Wall Street Greek

This Week: Turkey Nearly Cooked

2009-11-24T05:30:00.005-05:00

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This Week: Turkey Nearly Cooked

This holiday is one of conflict for some folks, because as you may know, Greeks do not normally like Turkey. However, for one day a year we forgive past grievances for the sake of poultry-kind. The holiday week should bring light trading volume as folks travel to be with family. Believe it or not though, the stock market is open on Black Friday, but only until 1 PM ET.

Monday

We covered Monday's schedule in our article, "Business News," found via the link provided here.

Tuesday

As we approach Black Friday, retail industry data and news will be in focus. Thus, there exists the potential for market reaction to the Weekly Same-Store Sales Report, published by the International Council of Shopping Centers every Tuesday in the pre-market. Last week's data produced the same old boring trend. Year-over-year results continue to trump increasingly easy comparisons. As you'll recall, Americans buried their cash in the backyard last holiday shopping season, and for good reason. All hell was breaking loose on Wall Street and Main Street both, and nowhere proved safe for capital.

Same-store sales improved 2.4% year-to-year at last check, which was a little less than the prior week's gain of 2.9%. On a week-to-week basis, sales slipped by 0.1%, matching the prior week's decline. Keep an eye on the week-to-week data, because despite seasonal influences, the market is watching that metric carefully in light of still rising unemployment.

Third quarter GDP is up for its first revision at 8:30 AM. Its initial read produced a market lifting +3.5% GDP gain, but economists are mostly looking for downward revision Tuesday to +2.8%, based on Bloomberg's survey. Driving the unfavorable change, lower consumer spending, greater inventory draw-down and international trade (import gains outpaced the export change). Since it's expected, the reining in of nascent economic growth may not weigh on the market, but economists' expert commentary on the matter could. NYU Professor Nouriel Roubini, for one, seems to garner a lot of airtime with controversial statements on days like these.

S&P Case Shiller weighs in on Home Prices a little later than we would prefer. Street whispers and the monthly data trend indicate that the Home Price Index will likely post another upward move for September. However, it's October we need to know about now! The FHFA House Price Index is also scheduled to be published Tuesday - at 10:00. FHFA's data is limited by the ceiling amount for conforming loans purchased by GSEs: Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).

After a steep decline in October (5.5 points to 47.7), the Conference Board is scheduled to post November's Consumer Confidence Index at 10:00 AM Tuesday. We do not see the situation much improved, and neither do economists, as their average forecast for the current month sits at 47.0. Last month's drop in the Expectations Index was alarming, as investors were hopeful that consumers who were down on current conditions might bank on better times ahead, which seemed the case not too long ago.

State Street (NYSE: STT) will report on Investor Confidence for November at 10:00 AM. October's reading showed a decline of 10 points, to 108.4. October marked the second month of decrease in a row since August's recent peak at 122.8. The 100 point mark represents neutrality on the part of institutional investor fund flows toward/away from risky assets.

At 2:00 PM, the Federal Open Market Committee (FOMC) will release the minutes of its most recent meeting. We do not expect much variance in the information from Chairman Bernanke's statements. Recall, the Chairman said inflation was tame and that rates would be kept low to help economic growth gain traction.

Tuesday's EPS reports include Allied Healthcare (Nasdaq: AHCI), American Eagle Outfitters (NYSE: AEO), American Italian Pasta (Nasdaq: AIPC), American Woodmark (Nasdaq: AMWD), Amtech Systems (Nasdaq: ASYS), Avanir Pharmaceuticals (Nasdaq: AVNR), Bank of Montreal (NYSE: BMO), Barnes & Noble (NYSE: BKS), Blue Coat Systems (Nasdaq: BCSI), Borders Group (NYSE: BGP), Brown Shoe (NYSE: BWS), ChinaEdu (Nasdaq: CEDU), Coldwater Creek (Nasdaq: CWTR), Cracker Barrel Old Country Store (Nasdaq: CBRL), Daktronics (Nasdaq: DAKT), dELiA*s (Nasdaq: DLIA), Dollar Tree Stores (Nasdaq: DLTR), DSW (NYSE: DSW), Eaton Vance (NYSE: EV), Fred's (Nasdaq: FRED), Genesco (NYSE: GCO), GeoPharma (Nasdaq: GORX), Giant Interactive Group (NYSE: GA), H.J. Heinz (NYSE: HNZ), Hillenbrand (NYSE: HI), Hormel Foods (NYSE: HRL), Industrie Natuzzi (NYSE: NTZ), J. Crew Group (NYSE: JCG), Medtronic (NYSE: MDT), Netezza (NYSE: NZ), QAD (Nasdaq: QADI), Signet Jewelers (NYSE: SIG), TIVO Inc. (Nasdaq: TIVO), Warner Music Group (NYSE: WMG), Wimm-Bill-Dann Foods (NYSE: WBD) and WSP Holdings (NYSE: WH).

Wednesday

The day before the Thanksgiving Day holiday will be a busy one for Wall Street. Many of the week's economic reports that might have been reported Thursday or Friday will be pushed to Wednesday so that bankers can avoid indigestion. That means we will have to swallow eight reports the day before we digest an enormous quantity of turkey.

Wednesday brings the now highly anticipated Weekly Applications Survey produced by the Mortgage Bankers Association. Over recent weeks, this regular report has provided interesting insight into the effects of the First-Time Homebuyer Tax Credit on the real estate market. Even as mortgage rates have dropped, Purchase Application activity has declined. Not coincidentally, this decline has coincided with the informal deadline date necessary to contract for a mortgage that would qualify for the tax credit (early October).

For the week ended November 13, the Market Composite Index of mortgage activity declined 2.5%. The Purchase Index fell 4.7%, while the Refinance Index declined 1.4%; all while the rates on contracted 30-year and 15-year fixed rate mortgages eased to 4.83% and 3.82%, respectively.

Durable Goods Orders are due for report at 8:30. Economists are looking for a 0.5% increase in orders for October, compared with the revised 1.4% increase reported for September. Excluding transportation, orders improved 1.2% in October. September new order growth was driven by machinery and transportation equipment.

Also at 8:30, Personal Income and Outlays are due for October reporting. Last month's confidence measures noted concern regarding future income, and Personal Income was unchanged at last check in September. Bloomberg's consensus of economists is looking for a 0.2% increase for October. Average weekly earnings were already reported up 0.3% in October, justifying economists' expectations here.

Consumer Outlays declined 0.5% in September following "Cash for Clunkers" cut-off. Economists are looking for an increase of 0.5% for October, as the month's retail sales and motor vehicle sales both improved. The Core PCE Price Index is seen rising 0.2% in October, versus the 0.1% increase in September. Providing some reason to expect such a rise, the Core Consumer Price Index (CPI) was just reported up 0.2% for the month.

The final premarket report for Wednesday is the Weekly Initial Jobless Claims data. Economists are looking for an important dip in initial benefits filings this time around, to 495K, versus 505K last week. The four-week moving average fell for the 11th straight week at last check, but still stood above 500K, at 514K. A move to below the 500K mark in initial filings would be uplifting for stocks, as the market is watching employment for a turn in trend.

The second of the week's consumer confidence measures comes due Wednesday at 9:55 AM ET. The Reuters/University of Michigan Consumer Sentiment Index dropped a significant 4.6 points in early November on renewed economic concerns. Economists are looking for this latest reading to place the index slightly higher, at 67.0, versus 66.0 at last check.

Existing Home Sales came in strong for October, running at an annual pace of 6.1 million, up 10.1%. New Home Sales are next up Wednesday at 10:00 AM, and economists are forecasting improvement there as well. Based on Bloomberg's survey, economists see the annual pace of New Home Sales improving to 410,000 for October, up slightly from 402K.

The EIA will report on both Petroleum Status and Natural Gas Wednesday, due to the holiday. Last week's oil report showed crude stocks decreased by 0.9 million barrels in the week ended November 13. Total motor gasoline stores fell by 1.7 million barrels. Natural gas inventory increased by 20 Bcf. Look for this week's oil data at 10:30 AM ET and the natural gas report at noon.

The day's earnings schedule includes China Finance Online (Nasdaq: JRJC), Conn's (Nasdaq: CONN), Deere & Co. (NYSE: DE), London Stock Exchange (LSE: LSE.L), Golden Ocean Group (Nasdaq: GDOCF.PK), Tiffany & Co. (NYSE: TIF) and Trintech (Nasdaq: TTPA).

Thursday

Happy Thanksgiving American readers! The remainder of the world has some important data to chew on. The European Central Bank is due to weigh in on its interest rates, and the Bank of Japan releases the minutes of its October meeting. Also, the International Atomic Energy Board is scheduled to meet.

Friday

Back to work for traders! Believe it or not, in one of those holiday anomalies that needs correction, the stock market is open on Friday until 1 p.m. The bond market also closes early, but at 2 p.m. It's Black Friday, so look for important first reads from retailers. This particular day holds great importance to the industry relative to the rest of the days of the year. In overseas news, look for the Bank of Mexico to make its key rate decision.

Friday's EPS reports include news from Frontline Ltd. (NYSE: FRO), Ship Finance International (NYSE: SFL) and a handful of foreign names.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Business News 11-23-09

2009-11-23T09:15:00.003-05:00

Visit the front page of Wall Street Greek to see our current coverage of the day's business news.

(Tickers: NYSE: ADI, ATW, BJS, TSN, VAL, CPB, DY, HPQ, LDK, NBG, NED, Nasdaq: JOBS, ALTU, BRCD, CDCS, CNTF, CTRN, LONG, GLAD, KCAP, NUAN, SBLK, TECD, NCTY, AMEX: EAG, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD)

The day's business news highlights data on Existing Home Sales and general economic conditions. Stock index futures indicate a positive opening to the day, but watch out for another negative reading we see highly possible for the real estate market. That report is due at 10:00 AM.

Business News 11-23-09

Economic Reports

Last week's Housing Starts data for October illustrated a sort of First-Time Homebuyer Tax Credit Hangover, which we detailed in the article hereto linked. Housing Starts ran at an annual pace of 529K in October, down 10.6% from September's revised rate of 592K. The result was quite a surprise for economists, who were looking for an October sales pace of 600K on average.

"The Greek" was not caught off-guard though, as we foresaw the "hangover." Economists have not adjusted their forecasts for October's Existing Home Sales, which will be reported this morning at 10:00 AM. Based on Bloomberg's survey, economists forecast an October Existing Home Sales pace of 5.7 million, versus September's 5.57 million rate. We have a sneaking suspicion that expectations here could also prove too high.

The Chicago Fed reported on its National Activity Index this morning, and noted another reading in negative territory. The National Activity Index measures overall economic activity and inflationary pressure. October's reading dipped to -1.08, but compared slightly favorably to September's -1.01. Dips in production and income offset other factors considered within the measure.

Washington DC Drivers

The Senate voted and agreed to "debate" Health Care Reform. The bill is not going to have easy going without amendment, especially regarding the "Public Option."

Corporate News Drivers

Japanese markets are closed on Monday due to the Labor Thanksgiving Day holiday. The US business news day earnings schedule includes 51job Inc. (Nasdaq: JOBS), Altus Pharmaceuticals (Nasdaq: ALTU), American Defense Systems (AMEX: EAG), Analog Devices (NYSE: ADI), Atwood Oceanics (NYSE: ATW), BJ Services (NYSE: BJS), Brocade Communications (Nasdaq: BRCD), Campbell Soup (NYSE: CPB), CDC Software (Nasdaq: CDCS), China TechFaith Wireless (Nasdaq: CNTF), Citi Trends Inc. (Nasdaq: CTRN), Dycom (NYSE: DY), eLong (Nasdaq: LONG), Gladstone Capital (Nasdaq: GLAD), Hewlett-Packard (NYSE: HPQ), Kohlberg Capital (Nasdaq: KCAP), LDK Solar (NYSE: LDK), National Bank of Greece (NYSE: NBG), Noah Education Holding (NYSE: NED), Nuance Communications (Nasdaq: NUAN), Star Bulk Carriers (Nasdaq: SBLK), Tech Data (Nasdaq: TECD), The9 Ltd. (Nasdaq: NCTY), Tyson Foods (NYSE: TSN) and Valspar (NYSE: VAL).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Top Ten Signs You Are Getting Fired

2009-11-21T20:40:00.004-05:00

In today's tough labor market, the few of us with jobs are constantly looking over our shoulders. It's important to catch rumors and notice the warning signs that might signal a trip to the firing line. There are important things to look for, and we've listed the top ten signs you are getting fired for you here. Pay attention now!

(Article interests: NYSE: RHI, NYSE: MAN, NYSE: KFY, NYSE: MWW, NYSE: XLF, NYSE: BAC, NYSE: AIG, NYSE: FRE, NYSE: FNM, NYSE: GS, NYSE: MS, NYSE: C, NYSE: GM)

Top Ten Signs You Are Getting Fired:

10 - When you accept Congress' request to take a position in the Treasury Department or a recently government bailed out firm, where your responsibilities will include the noble task of cleaning up someone else's mess...

9 - A month after honestly responding to an "anonymous review," your boss introduces you to his new "best friend" - who happens to be an IT techie dude you never saw him with before...

8 - When you notice emails you've never read have already been opened. Then later that same week you catch your girlfriend having dinner with your boss... OR the techie!

7 - When your supervisor, who usually comes in at 10:00 AM, suddenly turns tardy and starts beating you in. As you settle into your chair just a little late as usual, you can't help but notice him smugly typing an email entitled "Our evil trap is working."

6 - When colleagues notice your monitor is cracked and your hand is bleeding; and when they ask you if you are okay, they don't seem to believe your response about the "electrical surge."

5 - When your lunch buddies are suddenly too busy to eat with you due to what they term "pariah-itis"...

4 - When you catch the unmistakable whiff of urine around your cubicle...

3 - When the government purchases a majority stake in the bank where you are the CEO.

2 - As you boot up your computer, new software uploads and a smiley face appears on your screen and softly says, "Don't panic. This is a routine software upgrade. Why don't you go have a cup of coffee now? You deserve a break."

1 - When passing you in the restroom, your boss kindly says "hello dear friend," and then under his breath adds smartly, "I'm gonna fire you pal!"

SEE ALL OUR TOP TEN LISTS

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets. Please see our disclosures at the Wall Street Greek website and author bio pages found there. Article interests: NYSE: RHI, NYSE: MAN, NYSE: KFY, NYSE: MWW, NYSE: XLF, NYSE: BAC, NYSE: AIG, NYSE: FRE, NYSE: FNM, NYSE: GS, NYSE: MS, NYSE: C, NYSE: GM.

