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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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  • Housing Dilemma - By Charles Payne

    Question of the Week

    While the housing market improves, the prices for homes and buildings are steadily increasing. This results in higher mortgages and higher rent payments; however, the rate of growth of these items outpace the growth of renters' paychecks. What do you suggest renters do to save up to purchase a home when their rent payment is getting closer to matching a mortgage payment?

    Post your answer below.

    Today, we receive new home sales in which I think will come in above consensus since the demand for new homes have begun to outpace those previously owned.

    Yesterday, Existing Home Sales came in slightly below forecast in part to the ongoing supply issue. As a result, median home prices climbed 7.5% from last February to $202,600. This marks 36 straight months of home price increases as 1.8 million homes is equivalent to 4.6 months of demand.

    However, another part of the problem has been a lack of demand. In fact, lending standards and mortgage interest rates have plummeted because demand has weakened.

    Thus, here's the dilemma for renters: they're pouring more money into a pad they don't intend to own. When the rate of pay increases, mortgages also increase in the same town.

    Rent

    Pay

    +15%

    +11.2%

    In some places, the difference between pay and rent is even more obscene:

    • New York rent +50% (last year) - paychecks up +8%
    • Seattle rents surged 32% - paychecks up 15%
    • Nashville rents climbed 19% - paychecks up 14%

    Moreover, I continue to say it's all about ownership from a business, to your home and investments.

    Today's Session

    Mixed economic symbols out today with Europe's economy growing faster than anticipated; China is still showing signs of strain. The news sent the Euro a little higher, but subsequently the first rise in US CPI (see chart) tilts the scales toward a rate hike sooner than later...but only tilts it slightly.

    It would be great to see a longer term bounce in Europe coupled with a 6% rate of growth in China, but it's all day to day for the moment.

    The Federal Housing Finance Agency (FHFA) reported January results for its purchase focused house price index. On a monthly basis, prices increased by 0.3%, this is quite below the December reading of 0.8% growth and the consensus estimate for +0.5%. On an annual basis, growth also slowed, coming in at +5.1% compared to a prior reading of 5.4%.

    Mar 24 9:58 AM | Link | Comment!
  • Bubbles And Snakebites - By Charles Payne

    On Friday, shares of Biogen Idec (NASDAQ:BIIB) popped on news of positive developments in the treatment of Alzheimer's disease. The news sent their drug from Phase II to Phase III development. Then, Wall Street began jumping on the bandwagon. Note: this morning, Stifel downgraded the stock to a Hold rating from a Buy rating.

    Here Comes the Street…

    Piper

    Cowen

    Barclays

    Credit Suisse

    Citigroup

    Baird

    Morgan Stanley

    Old Target

    $421

    $425

    $435

    $400

    $410

    $445

    $418

    New Target

    $500

    $500

    $500

    $500

    $512

    $498

    $525

    The news sent the entire biotechnology sector much higher, extending momentum that's made it a strong place to be invested in this year.

    BIIB

    This is a sector to watch carefully as there were a ton of initial public offerings (IPOs) last year, and while most of the companies aren't earning money overwhelmingly, they have had drugs in at least phase one treatment. Still, considering valuations and past disappointments in the sector, this is the one that can best be labeled as a bubble.

    Remember last July when Janet Yellen offered stock advice while trying to play down the notion the entire market was a bubble? Instead, she threw social media and biotechnology stocks under the bus stating:

    "Valuation metrics in some sectors do appear substantially stretched - particularly those for smaller firms in the social media and biotechnology industries…"

    Obviously this was her Greenspan 'irrational exuberance' moment, but then again she's looking to take the Fed back to Greenspan with more opaque language and less Wall Street influence. I like the latter part, but I just hope she sticks to other parts of the job and leaves asset bubbles to the market.

    Biotechnology Sector Index (NASDAQ:IBB)

    This morning, there was news of adverse reactions with two Gilead (NASDAQ:GILD) Hepatitis C drugs, when combined with patients taking heart treatment. Out of nine patients, one died and three needed pacemakers installed. These are the kind of setbacks that would have destroyed the stock in the past and while there will be pressure today; all of these missteps are moments away from treatments becoming better.

    The Race is Joined

    In 1754, Benjamin Franklin took a British symbol for its holdings in the new world to promote the idea of unity among the colonies. More recently, I've seen that same symbol used to suggest unity among conservatives.

    The unite or die approach is how our upstart nation finally fought back the British crown as that chopped up snake became one giant rattlesnake, warning of determination and retribution for those that dare tread on our rights.

    The 'Don't tread on me flag' or Gadsden flag flies high among those that see a nation losing its hard fought rights to the government it formed to protect them.

