Data Not Supportive of Higher Stock Prices 25 comments
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Stock index futures were rocketing higher this morning off of Well Fargo's (WFC) "earnings beat." The significance of this is open to debate, but the shorts are scrambling for cover, no doubt.
I found several other pieces of data released this morning far more telling of the current economic, and hence corporate, conditions.
1) Intitial claims for unemployment still extraordinarily high at 654,000.
2) A drop of 5.1% in imports, resulting in a large drop in the US trade deficit. Multi-year lows in imports from Japan and China.
3) Same stores sales at Wal-Mart (WMT) up an anemic 1.4% and below consensus.
These three pieces of data point to increasing unemployment and hence decreased purchasing power by US consumers. Unemployment continues to rise rapidly, and consumer demand continues to decline. These data are not supportive of higher stock prices either in the US or in countries that depend on US demand such as China, Japan, and the emerging markets.
I believe that at this point stock and commodity prices are rising due to increased investor demand as money moves from cash and bonds into stocks and commodities. Also, there is a "hope" that a few months from now the economic picture will be better than it is now, and stocks "anticipate" this. I personally don't see any signs of this. The only reason I would be long stocks or commodities now would be as a trend follower or trader front-running some major asset allocation shifts.
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Can we all join in and agree we know about the issues in Michigan? We should also agree that people are going to need cars(or car substitutes) for a long, long time. So the Big 3 may be a disaster now, if they can actually become viable companies their money making power in the future will be fine.
Banks are similar except banks money making ability has not been lost like car companies. The losses that will come to Banks are on deals and loans that ALREADY occurred. Yes, they'll take time to work out, but ignoring bank earnings power is stupid.
TARP opponents forget that A.These banks over time will pay back TARP and B.Will pay billions of dollars a year in dividend payments.
We have to stop being a country of "internet" experts on all subjects and focus on moving forward. The "the country sucks" attitude is lame.
I for one am awaiting some of these people to really step up and move out of the country. I heard the rights in China are top notch.
Do I have to type "LOL" every time I make a "tongue in cheek" remark, such as gauging the economy by the resale price of Cubs tickets? Seriously though, this is the first time in years you could get good tickets online at face value.
Who wants to move out of the country? I was born in Chicago, and have lived in Illinois and now Michigan my entire life. I love this country. The people who run the country, the political class, are babbling idiots. The current backlash against capitalism that made this country rich is insane.
I don't want to live in Brazil, or China, or Singapore, I merely want to rent their stocks for a while. I have a hard time thinking of an S&P industry group that isn't going to be adversely impacted by the current administrations multi-faceted expansion of government.
Too many people blindly harping about the injustices and stealing that have been committed on them personally with absolutely no backup.
For anyone who really, truly has lived within their means this downturn should put you in stronger position. If you lost a whole lot on stocks, sorry but that is your fault.
If you lose your job, that is a different story and sucks, but we are acting as if this is the first time people have been laid off in the country. That it is the first time we've had a nasty recession, had a bank crisis.
To me, unless people start being realistic about things and expectations we ain't going to move forward.
Good info on the Cubs tickets. Was at Wrigley for all 3 of the Cubs-Sox a few years back. Talk about a good time.
Actually our Grandkids are in a great spot. This will all be worked out by the time they are older and they'll be living the good life...oh yea, life is already pretty good, so I guess the really good life.
Mortgage rates are incredibly low.
Stock valuations for quality, long-lasting companies are lower than they have been in a long time.
Jobs in specific industries are obviously hurting right now, but they are booming now or will be booming soon in healthcare, technology, environmental sciences, education, etc.
The short term is still ugly, but the road has been set for the next generation to do quite well if they live within their means.
And yet stock prices are HIGHER today...significantly so. I guess all that extra money in my Schwab account this evening is just an illusion.
Funny.
I certainly don't portray myself as an expert. I distrust anyone who does. That's my nature, I'm a skeptic. I am a part time stocks and options trader who has taken control of his own retirement accounts and does his own asset allocation.
Last June, I fired my financial adviser, and sold everything. Why? The charts were bad, the fundamentals were deteriorating, and Minyanville had some great commentary about the potential for a financial Apocalypse.
Apocalypses don't happen very often, but, in this decade alone we've had two 50% bear markets in the major market averages. I sat them both out in cash.
My financial adviser was big on Brazil (EWZ) at 80, down from 100. Great time to buy he said. And so on. My previous adviser liked the Russell 2000 Value Index (IWN) at 80 the year prior. I didn't buy EWZ at 80 and watched it fall below 30 at one point. It's now "recovered" to 44. IWN was cut in half too, without me.