First-Time Homebuyer Tax Credit Hangover

2009-11-20T15:05:00.005-05:00

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(Relative Tickers: BAC, FRE, FNM, GS, MS, WFC, TD, SRS, URE, IGR, XIN, RYHRX, TRREX, TOL, HOV, DHI, BZH, LEN, KBH, PHM, NVR, GFA, MDC, RYL, MTH, BHS, SPF, MHO, OHB, WCI, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD)

An ugly trend in the Mortgage Bankers Association's Weekly Applications Survey has real estate warning sirens blowing again. As the result of a relationship we see between mortgage activity and the First-Time Homebuyer Tax Credit, we are looking for a near-term pull back in the residential real estate marketplace.

First-Time Homebuyer Tax Credit

Before we tie the information together, we think it best to ensure the reader understands the First-Time Homebuyer Tax Credit. The Worker, Homeownership and Business Assistance Act of 2009 extends and expands the First-Time Homebuyer Tax Credit allowed by previous acts. Most importantly to new homebuyers, Congress extended the tax credit, which was set to expire this year. Prospective purchasers of a principal residence can now benefit from the tax incentive if they enter into a binding contract to buy a home before April 30, 2010, and close on the home by June 30, 2010. The credit, which remains $8,000, can be applied to reduce your tax bill dollar for dollar, or to boost your tax refund, in either the reported 2009 or 2010 tax year (for qualifying 2010 purchases).

A new facet of the legislation allows long-time homeowners to benefit as well. Those who have lived in the same principal residence for any five consecutive year period during the eight-year period ended on the date the replacement home is purchased, may take a $6,500 credit (up to $3,250 for married filing separately). Also, the income limit has been raised to allow more Americans to qualify. Tax credit phase out now occurs at individual income levels of $125K to $145K ($225K to $245 for joint filers).

As you can see, the First-Time Homebuyer Tax Credit provides great incentive to buy a home. Thus, a great many Americans, some advised by clever and perhaps starving real estate agents, rushed to buy homes before the previous credit would expire on December 1st. Since home closings typically take 60 days, early October marked the effective deadline for entering into contract. We think this factor drove a burst of home sales, as was intended, up to and ending in early October.

The Evidence is Clear

The last six weeks of Mortgage Activity highlighted the effect of the legislation in vivid color. Despite a favorable and consistent drop in the average contracted rate on 30-year and 15-year fixed rate mortgages, mortgage activity for the purchase of homes has declined decisively. Up until the latest reading of the Mortgage Bankers Association data, the Refinance Index, which measures contract volume for mortgage refis, had shown refinance activity benefiting from lower rates; during the same period though, the Purchase Index deteriorated consistently. In fact, purchase activity has decreased for six consecutive weeks now, and sits at its lowest point since November of 1997.

Tying the Setback in Housing to its Cause

If the then pending expiration of First-Time Homebuyer tax incentive (before its renewal) and the push of real estate and tax agents to help sales along, helped to drive home purchase activity ahead of the decline begun in early October, then perhaps significant demand has been pushed forward. Thus, similarly to the effect of the "Cash for Clunkers" program, we would expect home sales to teeter off in the coming month or so. While this article comes to you after the latest Housing Starts data, which showed a precipitous decline in the pace of Starts in October, the report now seems to only confirm our assumption that the housing recovery benefited significantly from the First-Time Homebuyer Tax Credit. Furthermore, the previous gains in home sales may have been due to pushed forward purchases that may now limit near-term sales in their absence.

Add to this the burdensome weight of still rising unemployment and tightly squeezed credit standards, and the real estate market seems set for a longer near-term retrenchment. Perhaps offering a counter to this, however, is the expansion of the legislation to bring higher income and existing homeowners into play. This wise decision seems clearly construed for the purpose of floating the housing market further down the economic stream. November Starts should provide telling results as to whether the effort was effective or not.

Editor's Note: This article should interest real estate industry participants, perhaps including in Bank of America (NYSE: BAC), Freddie Mac (NYSE: FRE), Fannie Mae (NYSE: FNM), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Company (NYSE: XIN), Rydex Real Estate H (Nasdaq: RYHRX), T. Rowe Price Real Estate (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Home (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR, Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO) and Orleans Homebuilders (NYSE: OHB).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Wall Street News 11-20-09

2009-11-20T09:55:00.003-05:00

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

(Tickers: Nasdaq: DELL, NYSE: HPQ, IBM, AAPL, MDT, ORCL, JAVA, DHI, ANN, CRMT, SJM, JOUT, KIRK, MPR, SCORE.OL, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Today's Wall Street news schedule highlights the earnings of Dell Computer, D.R. Horton, AnnTaylor and J.M. Smucker in the US. With an absence of economic data, overseas activity took some focus. The EU selected its first president and begins seeking its next ECB chief. The Bank of Japan weighed in with its own rate decision and raised concern about falling prices.

Wall Street News

Corporate News Drivers

Dell (Nasdaq: DELL) reported earnings last night and is down about 7% in early Wall Street trading. DELL is down due to its reporting weaker than expected Q3 revenue and earnings. The stock's hit this morning is largely due to Wall Street's surprise, since many of the company's peers, including Hewlett-Packard (NYSE: HPQ), Apple (Nasdaq: AAPL) and IBM (NYSE: IBM), reported a strong quarter on improved global technology spending. Excluding one-time items, Dell posted $0.23 per share against analysts' expectations for $0.28, based on Thomson Reuters data. Adding salt to its wound, Dell was also passed by Acer in market share, as the Taiwan based company moved to #2 in the world.

D.R. Horton (NYSE: DHI) shares are lower in morning Wall Street trade, as the homebuilder missed consensus estimates on both revenue and EPS lines. Revenue of $1.01 billion, down 42% from the prior year, compared against analysts' consensus for $1.11 billion, based on Thomson Reuters survey. DHI's loss per share narrowed versus the prior year, but at $0.73 still missed analysts' view for a $0.30 loss.

An FDA panel takes up a Medtronic's (NYSE: MDT) new epilepsy treatment. Friday's Wall Street EPS schedule includes reports from America's Car-Mart (Nasdaq: CRMT), AnnTaylor Stores (NYSE: ANN), D.R. Horton (NYSE: DHI), J.M. Smucker (NYSE: SJM), Johnson Outdoors (Nasdaq: JOUT), Kirkland's (Nasdaq: KIRK), Met-Pro (NYSE: MPR), Scorpion Offshore (SCORE.OL) and a few others.

Overseas News

The European Union (EU) extended its antitrust review deadline for Oracle's (Nasdaq: ORCL) acquisition of Sun Microsystems (Nasdaq: JAVA) to January 27, 2010. Oh, and by the way, that conglomerate of nations across the pond also picked its first President, Belgian Herman van Rompuy. Jockeying is already under way to find the replacement for ECB President Jean-Claude Trichet, for when he steps down in 2011. European shares were in decline at hour of publishing, with the Dow Jones Euro Stoxx 50 off 0.66%.

The Bank of Japan (BOJ) decided to leave its key rate unchanged at 0.1%. The BOJ announced that its economy was improving both due to exports and domestic gains on stimulus efforts. However, Deputy Prime Minister Naoto Kan said Friday that Japan is in deflation, while Finance Minister Hirohisa Fujii expressed grave concern over falling prices. The NIKKEI 225 fell 0.54% on the day, and broader Asia declined as well.

Philly Fed President Plosser is in Singapore today, giving a speech on global interdependence, especially in regard to food and water. The World Economic Forum is meeting to discuss the global agenda.

In Washington, the Senate will meet Saturday to deliberate on whether to debate on health care reform or not. Yes, the Senate is meeting to decide whether to meet. Ah politics...

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Financial News 11-19-09

2009-11-19T09:50:00.003-05:00

We See Signs of Economic Pace Ease

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial news.

(Relative Tickers: PG, CL, CDY, CLD, ACTI, ADCT, ARUN, BONT, BAMM, BRC, CMRG, CENT, CMED, CHRD, DWCH, DKS, DITC, DOLE, DBRN, EFUT, FL, GME, GPS, GFF, HP, HIBB, IGLD, INTU, KITD, KLIC, MTSC, NGG, NWY, OMER, PDCO, RAVN, ROST, SBH, SCHS, SHLD, SCVL, SKIL, SSI, SMRT, STP, SCMR, BKE, CATO, PLCE, WTSLA, TWMC, TDG, TSL, TTIL, VRGY, WSM, ZUMZ, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD)

The day's financial news offered what seems a non-starter in the Weekly Jobless Claims data, with the count little changed. The report is more likely to be a negative influence on stocks this morning than positive, as "little-to-no change" is now a bad thing, which varies greatly from this spring when "less bad news" was good.

Financial News

Jobless Claims

The day's financial news produced the regular Weekly Initial Jobless Claims data. For the week ending November 14, first-time filers for unemployment benefits amounted to 505K. The weekly count matched against a revised prior week tally of the same result. Expectations stood at 504K, but are inconsequential, as economists simply do not spend much time on this short-term forecast. The four-week moving average declined 6,500, to 514,000. Insured unemployment stuck at 4.3%. Traders are not going to like this data until it makes a decisive move below 500K or deeper, so we view the report a non-starter or negative director for stocks within the day's financial news flow.

Leading Economic Indicators

The Conference Board will release its October data on Leading Indicators at 10:00 AM this morning. The September LEI reading showed the sixth gain in a row, as Indicators improved 1.0%. In fact, the LEI sixth month growth rate reached its fastest pace since 1983 last month. However, economists asked by Bloomberg expect an October read of +0.4%. We read this as a negative even if the data falls in line, since a slower rate of improvement might be construed as an indicator of the start toward double-dip recession, something we're concerned about here.

Philadelphia Fed Survey

On Monday, The Empire State Manufacturing Survey fell to 23.51 for November, down from 34.57 in October. The reading still showed decent growth, but the pace ease is consistent with other features of this economy. It may be natural, but it's still concerning to investors and troubling to stocks' progress. This morning at 10:00 AM, look for the Philadelphia region's version of this data in financial news flow. After an October take of 11.5 on the Philly Fed's General Business Conditions Index, economists are looking for about the same result this month. According to Bloomberg's survey, November should read 12.0. A positive for this month's data point - its New Orders Index posted improvement in October.

Natural Gas Report

Earlier this week, we noted that natural gas prices had advanced 16.3% in October, based on the Producer Price Index (PPI). This morning at 10:30, the Energy Information Administration (EIA) produces its weekly Natural Gas Report on gas storage activity. Last week's report for the week ending November 6, 2009 showed working gas in storage increased by 25 Bcf. Stocks of natural gas stood well above both the mark set last year and the five-year average for this time of year. Still, economic growth and the closing of the difference between oil and natural gas pricing has spurred renewed interest in the energy resource.

Washington Drivers

Senate Democrats say their Health Care Reform proposal released last night would cost $849 billion over 10 years, cutting the deficit while making sure that 94% of Americans have health insurance. Join our Health Care Reform Debate Forum.

Treasury Secretary Timothy Geithner testifies today before the Joint Economic Committee on Financial Reform. The Fed reports on its Balance Sheet this afternoon. The Fed's balance sheet is a report showing factors supplying reserves into the banking system and factors absorbing (using) reserve funds. President Obama met with South Korean President Lee Myung-bak today, and he noted the most fantastic greeting he has received from any nation since becoming president. The SEC will host a gathering today on small business capital formation.

Corporate News Drivers

Finally, the financial news day is flooded with corporate news drivers. Morgan Stanley (NYSE: MS) kicks off its global consumer conference, with presenters including Proctor & Gamble (NYSE: PG), Colgate (NYSE: CL) and Cadbury (NYSE: CBY). Cloud Peak Energy (NYSE: CLD) is seen raising $500 million today in its IPO.

Thursday's earnings schedule includes ActivIdentity (Nasdaq: ACTI), ADC Telecommunications (Nasdaq: ADCT), Aruba Networks (Nasdaq: ARUN), Bon-Ton Stores (Nasdaq: BONT), Books-A-Million (Nasdaq: BAMM), Brady Corporation (NYSE: BRC), Casual Male Retail Group (Nasdaq: CMRG), Central Garden & Pet (Nasdaq: CENT), China Medical Technologies (Nasdaq: CMED), Chordiant Software (Nasdaq: CHRD), Datawatch (Nasdaq: DWCH), Dick's Sporting Goods (NYSE: DKS), Ditech Networks (Nasdaq: DITC), Dole Food Co. (Nasdaq: DOLE), Dress Barn (Nasdaq: DBRN), eFuture Information Technology (Nasdaq: EFUT), Foot Locker (NYSE: FL), Gamestop (NYSE: GME), The Gap (NYSE: GPS), Griffon (NYSE: GFF), Helmerich & Payne (NYSE: HP), Hibbett Sports (Nasdaq: HIBB), Internet Gold (Nasdaq: IGLD), Intuit (Nasdaq: INTU), KIT digital (Nasdaq: KITD), Kulicke & Soffa (Nasdaq: KLIC), MTS Systems (Nasdaq: MTSC), National Grid plc (NYSE: NGG), New York & Company (NYSE: NWY), Omeros Corp. (Nasdaq: OMER), Patterson Dental (Nasdaq: PDCO), Raven Industries (Nasdaq: RAVN), Ross Stores (Nasdaq: ROST), Sally Beauty Co. (NYSE: SBH), School Specialty (Nasdaq: SCHS), Sears Holdings (Nasdaq: SHLD), Shoe Carnival (Nasdaq: SCVL), SkillSoft Corp. (Nasdaq: SKIL), Stage Stores (NYSE: SSI), Stein Mart (Nasdaq: SMRT), Suntech Power (NYSE: STP), Sycamore Networks (Nasdaq: SCMR), The Buckle (NYSE: BKE), The Cato Corp. (Nasdaq: CATO), The Children's Place (Nasdaq: PLCE), The Wet Seal (Nasdaq: WTSLA), Trans World Entertainment (Nasdaq: TWMC), Transdigm Group (NYSE: TDG), Trina Solar (NYSE: TSL), TTI Telecom (Nasdaq: TTIL), Verigy Ltd. (Nasdaq: VRGY), Williams-Sonoma (NYSE: WSM) and Zumiez (Nasdaq: ZUMZ).

