A big surprise from homebuilder D.R. Horton (DHI) pushed stocks higher on Tuesday, as optimism spread that the US economy was truly on the rebound. The company said it earned $192 million, or 56 cents per share, in its fiscal first quarter, after analysts' called for a loss of $62.6 million, or 13 cents per share. The gigantic improvement, however, was mostly due to a tax gain of $149 million, making the true earnings picture much cloudier. Shares of D.H. Horton rose nearly 11% on the day.
Additionally, Emerson Electric (EMR) beat estimates, posting a profit, though a smaller one than last year at the same time.
Dow Chemical (DOW) may have had the most sobering and honest report of the day, though. The company earned $87 million, or 8 cents per share, compared to a loss of $1.55 billion, or $1.68 a share, in the year-ago period. While becoming profitable again, Chairman and Chief Executive Andrew Liveris warned that growth in the US and Europe may lag and that the overall global economy remains uneven.
Investors took all of this in stride and bought stocks like they were going out of style, which, to some degree, they actually are. There's more and more investor skittishness stemming from the financial meltdown of '08 and the missteps and inconsistent signals from both the administration and congress aren't helping matters much. A ton of money is still parked in money market funds or headed into less-mainstream investments.
Stocks are below their recent highs, though not down far enough to encourage the kind of wide-eyed participation seen today.
With the January non-farms payroll data due out on Friday, and ADP's private employment survey hitting the wires prior to Wednesday's open, the two-day rally may be more of a bounce than a lasting event. Unemployment remains stubbornly high and any disappointment in the upcoming employment data may skewer those who rushed in yesterday and today.
Besides the worries over unemployment, price rises in stocks are pushing p/e ratios close to nosebleed territory even though many companies have not increased revenues to the point at which they are planning to hire.
Dow 10,296.85, +111.32 (1.09%)
NASDAQ 2,190.06, +18.86 (0.87%)
S&P 500 1,103.32, +14.14 (1.30%)
NYSE Composite 7,101.44, +93.21 (1.33%)
Advancing issues outpaced decliners by a healthy margin for the second straight day, 4470-2051. There were 157 new highs, to just 57 new lows. Volume was very good, though not out of the recent range.
NYSE Volume 5,502,060,000
NASDAQ Volume 2,508,011,500
Commodities advanced, with crude oil leading the charge, up $1.77, to $77.23. Gold rose $13.20, to 1,118.20. Silver gained 8 cents to $16.74.
The major indices fell through their 50-day moving averages last week, so a snap-back rally like this is not unconventional. Notably, the 50-day moving average for the Dow Jones Industrials has reversed course, pointing lower for the first time since July of last year. It's going to take more than a few company earnings reports to restore confidence and resume last year's miracle rally.
A more probable outcome is that stocks languish further after earnings dissipate from investors' minds and the focus shifts more toward economic reports, the government and outside events. Growth in the economy has returned, but the stock market gains were so overdone in '09 that there's little upside from here.
Adding to the confusion are housing and unemployment, which remain the bogey men in the closet. Nobody is going to sleep well until foreclosure data begins to subside and employment begins to perk up. For now, it's mostly empty rhetoric and cheerleading from major firms and the entrenched financial reporters who toil on Wall Street.
Real estate markets across the country are still reeling, government budgets are broken, especially in municipalities of more than 100,000, and jobs simply are not being created by the biggest companies. The stimulus package passed by congress last year only staved off a depression. Another round of stimuli - focused on Main Street and small business - is essential to sustain any momentum that's been garnered.
As for stocks, they're generally 20-30% below their 2007 highs, and while many investors are hoping for a return to those levels, that outcome is highly in doubt because stock prices were wildly over-inflated at that juncture. The collapse of the market was more a predestined event than a surprise, so bullish arguments for continuation of the rally - which seems to have fallen apart - ring hollow.
Tuesday, February 2, 2010
Monday, February 1, 2010
My Open Letter to Senator Charles Schumer
I've been trying (in vain) to find the bill which helped me in 1983-84 hire a young woman as an advertising sales executive for what was then my fledgling newspaper, Downtown Magazine.
