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David Sims is a full-time independent analyst and contributor on popular investment sites such as Seeking Alpha. David covers distressed equities and activist investing campaigns most recently. In the past, covered topics included covered call trading and the housing market. David is Certified... More
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  • Update: Conservative Coalition Sends Message To Financial Services Committee

    A coalition of conservative groups has sent a letter to the U.S. House Committee on Financial Services regarding transparency and accountability in government and specifically the Third Amendment to the bailout agreement with Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC).

    The Third Amendment of the Preferred Stock Purchase Agreement is the center of multiple lawsuits and is considered by many shareholders to be an unlawful taking of private property. This amendment is also referred to as the "Sweep Amendment" because of the Treasury's decision to sweep the majority of each company's net worth as a cash payment in lieu of a dividend.

    The groups signing the letter include:

    This adds to the growing chorus of conservative voices joining shareholders and the cause that has long been championed by Ralph Nader.

    Disclosure: The author is long FNMA, FMCC. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

    Tags: FMCC, FNMA, long-ideas
    Sep 18 4:54 PM | Link | 2 Comments
  • Big Week Ahead For Economic Data

    On Monday June 2nd, we get the ISM index reading and Construction spending. The ISM index for May is supposed to bring a reading of 55.6. The April construction spending is supposed to bring in a reading of 0.7 percent growth.

    US Construction Spending Chart

    US Construction Spending data by YCharts

    On Tuesday June 3rd, we will get Factory Orders data, as well as Auto Sales. Factory Order growth for April is expected to read 0.5%.

    On Wednesday June 4th, the ADP employment report will be released. The market expects 200,000 jobs added for the period of May 2014. Unit Labor costs, Productivity, and the Fed's Beige book will also be released.

    ADP Change in Nonfarm Payrolls Chart

    ADP Change in Nonfarm Payrolls data by YCharts

    On Thursday June 5th, the Challenger job cuts report will be released, shortly before we get the initial claims report for the prior week. Last week, the 4-week average of initial claims hit a 7-year low. The market expects an initial claims reading of 310,000 for the prior week.

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance Chart

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance data by YCharts

    On Friday June 6th, the non-farm payrolls report and the unemployment rate will be released by the Bureau of Labor and Statistics. The market expects job growth of 220,000 and the unemployment rate to check up to 6.4%.

    Commentary:

    If the market truly expects job growth of 220,000 while the initial claims rate is hitting 7-year lows there will be a surprise to the upside. Unless there is some funky data in the 6.3% reading from last month, the unemployment rate should easily beat the 6.4% expectation provided by the market. Who is providing this data and these expectations anyway?

    Several indices recently hit their all time highs. The Russell 2000 (NYSEARCA:IWM) even hit a new high then corrected by 10 percent in May. Meanwhile, the S&P 500 (NYSEARCA:SPY) has hit new highs without correction.

    If inflation continues to trend upwards, as it has in a few recent reports, and employment continues to accelerate, then the economy could be well on its way to the higher growth rates expected in the 3rd and 4th quarters.

    Disclosure: I am long IWM.

    Tags: IWM, SPY
    Jun 02 8:06 AM | Link | Comment!
  • Initial Claims 4-Week Moving Average At 7-Year Lows

    The big news this morning, eclipsing the downward revision on 1st Quarter GDP, is the fact that initial claims data hit 300,000 last week. And most importantly, the 4-week moving average of claims is at a 7-year low.

    Adding layers of complexity is the news that GDP contracted due to slower than expected inventory growth. This is all setting up to create an inflationary trend in the second half of the year, caused by labor gains, economic growth, and draw-downs on inventory.

    10 Year View of Claims Data

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance Chart

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance data by YCharts

    5 Year Chart

    A closer view of the data over a 5 year period shows the obvious downtrend, post-recession.

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance Chart

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance data by YCharts

    Reading into this data, one might also want to look at the year to date data and compare this to weak GDP results. The most recent revised GDP figures from this morning show contraction in the economy with -1.0% GDP growth. Meanwhile claims data continued to drop.

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance Chart

    US 4-Week Moving Average of Initial Claims for Unemployment Insurance data by YCharts

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    May 29 9:21 AM | Link | Comment!
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