See yesterday's Business News.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Business News - 11-18-09

2009-11-18T09:48:00.003-05:00

Visit the front pages of Wall Street Greek to see our current coverage of the day's business news.

(Tickers: Nasdaq: SMLC, TRMD, ATGN, CSCO, AMTC, CSUN, CYBX, DEST, GYMB, HOTT, JACK, NTAP, NTES, PNNT, PERY, PETM, ESLT, SMTC, SHMR, SOLF, VVTV, WGOV, NYSE: BJ, CHS, DCI, GU, LTD, MTU, TOT, DNA, CF, NM, PVH, AMEX: BMJ, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Today's early business news showed that Housing Starts stopped and mortgage activity continued its slide, and we know why! You'll see exactly why when we publish our feature article on the subject later today. This report on the day's business news includes coverage of Housing Starts, Mortgage Activity, Consumer Prices, Petroleum Status, Corporate Earnings, and more. Stocks are only off modestly to start the day, as this bad news is absorbed into a base of recent past improved economic data across the board. However, turns in trend start somewhere, and we may be sitting at the precipice of return to recession, ala double-dip fashion.

Business News

Housing Starts Stopped!

The day's business news highlights the monthly Department of Housing report showing Housing Starts fell to an annual pace of 529K in October, versus misguided expectations for a pace of 600K. We say misguided for good reason, and boy are we itching to tell you why, but that article is prepared and scheduled for publishing later this day. Just come back a little later...

The slower pace of starts represents a 10.6% fall from September's revised rate of 592K, and is off 30.7% from last year's pace. Single family Starts were down 6.8% from September. Permits did better, though also slipped. Privately owned housing units authorized by building permits, a forerunner to actual starts, ran at a pace of 552K, versus September's revised pace of 575K.

Mortgage Activity Falls Further

The day's business news also highlights a trend we have well-noted previously that continued again in the week ended November 13. Despite lower contracted rates for 30-year and 15-year fixed rate mortgages to 4.83% (from 4.9%) and 4.32% (from 4.33%), respectively, mortgage activity declined. The Market Composite Index measuring overall mortgage volume fell 2.5% on a seasonally adjusted basis. The Purchase Index, which measures loans taken out for home purchases, dropped another 4.7%. The Refinance Index fell 1.4%. Take Note: The MBA's Index has not been this low since 2000.

Consumer Price Index (CPI)

A day after the Producer Price Index (PPI) offered a nice bit of business news for inflation watchers, the government released information on consumer level pricing. This data, however, was a bit salty. Headline Consumer Prices rose 0.3% in October, against expectations for a 0.2% increase, according Bloomberg's survey of economists. The government noted the key drivers as energy and new and used motor vehicle price increase. That information led "The Greek" to scratch his head (or my head if I were sane), because we were under the impression that automakers were slashing prices post "Cash for Clunkers." We welcome your thoughts here auto market enthusiasts. Comment below. The renewal of energy price inflation is no surprise though, as the energy index has now risen five of the last six months. Headline CPI is now only down 0.2% from the prior year check...

Ex-food and energy, or Core CPI, rose a troubling 0.2%, against expectations for a slighter 0.1% increase. We worry about this figure more, because it excludes the wild swings in energy pricing. This represents a more accurate current metric of inflation, and it's on the rise at a decent pace for a recessionary period. Core prices also increased 0.2% in September.

Petroleum Status Report

At last check - for the week ended November 6, crude oil inventory increased by 1.8 million barrels and stood slightly above the upper limit of the average range for this time of year. Gasoline stores also increased by 2.5 million barrels and stood above the upper limit of the average range. Distillate fuel inventories rose 0.3 million barrels, and also stood at above average levels. Look for the latest data at 10:30 AM.

Corporate News Drivers

Agrium's (NYSE: AGU) offer of $97.47 for the shares of CF Industries (NYSE: CF) expires today. The shares trade at $85, so the deal is apparently not happening. We have not followed this story, but the price action tells us that - the shares would trade at about $97.47 otherwise. Cisco Systems' (Nasdaq: CSCO) offer for Tandberg is also set to expire today.

An FDA committee will review Genentech's (NYSE: DNA) and Novartis' childhood asthma treatment. Also, a French court rules on Total's (NYSE: TOT) appeal against environmental damages ruled its fault from a '99 incident.

Wednesday's EPS schedule includes reports from 012 Smile.Communications (Nasdaq: SMLC), TORM A/S (Nasdaq: TRMD), AltiGen Communications (Nasdaq: ATGN), Ameritrans Capital (Nasdaq: AMTC), Birks & Mayors (AMEX: BMJ), BJ's Wholesale Club (NYSE: BJ), Chico's FAS (NYSE: CHS), China Sunergy (Nasdaq: CSUN), Cyberonics (Nasdaq: CYBX), Destination Maternity (Nasdaq: DEST), Donaldson (NYSE: DCI), Elbit Systems (Nasdaq: ESLT), Gushan Environmental Energy (NYSE: GU), Gymboree (Nasdaq: GYMB), Hot Topic (Nasdaq: HOTT), Jack in the Box (Nasdaq: JACK), Limited Brands (NYSE: LTD), Mitsubishi UFJ Financial Group (NYSE: MTU), Navios Maritime (NYSE: NM), NetApp Inc. (Nasdaq: NTAP), NetEase.com (Nasdaq: NTES), Pennantpark Investment (Nasdaq: PNNT), Perry Ellis Int'l (Nasdaq: PERY), PetSmart (Nasdaq: PETM), Phillips-Van Heusen (NYSE: PVH), Semtech (Nasdaq: SMTC), Shamir Optical Industry (Nasdaq: SHMR), Solarfun Power Holdings (Nasdaq: SOLF), ValueVision (Nasdaq: VVTV), Woodward (Nasdaq: WGOV) and a few others.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Miral Shipping Market Report

2009-11-17T15:30:00.003-05:00

BDI to Test June 2009 Highs

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(Tickers: NYSE: OSG, ISH, SEA, GNK, TNP, DAC, BDI, DSX, NAT, BC, MPX, Nasdaq: TOPS, EGLE, SINO, PRGN, XSEAX, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Since my last report on October 8, the BDI has been firm and in the past two weeks, its increase has intensified. After an over 20% rise last week, the BDI's current momentum suggests that this year's highs, in most vessel categories, will be tested shortly.

Shipping Market Report

As mentioned in my previous reports, government stimulus spending in China and in other major countries has benefited the global dry bulk trade. Several factors that were in play during 2007 and the first half of 2008 that drove the BDI to record levels have re-asserted themselves this year. The rapidly weakening dollar and the associated increasing prices of commodities are an important side-effect of the US government policy of increased spending and assistance to the banking / financial sector. Billions of US dollars have flooded global markets, driving up many asset prices, including the prices of many commodities that are transported in dry bulk vessels.

Very often, these global trends last a long time; longer than many would think. This is also true in the dry bulk shipping market, which relies on the health of global trade. Earlier this year, many (myself included) were skeptical of the duration of this rally, and for good reason. One cannot say that the difficulties in the global economy have been "fixed" within only one year; nor could we have been unconcerned about the amount of new buildings scheduled to enter the market. I'm sure there will be more difficult times ahead, but for now we cannot yet buck the trend – it is for higher freight, and it will remain so until the technical and or fundamental indicators change.

Let's break it down by vessel category:

The Capesize market has been on a tear lately. The Capesize Index stands at 7326; its 4 TC average at 78,075, an increase of nearly 30% in only ten days. We hear reports of increased coal and ore movement in the Atlantic probably destined for Europe; as well as the continued near record imports of ore into China. Port congestion in Chinese ore ports is re-emerging, thus the upward squeeze on Capesize freight.

The Panamax market has run similarly upward, standing at 4091; 4 TC average at 32,879, an approximate 10% increase in the last week. The Panamaxes are participating in the increased coal and ore movements, but there have also been substantial increases in grain transportation from the U.S. Gulf. The weak US dollar has greatly contributed to the reported 30% increase in US exports so far this year, a statistic that is certainly pleasing to US. Government officials and ship-owners alike, as agricultural commodities should make up a large part of this increase.

The Handymax and Handysize freight markets have also increased, but have initially lagged behind the Capesize and Panamax markets. Now they are catching up, with the Handymax index up nearly 5% today alone. The Handysize market was up a little more than 10% in the last week. The US Gulf and India have been particularly active in these vessel segments recently. The Handymax and Handysize Index stand today at 2257 and 985, respectively.

Where do we go from here?

Let's look at the technical clues first. The test for the Capesize market will be if it could surpass the mid US $90,000s 4 TC average. The Panamax market has already surpassed the last resistance point in the high US $20,000s 4 TC average, and the next major resistance is in the low US $40,000s. Handymaxes have also surpassed near-term resistance, and their next test is in the low US $30,000s. Handys are just at near-term resistance, and I would expect them also to follow the larger vessels through. Therefore, it appears as though 20% to over 30% upside now exists in Capes – Handys before new resistance is encountered.

Global macro economic trends appear to have some staying power as well. U.S. government policy is not likely to change at least for the near to possibly medium term. Therefore, the dollar looks to stay weak, and commodity prices elevated. Several government stimuli, China's - of particular importance to dry bulk freight, appear to be in place for a while. India also has needs for a substantial amount of tonnage. Furthermore, the anticipated growth in vessel supply has not yet been realized. Delays and cancellations in new buildings have greatly limited supply growth of new ships, and freights have increased with the rise in vessel demand seen recently. However, a substantial rise in new building deliveries, or decrease in economic stimulus in China and other major economies would end this rally quickly. Stay tuned !!

Editor's Note:

This article should interest shipping market investors in securities including: Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Nordic American Tanker (NYSE: NAT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), Nasdaq: Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), Claymore/Delta Global Shipping (Nasdaq: XSEAX).

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Producer Price Index (PPI) - October 2009

2009-11-17T14:00:00.004-05:00

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(Tickers: NYSE: IMF, WIW, WIA, GDX, SGOL, DGL, GLD, UGL, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

A day after the Chairman of the Federal Reserve gave the all-clear on inflation, the Bureau of Labor Statistics produced its monthly Producer Price Index (PPI) showing a rise in prices on the business level. A closer inspection of the data, ex-food and energy, would seem to resolve any inflation concern, except for an old troubling issue once regularly discussed here at the column, but since lost in the wake of recessionary deflation.

Producer Price Index (PPI)

Producer prices were reported increased by 0.3% in October, marking the sixth monthly price rise of the last 12 months. Price increase in a period of recession might seem counterintuitive, but as we know well by now, Headline PPI is influenced by wild swings in energy prices. Taking a longer-term look at the metric shows the Headline Producer Price Index is in fact down 1.9% from where it stood a year ago. Recall, oil prices started their trek downward from mountainous peaks in July of 2008, and by October of that year still had a ways to fall. Despite the mid-term trend, though, dollar weakness and reviving Emerging Market demand (read China) seem sure to keep pricing stable-to-higher moving forward.

Both volatile components of Producer Prices that regularly drive wild monthly swings in Headline PPI, energy and food, increased a substantial 1.6% in October. Gasoline price increase of 1.9% was mostly behind the big increase in finished energy prices. Higher residential power costs and liquefied petroleum gas contributed the rest. On the Intermediate Goods level, higher diesel fuel and natural gas shipped to electric utilities and commercial electric power drove pricing. Behind all this were rising energy prices on the Crude Level. Natural gas prices increased 16.3% in October based on the BLS produced index, and higher coal and petroleum contributed as well.

A 9.0% higher Grains Index, and also increased prices for slaughter poultry, factored significantly in increased foods prices on the Crude Level. On the Finished Foods level, 24.2% higher vegetable prices led the push.

When excluding volatile food and energy prices from the October measurement, Core Producer Prices declined 0.6%. That's a figure we can find more consistent with the recessionary times. However, when compared against the prior year Core Producer Price Index, prices are actually up 0.7% versus year ago levels.

Today's reported PPI rise of 0.3% compared against economist expectations for a greater price increase of 0.5%. That's good news, but an even better result was found in the Core Producer Price Index comparison to expectations. The decline in Core Prices of 0.6% last month compared against economists' expectations for a rise of 0.1%. Core prices fell for the second month in a row (-0.1% in September), but have only declined four out of the last twelve months (though also 4 out of the last 6). So why then have prices held up relatively well in such a tumultuous environment? That's the subject of a follow on feature article you will find here soon. For now, if you are worried about inflation, we suggest you read our recent piece, "The Coming Inflation Trade."

