Exhaustion from the Economic Data

I think it was Popeye who used to say, “That’s all I can stands! I can’t stands no more!” Then he would squeeze open a can of spinach with his bare hand, sending the greens arching through the air and into his mouth, and in one great gulp, into his belly. His muscles would bulge sequentially one by one. Spinach digested, iron running through his veins, he would then do something incredible like motor across the surface of a lake via the power of his gyrating legs alone.

On Friday, I, like Popeye, said those words to myself after enduring a full week’s worth of the harshest of economic data... and myself answered (that’s the scary part). Myself replied, “If you’re exhausted now Greek, prepare to enter a comatose state next week when the Employment Situation Report is published!” Seriously, the constant battering of dire economic data is like a nightmarish fight to the death with Mike Tyson in his prime, and absent the three knock down rule! We’re taking a beating here, and there’s just no end in sight!

Last week, jobless claims jumped into frightening territory, reaching 667,000, and the insured unemployed rate moved another tenth of a percentage point higher to 3.8%. While all these folks are getting laid off, nobody is finding a job you see. Unemployment is no doubt skyrocketing, and we’ll get the unavoidable horror story of a report detailing the chaos on Friday. I think there’s a decent chance the unemployment rate could have soared to as high as 8.0% in February, from 7.6% in January. The economists’ consensus is for 7.9% unemployment, according to Bloomberg. The real unemployment rate, the one that includes people who are working part-time, but wish they had a real job, and the people who have completely given up their job search for the fantasy of full-time blogging, is moving into the mid-teens!

Last week’s data dump was not limited to employment news. GDP, that sometimes considered noteworthy gauge of economic activity, was revised dramatically lower. GDP contraction deteriorated to 6.2% in the fourth quarter, marking a rare sharp revision from the 3.8% initial report. The grand shortfall was driven by expired export demand (-23.6%), fretful residential fixed investment (-22.2%) and sad equipment and software sales (-28.8%).

It was a week that saw Durable Goods Orders diminish by 5.2% in January, versus expectations for a 2.5% decline, according to Bloomberg’s survey of economists. Meanwhile, the Conference Board’s measure of Consumer Confidence sank to 25.0, a record low. Existing and New Home Sales both dropped precipitously, but the sector’s decline this particular month was attributed to the still pending status of fiscal stimulus in January. The theory goes that would-be real estate buyers knew great new incentives would soon avail themselves, and so they waited a little longer.

The coming week will offer more than unemployment data for reason to hide under the covers. Personal Spending threatens to dwindle into nothingness as a direct result of rising unemployment. Construction Spending and Manufacturing Sentiment are likely to pound a few more painful blows home when reported on Monday. Tuesday brings Motor Vehicle Sales, though it would be more appropriate to call it the reporting of the lack of sales these days. Economists see the pace slowing to 6.2 million in February, compared to the anemic 6.8 million pace reported in January. You get the picture, there’s more bad news in store...

We should note that retailers received some good news this past week; the government might loosen the rules for them around bankruptcy and liquidation proceedings. Sounds wonderful right, like choosing the guillotine over hanging.

A few retailers (stressing “few”) exhibited some resiliency last week, managing costs well enough to surprise analysts despite tough declines in sales. The Gap (GPS) was one of those few, and Dell (DELL) did the same job in its business. Saks (SKS) thawed the frozen hearts of its shareholders, when after reporting a terrible quarter, management declared its expectation for the luxury retailer to survive at least through ’09. This coming week, look for important reports from the likes of American International Group (AIG), MBIA (MBI), Toll Brothers (TOL), Anheuser-Busch InBev and AnnTaylor Stores (ANN). You might want to also thank the Lord for the start of lent, and the opportunity to consume more spinach.

Comments

[Mad Hedge F...:]

Vc Gs Welcome to the worst case scenario, with Q4 GDP revised down from -3.8% to -6.2%. Q4 will be just as bad, if not worse, then we will find a bottom. Technical analysts were ringing their hands as the Dow hit a new 12 year low and the S&P 500 broke key support at 740. Thank God I don’t believe in that mumbo jumbo. Natural gas hit a new six year low at $3.90, and even gold backed off to $928. Citigroup (C) is now so cheap at $1.40 that you could launch a hostile takeover with your American Express card. It really had the flavor of a “throw up your hands and sell everything” day.