Nope, I make my own decisions now, and I was out of all investments as of June 2008.
So, yes, I'm an internet ninny. I'm trying to educate myself and when I formulate an opinion I try to share it, for better or for worse. Many professionals didn't see the risk, and, didn't prepare their clients.
Todd Harrison and the late Bennett Seddeca of Minyanville saw the credit crisis unfold long before it significantly affected stock prices. So did Bill Fleckenstein.
I miss Bennett's commentary on Minyanville. When the market was accelerating down and people were saying what a fabulous buying opportunity it was, Bennett would say something like, "the bonds on this company have an implied yield of 25% and no one's bidding on them." Gives you something to think about.
All we have to do to make it better is to give the perps a few trillion of our tax dollars, take a job loss, lose our 401k, give our house back, and then buy it back from the same crooks for 3 times the price and at 15% interest, and then pay huge taxes on an untennable deficit, while what dollars we have left are devalued down the toilet.
Yeah -- the country is full of whiners.
People need to go to jail. To deny that is crazy.
Also -- whats wrong with the internet ? Well plenty, sure -- but it has revolutionized investing, research, and trading. Whats wrong with having information available to all ? If it has any issue, its the absolute volume of information, and of course the dubious quality of some of it.
Anyway, nothing personal CJJ, but you sound alot like Phil Graham did when he was chosen as McCains financial guy -- its all in our heads. Its an attitude problem on the part of the american people, who bought more house than they could afford.
mmmbaaahhh. What a load of crook-protecing crap.
You show me an American who dreams of owning a home, but lives on meager means, and then a bankster comes along and tells him he can help him achieve that dream, and its all above board, and everythings alright -- then blame the buyer cuz he didnt do due dilligence right ? RRRrrriiiight !
Alotta mad citizens around, and very very justifiably so. I havent been adversely impacted, but Im livid with what has gone on to date, and with even the thought that the crooks who perpetrated this thievery are gonna get away with it.
And no, Obama is not a communist. He ran as a pragmatic centrist, then took a hard left turn to socialist after inauguration. He is levering federal money against industry, state and municipality to create the behavior that he and his minions think is proper. You dont behave right, you dont get the bucks.
I just want to hear some good news at this point. It's been flooding bad news lately.
NO NEW CONSUMER MARKETS (consumer markets were long saturated thanks to offshoring of jobs for lower pay, that's why they needed debt to keep the economy growing).
NO NEW CHEAP LABOR (labor in Asia is as cheap as it gets, when we reduce labor costs here, those new laborers will make real poor consumers, so it won't help).
NO NEW CHEAP RESOURCES (we are running out of all kinds of stuff in cheap form, especially oil).
PAX AMERICANA IS OVER.
On Apr 09 04:01 PM Rick Urban wrote:
>"You better do your homework based on the facts. Go out in the >field, check the channels. It's hard and takes time, but it's better >then reading rubish articles on the Internet and reading charts. >Just use common sense, you don't need Harvard degree.
On Apr 10 12:01 AM User 392396 wrote:
> People are starting to look for alternative earnings, some are brave
> enough to make risky move at this point, others refer to them as
> "silly ones" that's their choices.
>
> I just want to hear some good news at this point. It's been flooding
> bad news lately.
You seem desperate for good news. The good news should be that you read these articles and hopefully understand that things are gonna get worse and stay there. If you understand this, you can be prepared at least mentally. That's your good news, don't expect "a recovery" a la CNBC "goldylocks" style.
On Apr 10 12:26 AM penny_stocks wrote:
> I've been waiting for good news myself and hoping things will turn
> 360 degrees in a good way pretty soon. Wake me up if I'm just dreaming.
Put together it means that people are still getting poorer, and Target will have to close bunch of stores soon. Can you imagine what this year's holiday season will look like? CARNAGE.
On Apr 09 05:56 PM User 371158 wrote:
> Let's see- Walmart was "disappointing" despite a growth in sales-
> that is amusing in and of itself, but so be it.
>
> On the other hand, Target beat expectations by having a 6.3% drop
> instead of a 7.4% concensus projection. That is a significant increase
> over expectations.
> Could it be that Walmart sales dropped because people are finally
> "kicking it up a notch" and going to Target instead?"
On Apr 09 06:44 PM drbob66 wrote:
> "Data Not Supportive of Higher Stock Prices"
>
> And yet stock prices are HIGHER today...significantly so. I guess
> all that extra money in my Schwab account this evening is just an
> illusion.