    Now that Ted Cruz has formally announced his presidential candidacy campaign, the floodgates could open to a very crowded field of presidential aspirants. But many wonder if this group can survive without releasing so much venom that the eventual candidate is poisoned beyond repair.

    Moreover, many experts say to win the general election, the GOP will have to abandon its hard edges and seek to find a message that doesn't rattle the crowd.

    It's time for fiscal discipline by our government to unleash the greatness of the country and I hope Americans get and understand this isn't a message to fear, but to embrace.

    Today's Session

    Equity futures were under some pressure from the usual global economic angst including more shenanigans out of Greece, but moved to open flat.

    Mar 23 4:55 PM | Link | 1 Comment
  • Snowy Spring But It's Here - By Charles Payne

    It's Spring again
    I can hear the birds sing again
    See the flowers start to bud
    See young people fall in love

    Well, it's Spring again
    Thunder showers, they are here again
    An extra hour for me and you
    To spend together

    Pretty colors are everywhere
    Mother Nature, she still cares

    -Lou Rawls

    Target announced that they have settled a class-action lawsuit over its credit card breach. The company has agreed to pay victims $10,000 each. In addition, the discount chain giant joined rivals Wal-Mart and TJX Companies in upping its minimum wage to $9.00 an hour.

    That news is a moot point in Seattle. The final legal hurdle was cleared earlier this week when U.S. District Judge Richard A. Jones rejected claims of discrimination by the restaurant franchise industry. The judge says there is no proof that a higher minimum wage will hurt the business of franchisees.

    Therefore, large franchise owners will have to fork over $11 an hour on April 1st, and eventually that number will grow to $15.00 an hour.

    However, a rash of restaurants have already gone out of business or moved away from Seattle. In spite of the judge's observation, the math simply points to a disaster.

    According to Anthony Anton, the Washington Restaurant Association President, the math is simple:

    Currently, typical restaurant owners in Seattle enjoy a profit margin of 4%.

    Seattle Restaurant Income Statement @ current wage

    36%

    Labor

    30%

    Food

    30%

    Operational

    4%

    Profits

    With a $15 an hour minimum wage, a small restaurant will lose 2% a year, while larger operations will lose 7% a year.

    Seattle Restaurant Income Statement @ $15 Hour

    42%

    Labor

    30%

    Food

    30%

    Operational

    2%

    Loss

    Speaking of progressive policies doomed for failure…the role of corporations as mediators or peacemakers show faux efforts of concern.

    By now, you have all heard about Starbuck's effort to start a national conversation on race by having baristas write "race together" on coffee cups. For me, the idea is an unmitigated disaster and it is insulting.

    However, I was not the only one taken aback; the social media backlash was swift and unrelenting. Here are some of the nicer tweets:

    Starbucks Coffee ✔ @Starbucks

    It's worth a little discomfort. Here's the what and the why of #RaceTogether. http://sbux.co/racetogether

    I love you guys, but I'm probably not going to have a complex discussion about racism at 8am with my barista. @Starbucks

    @Starbucks My fam spends thousands at your stores yearly, and we don't come there to be beat over the head with your political ideologies.

    @Starbucks Just sell coffee. How hard is that? *You had one job*. JUST SELL COFFEE.

    @Starbucks how about getting my name spelled correctly on my cup, then we can talk about deeper issues.

    Moreover, having conquered the world of business and politics, Starbuck's CEO Howard Schultz is aiming higher. In February's Time magazine cover, Schultz essentially says it all; his to-do list; checked off is jobs, race, education, and veterans, but 2016 candidate is left unchecked.

    The regular viewers to my show know that I have a special dislike for the so-called conscious capitalism crowd of which Schultz is the godfather of this movement. He and the Whole Foods CEO have been able to carve out reputations for liking the little guy, even as they sell them very expensive coffee and breakfast cereal.

    However, the company that has worn its disdain for American-style capitalism does not have the luxury of selling overpriced plastic hangers. Hence, The Container Store (NYSE:TCS) has paid a heavy price for putting their shareholders last.

    TCS

    For me, there is nothing more insulting than the notion that I should be happy because some liberal is taking the time to be nice to me and ask about race, as if that is some amazing prize. Keep your Oscars and pats on the head. Black people want a chance to work. And I must say that I do not see many of them at any of these great open-minded businesses.

    Today's Session

    The markets are finally in the green. Later today, the Atlantic Fed will release its manufacturing report. The New York Fed and Philly Fed both released less than stellar reports so far for the month of February, therefore we anticipate that the Atlantic Fed will do the same.

    Mar 20 10:59 AM | Link | Comment!
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