July 15, 2011

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MARKET OVERVIEW

Index
DJIA NASDAQ RUSSELL 2000 S&P 500

started week
12655.77 2828.1 844.61 1343.31

Thursday Close
12437.1 2762.67 823.32 1308.87

4 day change
-218.67 -65.43 -21.29 -34.44

4 day change %
-1.73% -2.31% -2.52% -2.56%

ytd
7.78% 4.69% 5.06% 4.53%

Summary of VE Stock Universe

Stocks Undervalued Stocks Overvalued Stocks Undervalued by 20% Stocks Overvalued by 20% 55.17% 44.83% 22.85% 16.32%

SECTOR OVERVIEW
Sector
Aerospace Auto-Tires-Trucks Basic Materials Business Services Computer and Technology Construction Consumer Discretionary Consumer Staples Finance Industrial Products Medical Multi-Sector Conglomerates Oils-Energy Retail-Wholesale Transportation Utilities

Change
-1.15% -0.71% -1.31% -1.43% -1.22% -1.04% -1.05% -1.39% -1.11% -1.26% -0.83% -0.73% -0.85% -1.38% -1.37% -0.94%

MTD
1.12% -0.31% 0.95% -2.01% -2.49% -0.56% -1.02% -0.68% -1.92% -0.30% -0.21% -3.71% -1.91% -0.56% -1.79% -1.96%

YTD
16.71% -5.27% -4.60% 6.22% 5.46% -10.57% 3.07% -3.77% 1.20% 3.87% 13.82% -0.27% -1.57% 7.60% -7.01% 4.07%

Valuation
2.14% overvalued 0.42% overvalued 4.04% undervalued 1.52% overvalued 4.14% undervalued 5.97% undervalued 0.51% undervalued 3.87% overvalued 1.07% undervalued 2.63% undervalued 2.32% undervalued 4.37% overvalued 1.05% overvalued 0.28% overvalued 6.27% overvalued 5.35% overvalued

Last 12MReturn
31.27% 49.30% 59.19% 21.49% 32.16% 4.85% 29.48% 17.84% 11.94% 38.24% 27.66% 30.45% 42.59% 33.68% 17.32% 21.15%

P/E Ratio
21.64 24.59 30.24 24.16 42.54 39.11 35.43 28.1 26.88 29.64 32.17 25.32 56.6 30.97 29.37 28.32

Sector TalkFinance Stocks

Below, we present the latest data on leading Finance Sector stocks from our Institutional software package (VEI). These results were filtered by market price and volume--no results below 3$/share or less than 100k shares/day volume.

Top-Five Finance Sector Stocks--Short-Term Forecast Returns

Ticker
RDN FAF SFE DB BFR

Name
RADIAN GRP INC FIRST AMER FINL SAFEGUARD SCTFC DEUTSCHE BK AG BANCO FRANC-ADR

Mkt Price
4.16 15.13 17.76 52.86 9.75

Valuation(%)
-75 -4.51 -75 -9.9 -41.17

Last 12-M Retn(%)

-51.46 12.91 53.5 -16.02 54.03

Top-Five Finance Stocks--Long-Term Forecast Returns

Ticker
RDN SFE MIM FAF WAC

Name
RADIAN GRP INC SAFEGUARD SCTFC MI DEVLPMNTS -A FIRST AMER FINL WALTER INV MGMT

Mkt Price
4.16 17.76 30.36 15.13 24.19

Valuation(%)
-75 -75 N/A -4.51 -68.36

Last 12-M Retn(%)

-51.46 53.5 149.06 12.91 54.17

Top-Five Finance Stocks--Composite Score

Ticker
MCO AEA AMP SLM UBS

Name
MOODYS CORP ADV AMER CASH AMERIPRISE FINL SLM CORP UBS AG

Mkt Price
36.32 8.32 54.75 16.15 16.99

Valuation(%)
-26.31 -18.99 -16.13 -23.59 -47.09

Last 12-M Retn(%)

