A lot of people are wondering when the stock market will get back to fundamentals now that Janet Yellen has been named to replace Ben Bernanke.
I won't really, or at least not in the way traditionalists look at such things.
"I wish we could get back to fundamentals," lamented Brian Battle, director at Performance Trust Capital Partners on Bloomberg TV. "Right now it is short-term and all trading and bad news in the financial sector."
Fundamentals are there, it's just that the Federal Reserve money supply, that will keep going under Yellen, is increasing price-earnings ratios in the stock market. Earning aren't growing, just the premiums investors are willing to pay for stocks.
"The real banking business like lending and interest-rate margins and net interest margins takes takes a long time to recover," said Battle. "The capital markets business for the big banks stinks because of mortgage revenue. The lending business is not picked up yet. The financial sector looks very vulnerable because of low rates on low demand whitchurch traditional banking."
Below we've outlined three companies in our Stocks in the News format that demonstrate how fundamentals work in today's market.
The first company, Teradata, disappointed investors and consequently got punished. In fact, it's been punished all year because it's failed to perform. The second company, Coca-Cola, performed exactly as expected and therefore is being rewarded, a bit. The third company, Wynn Resorts, seems to be performing in a way that exceeds investors expectations and therefore it will receive an outsize reward.
That outsized reward is made possible by the friendly folks of the Federal Reserve Bank. More money supply means higher price earnings ratios for stocks.
Welcome to Ransom's Stocks in the News where the headline meets the trendline.
Stocks in the News is produced by John Ransom in conjunction with Ransom Notes Radio.
Stocks in the News:
Stock Number One: Teredata. (SYMBOL: TDC)
And the headline says: Teredata plunges on weak results - OptionMonster
Moody's Puts Puerto Rico on Downgrade to Junk Review Citing Very High Debt, Pension Obligations, Chronic Deficits; Exodus Underway | Mike Shedlock
Radical Capitalism: A remote Indonesian village runs its own telecommunications company. (From a laptop and a tree) | Nick Sorrentino
Open Letter to Obama and Congress From Internet Giants Calls For Reining In Government Surveillance | Nick Sorrentino
(An important interview) Saving the Net from the surveillance state (And Crony Media): Glenn Greenwald speaks up (Q&A) | Nick Sorrentino