I was able to determine that it must have been part of the 1983 Emergency Employment Act, but little else, so, upon hearing that Senator Schumer and others were going to propose another "tax credit" type bill in coming days, I decided to query New York's senior Senator. The text of my message appears below:
------------------------------
Dear Senator Schumer,
Please have somebody on your staff research the 1983 Emergency Employment Act. I ask that you do this because I believe I was an employer who received great benefit from the implementation of one of the programs.
I had started up a newspaper in Rochester, NY in 1982 and it was just beginning to turn a small profit in '83. I don't recall the specific agency, but, if my memory serves correct, the deal was that if I hired an unemployed person - and I did - the government (it may have been NY State or the US) agreed to pay half of the wages for a period of time - I believe it was six months.
This was a great program and allowed me to hire a young woman to sell advertising for my newspaper. She and I both benefitted. She got a job and I got half of my money back over the first six months of her employment.
It was a pretty nice, simple arrangement. All I had to do was pay her on time, submit proof of payment (and all taxes and withholding was paid by me) once a month, and the agency cut me a check for half of her gross pay.
Now, I believe that this kind of program would get people back to work in a hurry, especially if targeted at small businesses with less than 10 employees, or some other similar threshold. It worked for me, and, incidentally, the woman worked for me for a few more years after that initial six months, so the job was not "make work," but real, productive employment.
It is my firm conviction that the federal government has not done enough for small business during this financial downturn, and that a jobs bill that actually puts money into the hands of employers, rather than shadowy tax breaks or credits, offers the true path to recovery.
My belief is that small businesses, which create 75-90% of all jobs in this country, can do what Wall Street, the Fed, Treasury and congress have been unable to do, but, we need some help and some time in which to do so.
I trust that you and your staff will give this matter serious consideration. I am going to publish this entire communication on my blog,
http://moneydaily.blogspot.com
so, I expect a positive response. Please, stop the pandering and posturing and propose a jobs bill that works from the bottom up.
Thank you,
Rick Gagliano
Publisher, Downtown Magazine (dtmagazine.com)
Money Daily
I was able to determine that it must have been part of the 1983 Emergency Employment Act, but little else, so, upon hearing that Senator Schumer and others were going to propose another "tax credit" type bill in coming days, I decided to query New York's senior Senator. The text of my message appears below:
------------------------------
Dear Senator Schumer,
Please have somebody on your staff research the 1983 Emergency Employment Act. I ask that you do this because I believe I was an employer who received great benefit from the implementation of one of the programs.
I had started up a newspaper in Rochester, NY in 1982 and it was just beginning to turn a small profit in '83. I don't recall the specific agency, but, if my memory serves correct, the deal was that if I hired an unemployed person - and I did - the government (it may have been NY State or the US) agreed to pay half of the wages for a period of time - I believe it was six months.
This was a great program and allowed me to hire a young woman to sell advertising for my newspaper. She and I both benefitted. She got a job and I got half of my money back over the first six months of her employment.
It was a pretty nice, simple arrangement. All I had to do was pay her on time, submit proof of payment (and all taxes and withholding was paid by me) once a month, and the agency cut me a check for half of her gross pay.
Now, I believe that this kind of program would get people back to work in a hurry, especially if targeted at small businesses with less than 10 employees, or some other similar threshold. It worked for me, and, incidentally, the woman worked for me for a few more years after that initial six months, so the job was not "make work," but real, productive employment.
It is my firm conviction that the federal government has not done enough for small business during this financial downturn, and that a jobs bill that actually puts money into the hands of employers, rather than shadowy tax breaks or credits, offers the true path to recovery.
My belief is that small businesses, which create 75-90% of all jobs in this country, can do what Wall Street, the Fed, Treasury and congress have been unable to do, but, we need some help and some time in which to do so.
I trust that you and your staff will give this matter serious consideration. I am going to publish this entire communication on my blog,
http://moneydaily.blogspot.com
so, I expect a positive response. Please, stop the pandering and posturing and propose a jobs bill that works from the bottom up.
