Contents: Overview; Tea leaf readings; Economic reports; Perspective, “The Wall of Worry”
“Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window.” - Peter F. Drucker, Austrian-born American business consultant, (1909-2005)
Overview
Even though the major indexes closed just slightly lower this past week from the week before, stopping the market’s run at four up weeks in a row, “let the record reflect” that all three of the major indexes are still up year-to-date: The Dow's up 6.2 %, the NASDAQ, 26%, and the S&P, 11%. While we still haven’t recaptured what we lost late in the third quarter and into the fourth quarter last year, we are definitely trending the right way.
Have you noticed how the media seems to always overplay the negative in the markets, economy and investing? For example, a headline at the close on Friday said, “Stocks Snap Four Week Winning Streak.” Reading that, I’d be inclined to think things were really ugly. I mean, to snap something is painful. In reality, the Dow was only down 0.006% - 60 points – from Friday to Friday. Maybe it’s just me but my headline would have been more like, “Stocks just miss extending rally for fifth week.” That, in my opinion, would have been more forthright.
The point is that when you’re reading market comments, hearing opinions, evaluating information – do yourself a huge favor. Do like Paul Harvey used to do – get the rest of the story. What is the reason the person is writing or saying something about the topic?
Contrary again to what the web pages, ads and talking heads would have you believe, there is no one size fits all when it comes to investing. Your needs, situation, timing, abilities and feelings are the key to building a successful investment result. Finding someone you can trust to take all those personal considerations and who will communicate with you in a manner with which you are comfortable will do much to defend you from the – as Mr. T would have it – the “jibber-jabber” and get you to where you want to be.
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
"“We can expect a lot of volatility in stocks. When you have these rapid increases, almost without correction, you will definitely have a correction at some point.” - Mark Mobius, executive chairman, Templeton Asset Management Ltd.
“There’s always a real risk that a rally is going to be tested. Investors are thinking that giving up some upside to hedge the downside is a very reasonable investment profile.” - Stephen Wood, chief market strategist for North America, Russell Investments
“The combination of a highly accommodative Federal Reserve monetary policy, the end of the panic and the relaxing of the mark-to-market accounting is boosting economic activity. Over the next 12 to 18 months, we expect higher stock prices, more inflation, higher bond yields and a relatively stable dollar. The economy is improving – stimulus or not.” – Brian Wesbury, chief economist, First Trust (I definitely agree with his overall view and conclusion.)
“The news on the economy is that it’s recovering, the news on corporate profits is that they’re recovering. That’s what’s bolstered the stock market.” - Nick Sargen, chief investment officer, Fort Washington Investment Advisors
“Cost of Government Day for 2009 was August 12. On average, working people must toil 224 days out of the year just to meet all costs imposed by government. In other words, the cost of government consumes 61.34% of national income.
Cost of Government falls 26 days – almost a full month – later in 2009 than last year’s revised date of July 16. In 2009, the average American will have to work an additional 43 days out of the year to pay off his or her share of the cost of government compared to 2000, when COGD was June 29.” – Americans for Tax Reform
"Stock investors are making overly optimistic assumptions. The key stimulus has already come into the consumer and has helped in the last few months. But for the third and fourth quarters looking ahead, I am not so sure things will be as good." - Mohamed El-Erian, co-CEO and co-CIO, PIMCO (A smart guy to be sure. He’s also in charge of one of the largest bond portfolios in the world – and bonds usually don’t do so well when stocks go up…)
Economic reports from the past week (with occasional translations…)
Productivity, a measure of how much an employee produces for each hour worked, rose at an annual 6.4% pace, more than forecast, after a 0.3% gain the prior three months. Labor costs fell by 5.8%, the most in eight years, more than double the first quarter's 2.7% decline. – US Department of Commerce
The US trade deficit widened less than forecast in June, reflecting a second consecutive gain in exports spurred by a pick-up in economies throughout the world. The gap increased 4 % to $27 billion from $26 billion in May. Exports gained 2%, helped by stronger demand for goods such as semiconductors and aircraft engines, while imports rose 2.3%, led by a higher cost for oil. Increases in both exports and imports signals that the global slump is coming to an end. Investor sentiment improved around the globe this month, turning bears into bulls in five of the world’s biggest stock markets as earnings and economic data topped estimates. – US Department of Commerce
