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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • China Takes & Gives - By Charles Payne,

    Question of the Week

    Which one of these comebacks will be successful and which one will fall flat on its face? Corzine, Tebow or the Fanny Bag

    Post your answer below.

    Why does the market have to correct? It has to correct because the rally is long in the tooth. Market bears have griped about the lack of a correction (which is a decline of 20% or more) for a long time. However, even more upsetting is how long it's been since the market had a garden variety pullback- a 10% decline.

    Well, they had to feel a lot better on Friday as the market stumbled out the gate and never regained equilibrium.

    There are a bunch of theories on why the weakness, including news out of China and Greece, however many point to the higher core-consumer price index (NYSEARCA:CPI) as the biggest source of pressure. The core number does not include food or energy prices. However, that number, while in a declining long-term downtrend, is higher this year and Americans are now worried about inflation.

    If inflation becomes an issue, it will force the Fed to hike rates although June is off the table, more and more mavens are calling for September.

    Turn Those Machines Back On!

    On Friday, equity markets around the world, including the United States, were hit hard when China loosened rules to make shorting stocks easier. Well, they took a page from the character Mortimer Duke, to "Turn those machines back on!"

    The People's Bank of China (PBOC) announced a dramatic cut in reserve requirements to 18.5% that will unleash $194 billion into their economic system.

    This big move in China leaves its reserve levels significantly higher than America, which is still far too high at 10%.

    US Reserve Requirements

    % of liabilities

    $0 to $14.5 million

    Zero

    $14.5 million to $103.6 million

    3%

    More than $103.6 million

    10%

    For all the trillions pumped into banks, Main Street has been shut out by rules ostensible sold as punishment and a way to curb risk at those same banks.

    Don't Call it a Comeback...

    Big-time comebacks- The Philadelphia Eagles have signed Tim Tebow, and reportedly, he will have a shot at becoming the starting quarterback.

    Apparently, Jon Corzine is ready to start a hedge fund. Many say the infamous Wall Street powerhouse is lucky not to be in jail.

    In addition, the hippest concert in the world, Coachella, has ushered in the return of the fanny pack… for men!

    Today's Session

    Speaking of comebacks, the major equity markets are slowly climbing their way back to former highs. The Dow Jones Industrial Average has already recovered over 100 points. The Chicago Fed's March national activity index report was a doozey, coming in much lower than estimates and last month's readings. However, the positive earnings reports may be enough to keep the market in check. Below are some of the companies that reported this morning.

    Company

    Date

    EPS

    Consensus

    Revenue ($M)

    FY EPS Guidance

    FY EPS Consensus

    HAL

    20-Apr

    0.49

    B 0.11

    7,050

    -

    1.14

    HAS

    20-Apr

    0.21

    B 0.13

    714

    -

    3.28

    MS

    20-Apr

    0.85

    B 0.06

    9,907

    -

    2.89

    PLD

    20-Apr

    0.49

    M 0.01

    463

    2.07-2.13

    2.08

    RCL

    20-Apr

    0.20

    B 0.06

    1,816

    4.45-4.65

    4.74

    Apr 20 10:41 AM | Link | Comment!
  • Home Sweet Home (Again) By Charles Payne

    The housing data will roll in again and it could reveal much more about the economy than the jobs report. There are interesting dynamics, such as the young adults who settle with paying rent, while putting off ownership. And for those looking to own, there's a growing appetite for new homes.

    Later this morning, we get the latest data on housing starts and permits, which have mostly been disappointing. While, the starts are up from the trough, they are still below the historical average and more than 50% below the peak of 2004.

    Although, there have been a lot of miscues with the housing recovery, the homebuilder index (XHP) just keeps chugging along.

    Interestingly, underscoring the potential for housing to come to the rescue, homebuilder sentiment improved for the first time this year with high expectations; giving hope that perhaps the housing market is turning the corner.

    Today's Session

    The major equity indices began fading fast in the premarket hours and the early economic releases did little to revive them this morning. Initial jobless claims for the week ended April 11th climbed to 294,000 (14,000 above consensus) after coming in at a revised 282,000 (from 281,000) the prior week. However, this did little to move the 4-week average which inched up to 282,750, still lower than the same measurement from a month ago. On the other hand, continuing jobless claims, which lag by a week declined by 40,000 to 2.268 million which is a new 15-year low. The four week average also fell, declining 33,000 to 2.329 million. For the third week in a row, the unemployment rate for insured workers came in at a reading of 1.7%.

    As we mentioned earlier, the housing starts and permits report was also released earlier and was rather disappointing. The seasonally adjusted annual rate (SAAR) for starts came in at 0.926 million when consensus called for over 1.0 million starts and the SAAR for permits was also shy of consensus, coming in at 1.039 million. We will dig further into these numbers in the Afternoon Note.