Thank you,
Rick Gagliano
Publisher, Downtown Magazine (dtmagazine.com)
Money Daily
Market Rebounds, Erases Some Losses
Having spent the majority of my day researching the establishment of local currencies (a little progress, and more to be reported at a later date), this daily dose of economic news and views is going to be brief.
Stocks were generally higher on the first day of February. It could have had something to do with economic data, though that was generally mixed. Construction spending in December was down 1.2%, worse than the 0.5% decline that had been forecast.
January's ISM Manufacturing Index hit a five-year high at 58.4, much better than the consensus call of 55.5. That was the most positive news the market has seen in months, and that seemed to be where investors were mainly focused. Additionally, personal income rose 0.4% in December, though spending for the month increased just 0.2%, implying that consumers were saving during the holidays, rather than spending, as our great inflationist Fed would have us do.
In any case, all of that added up to considerable glee on Wall Street, erasing some of the losses incurred over the past two weeks. All 10 industry sectors sported positives, with basic materials leading the charge. Gold and silver soared in value, which can be viewed either as a consequence or a cause of the rally. The metals had been trending lower for weeks.
Dow 10,185.53, +118.20 (1.17%)
Nasdaq 2,171.20, +23.85 (1.11%)
S&P 500 1,089.18, +15.31 (1.43%)
NYSE Composite 7,008.23, +124.45 (1.81%)
Advancing issues clobbered decliners, 4719-1826, though there were just 114 new highs and 61 new lows. The narrow margin continues to suggest that the market is still weak and in danger of rolling over. Volume was tepid, at best, even though there was obviously more interest in buying than selling.
One caveat to this entire scenario must be exposed: the rally which began in earnest in March 2009, may have been more a trader's push than any real investment-making by the general public. Even though the market serves as a discounting mechanism and the accepted logic is that the market is 6 months ahead of the economy, the current condition is just not bearing fruit. If we rallied sharply from March through June, and then again from late July through December, the initial signs of recovery should not be as well-disguised as they are. That may be begging the question, but how long is the American public supposed to wait before seeing real growth, not the inflation-inspired, deficit-spending, government-stimulated variety which is now evident?
NYSE Volume 4,823,760,500
Nasdaq Volume 2,234,145,750
As mentioned above, the metals were higher. Gold spiked $21.00, to $1,105.30. Silver was up 46 cents, to $16.65. The bad news was that oil followed, gaining over $2.00, to $74.93. Ouch!
Stocks were generally higher on the first day of February. It could have had something to do with economic data, though that was generally mixed. Construction spending in December was down 1.2%, worse than the 0.5% decline that had been forecast.
January's ISM Manufacturing Index hit a five-year high at 58.4, much better than the consensus call of 55.5. That was the most positive news the market has seen in months, and that seemed to be where investors were mainly focused. Additionally, personal income rose 0.4% in December, though spending for the month increased just 0.2%, implying that consumers were saving during the holidays, rather than spending, as our great inflationist Fed would have us do.
In any case, all of that added up to considerable glee on Wall Street, erasing some of the losses incurred over the past two weeks. All 10 industry sectors sported positives, with basic materials leading the charge. Gold and silver soared in value, which can be viewed either as a consequence or a cause of the rally. The metals had been trending lower for weeks.
Dow 10,185.53, +118.20 (1.17%)
Nasdaq 2,171.20, +23.85 (1.11%)
S&P 500 1,089.18, +15.31 (1.43%)
NYSE Composite 7,008.23, +124.45 (1.81%)
Advancing issues clobbered decliners, 4719-1826, though there were just 114 new highs and 61 new lows. The narrow margin continues to suggest that the market is still weak and in danger of rolling over. Volume was tepid, at best, even though there was obviously more interest in buying than selling.