Officials on Wednesday left interest rates near zero but suggested the economy is on more stable ground. The Fed plans to continue purchases of up to $300 billion of Treasury securities through October. The one upgrade came on the economy: "economic activity is leveling out" is definitely a bit more positive than their "the pace of economic contraction is slowing," statement of June 24th. – Federal Reserve (This is Fed-speak for they think the recession is over…)
The average taxable money market fund yielded 0.08% for the week ended August 4, according to iMoneyNet.com. (Tax-free rates would be lower.) At that rate, a $10,000 investment would return 15 cents a week or $7.80 a year, according to USA TODAY. Nearly one-quarter of these money funds have no yield. The average money market fund charges about 40 basis points per year for expenses. It is estimated that 80% of all funds are waiving some or all of their expenses to keep share prices from falling below $1. - Peter Crane, editor, Money Fund Intelligence (Money markets accounts are NOT investments – they’re just parking places for money. There is still over $2 trillion parked in these type things – fuel for the markets…)
Initial claims for jobless benefits rose by 4,000 to 558,000 on a seasonally adjusted basis in the week ending August 8. The tally of continuing claims -- those drawn by workers for more than one week -- fell by 141,000 during the week ended August 1 to 6,202,000 -- the lowest level since April 11. – US Department of Labor
US business inventories fell by a slightly more-than-expected 1.1% in June. Companies continued to reduce merchandise amid weak demand. The need to rebuild inventories in almost all industries will keep the economic recovery going. It was also reported that business sales at all levels rose 0.9% in June after being flat in May. This marked the first increase in total sales since July 2008. – US Department of Commerce
Perspective
“The wall of worry”
An old stock market adage has it that a bull market climbs a wall of worry. My way of interpreting that is that the markets go up even when current events – or some yet to come – cause many to worry that the results of these events will make the markets drop. Given the extremely positive market results of the past 5 months, it would seem to be true as many today continue to worry about some aspect of the economy.
Markets are cyclical and values fluctuate – daily, quarterly and annually. Mr. Drucker’s opening quote is especially true about the markets. Day to day results are simply a function of how the investing public feels that day. However, real investing, as opposed to trading, is all about longer term results – say, in excess of three years. For that reason, I can’t be worried about the outcomes. Whether I consider just my time in the industry or I study the history of markets, the results have always been positive.
Let’s consider that historical record…keeping it, for these purposes, relatively recent and look at the data back to 1970. And these results include 2008.
The annual return for US bonds has been 9.30%. For international bonds, with a bit more risk, has been 9.70%.
US stocks have returned annual results of 9.5% with international stocks up 9.70%. Pretty good, right? The key is that you would have had to stay the course and not bail when the media scaredy cats were running about.
Inflation over these almost 40 years has averaged 4.5% per year. The 70s and most of the 80s were pretty tough in that category. So, netting out the inflation, returns on both stocks and bonds in and out of the US was about 5%. At that rate, you were doubling your money every 14 years.
Since I hitched a ride with Mr. Drucker, I can’t tell you if this will be the case going forward…but I sure am inclined to think it will be pretty close. Near-term will likely be tough for bonds with interest and inflation rates rising but it reinforces the case for asset allocation and not being all in one investment class.
Let’s now consider what some folks who are supposed to know what they’re talking about have to say. The Blue Chip Economic Indicators national survey of private economists released this past week showed about 90% of the respondents believed the economic downturn would be declared to have ended this quarter. "Debate now centers on the speed, strength and durability of the recovery," the survey said. That will always be the subject of debate –especially if, occasionally, you substitute the word “correction” for recovery…
There’s a lot of talk right now about big government saving America. I don’t think big government saves us from anything. At the end of the day, it’s all about economic freedom, market competition and free enterprise that remain the great engines of American growth.
Government “programs” are similar to the result you get when you put sugar in the gas tank – for sure, don’t try that at home.The greatest source of stimulus for both this new bull market and the economic recovery is profits. Profits – not taxes - are what drive stocks, business and eventually - the economy. The current party in power never seems to grasp that. To be fair, the Federal Reserve played a big role in cushioning the banking system. Ultimately, the self-correcting actions of American businesses are what always drive this economy.
