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Mid-Week Update 02-24-10

Despite some positive economic news that has come out in recent weeks, one area of the economy that has yet to show real signs of improvement is retail spending. American consumers are still reeling from the near collapse of the U.S. economy, and nearly 10 percent of them don’t have a job (many more if you count partially employed). This raises doubts about the sustainability of the recovery, given that personal consumption accounts for roughly 70 percent of U.S. GDP.
 
Consumer sentiment is still not back to normal. Yesterday the Conference Board announced that its consumer confidence index had fallen from an upward-revised 56.5 to 46.0. The historic average of the index is 95.6, which means that the recovery, from the consumer’s perspective, has a long way to go. When consumers were asked to assess the current-day conditions, the relevant index fell 5.8 points to 19.4 – its lowest level since 1983. Perhaps even more worrisome, the Expectations Index, which measures the six-month outlook, also declined, dropping 13.5 points to 63.8.
 
The main factor contributing to these declines was, not surprisingly, the dismal job climate.
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Market Update 01-25-10

 
Short-Term Key: Negative
Long-Term Key -90 (Negative to Neutral)
 
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Inside this week's update...
 
***** 4 high-potential Chinese stocks.
***** Real estate bubble or joint venture financing?
***** Top funds geared to China's growth.
***** Move over Wal-Mart, make room for Wumart.
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Speculation continues to run high on the issue of whether China is experiencing a bubble that threatens investors. Chinese real estate looks hugely overpriced and manufacturing capacity (according to some) has run far in excess of potential demand.
On the political front, an argument has erupted between the Chinese government and Google. Google claims China hacked the email accounts of some of its customers, who coincidentally were human rights crusaders.
Read more...

Mid-Week Update 11-18-09

As we head into holiday shopping time, third-quarter earnings season is coming to a close with 95 percent of S&P 500 companies having reported. There have been many upside surprises (80 percent), but as consumer spending and the underlying economy have remained weak – most have been due to maneuvering by management, including inventory controls and cost cutting, as well as lowered analyst expectations. 
 
The market has cheered estimate-beating results, but we’re hardly convinced that the US economy is in the clear.
 
Wal-Mart (WMT), a Growth Portfolio resident and consumer bellwether has been no exception, as evidenced by the company’s recent earnings report. The retail giant saw U.S. same-store sales fall 0.4 percent versus the same period last year, short of the management’s expectations of flat to a 2 percent increase in sales. Earnings were up to $3.24 billion (84 cents a share) from $3.14 billion (80 cents a share) a year earlier as. Like so many others recently, the company beat profit expectations of EPS of 81 cents as CEO Mike Duke cut inventory by 4.1 percent and accelerated other expense-cutting mechanisms.
 
Looking towards the fourth quarter, management sees comparable sales flat (plus or minus 1 percent), but thinks even with the recession officially behind us, shoppers will continue to flock to Wal-Mart for value. We agree.
Read more...

Mid-Week Update 08-19-09

The consumer continues to be under duress. Job losses continue to mount; while weekly readings are down from their highs, initial unemployment claims are still running above expectations. For those already out of work, they face only a finite amount of unemployment benefits. Housing prices continue to fall, again, at a slower pace, but the effect is still the same as Americans can no longer draw on their home values for spending or count on the ever-rising house price for future wealth increases. Credit lines are being drawn in by card issuers and consumers face high fees for their outstanding debt balances. Without question, these factors have had their effect on consumer spending (and saving). Retail sales continue to contract more than economists have expected. The savings rate, at 4.6 percent, remains close to the 13-year high it reached in May.   Read more...

Weekly Update 04-21-08

Energy Secretary Samuel ...

Image by Getty Images via Daylife

The market has us worried these days. We'd be dishonest not to admit that. Nonetheless, when we sit back and look at the economic data, we find it much easier to make a bullish case than a bearish one.

We've been straining our eyes, peering over the horizon, looking for signs of a real recession, but none are to be found. We can accept that the U.S. economy might get a recession in name only – a quarter or two of very mild slowing growth – but nothing worse than that.

There's just no hard evidence to support a serious downturn. And any evidence we can find is uniformly softer than a roll of Charmin – stuff like survey data, unemployment stats, and weakening consumer confidence (no doubt brought on by scary but exaggerated newspaper headlines).

Fortunately, as insecure as the average consumer claims to be, he hasn't cut back on spending in a meaningful way.Read more...

Weekly Update 04-07-08

President Reagan being sworn in for second ter...

Image via Wikipedia

 

Market declines pass through some very obvious stages. One stage, which we think may have ended in January/February, is when the sky appears to be falling. It's the time when investors see no end to the unfolding crisis, and the Fed, along with all other in authorities, appears powerless to restore order.

The next stage occurs when investors begin to see the light at the end of the tunnel. They know the authorities are taking charge of the situation and doing what needs to be done to keep the economy afloat. We appear to be in that stage today,Read more...

Weekly Update 01-30-06

The foreign ministers from France, Philippe Do...

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The big news last week was that the Gross Domestic Product grew by only 1.1% last quarter, as fewer people bought cars, appliances, and other durable goods.

The GDP is generally considered the best measure of the U.S. economy – except when the news is bad. In this case, Treasury Secretary Robert Kimmitt dismissed the results, saying “We think those figures are anomalous and out of step with the other figures showing the strength of the economy both now and in the future.”

(Even funnier was the headline for Reuters’ article on the subject, which read, “US Trsy says GDP data out of step with economy.” Does it not occur to anyone that perhaps it is their optimism about the economy that is out of step with the data?)

At any rate, we wish we had Kimmitt’s access to data from the future. It would make the job of choosing good investments so much easier.Read more...

Weekly Update 11-28-05

Rare 1934 $500 Federal Reserve Note, featuring...

Image via Wikipedia

 

SHIFTING INTO NEUTRAL

Lately, we’ve been trying to give the market the benefit of the doubt and assume stocks were more likely to rise than fall – especially since the markets have seldom plummeted in December. However, for the first time in many months, the market’s short-term indicators have shifted from positive into neutral. Our Master Key now stands at 0.17, which is virtually the same as zero, and makes us unable to issue a favorable outlook.

What are the naughty factors that stand in the way of the traditional Santa Claus rally? The secondary indexes and the broad market have turned in weaker performance than the big cap stocks. The S&P 500 made new highs recently – which we expected – but utilities remain well below their highs, a traditionally bad omen. The broad market made a new high, but it was a weaker advance than the large caps.Read more...

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