One caveat to this entire scenario must be exposed: the rally which began in earnest in March 2009, may have been more a trader's push than any real investment-making by the general public. Even though the market serves as a discounting mechanism and the accepted logic is that the market is 6 months ahead of the economy, the current condition is just not bearing fruit. If we rallied sharply from March through June, and then again from late July through December, the initial signs of recovery should not be as well-disguised as they are. That may be begging the question, but how long is the American public supposed to wait before seeing real growth, not the inflation-inspired, deficit-spending, government-stimulated variety which is now evident?
NYSE Volume 4,823,760,500
Nasdaq Volume 2,234,145,750
As mentioned above, the metals were higher. Gold spiked $21.00, to $1,105.30. Silver was up 46 cents, to $16.65. The bad news was that oil followed, gaining over $2.00, to $74.93. Ouch!
Friday, January 29, 2010
Despite Solid GDP, Stocks Slide Again
As goes January, so goes the year...
If that old adage - the basis for the January Barometer, correct 90% of the time - rings true in 2010, we're in for a very tough year in the stock market, so, like I've been repeating over and over, CASH will be king, CASH is king, and CASH almost always has been and will be king. Even the perceived safety of commodities is no safe haven. We've seen them behave in volatile manners, and, for the past two weeks, steadily decline in price. Gold, silver, oil, all returned lower this week.
As for stocks, nothing, it seems, can break them out of their current funk, not even the robust 4th quarter 2009 GDP numbers released this morning. The advance reading came in at +5.7%, about in the middle of expectations, but, transposed against the horrible figures of 2008, it really didn't help investors' confidence very much. Following a spirited morning rally, stocks soon went back to their favorite posture of late, and sold off into the close.
The Dow dropped another 100 points for the week, with the other averages following suit. For the month, stocks were losers. Though they began with steady gains, economic realities and price pressure took over in the final two weeks of the month.
Dow 10,079.80, -40.66 (0.40%)
NASDAQ 2,149.15, -29.85 (1.37%)
S&P 500 1,075.16, -9.37 (0.86%)
NYSE Composite 6,890.53, -66.46 (0.96%)
Declining issues overwhelmed advancers once again, 4465-2021, with new highs and new lows continuing to converge. The highs held sway, but barely, 120-80. The market, and the high-low indicator, continue to appear ready to roll over. Volume was moderate.
NYSE Volume 5,431,270,500
NASDAQ Volume 2,685,607,500
Deflating prices continue to show up in the commodity markets. Oil finally sold off substantially, down $1.00, to $72.89, it's lowest price in over a month. Last year at this time, oil was trading for less than $60, and, considering the economic climate pervading the globe, there's no good reason other than naked speculation for crude to be at these elevated levels.
Gold drifted down $1.60, to $1,083.20, though silver finally managed a gain of 6 cents, to finish the week at $16.27. Less than two weeks ago, silver appeared headed for $19.00. Some people surely were burned badly by over-estimating the appeal of both gold and silver.
US dollars continued their 6-week rebound, strengthening against a basket of currencies, but mostly solid against the Yen, Pound and Euro. Cash, cash, cash. You've either got it or you don't.
If that old adage - the basis for the January Barometer, correct 90% of the time - rings true in 2010, we're in for a very tough year in the stock market, so, like I've been repeating over and over, CASH will be king, CASH is king, and CASH almost always has been and will be king. Even the perceived safety of commodities is no safe haven. We've seen them behave in volatile manners, and, for the past two weeks, steadily decline in price. Gold, silver, oil, all returned lower this week.
As for stocks, nothing, it seems, can break them out of their current funk, not even the robust 4th quarter 2009 GDP numbers released this morning. The advance reading came in at +5.7%, about in the middle of expectations, but, transposed against the horrible figures of 2008, it really didn't help investors' confidence very much. Following a spirited morning rally, stocks soon went back to their favorite posture of late, and sold off into the close.
The Dow dropped another 100 points for the week, with the other averages following suit. For the month, stocks were losers. Though they began with steady gains, economic realities and price pressure took over in the final two weeks of the month.