I’m an optimist because we remain a market-driven economy. Based on what I’m seeing, it would sure seem that most people in the country still fell that way and want it to remain so.
As the always subdued Jim Cramer has put it, “don't let the press confuse you. We are almost at Dow 9,400 because things are better than you think - and still improving by the day.”
Nothing to worry about – the future’s so bright, you have to wear shades…
All my best,
Mike
509-747-3323
Closing values as of 14 August 2009
Dow Jones 9321 S&P500 1004 NASDAQ 2009 Oil $67.47/bbl Gold $949.20/oz
Thursday, August 20, 2009
Wednesday, August 19, 2009
Market retrospective - week of 7 August
Contents: Overview; Tea leaf readings; Economic reports; Perspective, “This recession is OVER!”
“I have never known a concern to make a decided success that did not do good, honest work, and even in these days of fiercest competition, when everything would seem to be a matter of price, there lies still at the root of great business success the very much more important factor of quality. The effect of attention to quality, upon every man in the service, from the president of the concern down to the humblest labourer, cannot be overestimated.” - Andrew Carnegie, Scottish-American Industrialist, Philanthropist (1835-1919)
Overview
In my Perspective last week, I said that the market move was a long way from being done. Even after this week’s rather magnificent performance, I am still very much of that opinion.
As of Friday’s close – and after coming out of the cavern that existed up until 6 March – the Dow Jones is now up 6.8% for the year, the S&P 500 is up 11.9% and the NASDAQ – home of tech and newer growth companies – is up 26.8%. And yet, many (most?) people are still casting a wary eye on all this and waiting for “something bad” to happen. That’s evidenced by the fact that deposits in money market and other savings type accounts is still more than the value of the ENTIRE S&P 500. I’m sorry but that’s crazy – it can’t stay that way. Other than bad government policy gumming up the works, I really don’t know what that bad thing would be. Right now, the markets are saying the health care “reform” and cap and trade are dead deals. Once those are officially put to sleep or hugely modified, things will really light up.
I’m very much in the V shaped recovery camp. That is, we went down hard and fast and we’re going to recover a lot faster than the current conventional wisdom has it. We’re well past the green shoots phase and into the growth phase. I can bore you with lots of facts and data but the best proof is in the market itself.
Markets have always been anticipators – about 6 months ahead is what they suggest. Right now, the vote is a big thumbs up for stocks and a big thumbs down for bonds.
By the way, in the 36+ years I’ve been advising clients, each time we’ve had a recession, the subsequent recovery has always taken the stock market past the previous highs. After all the recovering we’ve done so far this year, we still remain about 30% below those previous highs.
The market train hasn’t left the station but you need to have a seat if you want to ride it
higher…
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
"Our propriety cyclical index says RECESSION IS OVER (his caps). All the encouraging global readings on manufacturing, including this morning's report from China, are consistent with the onset of recovery and some point to a strong recovery. We call July the first recovery month. The transition from job losses to gains could come as soon as August. Remember historically, once you have seen one month’s job increase, you are already in recovery." - Robert Brusca, Chief economist, FAO Economics
"What you really have is money that's been on the sidelines starting to gently come in and more of a willingness to take on some risk." - Pete McCorry, stock trader, Keefe Bruyette
A middle-income family with a child born last year will spend about $221,000 raising that child through age 17. Housing is the largest single expense, followed by food and child care/education costs. The $221,000 in expenses rises to about $292,000 when adjusted for inflation - USDA Center for Nutrition Policy and Promotion report
Barclays Capital raised its forecast of current quarter growth to a 2.5% real annual rate, with a 3.0% growth pace during the fourth quarter. Economists at JPMorgan Chase revised their third quarter growth forecast from 2.5% to 3.0%. - The Wall Street Journal (This is majorly better compared with a negative 6.4% in Q1 and a negative 1% in the just passed quarter.)