64.87 129.83 40.89 41.92 15.19

Top-Five Finance Stocks--Most Overvalued

Ticker
UAM GRT SLG KCAP CLP

Name
UNIVL AMERICAN GLIMCHER REALTY SL GREEN REALTY KOHLBERG CAPITL COLONIAL PPTYS

Mkt Price
10.33 9.73 83.79 7.79 20.84

Valuation(%)
283.04 140.64 121.12 106.02 90.95

Last 12-M Retn(%)

-28.41 63.26 47.28 81.16 39.77

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Free Report Download for Subscribers

As a bonus to our Free Weekly Newsletter subscribers, we are now offering a FREE DOWNLOAD of one of our $ 25.00 Detailed Valuation Reports.
This week's free download is our report on on Citigroup Inc. Citigroup Inc. is a global financial services company, has some two hundred million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Major brand names under Citigroup's trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney, and Banamex.

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What's Hot--Latest FDIC Report Update is Posted

Fed Acknowledges Housing, Banking Issues as Foretold by VE's Suttmeier
ValuEngine Chief Market Strategist Richard Suttmeier is an expert on the US Banking System and uses the health of the system as a leading economic indicator. He distills his thoughts on the banking system in our FDIC Report. The latest update of the report is now available.

In his summary of the report he notes the following: At Bernankes press conference following the June FOMC meeting, the Chairman expressed concern about the housing market and the banking system. The FOMC says that it will keep the federal funds rate at 0 to percent for an extended period. The $600 billion QE2 ended at the end of June and the Fed will maintain its policy of reinvesting principal payments from its securities holdings, from both mortgage backed securities and US Treasuries. The latest FOMC Statement also notes that investment in nonresidential structures is still weak, and the housing sector continues to be depressed. These understated comments don't describe the real situation. As I have been saying, the key to an economic recovery and job creation is helping the housing market, and cleaning up the community banks that are overexposed to commercial real estate loans. I remain extremely concerned about the construction industry as this is the key to economic growth on Main Street USA. The Federal Reserve is beginning to realize that a housing market depression exists and they have no idea how to fix it. Despite the maintenance of extremely low interest rates for two and a half years, Main Street USA has seen little benefit. Big banks are using this time to recapitalize, but consumers remain stymied by a lack of credit and Consumers are having difficulty refinancing their mortgages, yet banks are charging some citizens credit card interest rates above 20%. small businesses are also having difficulty with financing. This is a travesty! Without a recovery in housing, job creation will remain difficult. Main Street USA needs a vibrant construction sector to create jobs. The problem is that many communities are riddled with incomplete housing projects, strip malls, and office complexes.Declining home prices, high unemployment, and stock market worries continue to bedevil Main Street. Banks both big and small have slowed home foreclosures but maintain tight lending standards for those wanting to buy a home. Can the market ever recover under these circumstances? In addition to the ongoing issues with housing, there remain many community banks whose balance sheets are in shambles. I still predict many additional failures over the next few years despite the momentary respite in FDIC activity on Bank Failure Friday.

A critical portion of this report is the ValuEngine List of Problem Banks. Problem banks are publicly traded FDIC insured financial institutions who are overexposed to Construction & Development Loans and/or Nonfarm nonresidential real estate loans, with 1-Engine--Strong Sell, or 2-EngineSell. The report also includes a listing of all other engine-rated banks-- and those with n/a ratings but forecast figure data points according to our models-- in violation of FDIC guidelines vis-a-vis loan exposures. Our latest ValuEngine FDIC Report is now posted. The report contains loan exposure and/or ValuEngine datapoints on valuation, forecast, and ratings for all of the institutions on our List of Problem Banks. Subscribers can download it HERE. Others interested in the report may find out more on our website by clicking the image below.

--The Hard Trade

Yaron Sadan of Osher Capital on the European Crisis
ValuEngine is pleased to announce another addition to our stable of high quality investment newsletters. Our latest premium newsletter comes to us from Yaron Sadan and is called "The Hard Trade." Sadan is the founder and president of Osher Capital Advisors, LLC (Osher). Before starting Osher, Sadan worked in the private wealth management group of Goldman Sachs.