Note:

If you are concerned about inflation, you may consider some inflation protection funds or other hedges. Some useful tools may include: Western Asset Inflation Management Fund Inc. (NYSE: IMF), Western Asset/Claymore Inflation- Linked Opportunities & Income Fund (NYSE: WIW), Western Asset/Claymore Inflation-Linked Securities & Income Fund (NYSE: WIA), Market Vectors Gold Miners ETF (PCX: GDX), ETFs Gold Trust (NYSEArca: SGOL), PowerShares DB Gold (NYSE: DGL), SPDR Gold Shares (NYSE: GLD), Ultra Gold ProShares (NYSE: UGL), AMERICAN CENTURY VP INFLATION P (Nasdaq: AIPTX), AMERICAN CENTURY VP INFLATION P (Nasdaq: APTIX), American Century Inflation Prot Bd A (Nasdaq: APOAX), American Century Inflation Prot Bd B (Nasdaq: APOBX), American Century Inflation Prot Bd C (Nasdaq: APOCX), American Century Inflation Prot Bd Instl (Nasdaq: APISX), American Century Inflation Prot Bd Inv (Nasdaq: APOIX), American Century Inflation Prot Bd R (Nasdaq: APORX), BlackRock Inflation Protected Bond A (Nasdaq: BPRAX), BlackRock Inflation Protected Bond B (Nasdaq: BPIBX), BlackRock Inflation Protected Bond Black (Nasdaq: BPLBX), BlackRock Inflation Protected Bond C (Nasdaq: BPRCX), BlackRock Inflation Protected Bond Instl (Nasdaq: BPRIX), BlackRock Inflation Protected Bond Svc (Nasdaq: BPRSX), DB USD IG INF USD IG INFLATION (LSE: XUIT.L), DFA Inflation-Protected Securities I (Nasdaq: DIPSX), DWS Inflation Protected Plus A (Nasdaq: TIPAX), DWS Inflation Protected Plus B (Nasdaq: TIPTX), DWS Inflation Protected Plus C (Nasdaq: TIPCX), Alliance Resource Partners L.P. (Nasdaq: ARLP), Alliance Resource Holdings (Nasdaq: AHGP), Atlas Pipeline Partners L.P. (NYSE: APL), Atlas Pipeline Holdings (NYSE: AHD), Atlas Energy Resources (NYSE: ATN), Boardwalk Pipeline Partners (NYSE: BWP), Breitburn Energy Partners (Nasdaq: BBEP), Buckeye Partners (NYSE: BPL), Buckeye Holdings (NYSE: BGH), Calumet Specialty Products (Nasdaq: CLMT), Capital Product Partners (Nasdaq: CPLP), Cheniere Energy Partners (AMEX: CQP), Constellation Energy Partners (PCX: CEP), Copano Energy (Nasdaq: CPNO), Crosstex Energy (Nasdaq: XTEX), DCP Midstream Partners (NYSE: DPM), Dorchester Minerals (Nasdaq: DMLP), Duncan Energy Partners (NYSE: DEP), Eagle Rock Energy Partners (Nasdaq: EROC), El Paso Pipeline Partners (NYSE: EPB), Enbridge Energy Partners (NYSE: EEP), Encore Energy Partners (NYSE: ENP), Energy Transfer Partners (NYSE: ETP), Energy Transfer Equity (NYSE: ETE), Enterprise Products Partners (NYSE: EPD), Enterprise GP Holdings (NYSE: EPE), EV Energy Partners (Nasdaq: EVEP), Exterran Partners (Nasdaq: EXLP), Ferrellgas Partners (NYSE: FGP), Genesis Energy (AMEX: GEL), Global Partners LP (NYSE: GLP), Hiland Partners (Nasdaq: HLND), Holly Energy Partners (NYSE: HEP), Inergy (Nasdaq: NRGY), Inergy Holdings (Nasdaq: NRGP), Kinder Morgan Energy Partners (NYSE: KMP), K-Sea Transportation (NYSE: KSP), Legacy Reserves (Nasdaq: LGCY), Linn Energy (Nasdaq: LINE), Magellan Midstream Partners (NYSE: MMP), MarkWest Energy (NYSE: MWE), Martin Midstream Partners (Nasdaq: MMLP), Natural Resource Partners (NYSE: NRP), Navios Maritime Partners (NYSE: NMM), NuStar Energy (NYSE: NS), NuStar GP Holdings (NYSE: NSH), ONEOK Partners (NYSE: OKS), OSG America (NYSE: OSP), Penn Virginia Resource (NYSE: PVR), Penn Virginia GP Holdings (NYSE: PVG), Plains All American (NYSE: PAA), Quest Energy (Nasdaq: QELP), Quicksilver Gas Services (NYSE: KGS), Regency Energy Partners (Nasdaq: RGNC), Rio Vista Energy (Nasdaq: RVEP), Spectra Energy Partners (NYSE: SEP), Stonemor Partners (Nasdaq: STON), Sunoco Logistics Partners (NYSE: SXL), Targa Resources (Nasdaq: NGLS), TC Pipelines (Nasdaq: TCLP), Teekay LNG Partners (NYSE: TGP), Transmontaigne Partners (NYSE: TLP), Vanguard Natural Resources (NYSE: VNR), Western Gas Partners (NYSE: WES), Williams Partners (NYSE: WPZ) and Williams Pipeline (NYSE: WMZ).

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Daily Stock Market Preview 11-17-09

2009-11-17T08:16:00.007-05:00

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

(Tickers: NYSE: ATV, Nasdaq: ALOT, ADSK, CSIQ, DL, CPSL, CRTP, CSKI, CHBT, CNQR, COV, EJ, EDAP, GIGM, HD, JEC, JST, KEI, LZB, PLNR, RTLX, SKS, CRM, SYPR, TGT, TJX, ULU, VIT, WX, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Fed Chair Bernanke addressed inflation in his Monday speech to the Economic Club of New York, and he gave the all-clear. Well, the Producer Price Index is due for its latest reporting Tuesday morning at 8:30, so the market has stew to chew on.

Daily Stock Market Preview

Producer Price Index

Inflation was non-existent again in September, as the Core PPI, which excludes food and energy prices, actually fell by 0.1%. A drop in auto pricing, on "Cash for Clunkers" snap-back, as automakers seek to keep the flow of inventory moving, apparently drove price decline. For the October period, economists are looking for a 0.1% rise in Core Producer Prices. Headline PPI is regularly swayed by changes in energy prices, and should show rebound in October (+0.5%), according to economists surveyed by Bloomberg.

At 9:00 AM, the Treasury Department will report on Treasury International Capital (TIC). The TIC report tallies net purchases of long-term US securities. The report for August counted net purchases of $28.6 billion. However, purchases by foreign official institutions were only $11.6 billion, and foreign holdings of US Treasury bills decreased by $2.5 billion. Net purchases of long-term US securities were down to $264.8 billion in the twelve months ended August 2009, versus $772.2 billion in the relative 2008 period. Considering the dollar's demise and threats from foreign entities of abandonment of US Treasury instruments, this is one report that is likely to garner greater and greater attention as time passes (warranted attention mind you). Speaking of timely... President Obama meets with Chinese President Hu Jintao today. There's an awful lot to discuss between the economic heavyweights...

Chairman Bernanke also spoke about production gains on Monday, noting that they were coming at the cost of overburdened employees, not technology gains nor significant new business scale gain. This bodes well for hiring, once real and sustainable economic demand finds traction. Bernanke suggested that panic led companies to layoff excessively this recession, as compared against prior downturns. This in turn should require sharp hiring once demand picks up.

Industrial Production is due for report Tuesday at 9:15. Production rose 0.7% in September, after increasing a revised 1.2% in August. Economists see a 0.4% increase for October, according to Bloomberg's survey. The gurus forecast an improvement in Capacity Utilization to 70.7% in October, versus the 70.5% measured in September.

For the week ended November 7, the International Council of Shopping Centers (ICSC) noted retail same-store sales fell 0.1% on a week-to-week basis. Sales improved over the prior year by 2.9%, continuing a sales trend advantaging on soft comparable results. You will find the ICSC's latest data on the pre-market wire Tuesday.

Look for the Housing Market Index to be reported at 1:00 p.m. The National Association of Homebuilders' regular report has reflected builder depression for quite a while now, but has recovered from drop-dead lows found at the beginning of the year. More recently, the index has stuck range-bound, slipping to 18 for October, versus 19 in September. We suspect this next reading will stick at 18, but over the next month or so it could deteriorate further based on our analysis of housing (see pending article in coming days).

"If a big bank can't cover fifty cents for me, then I'll take my business elsewhere,"

At 10:00 AM, Jeffrey Lacker is due to address a Virginia group on the economic outlook. In DC proper, the House Financial Services Committee will discuss banks' abusive overdraft fees. "The Greek" has heard a lot about this on the streets of New York from disgruntled bank customers suffering to pay bills they do not need (shout out to Valerie, my good friend who pointed this out to me recently). Guess what, I'm in agreement. The last thing poor people need is a fee for a fifty cent overdraft. "If a big bank can't cover fifty cents for me, then I'll take my business elsewhere," quoting Val; and she did! Problem is, these fees are commonplace and very few banks are capitalizing on an opportunity to win customers (by eliminating them!). I guess we folks who care about silly things like fees are small fish... Well then, Congress better look out for us! Call your Congressman and put an end to oversized and unfair fees for small short-term overdrafts!

Earnings Drivers

Tuesday's EPS reports include Acorn International (NYSE: ATV), Astro-Med (Nasdaq: ALOT), Autodesk (Nasdaq: ADSK), Canadian Solar (Nasdaq: CSIQ), China Distance Education (NYSE: DL), China Precision Steel (Nasdaq: CPSL), China Ritar Power (Nasdaq: CRTP), China Sky One Medical (Nasdaq: CSKI), China-Biotics (Nasdaq: CHBT), Concur Technologies (Nasdaq: CNQR), Covidien PLC (NYSE: COV), E-House Holdings (NYSE: EJ), Edap TMS (Nasdaq: EDAP), GigaMedia (Nasdaq: GIGM), Home Depot (NYSE: HD), Jacobs Engineering (NYSE: JEC), Jinpan Int'l (Nasdaq: JST), Keithley Instruments (NYSE: KEI), La-Z-Boy (NYSE: LZB), Planar Systems (Nasdaq: PLNR), Retalix (Nasdaq: RTLX), Saks (NYSE: SKS), Salesforce.com (NYSE: CRM), Sypris Solutions (Nasdaq: SYPR), Target (NYSE: TGT), The TJX Cos. (NYSE: TJX), ULURU (AMEX: ULU), VanceInfo Technologies (NYSE: VIT) and WuXi PharmaTech (NYSE: WX).

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Retail Sales Data Dictates Trade

2009-11-16T09:20:00.006-05:00

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

(Tickers: GM, LOW, SPA, CEL, GILT, PSUN, FTK, AOB, ESEA, WGNR, ZOOM, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Retail Sales Dictate

Today's retail sales data is adding lift to shares. The gain for October is impressive; especially considering its coming on the heels of a nasty skew for strong September sales, due to a weird Labor Day holiday that fell deep into the month. Still, we suspect it will not be long before traders focus on a tight holiday shopping season and heavy retail insider selling moving into the important period.

Retail Sales

October Retail Sales were reported today up 1.4% over September sales. As you will recall, those sales benefited from a late Labor Day holiday and delayed "back to school" shopping. When compared to the prior year, October sales weakness was still in evidence, as sales fell 1.7% against the prior year. Last fall marked about when all hell started to break loose.

October's monthly rise exceeded economists consensus forecasts for a 0.9% rise. Ex-autos, sales improved only 0.2%, versus expectations for 0.4%. We should also note relatively positive results from the August through October period. Those sales rose 1.5% against prior year results, but autos helped drive that on "cash for clunkers"...

New York Manufacturing

The Empire State Manufacturing Index came in down to 23.51 for its November reading, dropped from October's 34.6 and the consensus view for 29.0. This is consistent with double-dip recession concerns we have here.

Business Inventories

Business Inventories for September are due at 10:00 AM. The consensus, as measured by Bloomberg, sees a monthly decrease of 0.8%. Augusts' tally noted a 1.5% drop in inventory on the business level. Clunkers again fogs up comparisons, so keep your senses...

Bernanke Takes Stage

Federal Reserve Chairman Ben Bernanke will address the Economic Club of New York today at noontime. He will be talking to the ever-intensifying challenges to his group's policy making. Those pesky lawmakers keep seeking to restrict the Fed's uber-power.

Overseas News Drivers

Japan today reported its strongest GDP growth since 2007. Third quarter gross domestic product increased 4.8%, on the strength of renewed export demand and government stimulus.

The European Central Bank (ECB), the Bank for International Settlements, and the World Bank are meeting today to review their own portfolio and risk management methods.

Corporate Earnings Drivers

Lowe's (NYSE: LOW) reported results that were in line with analysts expectations, earning $0.24 per share ex-items. The company noted 30% lower revenues than last year though, while attempting to appease market concerns with its view for a reviving housing market and flat Q4 revenue forecast. We have a feeling the market is not going to buy it. LOW shares have backed off of summer highs, but have seen some renewed strength of late. The company's revenue forecast is better than analysts' view, but we just have trouble seeing them making the mark despite the easy comp. See our report on housing in a pending article...

Talk about kitchen sink write-offs! General Motors (NYSE: GM) reported only a $1.2 billion loss for its Q3, or that portion of the quarter that came post bankruptcy. Unfortunately, it cannot hide the $79.4 billion it lost in the first few days of the quarter while still under bankruptcy protection. Actually though, many of those cost burdens have been permanently removed and operating burden lightened. Get this though... GM congratulated itself on its revenue drivers, its Camaro muscle car, its Silverado, its full-size Impala and other same olds... Also, it was sure to mention today's keyword, "global" sales efforts. Good luck GM, but we're not so sure you are that much different since renovation, though smaller; at least not beyond the cuts to the knees of the autoworkers that had no leg to stand on during the bankruptcy. That's for my friends in Detroit...

Monday's earnings schedule includes news from ADA-ES (Nasdaq: ADES), American Dairy (NYSE: ADY), American Oriental Bioengineering (NYSE: AOB), Arcadia Resources (AMEX: KAD), Assured Guaranty (NYSE: AGO), Authentidate Holding (Nasdaq: ADAT), Cellcom Israel (NYSE: CEL), China Architectural Engineering (Nasdaq: CAEI), Document Security Systems (AMEX: DMC), DRI Corporation (Nasdaq: TBUS), Emrise (NYSE: ERI), Encorium Group (Nasdaq: ENCO), Energy Focus (Nasdaq: EFOI), Euroseas Limited (Nasdaq: ESEA), Flamel Technologies (Nasdaq: FLML), Flotek Industries (NYSE: FTK), Fortune Industries (AMEX: FFI), Franklin Covey (NYSE: FC), FreeSeas (Nasdaq: FREE), Gilat Satellite (Nasdaq: GILT), Hastings Entertainment (Nasdaq: HAST), International Royalty (AMEX: ROY), KHD Humboldt Wedag Int'l (NYSE: KHD), Longtop Financial Technologies (NYSE: LFT), Lowe's Cos. (NYSE: LOW), Misonix (Nasdaq: MSON), Multiband Corp. (Nasdaq: MBND), Napco Security (Nasdaq: NSSC), Northern Dynasty Minerals (AMEX: NAK), Pacific Sunwear of California (Nasdaq: PSUN), Palatin Technologies (AMEX: PTN), Perfect World (Nasdaq: PWRD), Pet DRx Corp. (Nasdaq: VETS), Pressure Biosciences (Nasdaq: PBIO), ReneSola (NYSE: SOL), Response Genetics (Nasdaq: RGDX), Simcere Pharmaceutical Group (NYSE: SCR), SINA Corp. (Nasdaq: SINA), SinoHub (Nasdaq: SIHI), Sinovac Biotech (AMEX: SVA), Sparton (NYSE: SPA), Spreadtrum Communications (Nasdaq: SPRD), Starwood Property Trust (Nasdaq: STWD), Telkonet (NYSE: TKO), The Allied Defense Group (AMEX: ADG), TLC Vision (Nasdaq: TLCV), US Dataworks (AMEX: UDW), Wegener (Nasdaq: WGNR), WidePoint (AMEX: WYY) and Zoom Technologies (Nasdaq: ZOOM).