    Below are some of the notable companies that reported earnings this morning before the open…

    Company

    EPS

    Consensus

    Revenue ($M)

    FY EPS Guidance

    FY EPS Consensus

    C

    1.52

    B 0.12

    19,736

    -

    5.37

    GS

    5.94

    B 1.67

    10,620

    -

    17.15

    PM

    1.16

    B 0.15

    6,616

    4.32-4.42

    4.25

    SHW

    1.38

    M 0.06

    2,450

    10.90-11.10

    11.19

    UNH

    1.46

    B 0.11

    35,756

    6.15-6.30

    6.21

    Apr 16 9:36 AM | Link | 1 Comment
  • Today, We All Sink In Our Grave By Charles Payne

    I see a schoolboy when I think of him,
    With face and nose pressed to a sweet-shop window,
    For certainly he sank into his grave
    His senses and his heart unsatisfied,
    And made -- being poor, ailing and ignorant,
    Shut out from all the luxury of the world,
    The coarse-bred son of a livery-stable keeper --
    Luxuriant song.

    -W. B. Yeats

    On this tax day, I know many Americans who live in the richest nation in the world who are poor, ailing, and in many cases, ignorant to why they're being "shut out from all the luxury of the world."

    Like Yeats' ode, these same Americans continue to vote for those who they think love them, yet leave them "with face and nose pressed to a sweet-shop window."

    You see, this beloved government keeps taking in more and more money; and yet the economic standing of most Americans remain the same. Somehow, it's the fault of those paying taxes and not those collecting taxes.

    Six-Month Tax Payers $1.42 Trillion

    • Individuals $642 billion +9.7%
    • Payroll $509 billion +3.7%
    • Corporate $133 billion +12.8%
    • Other $137 billion +5.5%

    Right now, the U.S. government is on course to spend $482 billion, more than it will take in for the fiscal year in October (FY15). Since the pace quickened in March, I wondered if it might point to yet another year of spending $1.0 trillion more than the amount of revenue taken in. In March, the Federal government spent $52.9 billion, more than it had taken in, which created a deficit that was 43% higher than a year ago. Revenue climbed 8.5% in March, but a spike in Medicare spending and a sharp decline in revenue from Fannie and Freddie, the spending soared 13.6%. These are two key shifts:

    • Medicare spending associated with ObamaCare +9.4%
    • Defensive spending in accordance with sequester -3.0%

    If you're like me, you were hit harder this year more than ever, but some people got breaks.

    It might be surprising to know there will be $1.3 trillion in tax breaks allowed under the U.S. tax code. Among the biggest tax breaks: Employer paid healthcare, lower dividend and long- term capital gains and mortgage interest and earned income tax credit

    Politics (not as usual)

    Race and gender politics are the order of the day. For the Democratic Party, it feels like a slam-dunk. However, non-whites will always vote as a complete monolith block, even as our nation becomes a more racially and ethnically diverse country.

    In fact, there were dramatic shifts in Hispanic and Asian votes, while the white and black votes barely nudged between 2012 and 2014.

    Hispanic

    Dem

    GOP

    2012

    69%

    31%

    2014

    63%

    37%

    Asian

    Dem

    GOP

    2012

    74%

    26%

    2014

    49%

    51%

    If those results don't worry democrats, then a recent Pew survey should. Hispanics and younger blacks are no longer slam-dunks for the party.

    Democrat Advantage Over GOP

    Hispanics

    Blacks

    Younger Millennials (18 - 25)

    21%

    56%

    Older Millennials (26 - 33)

    28%

    64%

    Younger Gen X (34 - 41)

    28%

    67%

    Younger Boomers (50 - 58)

    35%

    71%

    Older Gen X (42 - 49)

    36%

    75%

    Older Boomer (59 - 68)

    42%

    81%

    It seems to me that more people, including non-white voters, are going to vote with their pocketbook rather than against offensive and injustices of yesteryears.

    Moreover, let's hope there's a real effort to get back to the basics...It's the Economy Stupid!

    Today's Session

    The major indices are extending their rally so far this morning with green on the screen. The New York Fed released its Empire State Manufacturing report for the month of April. The report indicated that general business confidence has plunged in the district to a reading of negative 1.19 from a prior reading of 6.90. This is devastatingly below the consensus estimate of 7.0 and the second time the index has come in with a negative reading in the past 23 months. New orders were down to negative 6.9, primarily due to the strengthening US dollar decreasing demand for US goods. Unfilled orders also contracted, coming in at negative 11.7. Surprisingly, shipments did not contract as much during the month. There is still hope for positive change, however, new orders need pick up or else we may see lower employment in the region.

    Below are some of the companies that reported yesterday afternoon and this morning.

    Company

    Date

    EPS

    Consensus

    Revenue ($M)

    FY EPS Guidance

    FY EPS Consensus

    CSX

    14-Apr

    0.45

    B 0.01

    3,027

    Q2 0.53-0.54

    Q2 0.58

    INTC

    14-Apr

    0.41

    in-line

    12,781

    -

    2.14

    BAC

    15-Apr

    0.27

    M 0.02

    21,421

    -

    1.39

    DAL

    15-Apr

    0.45

    B 0.01

    9,388

    -

    4.74

    PNC

    15-Apr

    1.75

    B 0.04

    3,731

    -

    7.24

    TITN

    15-Apr

    -0.20

    M 0.01

    491

    0.01 <

    0.02

    Apr 15 10:22 AM | Link | 2 Comments
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