Dow 10,079.80, -40.66 (0.40%)
NASDAQ 2,149.15, -29.85 (1.37%)
S&P 500 1,075.16, -9.37 (0.86%)
NYSE Composite 6,890.53, -66.46 (0.96%)
Declining issues overwhelmed advancers once again, 4465-2021, with new highs and new lows continuing to converge. The highs held sway, but barely, 120-80. The market, and the high-low indicator, continue to appear ready to roll over. Volume was moderate.
NYSE Volume 5,431,270,500
NASDAQ Volume 2,685,607,500
Deflating prices continue to show up in the commodity markets. Oil finally sold off substantially, down $1.00, to $72.89, it's lowest price in over a month. Last year at this time, oil was trading for less than $60, and, considering the economic climate pervading the globe, there's no good reason other than naked speculation for crude to be at these elevated levels.
Gold drifted down $1.60, to $1,083.20, though silver finally managed a gain of 6 cents, to finish the week at $16.27. Less than two weeks ago, silver appeared headed for $19.00. Some people surely were burned badly by over-estimating the appeal of both gold and silver.
US dollars continued their 6-week rebound, strengthening against a basket of currencies, but mostly solid against the Yen, Pound and Euro. Cash, cash, cash. You've either got it or you don't.
Thursday, January 28, 2010
Stocks Continue Taking It on the Chin
Today's market - no, check that, the past two weeks - have been similar to watching an overmatched heavyweight slogging through the late rounds of a fight. The stumbling, grasping hulk is doing everything he can to stay on his feet, but his opponent, peppering him with body shots and head blows, is wearing him down, and eventually, that's where he's going: down to the mat for a long rest.
After a stirring speech by President Obama in the State of the Union Wednesday night, there were ample amounts of optimism, though not enough to lift stocks off the break even mark at the open. Jobless claims once again disappointed, and durable goods orders, which were expected to grow by as much as 2% in December, came in at a feeble 0.3%, giving even more credence to the thinking that the nascent recovery is giving way to larger pressures.
The deflationary cycle will not relent. Consumers aren't spending, which means companies won't hire, which will eventually be reflected in slower sales, weaker earnings and potentially even more job losses. Unemployment continues to be the weight on the economy, though housing isn't far behind.
Just an anecdotal reference from my vantage point bears reflection on where housing prices are headed. Three months ago, here in an upstate New York suburb, I searched the local multiple listing service site for homes under $90,000, and found four. Now, this is a relatively modest area, which wasn't damaged by the ups and downs of the housing boom and subsequent bust. Prices remained fairly stable throughout the years from 2003-2009. However, when I checked the same reference with the same parameters, my search showed 49 properties under $90,000, a 10-fold increase since late October, with the lowest price coming in at $36,500.
I was absolutely stunned to see so many properties around me at such low prices. In many cases, the property taxes would exceed the monthly mortgage payment on a 30-year fixed rate loan at 5.5%. I can only imagine the number of bank-owned properties that are being kept off the market (the so-called "shadow inventory") and the heartache and pain many of my neighbors are suffering.
With real estate in such a dreadful condition, if the stock market takes an extended dive - which it appears to be doing - many more families are going to be hurt, especially those with kids in college or nearing retirement. Their two great stores of value - their home and their retirement savings - are both losing value simultaneously, an unsustainable condition.
America sits on the precipice of a grand collapse and there aren't many people offering solutions, especially in Washington, where the fight is mostly political. It's almost comical to watch the daily panorama of posturing from a detached position; who in their right mind would want to be in a political position of power at this juncture? Maybe politicians are all just closet masochists, waiting to be flogged by an angry populace.
Wall Street seems to have noticed. Over the last seven sessions, the Dow has dropped 605 points, or nearly 5%. If the downdraft turns into a full-blown correction - a likely scenario - another 8-15% could be shaved off in short order, bringing the Dow not only back below the 10,000 mark, but even below 9000, a place where fear and panic both reside. It just doesn't look very pretty right now.
Dow 10,120.46, -115.70 (1.13%)
NASDAQ 2,179.00, -42.41 (1.91%)
S&P 500 1,084.53, -12.97 (1.18%)
NYSE Composite 6,956.99, -78.62 (1.12%)
Declining issues easily outdistanced gainers, 4690-1826. New highs remained modestly ahead of new lows, 131-79. Volume was strong.