“I think we’re factoring in some pretty major inflation. There’s been a report that there has been $21 trillion of new debt that was recently put out. The Treasury has been printing money 24-7 and that’s got to have its toll. We will see markets go down some and we’ll have volatility but, all in all, we’re in a market that will go up much higher over the next 3 to 5 years.” - David Dreman, chairman and CIO, Dreman Value Management
"The economy is at the turning point from the recession as the labor market is starting to heal. If the job losses have halted, and this is a good first step in that direction, consumer spending could lift faster than the market is expecting. At the very least, today's (unemployment) report is additional evidence that the recession ended in the second quarter and the odds of a 3% real GDP recovery in the second half of 2009 are growing. Today is welcome news as it is likely to chase the doomsayers out of the market." - Chris Rupkey, economist, Bank of Tokyo-Mitsubishi
Treasuries lost 5% in market value this year and are on a pace to post an annual loss for only the third time since 1978. The index rose 14% last year. - Merrill Lynch & Co. and its US Treasury Master Index (The moral here is to NOT use what worked last year as the place to invest this year…)
Economic reports from the past week (with occasional translations…)
Pending home sales rose for the fifth consecutive month in June, easily topping expectations. The last time there were five consecutive monthly gains was July 2003. Pending home sales were higher in all four regions than last month and only the west experienced a decrease from a year ago. - National Association of Realtors
“Consumer spending was up in June and is up at a 2.5% annual rate so far in 2009, a marked contrast to the 6.6% rate of decline in the second half of 2008. However, for the time being, a revival in inflation is offsetting the gain in cash spending. Temporarily, we see the upswing in inflation as good news, in the sense that monetary velocity is returning and the recession is over.
Moreover, yesterday’s data on auto sales show that real consumer spending will be substantially higher in July. With cars and light trucks (pick-ups and SUVs) being scrapped at a 13+ million annual rate, we expect auto sales to grow strongly over the next couple of years, with or without government incentive programs.” – First Trust
New orders received by US factories unexpectedly rose in June, advancing for a third straight month. Factory orders climbed 0.4% in June after increasing by a revised 1.1% in May, previously reported as a 1.2% rise. – US Commerce Department
The US Treasury said Wednesday it would sell $75 billion in debt next week in a record quarterly refunding and announced plans to gradually increase issuance of inflation-indexed notes as its borrowing to fight a recession grows. The bonds are commonly known as TIPS, which is short for Treasury Inflation-Protected Securities. First sold more than a decade ago, TIPS pay out a fixed amount above the change in the consumer price index (CPI). That makes them popular for investors who believe that economic growth or heavy federal spending will put upward pressure on prices. China, the largest holder of U.S. government debt, is among investors that have indicated they want to buy more of the securities. – Wall Street Journal
The number of US workers filing new claims for state jobless benefits fell last week. The four-week average of new claims, which aims to smooth volatility in the data, fell to the lowest level since January 24.
The pace of US job losses slowed more than forecast in July and the unemployment rate dropped to 9.4% from 9.5% for the first time since April, 2008. In addition, workers' hours and pay edged upward. – US Labor Department
Large US industrial manufacturers are far more optimistic about domestic and global economies than they were three months ago. 43% of respondents are optimistic about the U.S. economy over the next 12 months, up by a significant 27% from the first quarter. – PricewaterhouseCoopers consultancy quarterly survey
The government's results showed small cars as the top choice for shoppers looking for Cash for Clunker deals. But an independent analysis by Edmunds.com disputed those results and showed that two full-size trucks and a small crossover SUV were actually among the top-ten buys.
The discrepancy is a result of the methods used. Edmunds.com uses traditional sales measurements, tallying sales by make and model. The government uses a more arcane measurement method.
For example, the Ford Escape crossover SUV, instead of being the seventh-most popular vehicle under the program, as the government ranked it, was actually the best seller, according to Edmunds.com. (I’m “sure” the administration isn’t trying to stack the deck…)
The (real) Top 10 / Ford Escape SUV; Ford Focus; Jeep Patriot; Dodge Caliber; Ford F-150; Honda Civic; Chevy Silverado; Chevy Cobalt; Toyota Corolla; Ford Fusion – CNNMoney.com
Perspective
“This recession is OVER!”
Two items for disclosure, as they color this – and most other – of my perspectives.