When the Tide Recedes Warren Buffett famously remarked that when the tide recedes we get to see who has been swimming without a bathing suit. He was referring to the idea that when things are good, a lot of corruption and corner-cutting and dirt can be hidden as investors willfully ignore basic valuations; however, as things become more turbulent and investors inspect more, companies and leaders have fewer places to hide and things come to the surface. In Europe, we're seeing a lot of nudity as the tide recedes! Imagine a political culture in which allegations that you paid for sex with an underage girl are NOT your greatest problems. Yet, thats exactly whats happening in Italy--a country where a stable government is a theoretical exercise anyway. Italian Prime Minister Berlusconi is fighting charges of financial corruption while ALSO fighting allegations he repeatedly hired an underage prostitute. At the same time, corruption charges effecting Italian Minister of Finance Tremonti--who was seen as a stabilizing forceare also pressuring the Italian government and financial system. Italian yields have jumped, spreads have widened, and the euro this week is trading with a 1.42 handle and heading lower. The 10-year Italian government bond yield remained up by around 14 basis points at 5.25% in recent action, according to FactSet Research data. The premium demanded by investors to hold 10-year Italian debt over German bunds widened by around 24 basis points to 2.4 percentage points. The spread on Italian credit default swaps widened to nearly 243 basis points from 216.2 on Thursday, according to data provider CMA. That means it would cost $243,000 annually to insure $10 million of Italian debt against default for five years, up from $216,200 on Thursday. Source: CBS Marketwatch

But, Italy is not Greece, and herein lays the problem for the market. As weve noted previously, the Greek bailout will set a precedent for the eurozone when it comes time to address Italy, Portugal, and Spain. Italy, the third largest euro economy, will be especially difficult to bail out at the same level as Greece. German voters are pulling back from EU support and Germany will be the key player in any additional bailouts. Additionally, international banks exposure to Italian debt is significantly higher than Greek exposure and could ripple through the banking world and eventually impact the US markets-- specifically the money-markets. Thats where the Fed is looking. When Lehman and Bear broke, the danger was averted because only a limited amount of money market funds were in danger of breaking the buck; we may have more funds in danger now. The Fed knows that with the Italian breakdown and the emergency meetings of the EU this week, the money markets need to maintain liquidity. If there is a crisis the Fed will be forced to step in to ensure the maintenance of the largest funds. As a side note, after a brief sell-off gold-euro is again approaching its highs. I think this is only the beginning of the move.

The Hard Trade Premium Newsletter is now available on our website HERE

Suttmeier Says
--Commentary and Analysis from Chief Market Strategist Richard Suttmeier
If you have any comments or questions, send them to Rsuttmeier@Gmail.com Treasury Yields 10-Year--((2.944) My quarterly pivot is 3.052 with my weekly pivot at 2.870 and daily and annual risky levels at 2.808 and 2.690. Commodities and Forex Comex Gold--($1587.1) Monthly and weekly pivots are $1547.9 and $1560.3. We need a weekly close in July above $1547.9 to inflate the bubble further. Daily, semiannual and quarterly risky levels are $1624.4, $1644.8 and $1655.1. A new all time high was set at $1594.9 on Thursday. A close this week above my monthly pivot at $1547.9 targets semiannual and quarterly risky levels at $1644.8 and $1655.8.