NYSE Volume 6,385,494,500
NASDAQ Volume 2,906,497,750
Commodities were steady, after a few weeks of declines. Oil gained 11 cents, to $73.75; gold lost $1.20, to $1,084.50; silver finished at 16.21, down 23 cents on the day.
Friday offers the first government estimate on 4th quarter GDP, at 8:30 am, prior the the opening bell. experts are looking for gains of 4.7% to 6.8% over last year. The projects may appear overly optimistic, and may well be, but, then again, the final quarter of 2008 was one of the worst in years. Some improvement is surely there in the economy, the larger question is whether it will last.
After a stirring speech by President Obama in the State of the Union Wednesday night, there were ample amounts of optimism, though not enough to lift stocks off the break even mark at the open. Jobless claims once again disappointed, and durable goods orders, which were expected to grow by as much as 2% in December, came in at a feeble 0.3%, giving even more credence to the thinking that the nascent recovery is giving way to larger pressures.
The deflationary cycle will not relent. Consumers aren't spending, which means companies won't hire, which will eventually be reflected in slower sales, weaker earnings and potentially even more job losses. Unemployment continues to be the weight on the economy, though housing isn't far behind.
Just an anecdotal reference from my vantage point bears reflection on where housing prices are headed. Three months ago, here in an upstate New York suburb, I searched the local multiple listing service site for homes under $90,000, and found four. Now, this is a relatively modest area, which wasn't damaged by the ups and downs of the housing boom and subsequent bust. Prices remained fairly stable throughout the years from 2003-2009. However, when I checked the same reference with the same parameters, my search showed 49 properties under $90,000, a 10-fold increase since late October, with the lowest price coming in at $36,500.
I was absolutely stunned to see so many properties around me at such low prices. In many cases, the property taxes would exceed the monthly mortgage payment on a 30-year fixed rate loan at 5.5%. I can only imagine the number of bank-owned properties that are being kept off the market (the so-called "shadow inventory") and the heartache and pain many of my neighbors are suffering.
With real estate in such a dreadful condition, if the stock market takes an extended dive - which it appears to be doing - many more families are going to be hurt, especially those with kids in college or nearing retirement. Their two great stores of value - their home and their retirement savings - are both losing value simultaneously, an unsustainable condition.
America sits on the precipice of a grand collapse and there aren't many people offering solutions, especially in Washington, where the fight is mostly political. It's almost comical to watch the daily panorama of posturing from a detached position; who in their right mind would want to be in a political position of power at this juncture? Maybe politicians are all just closet masochists, waiting to be flogged by an angry populace.
Wall Street seems to have noticed. Over the last seven sessions, the Dow has dropped 605 points, or nearly 5%. If the downdraft turns into a full-blown correction - a likely scenario - another 8-15% could be shaved off in short order, bringing the Dow not only back below the 10,000 mark, but even below 9000, a place where fear and panic both reside. It just doesn't look very pretty right now.
Dow 10,120.46, -115.70 (1.13%)
NASDAQ 2,179.00, -42.41 (1.91%)
S&P 500 1,084.53, -12.97 (1.18%)
NYSE Composite 6,956.99, -78.62 (1.12%)
Declining issues easily outdistanced gainers, 4690-1826. New highs remained modestly ahead of new lows, 131-79. Volume was strong.
NYSE Volume 6,385,494,500
NASDAQ Volume 2,906,497,750
Commodities were steady, after a few weeks of declines. Oil gained 11 cents, to $73.75; gold lost $1.20, to $1,084.50; silver finished at 16.21, down 23 cents on the day.
Friday offers the first government estimate on 4th quarter GDP, at 8:30 am, prior the the opening bell. experts are looking for gains of 4.7% to 6.8% over last year. The projects may appear overly optimistic, and may well be, but, then again, the final quarter of 2008 was one of the worst in years. Some improvement is surely there in the economy, the larger question is whether it will last.
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