First, politically, I’m a card-carrying, dyed-in-the wool Independent. Have been since we lived in Alaska and registered as one. Then, when it comes to the markets – and “conventional wisdom” – I’m a contrarian. According to the good folks at Wikipedia, that means I’m a guy who “seeks opportunities to buy or sell specific investments when the majority of investors appear to be doing the opposite, to the point where that investment has become mispriced.” You can substitute “market” and/or “economy” for investment and still be accurate.
As you can see from a few of the Tea Leaf quotes and some of the Economic reports, I’m not exactly the Lone Ranger here…there are some already noticeably positive things going on.
However, I’m a long way from the majority opinion either. Let me try and explain how I got to this.
There are still many “experts” – at least they were when brimstone was upon us – who can’t stop coming up with reasons why this is a head fake, a trap, etc. Many of them have a vested interest in doing so. One, because their workshops (and fees) are all based on an EOWAWKI (End Of The World As We Know It) premise of some sort. The other is because they are money managers who have stayed too long on the sidelines and are doing what they can to help drive prices lower so they can get in. Bottom line – they have a self-serving position that can’t become positive. They’ve been playing the bad guy too long…
Improving earnings are what make stock prices go up. We’ve got those in spades, right now. Of the 427 companies in the S&P 500 that have already reported their earnings, 73% have done better than expected, 8% were on target and just 19% missed – and many of them by a small amount. The trend is our friend…
The global markets – our vendors and our customers – are doing better. Shanghai, Germany, France, Hong Kong, Australia and the UK are all at yearly highs!
Here’s a biggie. Inventories for business have been driven to low levels not seen since the 80s. This means that with “stuff” in the stores and their nearby warehouses so low, manufacturing output has to pick up a lot and quickly to meet any new demand. A good example is cars. Even before the Cash for Clunkers deal, Ford, Chrysler and Government Motors have all had to increase production to meet the pent-up demand.
And finally, let’s add in interest and inflation rates at historic lows – and likely staying there for a while. Housing has stabilized and must pick up to meet the demand – we’re still making and importing more people and they need places to live.
Banks will reap major benefits from a resurgent real estate business. Techs will continue to lead with new developments and improvements on existing systems. Oil will probably continue to appreciate as the global economies pick up. Research and development will lead us to companies and products we don’t even know about yet.
It all seems pretty crystal clear to me. The only way we’re going is up. Please make sure that you’re included in this move…
All my best,
Mike
509-747-3323
Closing values as of 7 August 2009
Dow Jones 9370 S&P500 1010 NASDAQ 2000 Oil $70.78/bbl Gold $955.80/oz
“I have never known a concern to make a decided success that did not do good, honest work, and even in these days of fiercest competition, when everything would seem to be a matter of price, there lies still at the root of great business success the very much more important factor of quality. The effect of attention to quality, upon every man in the service, from the president of the concern down to the humblest labourer, cannot be overestimated.” - Andrew Carnegie, Scottish-American Industrialist, Philanthropist (1835-1919)
Overview
In my Perspective last week, I said that the market move was a long way from being done. Even after this week’s rather magnificent performance, I am still very much of that opinion.
As of Friday’s close – and after coming out of the cavern that existed up until 6 March – the Dow Jones is now up 6.8% for the year, the S&P 500 is up 11.9% and the NASDAQ – home of tech and newer growth companies – is up 26.8%. And yet, many (most?) people are still casting a wary eye on all this and waiting for “something bad” to happen. That’s evidenced by the fact that deposits in money market and other savings type accounts is still more than the value of the ENTIRE S&P 500. I’m sorry but that’s crazy – it can’t stay that way. Other than bad government policy gumming up the works, I really don’t know what that bad thing would be. Right now, the markets are saying the health care “reform” and cap and trade are dead deals. Once those are officially put to sleep or hugely modified, things will really light up.
I’m very much in the V shaped recovery camp. That is, we went down hard and fast and we’re going to recover a lot faster than the current conventional wisdom has it. We’re well past the green shoots phase and into the growth phase. I can bore you with lots of facts and data but the best proof is in the market itself.
Markets have always been anticipators – about 6 months ahead is what they suggest. Right now, the vote is a big thumbs up for stocks and a big thumbs down for bonds.
By the way, in the 36+ years I’ve been advising clients, each time we’ve had a recession, the subsequent recovery has always taken the stock market past the previous highs. After all the recovering we’ve done so far this year, we still remain about 30% below those previous highs.