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

The Coming Inflation Trade

2009-11-13T16:40:00.003-05:00

Making the case for Real Estate, Master Limited Partnerships and Alternative Hard Asset Investments

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

(Tickers: ARLP, AHGP, APL, ATN, BWP, BBEP, BPL, BGH, CLMT, CPLP, CQP, CEP, CPNO, XTEX, DPM, DMLP, DEP, EROC, EPB, EEP, ENP, ETP, ETE, EPD, EPE, EVEP, EXLP, FGP, GEL, GLP, HLND, HEP, NRGY, NRGP, KMP, KSP, LGCY, LINE, MMP, MWE, MMLP, NRP, NMM, NS, NSH, OKS, OSP, PVR, PVG, PAA, QELP, KGS, RGNC, RVEP, SEP, STON, SXL, NGLS, TCLP, TGP, TLP, VNR, WES, WPZ, WMZ, BAC, FRE, FNM, GS, MS, WFC, TD, SRS, URE, IGR, XIN, RYHRX, TRREX, TOL, HOV, DHI, BZH, LEN, KBH, PHM, NVR, GFA, MDC, CTX, KBH, RYL, MTH, XIN, BHS, SPF, MHO, OHB, WCI, NYX, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Inflation Trade

Inflation is coming! Not tame, controlled increases in prices and wages that make everyone feel richer; this inflation will be nasty, double digit, 70's style inflation that will erode purchasing power and destroy the fixed income markets. Annuities, bonds, and pensions will provide the same income, but it will cost much more to buy everything... not just petroleum-based products, but water, utilities, food, clothing, and all the necessities of life.

The massive debt accumulated by the US Government will be repaid with dollars 90%, 80%, or 50% of their current value; the debt will be monetized! This inflationary period should start to become apparent at the end of the 4th quarter of 2010 or the 1st quarter of 2011. There is time to prepare and protect income and wealth, as well as reap enormous profits.

"The stage has been set to reap "generational" profits from the financial turmoil of the past few years..."

The premise of my article is the accumulation of assets that generate income and will grow and benefit from rising prices. The focus is on the inflation-hedged asset class of single-family residential homes purchased for the express purpose of rental income and capital gains. Those who have identified the trend and positioned themselves early in the "Inflation Trade" should reap explosive profits. These rentals can be easily accumulated: individually, conservatively, and dependably. The stage has been set to reap "generational" profits from the financial turmoil of the past few years, and create a lifeboat to protect the investor and his family against future economic cycle troughs.

This article has been written to prepare the individual investor for the coming economic change that I view inevitable. I hope to provide an incentive to individuals to execute a plan to create lasting wealth that can be used immediately, and that can also be passed along to future generations as an income legacy.

The extraordinary times present in the US will likely allow the traditional time frame of 10 years, which is needed to accumulate and season a rental portfolio, to be reduced to 4 years. I strongly believe the combination of: historically low fixed rate mortgages; the developing housing shortage, due to the lack of new construction necessary to keep pace with our expanding population; and the explosion of government debt, will drive those wishing to protect purchasing power into tangibles and income producing Real Estate.

I hope to provide a recipe to accumulate, manage, and harvest the profits during the coming "Boom Years," and to prepare the reader for the inevitable downturn needed to contain the inflation unleashed by government action. My wish is to provide economic signposts to gauge the cycles' progress, as well as an exit strategy to be employed prior to the next recession, which will potentially be worse than the 2007 - 2009 downturn.

A dire and yet highly possible scenario for the future is a 70's style true inflation across all sectors of the economy. While visiting Australia this past summer, I met with school teachers who were striking for higher pay. The Nurses Union had just been awarded a 21% pay increase, and the government had offered the teachers a 12% raise, which was turned down. The teachers' demand was for a 16% increase in pay. This behavior is typical in an economy entering into a Price-Wage Spiral. As prices go up, more income is needed to afford the prices, in turn causing a need to raise prices to afford the wages. The cycle invariably ends badly.

However, huge gains can be made by those positioned in inflation hedged assets such as master limited partnerships typical with commodity based products such as gas, oil, coal, pipelines, iron ores, etc, as well as tangibles such as art, stamps, and coins. Real estate rental properties have an income stream that can grow significantly during an inflationary "boom." Furthermore, property value/price generally exceeds the rate of inflation adding a "value-on" component.

Editor's Note:

A few publicly traded master limited partnerships include: Alliance Resource Partners L.P. (Nasdaq: ARLP), Alliance Resource Holdings (Nasdaq: AHGP), Atlas Pipeline Partners L.P. (NYSE: APL), Atlas Pipeline Holdings (NYSE: AHD), Atlas Energy Resources (NYSE: ATN), Boardwalk Pipeline Partners (NYSE: BWP), Breitburn Energy Partners (Nasdaq: BBEP), Buckeye Partners (NYSE: BPL), Buckeye Holdings (NYSE: BGH), Calumet Specialty Products (Nasdaq: CLMT), Capital Product Partners (Nasdaq: CPLP), Cheniere Energy Partners (AMEX: CQP), Constellation Energy Partners (PCX: CEP), Copano Energy (Nasdaq: CPNO), Crosstex Energy (Nasdaq: XTEX), DCP Midstream Partners (NYSE: DPM), Dorchester Minerals (Nasdaq: DMLP), Duncan Energy Partners (NYSE: DEP), Eagle Rock Energy Partners (Nasdaq: EROC), El Paso Pipeline Partners (NYSE: EPB), Enbridge Energy Partners (NYSE: EEP), Encore Energy Partners (NYSE: ENP), Energy Transfer Partners (NYSE: ETP), Energy Transfer Equity (NYSE: ETE), Enterprise Products Partners (NYSE: EPD), Enterprise GP Holdings (NYSE: EPE), EV Energy Partners (Nasdaq: EVEP), Exterran Partners (Nasdaq: EXLP), Ferrellgas Partners (NYSE: FGP), Genesis Energy (AMEX: GEL), Global Partners LP (NYSE: GLP), Hiland Partners (Nasdaq: HLND), Holly Energy Partners (NYSE: HEP), Inergy (Nasdaq: NRGY), Inergy Holdings (Nasdaq: NRGP), Kinder Morgan Energy Partners (NYSE: KMP), K-Sea Transportation (NYSE: KSP), Legacy Reserves (Nasdaq: LGCY), Linn Energy (Nasdaq: LINE), Magellan Midstream Partners (NYSE: MMP), MarkWest Energy (NYSE: MWE), Martin Midstream Partners (Nasdaq: MMLP), Natural Resource Partners (NYSE: NRP), Navios Maritime Partners (NYSE: NMM), NuStar Energy (NYSE: NS), NuStar GP Holdings (NYSE: NSH), ONEOK Partners (NYSE: OKS), OSG America (NYSE: OSP), Penn Virginia Resource (NYSE: PVR), Penn Virginia GP Holdings (NYSE: PVG), Plains All American (NYSE: PAA), Quest Energy (Nasdaq: QELP), Quicksilver Gas Services (NYSE: KGS), Regency Energy Partners (Nasdaq: RGNC), Rio Vista Energy (Nasdaq: RVEP), Spectra Energy Partners (NYSE: SEP), Stonemor Partners (Nasdaq: STON), Sunoco Logistics Partners (NYSE: SXL), Targa Resources (Nasdaq: NGLS), TC Pipelines (Nasdaq: TCLP), Teekay LNG Partners (NYSE: TGP), Transmontaigne Partners (NYSE: TLP), Vanguard Natural Resources (NYSE: VNR), Western Gas Partners (NYSE: WES), Williams Partners (NYSE: WPZ) and Williams Pipeline (NYSE: WMZ).

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Business News Summary 11-12-09

2009-11-12T10:40:00.004-05:00

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

(Tickers: NYSE: WMT, KSS, Nasdaq: SSRX, ADUS, ACM, AFCE, ATSG, ABV, AMAC, APBRF.PK, A03.SI, BCH, BNX, BNGPY.PK, BBI, BPHX, BPA, BRKS, CAAS, DIET, ECA, EDL.PA, EPM, GRS, GSOL, HPJ, HSNI, ILI, KTEC, LIME, MATW, VIVO, JWN, PTSX, RLOG, REP, SPNS, HAWK, TGB, TEF, URBN, VIV.PA, DIS, WEBM, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Business News Summary

Wal-Mart posted a profit gain this morning, but its sales missed forecasts and gave investors pause. The discount king benefits from recession as consumers shift downward en masse. However, if sales fell even at Wal-Mart, investors are apt to worry about the rest of retail, not to mention the implications to overall consumer spending and the economy. Add to this distressing news the fact that contracts for new home purchase are waning (mortgage activity analysis below) and folks are still losing their jobs, and the market moves cautiously to start the day.

Weekly Jobless Claims

See our detailed report here: Jobless Claims

Weekly Jobless Claims have held above a troubling 500K rate of labor market outflow, and a mess is piling up in the streets. This week's count kept up the trend, as the Labor Department reported that 502K folks filed for unemployment benefits in the week ending November 7. That compared against a revised prior week count of 514K, and economists consensus estimate for 512K.

Mortgage Activity Report

Usually reported on Wednesday, the Mortgage Bankers Association released its Weekly Mortgage Activity Report on Thursday this time around, due to Veterans Day. A trend matching last week's data continued in the week ending November 6, and intensified. Rates again moderated on contracted 30-year and 15-year mortgages. The 30-year average contract rate on fixed rate mortgages dipped to 4.90%, from 4.97%; 15-year contracts stuck at 4.33%.

Again, as last week, the Market Composite Index improved, this time by 3.2%, on Refinance Index gain of 11.3%. Just like last week though, Purchase Activity offered disturbing information. The Purchase Index fell 11.7%, and sits at its lowest mark since December of 2000.

Last week: For the week ended October 30, the overall Market Composite Index of mortgage activity increased by 8.2%. Purchase Activity, however, declined by 1.8% as American confidence waned. Contracted mortgages on 30-year fixed rate mortgages averaged rates of 4.97%, down from 5.04% the previous week. Rates on 15-year contracts dipped to 4.33% on average, down from 4.53%. Thus, the Refinance Index (+14.5%) drove overall activity.

Petroleum Status Report

Weekly oil inventory data will be reported at 10:30 today. Last week's report for the week ended October 30 noted a decrease in crude stocks of 4.0 million barrels. Still, inventory is near the upper range for this time of year. While this is due to "The Great Recession," OPEC expressed concern yesterday for the long-term demand for oil, given relatively high pricing and its after-effects.

Gasoline stores decreased by 0.3 million barrels in the last reported week, while distillate fuel inventories fell by 0.4 million. Heating oil plays a big role here, and warmer weather in the use-heavy Northeast should have traders expecting soft numbers next week (this report might indicate otherwise).

Corporate News Drivers

Several significant retailers reported results today, including Wal-Mart (NYSE: WMT) and Kohl's (NYSE: KSS). The nation's most important retailer (by far) reported results today, and again showed growth. Wal-Mart shares are up 1.0% to start the morning, as the retail giant managed 3.2% profit growth in its fiscal third quarter (Oct.). The major store operator has benefited throughout the recession, as consumers have shifted decisively down to discount. Wal-Mart beat estimates by three cents and guided higher, but some concern has stricken the rest of the market, because WMT's sales came in lower than forecasts (by Thomson Reuters). Combine this news with the mortgage activity trend and still high jobless filings, and investors are giving pause today.

EPS Reports

Look for data from Kohl's (NYSE: KSS), Wal-Mart (NYSE: WMT), 3SBio (Nasdaq: SSRX), Addus Homecare (Nasdaq: ADUS), AECOM (NYSE: ACM), AFC Enterprises (Nasdaq: AFCE), Air Transport Services (Nasdaq: ATSG), AmBev (NYSE: ABV), American Medical Alert (Nasdaq: AMAC), Asia Pacific Breweries (OTC: APBRF.PK), Asia Power (A03.SI), Banco de Chile (NYSE: BCH), Banks.com (NYSE: BNX), Benetton Group (OTC: BNGPY.PK), Blockbuster (NYSE: BBI), BluePhoenix Solutions (Nasdaq: BPHX), Brasil Foods (NYSE: BPA), Brooks Automation (Nasdaq: BRKS), China Automotive (Nasdaq: CAAS), eDiets.com (Nasdaq: DIET), EnCana (NYSE: ECA), EuroDisney (EDL.PA), Evolution Petroleum (NYSE: EPM), Gammon Gold (NYSE: GRS), Global Sources (Nasdaq: GSOL), Hong Kong Highpower (NYSE: HPJ), HSN, Inc. (Nasdaq: HSNI), Interleukin Genetics (NYSE: ILI), Key Tech (Nasdaq: KTEC), Lime Energy (Nasdaq: LIME), Matthews Int'l (Nasdaq: MATW), Meridian Bioscience (Nasdaq: VIVO), Nordstrom (NYSE: JWN), Point.360 (Nasdaq: PTSX), Rand Logistics (Nasdaq: RLOG), Repsol (NYSE: REP), Sapiens (Nasdaq: SPNS), Seahawk Drilling (Nasdaq: HAWK), Taseko Mines (TGB), Telefonica SA (NYSE: TEF), Urban Outfitters (Nasdaq: URBN), Vivendi (VIV.PA), Walt Disney (NYSE: DIS), WebMediaBrands (Nasdaq: WEBM) and more.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Jobless Claims - How to Analyze the Data

2009-11-12T09:30:00.003-05:00

Helping You Make Sense of Jobless Claims Data

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

(Tickers: NYSE: RHI, MAN, KFY, MWW, STT, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Jobless Claims

Weekly Jobless Claims have held above the 500K rate of labor market outflow, and a mess is piling up in the streets! This week's count kept up the troubling trend, as the Labor Department reported that 502K folks filed for unemployment benefits in the week ending November 7. That compared against a revised prior week count of 514K, and an economists consensus estimate for 512K, as surveyed by Bloomberg.

How to Analyze Jobless Claims - Making Sense of it All

Remember, we do not put much weight into economists' consensus forecasts for jobless claims, as week-to-week changes are not likely to be dramatic and economists know that (as do we). Therefore, not much time is put into the generation of these forecasts. Rather, economists look further ahead to more discernible monthly labor market forecasting.

As you follow the trend in this economic data, you are likely better served to note the four-week moving average changes over time. In this latest reporting, the four-week average improved slightly to 519,750, from the prior week's revised 524,250. As we take note of weekly changes, we can look toward specific industry or even corporate layoffs, but information will be mixed with too much noise for most of us to discern causal factors. Here in the four-week average data for jobless claims we find something more tangible and useful for the typical portfolio manager to understand what is going on in the overall labor market.