Mar 01 08:26 AM

[boats.j:]

One can imagine how exhausting it can be to try to sell more Wall St. BS in the face of overwhelming evidence of that BS! Sad, so sad.

Mar 01 08:37 AM

[JC09058:]

Economic data is important and a necessary indicator (historically speaking) for gauging future economic activity. During normal times, it is worth paying attention to. These are not normal times and I really consider the validity of the news that is presented each and every day about how bad things are. Look at the view point of seven months ago when a lot of the current situation started breaking. At the tail end of July, after reading a number of historical documents about the state of the economy in 1928 through 1933, I had realized that the current situation was going to follow a similar path and that what was to come had to be endured. Mostly, when all I started seeing, for current news, were the same stories being rewritten day in and day out.

So, I started thinking about things my father had talked about living through the Great Depression. Along with that I also tried to remember what my grandparents had to say about that period in time as well. While in this case, I am not saying we are headed into a depression, I think their words about what they did carry great weight for today situation as well.

One thing that they always said is that the news will be always bad now and for a long time to come. Therefore, do NOT worry about the panic written into the article but look for the little things that are showing improvement. During the downward period, every little ray of sunshine in the news will be horribly crushed, by the writers of the news (Doom and Gloom), as aberrations and should be ignored. Sadly, papers sell on Doom and Gloom, and telling you how unhappy you are supposed to be because they say it is so. If you give into them, you personally will be needlessly be depressed and therefore miss opportunities out in the market.

Second, no matter how bad things are and how everyone is affected by this, there are good companies out there and it is those companies that WILL recover first before all others. Stock prices are depressed right now and that should be making you VERY happy. Now, while the market is going down, you need to look for the good companies. Find them now because when they start recovering, their share price will climb through the roof and will do so quickly.

Third, cut back on personal spending. I said cut back and not stop!! Don’t buy because you are depressed but start saving that money, NOW. You may not be able to save a lot but those share prices are cheap! Save that money while the market is going down but spend a little on yourself to feel a little better. Otherwise, no SUVs or third homes please. My grandfather stated that he made his best money ever by buying good companies when they got cheap for him and kept buying as long as they stayed cheap. I guess he should know because he retired very comfortably.

But, then my father listened to him as well because he did the same thing during various recessions and burst bubbles with the same results. Hummm, maybe, I should listen to this advice as well because being poor sucks. Tried it, didn’t like it. Seriously, no handouts from my folks. If I want it, I have to earn it and the only way was to make it myself. Then, if I do well enough, they will pass some on because I really did learn the value of a dollar. You may think that it is bad of them but then these are depression era folks and I think they are right on this.

My Grandfather and father both had the same viewpoint concerning people who wrote the financial news. When all you read is bad news, it is a wonderful thing. So, in more modern terms, if some bad news is good, more is better, then too much is just right. So, bring it on. Please continue to depress the market even more because you are helping my family to be a little bit richer. Am I being greedy by saying this? Maybe. But, market news has been and will be a great driver of share price and nothing has a greater impact good or bad other than earnings and debt load. Therefore, financial news is one of the tools I use to make money for my family.

So, in this topsy-turvy financial market, bad does equal good and a little does equal a lot. Please, I do care about my fellow man for those of you that think otherwise but opportunity does knock, I’m opening that door and making my best of a bad situation. I hope others will stop and think about this, and the words of my grandfather and father. They proved themselves right and I listened.

Mar 01 01:21 PM

[henarl:]

When you count some company saying they think they can survive thru 2009 as good news then you know that pessimism is rampant. The market may not yet have reached a bottom but it sure seems like optimism about the economy just about has. The next step is to just give up and cry "uncle". That's when we will see the actual bottom.

Mar 01 01:21 PM

[stocks2051:]

Excellant writing style!

Mar 01 02:39 PM

[Jugheadjack:]

Obviouly you're short the market and scrambling. Buy on worst news you see.

Mar 01 10:00 PM

[Aj2009:]

To JC09058 :
I really like your suggestion.Though I am not quite sure we are in the bottom, or even we are how fast we can climb out it.
We often imagine how bad the future will be and when it comes the first reaction is to find who's fault; then the majority will sink into desperation; and then hopefully we can decide we really need to do something.
Thank you.

Mar 03 12:17 PM