Beyond the Headline: JCP CEO Out - More to the Story

J.C. Penney (JCP) ousted CEO Ron Johnson after less than 2 years into his turnaround plan for the ailing retailer. This is a big story, but there is a bigger story here.

Bill Ackman, the big hedge fund manager, which has been pushing JCP for the last couple of years as one of the best investments in the market is looking worse and worse every day. In July 2012 at a conference the fund manager said that JCP was the only stock he owned that could go up by 20 to 15 times its value in the next 5,6, to 7 years. How did that work out for you Ackman??

He is also the infamous guy that has been shorting Herbalife (HLF) and bashing the company publicly calling it a ponzi scheme. The stock has been holding up even though Ackman believes the company should be trading much lower.

The point here is not to bash Ackman, but to show that even the best of the best make bad calls. Remember Bill Miller the mutual fund manager that had a streak of a decade of gains and beating the market? Well in 2007 his fund lost nearly half its value.

I pick stocks and ETFs for a living and know how difficult it can be. So as an individual investor you need to set realistic goals for your portfolio. Whether doing it yourself or with a paid advisor like myself. Without goals that are attainable or realistic you will continue to chase your tail and never achieve your financial goals.

Breaking Down the Ugly Jobs Report

You can read the headline numbers for the March Jobs Report and depending on where you get your news it could lean towards the positive or negative side of the fence. Unfortunately the numbers were not good and it is very difficult to find a silver lining to the report.

Here is a bullet point breakdown:

• 88,000 jobs created in March - well below the estimates and smallest gain in 10 months

• February and January were revised higher by a total of 61k jobs - possibly a tiny silver lining

• Civilian Labor Force fell by 496k – at lowest level in 9 months

• Unemployment Rate dropping to 7.6% from 7.7% - This is laughable because the only reason it fell was because another 496k workers dropped out of the work force.

• The labor participation rate, which is a true number of how the jobs market is fell to 63.3%, the lowest since May 1979! The number has now spent 15 consecutive months under 64%: longest streak since 78-79

• Retailers lost 24k jobs - this could be directly affected the the payroll tax change in the beginning of the year

• The only silver lining is that it could lead to continued quantitative easing from the Fed for many more months.

• Sector Breakdown: Transports -27k, Postal -12k, Temp +20, Gov -7 (not sequester), Construction +18k, Health Care +23

• Only creating 169k jobs per month over the last 12 months

• March 2013 unemployment rate would be 10.9% if the labor force participation rate was the same as it was in January 2009 (65.7%)

• March's job gains were half the pace of the previous six months, when the economy added an average of 196,000 jobs a month.

Morning Market Update - Japan, France, Jobs

The futures are up slightly after a worse than expected weekly jobs number and a big rally overnight in Japan.

Stocks are looking to bounce on the open this morning after a sell-off yesterday that was fueled by fears out of North Korea and San Francisco Fed President Williams suggesting that the quantitative easing (QE) efforts by the Fed could end at some point this year.

Morning Notable Headlines

• The yield on a bond auction in France came in at a record low for their 10-year paper. The 2 billion Euro auction yielded 1.94%, down from 2.1% in the previous sale. This is surprising considering the French economy has yet to turn around. 
• Related ETFs: iShares France ETF ($EWQ)
• The Nikkei was last up over 3% after the BOJ meeting in which they are set on fighting deflation. The open-ended plan to buy government bonds of all maturities has the Yen falling and stocks rallying.
• Related ETFs: WisdomTree Japan Hedge Equity ETF ($DXJ) and Rydex CurrencyShares Japanese Yen ETF ($FXY)

ETF of the Day - ITA Defense Stocks

The market began selling off after the noon hour as rumors started circulating about North Korea and what their next move may be. I am sure most of it is pure rumors, but what isn't rumor is that the US is sending land-based missile defense systems to Guam to protect against a North Korean attack.

The fears were enough to give investors a reason to sell and take profits after one of the best quarters in a decade. But one sector was able to dodge the bullet (no pun intended) of heavy selling.

The iShares Dow Jones US Aerospace & Defense ETF (ITA) was last up 0.6% as money was going into the true defensive companies. The top three holdings in the ETF were all up with 30 minutes left in trading: United Technologies (UTX), Boeing (BA), and Lockheed Martin (LMT).

ETF Facts

• 34 stocks in ETF
• Expense ratio of 0.46%
• Dividend yield = 1.95%
• P/E ratio = 16.58
• Beta vs. S&P 500 = 0.79
• 12-month Return: +9.4%

ETF of the Day - IHF

Shares of U.S. health insurers rallied Tuesday, after the Center for Medicare and Medicaid Services announced plans to increase the amount the government pays to insurance firms for its Medicare Advantage plan.

The payments to insurers will increase by 3.3% in 2014 versus the original proposal of cutting the payments by 2.2%. This sent the stock soaring the last 2 days.

Big winners include Humana ($HUM), UnitedHealth Group ($UNH), and Cigna ($CI).

An ETF that concentrates on the health insurers is the iShares Dow Jones US Health Care Providers Index ETF ($IHF). The ETF is up 2.6% today and 6% in the last week.

IHF Notes:

• Total of 47 stocks
• Largest Holdings are $UNH, Express Scripts Holding ($ESRX), and Wellpoint ($WLP) and they make up 32% of the ETF.
• Expense ratio = 0.46%
• Dividend Yield = 0.86%
• Beta vs S&P 500 = 1.1
• P/E Ratio = 18.61
• 12 month return = 18% 

The chart below is $IHF over the last year. Clearly you do not want to chase after a 6% rally in one week, but a pullback to the $78 area could be the time to get in.

Midday Market Update: New Highs, Health Care ETFs, Apple

Today midday market update.

• Stocks at new highs
• Health care ETFs breaking out
• KBWD (dividend ETF) gapping higher
• Apple stock bottoming?

Morning Market Video - 6 ETFs to Watch

Monday morning video with 6 ETFs we are watching closely.