State Trends

As incumbent governors approach tough elections (facing blame and all), expect more turnover of party in states where unemployment is highest.

The highest insured unemployment rates in the week ending Oct. 24 were in Puerto Rico (6.4 percent), Oregon (5.4), Nevada (5.2), Pennsylvania (4.9), Alaska (4.8), Arkansas (4.8), California (4.8), Wisconsin (4.8), North Carolina (4.6), Michigan (4.5), and South Carolina (4.5).

The largest increases in initial claims for the week ending Oct. 31 were in Wisconsin (+1,501), Illinois (+1,390), Michigan (+1,135), Puerto Rico (+1,101), and Texas (+965), while the largest decreases were in California (-6,752), Florida (-3,409), Georgia (-2,686), New York (-2,067), and North Carolina
(-1,872).

Extended Benefits

We like to provide helpful information here along with what we hope is useful economic and financial markets analysis. So, for those of you receiving benefits:

Extended benefits were available in Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia, and Wisconsin during the week ending Oct. 24.

Also Smart to Follow

You might keep track of the financial releases and conference calls from employment firms like Robert Half International (NYSE: RHI), Korn Ferry (NYSE: KFY), Monster Worldwide (NYSE: MWW), Manpower (NYSE: MAN) and others to color in missing facets to your analysis. Feel free to ask a question; we are here to help!

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Veterans Day - Markets Mostly Open

2009-11-11T08:58:00.007-05:00

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

(Tickers: NYSE: TOL, AAP, ANW, Nasdaq: AEZS, AMAT, AMEX: BLD, CAE, CAMT, CPHC, GRRF, CHLN, CSC, CTRP, DAC, MSN, FLO, GMCR, ING, JCDA, M, PHC, RA, TTEK, PGR, USHS, WES, XRIT, UBET, ZOLL, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK, AIG)

Today marks Veteran's Day, but stock and futures markets are open for business. Fixed income markets are closed today though, as we honor our nation's war heroes. After a relatively flat day of trading on Tuesday, early indicators seem to indicate the same in store for Wednesday, barring any breaking market moving news. We have a quiet news day to report, but several important foreign and international organizations made headlines with some market moving comments. Toll Brothers (NYSE: TOL) and Macy's (NYSE: M) lead U.S. news makers.

Overseas Action

There's plenty of overseas action this morning, with news out of OPEC, The World Bank and Bank of England. World Bank President Robert Zoellick warned that high unemployment threatened American (and global) recovery. He noted a few of the thorns we've discussed here over recent months. Ongoing credit defaults and consumer spending should hamper the robustness of economic recovery, and even threaten to "double dip" us back into recession. Zoellick sees U.S. unemployment sticking high in 2010.

Bank of England (BOE) Governor Mervyn King discussed the BOE's quarterly forecast, and noted that he still has an "open mind" regarding stimulus tools, including bond purchases. He said that while the Kingdom's economy has stabilized, it continues to have quite a way to go to return to recent past levels of health.

OPEC warned that high priced crude threatens demand in 2010. In an environment of unstable economic recovery, OPEC is concerned that the price of oil (and clearly alternative energy advancements) threaten crude demand. We'll have more to say about this in a near-term article.

Gates in NYC

I'm not talking about Hell's Gate Bridge here... Rather, for $50 you could have seen Bill Gates today in Manhattan. The iconic technology innovator and Microsoft (Nasdaq: MSFT) legend will appear with Economist Editor Matthew Bishop at the 92nd Street Y in Manhattan. We checked though, and tickets appear to be sold out or already prebooked fully. "The Greek" would consider playing financial markets paparazzi today, to grab a photo of the king of software, if not for a busy schedule.

Corporate News Drivers

Toll Brothers (NYSE: TOL) is up over 13% in the early going Wednesday, after the homebuilder reported signed contracts soared 42% in its fiscal fourth quarter ended October 31. That news far outweighed a sharp drop in revenue, and has the shares moving today.

Macy's (NYSE: M) is down 6% to start the day, on its lower than consensus forecast. The company reported a lower loss for its third quarter, and raised its outlook. Unfortunately for shareholders, its lifting of its EPS forecast did not reach the level analysts were looking for.

The day's earnings schedule includes Advance Auto Parts (NYSE: AAP), Aegean Marine Petroleum (NYSE: ANW), Aeterna Zentaris (Nasdaq: AEZS), Applied Materials (Nasdaq: AMAT), Baldwin Technology (AMEX: BLD), CAE, Inc. (NYSE: CAE), Camtek (Nasdaq: CAMT), Canterbury Park Holdings (Nasdaq: CPHC), China Grentech (Nasdaq: GRRF), China Housing & Land (Nasdaq: CHLN), Computer Sciences (NYSE: CSC), Ctrip.com Int'l (Nasdaq: CTRP), Danaos (NYSE: DAC), Emerson Radio (NYSE: MSN), Flowers Foods (NYSE: FLO), Green Mountain Coffee (Nasdaq: GMCR), ING Groep NV (NYSE: ING), Jacada (Nasdaq: JCDA), Macy's (NYSE: M), Pioneer Behavioral Health (NYSE: PHC), RailAmerica (NYSE: RA), Tetra Tech (Nasdaq: TTEK), The Progressive (NYSE: PGR), U.S. Home Systems (Nasdaq: USHS), Western Gas Partners (NYSE: WES), X Rite (Nasdaq: XRIT), Youbet.com (Nasdaq: UBET), Zoll Medical (Nasdaq: ZOLL) and more.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Premarket Report 11-10-09

2009-11-10T08:50:00.005-05:00

Visit the front pages of Wall Street Greek to see our current coverage of economic reports and financial markets.

Koreas Trade Fire, Salt Day's Trading

(Tickers: Nasdaq: PCLN, NYSE: APP, ARM, ATEA, ATO, BZH, BOBE, STV, CYD, CDTI, CLWR, ACA.PA, FOSL, GSL, HEW, ITP, JASO, KEP, MFB, PAAS, RAH, GOLD, RWC, SINGF.PK, STS, NZYM, TBAC, TIER, TISA, TGIC, TYC, UPG, VOD, WTW, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Premarket Report

Futures indicate a lower open today, after yesterday's 2% jump in the Dow Jones Industrials. European bankers are meeting, but likely played no role in futures direction this morning. Earnings have been sparse this morning and insignificant, in our view, and so the driver in the premarket is most likely the exchange of fire between naval vessels in Korea and perhaps a simple reaction to yesterday's strength.

ICSC Sales Data

As retail results come up against soft comparable sales from a year ago, the data has a chance to look better than horrible. The week ago reporting of the International Council of Shopping Centers (ICSC) Weekly Same-Store Sales results offered one example. When compared against the prior week data, sales improved by a slight 0.1%, matching the prior week gain. When matched against the prior year sales tally, however, same-store results posted a 1.9% increase (2.4% week before).

The latest tally of ICSC data was released in the premarket today. For the week ended November 7, sales fell this time by 0.1% on a week-to-week basis. Sales were again up 2.9% over the prior year count, as those easy comparables match with population growth and the absence of panic for now.

Feds Talkative

A slew of Fed Heads will meet microphones on Tuesday, so take your aspirin ahead of time, if not a shot of Jack. Atlanta Fed President Dennis Lockhart goes first, addressing the Urban Land Institute Conference at 9:15 a.m. At 10:00 a.m., San Francisco Fed President Janet Yellen speaks to the economic outlook and real estate with a group in Phoenix. In the evening at 7:00 p.m., Dallas Fed President Richard Fisher will address the Austin Headliners Club on the economy. European finance ministers will also be in the spotlight Tuesday, as they meet for an EU Economic and Financial Affairs Council meeting.

Small Business Check

Small businessmen weigh in on their economic view when the National Federation of Independent Business publishes the results of its Small Business Optimism Index for October Tuesday. While small businesses were late in shedding jobs at the start of the recession, they've been well represented over recent months.

World Energy Outlook

Look for the International Energy Agency's (IEA) latest update to its World Energy Outlook at some point Tuesday. Talk about a tough job; imagine attempting to predict the consumption demand trends for energy through 2030 at this interesting juncture in history. On one hand, you have the increasing needs of developing China and India, and on the other you have a developed world aggressively working toward alternative energy sources.

Corporate Earnings News

Priceline.com (Nasdaq: PCLN) shares are up 12% in the premarket, after the travel company produced its third quarter results last evening. Priceline.com's EPS more than tripled over the prior year period, as it benefited from trade down business. It seems many of you spend heavies have joined "The Greek" in using this enabling resource at Priceline.com. EPS actually only doubled when excluding a one-time gain, but it seems investors are getting on board anyway. PCLN gave good reason too as well, as it is forecasting EPS of $1.52 to $1.62 for its Q4, well ahead of analysts' consensus view for $1.49, according to Thomson Reuters.

EPS Reporters

The day's EPS schedule includes news from American Apparel (NYSE: APP), ArvinMeritor (NYSE: ARM), Astea Int'l (Nasdaq: ATEA), Atmos (NYSE: ATO), Beazer Homes (NYSE: BZH), Bob Evans Farms (Nasdaq: BOBE), China Digital TV (NYSE: STV), China Yuchai (NYSE: CYD), Clean Diesel (Nasdaq: CDTI), Clearwire (Nasdaq: CLWR), Credit Agricole (Paris: ACA.PA), Fossil (Nasdaq: FOSL), Global Ship Lease (NYSE: GSL), Hewitt Associates (NYSE: HEW), Intertape Polymer (NYSE: ITP), JA Solar (Nasdaq: JASO), Korea Electric Power (NYSE: KEP), Maidenform Brands (NYSE: MFB), Pan American Silver (Nasdaq: PAAS), Ralcorp Holdings (NYSE: RAH), Randgold Resources (Nasdaq: GOLD), RELM Wireless (AMEX: RWC), Singapore Airlines (OTC: SINGF.PK), Supreme Industries (AMEX: STS), Synthetech (Nasdaq: NZYM), Tandy Brands (Nasdaq: TBAC), Tier Technologies (Nasdaq: TIER), Top Image (Nasdaq: TISA), Triad Guaranty (Nasdaq: TGIC), Tyco Int'l (NYSE: TYC), Universal Power (AMEX: UPG), Vodafone (NYSE: VOD), Weight Watchers (NYSE: WTW) and several others.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

10.2% Unemployment Rate!

2009-11-07T21:20:00.004-05:00

A Frightful October Employment Report

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(Tickers: NYSE: RHI, KFY, MAN, MWW, WMT, TGT, M, JCP, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

In a little less than two years unemployment has nearly doubled, reaching a point we have not seen in 26 years. The recession began in December 2007, and since then, the number of unemployed persons in America has increased by 8.2 million, to a frightful 15.7 million. What's worse, is that the reported unemployment rate does not include folks working part-time due to reduced hours or layoffs from their full-time jobs. It also excludes people who have lost hope, but are employable under normal conditions.

10.2% Unemployment Rate!

The Department of Labor reported the unemployment rate rose to 10.2% in October 2009, up from 9.8% in September. The jump up in the jobless count also significantly surpassed economists' consensus expectations for a 9.9% reading, based on Bloomberg's survey.

The pace of labor force job shedding has at least eased though, with nonfarm payrolls dropping 190K jobs this time around, versus a revised -154K in September (from -201K) and -219K in August (revised from -263K). Still, the job-loss reading stayed consistent with the take on the rate of unemployment, as it was also worse than economists' consensus expectations for a -175K nonfarm payroll decline.

The bad news did not end there either, as the devil is always found in the details of the Employment Situation Report. It is a bad sign to find people out of work for an extended period of time, and a whopping 35.6% of unemployed persons were out of work for 27 weeks or more as of October. Those considered "marginally attached" to the labor force amounted to 2.4 million, up 736K from the prior year. Marginally attached workers are not counted in the unemployment figures, because they have not searched for a job in the last four weeks. Discouraged workers, which represent the segment of the marginally attached who believe there are simply no jobs for them, was also up nearly double from the year ago period. Another segment that we like to note here, despite getting little attention elsewhere until recently, is the 9.3 million working folks who are working part-time jobs, but would rather be fully employed.

"If we include the underemployed and the marginally attached workforce in the unemployment count, effective underemployment-unemployment measures 17.8%"

If we include the marginally attached (2.4 million) and involuntary part-timers (9.3 million) in the unemployment count (15.7 million + 9.3 mln. + 2.4 mln.), then 27.4 million folks are effectively unemployed or underemployed in America. If we divide those folks by the labor force count (27.4 million/ 153.975 million), then the effective rate of underemployment-to-unemployment is 17.8%. That's simply stunning!

The government's monthly data showed job losses continued to mount in Construction (-62K) and Manufacturing (-61K). The Retail Trade is not doing well either, as that telling segment shed 40K jobs in October and 44K in September. Health care still seems like the direction to steer your children, as the segment added 29K jobs in October and 597K since the start of the recession.

The President expressed regret at the sobering unemployment rate. The Administration instead focused on the improved rate of deterioration in the monthly job loss count, and it reminded folks of recent economic growth. In response to the bad news though, the government issued its fourth extension of unemployment benefits to a record 99 weeks. States where unemployment measures above 8.5% will get an extra 6 weeks of benefits. Also, Congress moved to extend the $8,000 First-Time Homebuyer Tax Credit for seven more months, which will take it through July of 2010. The government also expanded the credit to include a $6,500 break for purchasers of homes who have lived in their current residence for more than five years. Finally, businesses that are operating in the red will be allowed to again take a refund from taxes paid on profits of the last five years.

With unemployment still rising, one must consider if a jobless recovery is truly possible. We do not think so here, or at least it will not be a robust or consistent one. Consumer spending this holiday shopping season will be targeted to discount stores, and other operators like Macy's (NYSE: M) and J.C. Penney (NYSE: JCP) have also lowered their average cost and price of product for sale in order to compete with the Wal-Marts (NYSE: WMT) and Targets (NYSE: TGT) of the world. A good number of Americans might skip holiday gift giving this year, and instead focus on what they still have, which we hope continues to include health, love and happiness. Perhaps the best gift to give an unemployed person this December is an introduction to a future employer or an executive search/employment firm contact at Robert Half International (NYSE: RHI), Korn Ferry (NYSE: KFY), Manpower (NYSE: MAN) or Monster Worldwide (NYSE: MWW). A prayer is always welcomed as well...