>
> Funny.
But if they continue to try and hang on to the type of life they have had the pain will be immense. This is why people like me argue, I argue to spread this view of reality and snap out those that are willing so that the pain is less for all of us.
On Apr 09 05:09 PM CJJ wrote:
> Please stop with the Walmart crap. Walmart has seen a huge upswing
> as people who usually shopped elsewhere started to shop at Walmart.
> At some point, unless you expect everyone to shop at Walmart 100%
> of the time, those numbers will top out.
> Actually as the economy improves you would expect LESS spending at
> Walmart.
> Walmart same store sales rising is a BAD indication.
>
> I'm not someone who predicts anything about the market because markets
> are a gambling hall. They have always been.
>
> Can people at least understand that TODAY...after 16 months of recession
> time are tough, however, they aren't armageddon. People lost a lot
> of "supposed" wealth. Much of this money wasn't planned to be spent
> tomorrow or this year or in five years.
>
> No matter what happens people will make the adjustments necessary.
> It may be difficult, but whining, complaining and trying to sabotage
> things is no way to get a turnaround.
>
> Its sickening to see how many people are outright rooting for depression.
>
>
> Also, the trade deficit narrowing is good and bad, it is not just
> bad. And unemployment isn't just going to all of a sudden disappear.
> At what number of claims are you going to stop using as a reason
> we're heading down the toiler?
This sounds like a statement with absolutely no basis to it.
Mortgage applications up, housing sales up, industrial activity finally starting to step up.
If people want to look past these positive trends and continue to worry themselves into inaction then more power to you. I, on the other hand, will look at the trends that are moving to the upside and take advantage of these valuations.
Everyone is free to make their own choices, and my choice will be to acquire as many shares of various index funds as possible. In 30 years I will be evry appreciative of the roughly 25% discount to long-term fair value that I am getting right now.
On Apr 10 12:39 AM givargi wrote:
> WHAT? Walmart increased sales because people went there instead of
> Target (they are poorer now). Target dropped less because 1) guidance
> was purposely overly negative, 2) because initial shock wore off
> and some consumers braved the weather and went shopping there.<br/>Put
> together it means that people are still getting poorer, and Target
> will have to close bunch of stores soon. Can you imagine what this
> year's holiday season will look like? CARNAGE.
>
> On Apr 09 05:56 PM User 371158 wrote:
www.youtube.com/watch?...
www.youtube.com/watch?...
Cost of credit- yes, it's very low now, but will get very high later as govs everywhere have to finance their deficits. Higher and higher taxes will also choke off the engine for growth.
YES-- we need GROWTH, real profits, real cash flow to REALLY recover. Everything else is kind of hocus-pocus.
Thanks Dick Kovacevich, John Stumpf and all the dedicated employees at Wells Fargo...you guys rock!
On Apr 10 12:41 AM givargi wrote:
> Its not an illusion, it just should not be there, and will soon evaporate
> unless you sell.
This rally got sparked by Citi saying – they are going to make profits this quarter. Does anyone care if Citi would show profits or not– even on an operating basis. We know with FASB changes and all the bailouts any bank can SHOW anything – we are going through this phase of official regulatory forbearance. Govt. is going to rain as much money as needed for as long as needed to keep the banks from falling under.
China story and commodities – on the fundamental front lot of analysts are taking the commodity price rise as rebound in China and the expectation that China will grow 7-8%. All Chinese fundamental data pints to contraction – PMI shows contraction, export & imports both continue to dwindle. The commodity purchases are simply ending in stock piles, it is bottom fishing.
Housing - In US it is the burst of the credit bubble, with mounting job losses housing cannot simply rebound – inventories, home ownership, rent vs. home price ratio – all still much above historical averages. In a deep recession like this everything will overshoot on the down side.
Bottom fishing -I bought a lot of Cisco at 20 after it came down from 80 in the dot com crash, it went down to 10 and still at 17 after eight years. Of course the Japanese market is still 80% down from its ’89 highs and at 26 year lows. So be very careful about predicting the certainty of rebound
This rally got started from technically oversold conditions, short covering, etc but has stretched itself far too far. Wall Street pros taking advantage of amateurs, fund managers trying to suck in money with the show of a rally. Fundamentals always reassert they will. The November rally (sparked by Geithner’s nomination – can that be a reason at all) – lasted one and half months – it crashed and burnt, this rally quite likely will too. It is traders market – if you can buy low and sell high (or the converse – short and cover) – good for you, else just beware.