-Executive Summary-

• Markets UP nicely into fresh 2 Year High Territory… See more below.
• We’ve gone ahead and updated our Stock Market Companion Trend Table… See more below.

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– Markets “At a Glance” –

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

– Market Trends –

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

– Market Perspectives –

For your added perspective, we’ve included these two different views of the broader market –

1. SMC SP-500 ETF Daily Chart (Click to open helpful chart in a separate browser window).

2. SMC SP-500 Weekly Chart (Spanning back through 2007)

– Today’s Highlights –

We’ve gone ahead and changed our short term indicator in the Stock Market Companion Market Trend Table (above)  to UP, as the markets cross into fresh 2 year high territory.

Today, American consumer confidence numbers released for December were higher than expected and hit a 6 month high at 72.5.

General Electric Co. (Ticker: GE) increased their quarterly dividend to 14 cents a share.  So, on an annual basis the GE dividend will be 56 cents.  Today’s GE share price is $17.77/share.  Therefore, this 56 cent annual dividend amounts to a +3.2% yield.

The markets are lifting higher, but the volume has diminished over the last few days.  Normally, we would like to see a good, high volume punch to get the market going into this new 2 year high territory, but we haven’t seen that yet.

– Story-Stock Investing –

We had an up day in the market, but Cisco Systems Inc. (Ticker: CSCO) was flat and Ford Motor Co. (F) was down -3 cents, … which is quiet for stocks that should attract attention when the market is pushing into new highs.

On the other hand, our Stock Market Companion holding Zagg Inc. (Ticker: ZAGG) advanced +5.70% and took out its recent all-time highs at $8.79/share, but couldn’t muster the strength to close above this point.  Nonetheless, it’s a good sign for the stock.  If you happen to be in a Best Buy store over the weekend, you can see the Zagg products there and talk to the store staff to see how the product is moving.  That is what we do when we are participating in a stock that has products available for retail sale.

Bank of Ireland (IRE) stock again (for the second time this week) experienced some strong selling after the open, but was able to recover a fair portion of its price to close down -7.6%.

We were talking with a close friend and Stock Market Companion subscriber last night about the Chinese stock YOKU.com Inc. (Ticker: YOKU) that has hit the market roaring following its initial public offering this week.  YOKU opened higher again today at $47/share – cruised higher to $50/share, and then promptly sold-off the rest of the day down to $38.80/share.  Anyone purchasing the stock at $50 this morning is down -22% on their investment this afternoon.  A purchase at the opening price of $47/share is now -17%.  However, the stock is still +43% above its $27.05/share starting point two days ago.  YOKU needs to build a base from which investors can determine the next likely direction, based on published earnings.  At this point, unless an investor knows a lot about the company, an entry here falls in the gambling category.

Here are answers to several questions from a subscriber’s email last night regarding the Bank of Ireland (IRE) stock and situation (questions are italicized) –

Do you have any thoughts on Ireland’s credit rating being lowered today and how it may impact price performance of IRE?

At this time, we believe the credit rating adjustment is something that is more of a “rear-view mirror”  event than a forward looking event.  We were surprised yesterday that there wasn’t much of a blip in the stock value during the day as this news unfolded.  Maybe the stock will show a delayed reaction?  The credit rating change validates where Ireland is today, but not where Ireland will be in 18 to 36 months.

The actions of the credit rating agencies are a bit of a mystery, but certainly appear to be tremendously lagging relative to valuations on common stock.  The stock price of IRE is levitating in hopes of improved conditions or at least better conditions for the bank 6 months to 18 months out.

The article at

http://dealbook.nytimes.com/2010/12/09/bank-of-ireland-to-swap-debt-allied-irish-to-pay-bonuses/?partner=yahoofinance

states that one method the bank plans to use to attempt to shore up its core capital is raising funds from shareholders.

Won’t this dilute the value of the stock?

Unquestionably – raising more funding by adding more shares is normally a big negative. BUT – we have seen that even as Bank of America raised its outstanding shares to 10 billion – the stock still rose from $2.5 to near $20/share.  In the case of IRE, and in the face of this kind of crisis – it may well be a sign of strength or a kind of reassurance that investors are willing to take common stock.  This all sounds ridiculous, but we need to keep in mind that IRE was close to extinction as its stock price hovered at $1.93/share.  In 2007, the stock peaked at around $94/share.  Using $94/share as a reference, $1.93 represents a -97.9% destruction in value for the common stock shareholder.  Compare that to perhaps junior bondholders that are sitting on a -50% hit on their values.  If common stock shareholders can perhaps hope that their losses over time are mitigated to some modestly smaller hit, then there is certainly room for improvement in the common stock price.  A -90% haircut from 2007 values, still puts the common stock at $9.5/share, which is still below this year’s highs BUT a tremendous improvement over today’s $3/share.

I assume IRE is traded on other exchanges (e.g. Japan, Ireland, etc.).  Is it possible to check at what level IRE is currently trading using another web site (or sites)?

IRE stock is traded primarily in Dublin, London, and New York.  Investors can monitor the share price in those locations using the web and going to those individual exchange’s public viewing areas or – surprisingly simplified in this case –  the Bank of Ireland homepage.  As shareholders in IRE in New York, we own American Depository Receipts of the Bank of Ireland.

Sure appreciate your good questions.

Yours –

Eric

Stock Market Companion Watchlist stocks Motorola Inc. (MOT) and Rentech (RTK) are getting more interesting by the day.

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