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Inflationary Expectations

2009-11-05T09:50:00.004-05:00

Shelter from the Rain

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Inflationary Expectations

While inflationary expectations pervade, deflationary forces are still at work in the United States. The housing bubble, particularly evident in the "Sand States" of California, Nevada, Arizona, and Florida, has driven housing price decline of as much as 50%. In some areas, home values have declined to below replacement cost. Foreclosures have soared, and families as well as businesses have been disrupted and dislocated due the resulting huge loss of capital.

The housing correction has had consequences beyond just home values. As the values for homes have declined, many related factors have been affected. Insurance companies have lowered premiums for Homeowner and Landlord Policy Coverage due to lower labor and materials costs, as well as valuation changes of as much as 50%. As valuation has deteriorated, County Tax Assessors have reassessed properties, and cash starved governments are receiving lower tax revenues, exacerbating the local recession effects; conversely, individuals will benefit from lower real estate taxes. As the economy has cooled and the Federal Reserve aggressively lowered short-term rates to almost zero, intermediate-term rates collapsed, and long-term rates have dropped to historically low levels.

Fixed income investors experienced much lower income, yet consequently, any adjustable rate mortgage that has recently re-set has adjusted downward, resulting in lower monthly mortgage payments; any fixed rate re-finance has also benefited. The long-term rates for 30-year fixed rate mortgages have dropped from 6.5% to mid 5% or upper 4%, and with the base indexes of 1-Year Treasury, MTA, CofF, and LIBOR all under 1%, the typical margin is 2.75%. The new rate for adjusted and re-set loans will be the typical limit down of 2% below last adjustment rates. This brings a huge savings for the consumer and adds to the availability of spendable income.

Along with these savings, the actual cost of home ownership has dropped dramatically. As an example, a home purchased for $400,000 in 2006 can often be found today for $225,000. The monthly loan obligation has dropped from approximately $2800 to an unbelievable $1350; that's over 50% savings! This reduction has also impacted residential rentals, as rental housing prices have followed the correction down. Rental rates never exploded with the bubble excesses of 30-60% price gains, but did enjoy consistent annual increases of 3-5%, loosely tracking the price of housing but lagging by 12-18 months. The recent developments have resulted in a decline in rent revenues, but the decline has been partially offset by the decline in taxes, interest rates, insurances, and material and labor costs. The economy is adjusting.

The deflation of oil prices and the adjustment of housing is a huge stimulus for the economy. The deleveraging of lenders has been underway for 18 months, and the loss of capital has been staggering. The Treasury and the Federal Reserve, along with most of the world's central banks, have committed to a policy of replacing this lost capital and have increased the supply of money. The economy is adjusting; it is recovering! The new cycle is starting from a much lower and much better basis. Many of the excesses have been wrung out of the system.

"The economy is correcting... the economy is adjusting... it is healing..."

Unemployment is a lagging indicator and typically is an issue for 12-18 months after the economy has bottomed and started to recover. Many economists believe that point was reached in the May/June time frame of 2009. Although housing foreclosures will be an issue for the next 12 months and beyond, the brutal correction is working. I fully expect home price stabilization and population growth will bring the "Housing Crisis" to an end by the 4th quarter of 2010. The economy is correcting... the economy is adjusting... it is healing...

A new business cycle, although in its infancy, has begun, and by many accounts, less than 20% of the $13.6 trillion dollars of stimulant is in the system. The surprise to the economy should be the strength of the recovery, as banking system reserves are filled and lenders look for places to lend the extra trillions of dollars earmarked for the system. The new cycle will change concerns from deflation to fears of not 2% or 3%, or even 5% inflation, but pervasive double-digit inflation that will require investments that are different from today.

Just as rain is welcome to a parched and drought stricken region, capital and money supply is welcome and necessary for any economy to function. First the rain is first absorbed by the dusty earth, and then the deep aquifers begin to be replenished. As the rain continues to fall, the shallower wells begin to fill; trees sprout buds; and "green shoots" appear. The rain continues, and the "drought" is termed officially broken. Farmers rejoice and fields are sown with crops. The aquifers are full; the wells are full; the large reservoirs are full. The drought has broken, much as deflation will give way to inflation. The forecast is for more and more rain... Commodities, tangibles, and real estate will give shelter from the "RAIN".

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Buffet Buys Burlington Northern Outright (NYSE: BNI)

2009-11-03T10:10:00.004-05:00

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Anchor Chains, Plane Motors & Train Whistles

Remember a few weeks back when Burlington Northern (NYSE: BNI) and Union Pacific (NYSE: UNP) sank the transports and the Dow on warnings that the economy was not steaming ahead after all? BNI's stock derailed that day, but Warren Buffet, who owned a major stake in the company, demonstrated why he is the world's greatest investor of all-time. While the world was selling BNI like it was the plague, America's Grandpa was putting together a plan to buy the rest of the company's outstanding shares.

Buffet Buys Burlington Northern Outright

Remember that old adage, "Buy into fear and sell into greed?" As well-known as it is, it remains mostly misunderstood. It seems it goes against human nature to walk toward danger, but the answer to the riddle is found deeper within that philosophy. It is precisely because what seems dangerous is not always really so bad that opportunity exists. Our savings, however, is so important to our security-centric mindset that we cannot bear the risk of losing, and so we lose out.

Buffet's big trick is that he thinks differently. He considers first the long-term you see, and until they invent the Star Trek transporter, there will be a need for traditional transportation methods. Buffet, acknowledging this, thought here's a wonderful opportunity to take a greater stake in a key transportation company that supplies a fantastic economy.

Berkshire Hathaway Inc. (NYSE: BRK-A, BRK-B), Buffet's investment vehicle and conglomerate, agreed to acquire Burlington Northern Sante Fe (NYSE: BNI) today. Berkshire is acquiring the 77.4% of the company it did not already own. The deal, valued at $44 billion when including the $10 billion in debt obligations that Berkshire will take on, prices Burlington Northern at $100 a share. The acquisition price represents a 31.5% premium to the prior day closing price of $76.07. That's a nice short-term windfall for BNI investors. And isn't it just so Buffet like to set the acquisition price at $100 even!?! Buffet called the deal "an all-in wager on the economic future of the United States." You gotta love this guy...

Buy Railroads, Sell Truckers

Buffet likes railroads for the long-term because of what's going on in energy. As demand for oil and its distillates likely fires in the years ahead, truckers like J.B. Hunt (Nasdaq: JBHT), Landstar System (Nasdaq: LSTR) and Con-way (NYSE: CNW) face an economic impact four times more expensive than the railroads, according to Buffet. If this is truly the case, you could expect market share gains to ensue for the railroads, and at the expense of the truckers. Market share gains are often drivers of P/E expansion as well, and they certainly are drivers of earnings growth. Therefore, railroads should produce better than recent earnings growth and share price appreciation. Add to that the whammy of prospective economic recovery, and you have something worth owning. As a result, you might find strategic investors and profiteers alike seeking to buy railroads now. Thus, the shares of all the segment's stocks should rise.

This deal places the P/E of Burlington Northern at 18.2X BNI's estimated 2010 earnings of $5.51. Union Pacific's (NYSE: UNP) relative P/E ratio is 13.1, according to Yahoo Finance and its data providers. CSX (NYSE: CSX), another major rail player, sees a P/E of 13.1 as well. BNI's P/E was 13.8 before this deal was effected, and the slight premium probably had a lot to do with Buffet's growing interest, in every respect of the phrase.

While we do not offer investment advice here, another investment idea might be to play the market share trend by buying the railroads and selling the truckers, though economic recovery benefits all players, including the truckers. However, you negate that factor by evenly matching the two sides of the deal, or you might overweight the rails if you believe in the economic driver.

Now keep in mind that Buffet's reasoning ignores the possibility of changes in technology. While expecting the transporter beam to become reality any time soon might be far-fetched, it is possible truckers might find another way to fuel the big rigs and regain competitiveness. However, that does not seem to be soon coming either. The power train of a big truck seems a big stretch to be run by electric, natural gas, hydrogen fuel cells or any other prospective technology anytime soon. However, if that does become reality, you can sure bet Buffet will be buying truckers, or whichever segment adopts new cost effective technology.

In Conclusion - A Warm Note

If he ever took a moment from his wonderful investment life, we are certain Mr. Buffet liked to own the railroads in the board game Monopoly. He's just that kind of a down to earth fellow. When a Greek/American kid I know who likes to write and analyze stocks finished business school, he wrote to Mr. Buffet and offered to work for free in his Nebraska office. The kid figured he would deliver pizza to pay his bills, which should not be that high in Omaha. Meanwhile, he wondered at the prospect of learning from a genius of security analysis and a legend of the times. The reason "The Greek" has earnest affection to this day for Mr. Buffet, who he has never met, is not because the legend accepted the dreamer's offer. Nope, he probably gets too many of them to accept even one. However, Mr. Buffet actually took a moment to return the boy's letter with one of his own. I keep that letter to this day inside the pages of a book I have on the man. Thanks Warren.

We here happen to love the statement by George Bailey in "It's a Wonderful Life," "Hey, do you know what the greatest sounds in the world are? anchor chains, plane motors and train whistles." That dreamer also never got to go to the places he dreamed he would, and yet he lived a wonderful life anyway.

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Is the Recession Over?

2009-10-31T23:59:00.005-04:00

The world wants to know! But more importantly, we want to know what you think!

Please offer your comment below using the "Discuss" tab.

With third quarter GDP reported +3.5%, can we finally write off "The Great Recession?" Some have asked (including "The Greek") if government stimulus simply produced synthetic growth in Q3. After all, Motor Vehicle Sales made a 1.66 percentage point impact to GDP, and "Cash for Clunkers" was partly behind that. Since the end of the clunkers program, auto sales have tanked back to their nothingness. Christina Romer, the Chair of the Council of Economic Advisors to the President, indicated during an interview Saturday that the clunkers program probably added 0.4% to GDP.

Meanwhile, the First-Time Homebuyer Tax Credit is slated to expire at the end of the year. More importanly, history tells us that after an initial growth spurt on inventory build post recession, the economy often backtracks into economic decline for a quarter. Given the degree of initial economic decline this time around, and the fact that unemployment is flirting with double-digits and under-employment is nearing 20%, maybe it is still premature to sound the all-clear sirens to spend!? Consumers are not spending by the way, so how can a consumer driven economy grow while folks are hiding in their basements? Is a jobless recovery possible? Here's your chance to tell the world what you think:

Is the Recession Over?

DEBATE TOPICS ARCHIVE

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GDP & Home Sales Confound

2009-10-31T12:30:00.003-04:00

Hold Your Horses!

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GDP, Home Sales Confound

Investors were stumped this past week by mixed messages on the economic front. However, upon closer inspection, a common theme ran true. A duet of unsustainable economic drivers pushed both GDP and recent positive existing home sales data. The market seems to have caught on though, and investors are pulling on the reins. The Dow Jones Industrials (^DJI, NYSE: DIA, NYSE: DOG) pulled back by 2.6% on the week, while the S&P 500 Index (^GSPC, NYSE: SPY, NYSE: SDS) dropped 4%.

New Home Sales were reported down 3.6% in September, and measured well below economists' expectations. The report offered confounding information for those who have been following the housing market. The New Home Sales slump contrasted vividly against the prior week's report of strong Existing Home Sales (+9.4%) for the same month. So which data point is telling the truth? Is housing stabilizing or is it about to take another shot to the gut?

The clear difference between Existing and New Home Sales is of course foreclosures, or the absence of them within the New Home Market. Their existence in the much more significant pre-owned home market has pushed overall pricing downward, while also speeding the recent sales pace within the segment.

When reported, most interpreted the sharp increase in Existing Home Sales as the beneficiary of the expiring incentive provided by the First-Time Homebuyers Tax Credit. The theory goes that those who could afford a home purchase now, were rushing to enjoy the tax benefit before its end of year expiration, and we are sure this is the case to some degree. However, first time homebuyers are allowed to buy new homes just as soon as existing properties, so why the drop in new home sales then? Well, that question tells us something more.

Maybe government incentives are losing their punch. Perhaps we should face the fact that in the end a new normal is going to rule the day. Credit standards have tightened, and so the growing American home ownership rate, which characterized recent times, might stall for a long while to come. I do not believe a jobless recovery is possible when the jobless rate is as high as it is now. The unemployed and under-employed are certainly not qualifying for mortgages anyway. At the very least, any economic growth in the short-term should not be robust.

GDP Robust?

Most "gurus" would not venture out on a limb like that given Friday's GDP report that showed a return to economic growth in the third quarter (+3.5%), and a sharp bump up at that. But, while GDP looked good for Q3, "cash for clunkers" will not a recovery make, in my view. Motor Vehicle Output added 1.66 percentage points to GDP in Q3, and auto sales have evaporated since. Inventory build, a more important driver, was not significant in Q3; and that factor would be expected to provide a quarterly kicker, before a step back into recession (or rather negative change in GDP) for another quarter. Given consumer spending appears to be giving way to consumers hiding in their basements for the winter, economic recovery might lag a bit longer than the President might expect.

In conclusion, a boost in sales that is supported by foreclosure activity, and a drive in GDP that is supported by unsustainable stimulus, is not making me jump for joy given still deteriorating unemployment.

Note: Housing stocks took an especially big hit last week, with Toll Brothers (NYSE: TOL) dropping 9.7%; Hovnanian (NYSE: HOV) down 9.1%; Lennar (NYSE: LEN) -10.8%; D.R. Horton (NYSE: DHI) -11.8%; K.B. Homes (NYSE: KBH) -10.3%; and Beazer Homes (NYSE: BZH) off 13.1%.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

New & Existing Home Sales

2009-10-29T08:50:00.004-04:00

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The Distinguishing Characteristic

New & Existing Home Sales

New Home Sales were reported down 3.6% in September, and measured well below economists' expectations. This unexpected disappointment sank stocks on October 28th, as one would expect it might. The Dow Jones Industrials Index slumped 1.21%, while the S&P 500 moved 1.95% lower on the day. Housing stocks took an especially hard hit, with Toll Brothers (NYSE: TOL) slipping 5.5%; Hovnanian (NYSE: HOV) down 5.4%; Comstock (Nasdaq: CHCI) off 9.5%; Pulte (NYSE: PHM) -3.8%; D.R. Horton (NYSE: DHI) -4.0%; Lennar (NYSE: LEN) -4.0%; and K.B. Homes (NYSE: KBH) off 2.2%.