Nymex Crude--($95.86) The 200-day simple moving average is $94.01 with the 50-day at $97.85. My weekly pivot is $94.24 with daily and annual pivots at $98.64, $99.91 and $101.9, and quarterly and semiannual risky levels at $102.40 and $103.93. Crude oil could not stay above its 50-day simple moving average. The Euro-- (1.4139) Daily and quarterly value levels are 1.3861 and 1.3728 with the 200day simple moving average at 1.3909, and my monthly pivot at 1.4133 and the 50day at 1.4312. Weekly and semiannual risky levels are 1.4553, 1.4752 and 1.4872. The euro is between its 200-day at 1.3909 and its 50-day at 1.4312. Major Indices

Equity Technicals: We now have declining 12x3x3 daily slow stochastic readings on all daily charts for the major equity averages. The next negative would be daily closes below the 50-day simple moving averages at; 12,356 Dow Industrials, 1313.68 SPX, 2578 NASDAQ, 2316 NDX, 5343 Dow Transports, 819.31 Russell 2000 and 416.81 SOX. The S&P 500 has joined the SOX below its 50- day. Equity Fundamentals: According to our models, we have fairly valued stocks right now. 55.2% of all stocks are undervalued / 44.8% of all stocks are overvalued Seven sectors are undervalued Construction by 6.0% Nine sectors are overvalued Transportation by 6.3% P/E Ratios Range from 21.6 times for Aerospace to 56.6 times for Oils-Energy. Key Levels for the Major Equity Averages Dow --(12,437) The daily chart now has declining MOJO with the 50-day simple moving average at 12,356. My weekly and annual value levels are 12,047 and 11,491 with daily, monthly, quarterly and annual risky levels at 12,504, 13,155, 13,839 and 13,890.

S&P 500--(1308.9) The 50-day SMA is a pivot at 1313.7. My weekly value level is 1285.1 with daily, monthly and quarterly risky levels at 1314.3, 1422.8 and 1467.0. NASDAQ (2763) The 50-day SMA is support at 2758. My weekly value level is 2679 with daily, monthly, quarterly and annual risky levels at 2806, 2975, 3109 and 3243. NASDAQ 100 (NDX) (2325) The 50-day SMA is support at 2315. My weekly value level is 2239 with daily, monthly, annual and quarterly risky levels at 2367, 2483, 2590 and 2630. Dow Transports (5350) The 50-day SMA is support at 5343. My weekly and annual value levels are 5317 and 5179 with daily, monthly, quarterly and annual risky levels at 5381, 5736, 6112 and 6131. Russell 2000 (823.32) The 50-day SMA is support at 819.31. My weekly and annual value levels are 803.82 and 784.16 with daily, monthly, quarterly and annual risky levels at 836.50, 924.95, 930.83 and 978.58. The SOX (387.76) My weekly value level is 384.47 with the 50-day and 200-day simple moving averages at 416.81 and 416.19, close to a negative cross-over. A daily pivot is 388.00 with monthly and quarterly risky levels at 482.54 and 493.22. Note: For my technical momentum metrics--"MOJO"--I use whats called 12x3x3 slow stochastic readings from daily, weekly and monthly charts. The scale is zero to 10.0 where above 8.0 is overbought and below 2.0 is oversold.

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We provide a variety of means for accessing ValuEngine market analysis and other content. You can find us on some of the leading financial media websites as well as the more popular social media services. While our own website ValuEngine.com provides access to lots of analysis--and you can always sign up to receive email daily and weekly bulletins HERE, some users prefer to download PDF reports of content while others prefer to garner info while browsing the web. Our Chief Market Strategist Richard Suttmeier is a prolific market observer and you can find his content in a variety of places. His weekly column on Forbes provides insights into his "Buy and Trade" strategy while his daily market analysis can be followed and accessed at Scribd, Twitter, and Minyanville. Senior Editor Steve Hach re-posts PDFs and web-accessible copies of Daily and Weekly ValuEngine bulletins at Seeking Alpha and Scribd. In most cases, you can receive notification of VE content posting by Suttmeier and Hach by following the ValuEngine feed on twitter @ValuEngine. Links for this content are provided below, you may also find these links on our website HERE Intelligent Investing with Richard Suttmeier Articles by Richard Suttmeier | Articles by Steve Hach Newsletters, Articles and Other Research Pieces Articles by Richard Suttmeier | Articles by Steve Hach Get short, timely messages from ValuEngine Inc Daily Bulletin PDFs, Weekly Newsletter PDFs, and PDF Research Reports