The market train hasn’t left the station but you need to have a seat if you want to ride it
higher…
Tea Leaf Readings
(I use this term to describe quotes from a number of opinion leaders about current market and economic events – what they see happening now and their expectations.)
"Our propriety cyclical index says RECESSION IS OVER (his caps). All the encouraging global readings on manufacturing, including this morning's report from China, are consistent with the onset of recovery and some point to a strong recovery. We call July the first recovery month. The transition from job losses to gains could come as soon as August. Remember historically, once you have seen one month’s job increase, you are already in recovery." - Robert Brusca, Chief economist, FAO Economics
"What you really have is money that's been on the sidelines starting to gently come in and more of a willingness to take on some risk." - Pete McCorry, stock trader, Keefe Bruyette
A middle-income family with a child born last year will spend about $221,000 raising that child through age 17. Housing is the largest single expense, followed by food and child care/education costs. The $221,000 in expenses rises to about $292,000 when adjusted for inflation - USDA Center for Nutrition Policy and Promotion report
Barclays Capital raised its forecast of current quarter growth to a 2.5% real annual rate, with a 3.0% growth pace during the fourth quarter. Economists at JPMorgan Chase revised their third quarter growth forecast from 2.5% to 3.0%. - The Wall Street Journal (This is majorly better compared with a negative 6.4% in Q1 and a negative 1% in the just passed quarter.)
“I think we’re factoring in some pretty major inflation. There’s been a report that there has been $21 trillion of new debt that was recently put out. The Treasury has been printing money 24-7 and that’s got to have its toll. We will see markets go down some and we’ll have volatility but, all in all, we’re in a market that will go up much higher over the next 3 to 5 years.” - David Dreman, chairman and CIO, Dreman Value Management
"The economy is at the turning point from the recession as the labor market is starting to heal. If the job losses have halted, and this is a good first step in that direction, consumer spending could lift faster than the market is expecting. At the very least, today's (unemployment) report is additional evidence that the recession ended in the second quarter and the odds of a 3% real GDP recovery in the second half of 2009 are growing. Today is welcome news as it is likely to chase the doomsayers out of the market." - Chris Rupkey, economist, Bank of Tokyo-Mitsubishi
Treasuries lost 5% in market value this year and are on a pace to post an annual loss for only the third time since 1978. The index rose 14% last year. - Merrill Lynch & Co. and its US Treasury Master Index (The moral here is to NOT use what worked last year as the place to invest this year…)
Economic reports from the past week (with occasional translations…)
Pending home sales rose for the fifth consecutive month in June, easily topping expectations. The last time there were five consecutive monthly gains was July 2003. Pending home sales were higher in all four regions than last month and only the west experienced a decrease from a year ago. - National Association of Realtors
“Consumer spending was up in June and is up at a 2.5% annual rate so far in 2009, a marked contrast to the 6.6% rate of decline in the second half of 2008. However, for the time being, a revival in inflation is offsetting the gain in cash spending. Temporarily, we see the upswing in inflation as good news, in the sense that monetary velocity is returning and the recession is over.
Moreover, yesterday’s data on auto sales show that real consumer spending will be substantially higher in July. With cars and light trucks (pick-ups and SUVs) being scrapped at a 13+ million annual rate, we expect auto sales to grow strongly over the next couple of years, with or without government incentive programs.” – First Trust
New orders received by US factories unexpectedly rose in June, advancing for a third straight month. Factory orders climbed 0.4% in June after increasing by a revised 1.1% in May, previously reported as a 1.2% rise. – US Commerce Department
The US Treasury said Wednesday it would sell $75 billion in debt next week in a record quarterly refunding and announced plans to gradually increase issuance of inflation-indexed notes as its borrowing to fight a recession grows. The bonds are commonly known as TIPS, which is short for Treasury Inflation-Protected Securities. First sold more than a decade ago, TIPS pay out a fixed amount above the change in the consumer price index (CPI). That makes them popular for investors who believe that economic growth or heavy federal spending will put upward pressure on prices. China, the largest holder of U.S. government debt, is among investors that have indicated they want to buy more of the securities. – Wall Street Journal
The number of US workers filing new claims for state jobless benefits fell last week. The four-week average of new claims, which aims to smooth volatility in the data, fell to the lowest level since January 24.