Still, for those who noticed a conflict in the data and did not quite understand why it exists, the report offered confounding information. After all, the New Home Sales slump contrasted against last Friday's reported strong Existing Home Sales pace (+9.4%) for the same month. So which is it then? Which data point is telling the truth? Is housing stabilizing or is it about to take another shot to the gut?

The Difference

The clear difference between Existing and New Home Sales is of course foreclosures, or the absence of them within the New Home Market. Their existence in the pre-owned home market has impacted pricing (pushing prices downward), while also speeding the recent sales pace within the segment. When reported on Friday, most interpreted the sharp increase in Existing Home Sales as the beneficiary of the expiring incentive provided by the First-Time Homebuyers Tax Credit. The theory goes that those who could were rushing to enjoy the tax benefit before its end of year expiration, and we are sure this is the case to some degree. However, first time homebuyers are allowed to buy new homes just as soon as existing properties, so why the drop in new home sales then? Well, that question tells us something more.

"I just do not believe a jobless recovery is possible when the jobless rate is as high as it is now."

Maybe the impact provided by government incentives is losing its punch. Perhaps we should face the fact that a new normal is going to rule the day. Credit standards have tightened, and so the growing American home ownership rate, which characterized recent times, might stall for a long while to come. I do not believe a jobless recovery is possible when the jobless rate is as high as it is now. The unemployed and under-employed are certainly not qualifying for mortgages anyway. At the very least, any economic growth in the short-term should not be robust.

Most "gurus" would not venture out on a limb like that just ahead of a GDP report that is expected to show a return to economic growth, and a sharp bump up at that. But, while GDP will likely look good for Q3, "cash for clunkers" will not a recovery make beyond the quarter, in my view. Heck, I do not even expect to see much inventory build benefit yet, and that factor would be expected to provide a quarterly kicker, before a step back into recession (or rather negative change in GDP) for another quarter. Given consumer spending appears to be giving way to consumers hiding in their basements for the winter, economic recovery might lag a bit.

A Closer Look at the Report

While the annual pace of home sales slipped to 402,000 from a revised August rate of 417,000 (from 429K), the trend was not consistent across geographical regions. The Northeast held steady against August sales, and the Midwest experienced a 34% increase in the pace. The South (-10%) and West (-10.6%), where development is predominant and where prices ran most ramped, drove the monthly slowdown. Foreclosures are also most common in those same important regions, and so, they likely put distance in the variation between market segments as well.

Inventory of New Homes for sale stuck at 7.5 months in September, versus the same in August, but was much improved from the 10.9 months stock available last September and the peak inventory of 12.4 months seen in January. Still, inventory did not change this last month, which may be showing us an inflection point toward forward deterioration.

In conclusion, a boost in sales that is supported by foreclosure activity is akin to A-Rod's batting statistics, supported by performance enhancing drugs. Eventually the beneficial effects wear off, replaced by troublesome side effects and a good look at reality - drug addiction. So, as foreclosures thin out, we expect the Existing Home Sales pace will better match its New Home cousin. In the meantime, I would suggest trusting the new home sales figures a bit more. After all, they don't cheat.

Go Phillies!

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Business News Summary 10-27-09

2009-10-27T22:00:00.006-04:00

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Business News Summary

The day's business news summary offered a mixed report, but the remnants of economic decimation threaten a second impact and controlled the day's trading. Most importantly on the day's business news, consumer sentiment disappeared in October. Needless to say, nascent stabilization of home pricing might be gone soon as well if demand dries up without a First-Time Homebuyer Tax Credit renewal. Thus, the day's good news was drowned out, and the S&P 500 Index and Nasdaq Composite fell while the Dow inched fractionally higher.

S&P Case Shiller Home Price Index

Last week's Existing Home Sales Report showed prices continued to decline on average across the country. The data out of the National Association of Realtors (NAR) showed the median price of a home fell 8.5% in September when compared against the prior year. The price of the average American home (including all types) fell to $174,900, influenced of course by foreclosures and reversion to non-criminal market drivers.

Unfortunately, S&P Case Shiller produces its data on a two month lag. Published today, it shows an improvement in the annual rate of home price decline in August. Shiller's 10-City and 20-City Composite Home Price Indices fell 10.6% and 11.3%, respectively, when matched against last year's data. When compared against July's price data, sales rose across composites and across 17 of 20 MSAs. Only Cleveland posted year-over-year price decline.

Judging by the NAR's up-to-date report, pricing should firm even more in Shiller's September data, which is due toward the end of NOVEMBER... However, Case Shiller rightly points out the pending expiration of the homebuyer tax credit, though we expect that to be renewed BECAUSE IT SIMPLY MAKES SENSE.

In case you were wondering, Shiller reports the peak-to-trough price decline in housing, as measured by the 10-City Composite, was 33.5%.

Consumer Confidence Sinks

The Conference Board reported a steep drop in Consumer Confidence in October. Deepening unemployment led the index to 47.7, down from 53.4 in September. American worry may be reaching a breakpoint at a critical time, just before holiday shopping season. Last year, spending was impacted by fear. This year, spending is threatened by tangible reason, empty pockets and prospects.

Investor Confidence Also Falls

State Street's (NYSE: STT) Investor Confidence Index fell 10 points in October. The index slipped to 108.4, from 118.1 in September. Valuation concern, as the economy runs through its own after-burn at the same time it runs down on fuel, has institutions perhaps reconsidering "jobless recovery" prospects.

Same-Store Sales

The International Council of Shopping Centers reported on weekly same-store sales this morning for the week ended October 24. While they might not be spending much, consumers still spent significantly more than they did last year at this time. Sales increased by 2.4% over the prior year period, which was consistent with last week's 2.8% increase. Sales only moved 0.1% over its sequential predecessor, versus a 0.2% rise the week before that.

Shortly this week, GDP is expected to be reported significantly improved in the third quarter. However, the boost may be unsustainable, as "cash for clunkers" is seen as the key driver. As we all know by now, auto sales have dropped off a cliff since the incentive program was allowed to expire. Thus the same may be in store for GDP, and more likely for stocks, especially given government debate over renewing the First-Time Homebuyer Tax Credit.

Corporate Earnings

Earnings reporters for the day included AGCO (Nasdaq: AGCO), Akzo Nobel (AKZOF.PK), Amkor Technology (Nasdaq: AMKR), Avery Dennison (NYSE: AVY), Baidu (Nasdaq: BIDU), Ballard Power (Nasdaq: BLDP), B.E. Aerospace (Nasdaq: BEAV), Boyd Gaming (NYSE: BYD), British Petroleum (NYSE: BP), Buffalo Wild Wings (Nasdaq: BWLD), Calamos Asset Management (Nasdaq: CLMS), Celanese (NYSE: CE), Ceradyne (Nasdaq: CRDN), Daimler (NYSE: DAI), DreamWorks (NYSE: DWA), E*TRADE Financial (Nasdaq: ETFC), Fiserv (Nasdaq: FISV), Honda Motor (NYSE: HMC), Hospira (NYSE: HSP), Johnson Controls (NYSE: JCI), L-3 Communications (NYSE: LLL), McKesson (NYSE: MCK), Norfolk Southern (NYSE: NSC), Panera Bread (Nasdaq: PNRA), Plantronics (NYSE: PLT), Pool Corp. (Nasdaq: POOL), RF Micro Devices (Nasdaq: RFMD), TD Ameritrade (Nasdaq: AMTD), Under Armour (NYSE: UA), Visa (NYSE: V) and others.

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Railroaded by Burlington Northern (NYSE: BNI)

2009-10-26T01:40:00.003-04:00

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Railroaded by Burlington Northern (NYSE: BNI)

The Merriam-Webster Dictionary defines "railroad" as "to convict with undue haste and by means of false charges or insufficient evidence." The definition seems to fit snugly around what happened on Wall Street Friday, while also offering an interesting play on words. Based on popular press reports, investors convicted the market on the earnings data and forecast warnings of a couple key railroad companies. Specifically speaking, Friday's downturn was placed squarely on the engine car of Burlington Northern Sante Fe (NYSE: BNI).

Railroad companies and other shippers of goods, including truckers like J.B. Hunt Transport Services (Nasdaq: JBHT) and shipping companies like DryShips Inc. (Nasdaq: DRYS), are considered barometers of the economic lifecycle. After all, if manufacturers and distributors are moving product, it is going to be visible in the results of the shippers.

So when Burlington Northern reported third quarter results that fell short of analysts' consensus, a call to arms went up. Investors moved even more to the defensive when the popular press pointed out how well Burlington's bad news complemented the dastardly economic diagnosis out of its railroad peer Union Pacific (NYSE: UNP) from just one day earlier. The corporate leaders of both important transportation firms noted a common view for little improvement in the year ahead.

Burlington Northern's shares tanked 6.5% Friday, and while aided by Union Pacific's 5.5% decline, drove the DJ Transportation Average (^DJT) down 3.5% on the day. Lower moves for the Dow Jones Industrials and S&P 500 Index Friday erased a previously established gain for the week. The Dow slipped only fractionally through the period, while the higher-flying S&P 500 Index moved about 1% lower on the week.

Still, we are not so sure you can blame the railroads for the market's re-evaluation. After all, even an overwhelmingly stellar earnings season could not keep Wall Street on track Friday. Microsoft (Nasdaq: MSFT) and Amazon.com (Nasdaq: AMZN) both reported market-pleasing news last week, though Microsoft's lift came from its forward guidance. Amazon's estimate beating result simply aligned the tech giant with 81% of the S&P 500 companies that have bested estimates this quarter, according to Thomson Reuters. We should note that just less than 50% of traded firms have reported results thus far for the third quarter.

The overwhelmingly positive earnings trend, coupled with a less than surefooted recent market response, suggests to us that stocks may be fully valued currently. The S&P 500 Index is up 60% since the closing low set on March 9 of this year. Thus, stocks would need further economic reasoning to move higher in the months ahead. You would think the market might have found its economic reasoning in Friday's Existing Home Sales data though. Sales of pre-owned homes ran at an annual pace of 5.57 million in September. That otherwise dismal rate compared favorably against the economists' consensus for 5.35 million and against August's 5.10 million sales pace. However, the market found a flaw in those numbers, since first-time homebuyers are about to lose their special incentive to purchase when the relative federal tax credit expires at the end of the year. The rush to buy now is attributed to the processing time involved in buying a home and qualifying for the credit. We note, however, that many industry experts expect another extension of this important incentive for 2010.

Given Wall Street's modest reaction to good news at current valuation, and its tendency to run for cover at the sighting of a single cloud, market correction seems possible through the short-term. Unfortunately, a solid support for the market seems about to be pulled away. Paper gains and tax consequences are perhaps keeping institutions and retail investors alike from selling-off stocks. Most stock sales now would lock in taxable profits for the 2009 tax year. Thus, as the fiscal year for many a fund manager concludes, and a significant minority of them will before December, investors are likely to exchange winning holdings for cash or other securities. While that exchange could include perhaps shares in companies better positioned for this point in the economic cycle, short-term market consolidation would still seem likely from November through January.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.

Housing 2009

2009-10-22T15:25:00.003-04:00

Year of Transition

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Housing 2009

The huge glut of vacant, unsold builder inventory across the nation is almost completely gone. National builders and bank asset managers discounted the existing new homes until the specs were sold, often at huge losses. The land-bank accumulated by anxious builders for future development and sales is virtually gone. The greed driving more and more development gave way to fear of a spinning interest meter attached to the income-depleting vacant land. Unfortunately for most, it was 12 months too late.

The third and fourth quarters of 2008 devastated many local and national builders as the recession took hold and Wall Street disintegrated. Bear Stearns, then Merrill Lynch, and finally Lehman Brothers were effectively dissolved, causing panic as the stock market declined and the Federal Reserve Chairman and Secretary of the Treasury begged for funds. Thousands of speculators and home-buyers refused to close on new home purchases, and walked away from earnest money and deposits held by builders. The inventory of finished homes burned through fully phased construction loans, and that coupled with depleted and fearful banks unwilling to extend lifesaving lines of credit, were the death knell for under-capitalized and over-extended builders.

In many cases, lenders needed to repatriate the funds from individual new home closings, and demanded all the proceeds to clear the title and to reduce debt on other lines of credit. The fear of loss overcame greed for lucrative fees and interest charges; lenders protected their loans. Many builders were left with no proceeds to continue operating, and were left with no choice but to close the operation. Tradesman, suppliers, superintendents, sales and office staff, as well as owners and directors lost jobs and positions. The fear of expanding capital loss drove banks and lenders to acquire unsold inventory in an unfriendly environment. Primary lenders received partial re-payment, and those further downstream received nothing, resulting in many suppliers and sub-contractors facing financial difficulty. In true "trickle down" fashion, losses mounted.

"Greed gave way to fear!"

In an attempt to anticipate future growth and development, expensive land holdings were acquired during the greedy years of 2005-2007. Many national builders recognized the potential devastation inherent in their leveraged land banks and liquidated early into the down cycle. Some builders refused to sell their holdings, but eventually their lenders sold at huge losses, often for less than the development costs. As the de-leveraging reached crescendo, anyone over-encumbered was financially swept away. Greed gave way to fear!

The financial storm seems to be passing. Fears of a double dip or "W-shaped" recession are not materializing. There has been much damage done to the economy, and there is a huge clean up underway. Unemployment will be high for the next 12 months, but should start to decrease by the spring of 2010. The trillions of dollars earmarked for the recovery have not been fully deployed, and as the capital enters the economy, there should be a very noticeable improvement... possibly soon.

"...the supply of bank foreclosures should dwindle to a trickle, and the financial storm will have been reduced to showers from an epic hurricane."

The surviving home building companies have written down balance sheets and incurred huge losses. They are different organizations now than a mere 12 months ago. They will encounter far less competition going forward. They will have better sub-contractors because the inferior companies are no more, and the surviving builders will get better service and better pricing. New land acquisition will be at a much-reduced cost basis, and lower interest rates will reduce holding costs. Possibly within the next 12-18 months, the supply of bank foreclosures should dwindle to a trickle, and the financial storm will have been reduced to showers from an epic hurricane.

The natural growth of the US population will likely seed pent up demand for new homes; cautious and wiser builders may start to grow again and be profitable. The markets appear to be normalizing; the new business cycle is starting. The cycle will again swing from fear back to greed, but hopefully our experience with excess leverage will not be soon forgotten; nor the ugly face of fear!

Please see our disclosures at the Wall Street Greek website and author bio pages found there.