen sharply over the last 4+ years (a significant drag).   This is not helpful.

Chicago PMI Kicks Off the Week on a Positive Note

In what is likely to be a busy week for economic data (provided there is no government shutdown), things kicked off on a positive note Monday with a better than expected Chicago PMI report.  While economists were expecting the headline reading to come in at a level of 54.5, the actual level was 55.7.  This was enough for the highest level since May's reading of 58.7.

The table to the right breaks down this morning's report by category.  Of the index's seven sub-components, this month we saw month/month increases in five components while Employment and Prices Paid were the only categories that showed declines.  Relative to a year ago, today's report was equally as impressive.  Here again, Inventory and Prices Paid were the only two categories that declined relative to last year's reading, while the remaining five categories are higher now than they were last year.

Click here to read CNBC.com's recent article on Bespoke Investment Group.

Nicht mehr auszuschließen: Deutsche Chemiewaffen nun auch in Syrien

Wer kann wirklich bei einer Diktatur, wie der von Assad, die bekanntlich Chemiewaffen produzierte und dem Chemiewaffenabkommen mit seinen Inspektionen nicht beigetreten war, glauben, daß nur Zahnpaste und ähnlicher Kram produziert werden sollten? So ist zu befürchten, daß amtliche deutsche Sorglosigkeit und Liebe zum Export hunderte von Toten auf dem Gewissen haben.

10 Monday PM Reads

My afternoon train reading:

• The Unofficial Dividend.com Guide To Being An Investor (Dividend.com)
• 10 Terms Investment Pros Use to Raise Money (The Reformed Broker)
• The Shocking Cost to Taxpayers of a Shutdown (Fiscal Times)
• 10 surprising economic trends that rule the world (Quartz)
• Fed Too Familiar With Lost Workers Seeks New Guideposts: Economy (Bloomberg) see also Janet Yellen record gives pointer to Fed policy if Obama picks her as chair (FT.com)
• How Tighter Mortgage Standards Are Holding Back the Recovery (WSJ)
• Invest in whatever Wall Street hates (MarketWatch)
• Who Should Invest in Startups? (Priceonomics)
• How I botched it on CNBC (Salon)
• Survival After Cancer Diagnosis Strongly Associated With Governments Spending On Health Care (Science Daily)

What are you reading?


9.30.13 Index

Source: Bloomberg

Last-Day Selloffs, First-Day Rallies

The S&P 500 is continuing a trend today by selling off on this last day of the month.  The bulls are hoping the trend continues tomorrow with a day of gains.  Since May, the S&P 500 has declined on the last trading day of the month and then rallied on the first trading day of the following month.  The last day of the month declines and first day of the month gains are highlighted in the chart below.  

Click here to read CNBC.com's recent article on Bespoke Investment Group.

Record $217 Billion Corporate Bond Issuance in September; Verizon Leads the Way With Largest Bond Deal Ever at $49 Billion

Corporations are scrambling to raise cash to complete buyouts or simply because they can. Barron's reports September Sees Record $217 Bln Corporate Bond Issuance
September isn’t completely finished just yet and it’s already produced a record $217 billion in U.S. corporate bond issuance, an 18% bump from the previous single-month record, according to Janney Montgomery Scott. The secondary market fed off the activity of the primary market, translating to $394 billion in total trading, about 70% of which was in investment grade credits.
Five days ago Bloomberg reported Verizon and Sprint Lead Record Month for U.S. Bond Issuance.
Sales of corporate bonds in the U.S. reached an all-time high this month, with phone companies Verizon Communications Inc. and Sprint Corp. leading offerings of about $193.7 billion.

Verizon issued $49 billion on Sept. 11 in the biggest corporate bond deal ever while Overland Park, Kansas-based Sprint raised $6.5 billion on Sept. 4 in the largest high-yield sale since 2008, according to data compiled by Bloomberg. Offerings broke the previous monthly record of $177.3 billion set in September 2012.

Following the Fed’s surprise decision to leave the program untouched, yields on the Bank of America Merrill Lynch U.S. Corporate & High Yield Index dropped to a six-week low of 4.05 percent yesterday.

“Issuers are saying ‘let’s strike now because we have the wind at our back,’” Timothy Cox, executive director of debt capital markets at Mizuho Securities USA Inc. in New York, said in a telephone interview. “There’s no reason to wait.”

Yields from the most creditworthy to the riskiest U.S. borrowers declined from a 15-month high of 4.37 percent on Sept. 5, index data show. Yields touched an unprecedented low of 3.35 percent on May 2.
Largest Bond Deal Ever

Also consider Verizon Raises $49 Billion in Largest Corporate-Bond Sale.
Verizon Communications Inc. (VZ) sold $49 billion of bonds in eight parts in the biggest company debt offering ever.

The second-biggest U.S. telephone carrier issued fixed-rate debt with maturities ranging from three to 30 years as well as two portions of floating-rate securities, according to data compiled by Bloomberg.

The deal, which is about the size of all outstanding obligations of the Slovak Republic, is helping to fund New York-based Verizon’s buyout of partner Vodafone Group Plc. (VOD)’s 45 percent stake in the largest and most profitable U.S. wireless carrier, Verizon Wireless. The sale is more than double the previous issuance record of $17 billion from Apple Inc. sold in April.

The 30-year securities, the biggest corporate bond ever issued, traded as high as 107.6 cents on the dollar as of 1:12 p.m. in New York from an issue price of 99.883 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The bubble in corporate bonds is massive. And it's one of the things that has helped lift the stock market as well.

Mike "Mish" Shedlock
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