The pace of US job losses slowed more than forecast in July and the unemployment rate dropped to 9.4% from 9.5% for the first time since April, 2008. In addition, workers' hours and pay edged upward. – US Labor Department
Large US industrial manufacturers are far more optimistic about domestic and global economies than they were three months ago. 43% of respondents are optimistic about the U.S. economy over the next 12 months, up by a significant 27% from the first quarter. – PricewaterhouseCoopers consultancy quarterly survey
The government's results showed small cars as the top choice for shoppers looking for Cash for Clunker deals. But an independent analysis by Edmunds.com disputed those results and showed that two full-size trucks and a small crossover SUV were actually among the top-ten buys.
The discrepancy is a result of the methods used. Edmunds.com uses traditional sales measurements, tallying sales by make and model. The government uses a more arcane measurement method.
For example, the Ford Escape crossover SUV, instead of being the seventh-most popular vehicle under the program, as the government ranked it, was actually the best seller, according to Edmunds.com. (I’m “sure” the administration isn’t trying to stack the deck…)
The (real) Top 10 / Ford Escape SUV; Ford Focus; Jeep Patriot; Dodge Caliber; Ford F-150; Honda Civic; Chevy Silverado; Chevy Cobalt; Toyota Corolla; Ford Fusion – CNNMoney.com
Perspective
“This recession is OVER!”
Two items for disclosure, as they color this – and most other – of my perspectives.
First, politically, I’m a card-carrying, dyed-in-the wool Independent. Have been since we lived in Alaska and registered as one. Then, when it comes to the markets – and “conventional wisdom” – I’m a contrarian. According to the good folks at Wikipedia, that means I’m a guy who “seeks opportunities to buy or sell specific investments when the majority of investors appear to be doing the opposite, to the point where that investment has become mispriced.” You can substitute “market” and/or “economy” for investment and still be accurate.
As you can see from a few of the Tea Leaf quotes and some of the Economic reports, I’m not exactly the Lone Ranger here…there are some already noticeably positive things going on.
However, I’m a long way from the majority opinion either. Let me try and explain how I got to this.
There are still many “experts” – at least they were when brimstone was upon us – who can’t stop coming up with reasons why this is a head fake, a trap, etc. Many of them have a vested interest in doing so. One, because their workshops (and fees) are all based on an EOWAWKI (End Of The World As We Know It) premise of some sort. The other is because they are money managers who have stayed too long on the sidelines and are doing what they can to help drive prices lower so they can get in. Bottom line – they have a self-serving position that can’t become positive. They’ve been playing the bad guy too long…
Improving earnings are what make stock prices go up. We’ve got those in spades, right now. Of the 427 companies in the S&P 500 that have already reported their earnings, 73% have done better than expected, 8% were on target and just 19% missed – and many of them by a small amount. The trend is our friend…
The global markets – our vendors and our customers – are doing better. Shanghai, Germany, France, Hong Kong, Australia and the UK are all at yearly highs!
Here’s a biggie. Inventories for business have been driven to low levels not seen since the 80s. This means that with “stuff” in the stores and their nearby warehouses so low, manufacturing output has to pick up a lot and quickly to meet any new demand. A good example is cars. Even before the Cash for Clunkers deal, Ford, Chrysler and Government Motors have all had to increase production to meet the pent-up demand.
And finally, let’s add in interest and inflation rates at historic lows – and likely staying there for a while. Housing has stabilized and must pick up to meet the demand – we’re still making and importing more people and they need places to live.
Banks will reap major benefits from a resurgent real estate business. Techs will continue to lead with new developments and improvements on existing systems. Oil will probably continue to appreciate as the global economies pick up. Research and development will lead us to companies and products we don’t even know about yet.
It all seems pretty crystal clear to me. The only way we’re going is up. Please make sure that you’re included in this move…
All my best,
Mike
509-747-3323
Closing values as of 7 August 2009
Dow Jones 9370 S&P500 1010 NASDAQ 2000 Oil $70.78/bbl Gold $955.80/oz
Subscribe to:
Posts (Atom)