Trading Alpha

Nine Regional Housing Markets Now Down Below March Lows... and Counting

Dubai is small and contained. It will be managed and is not a big deal.

Didn't they say this about the subprime crisis?

We are not living in normal times now. It is difficult to know the chain reaction of events.

BLS: Mass Layoffs Continue to Reign

The past few years of mass layoffs (not seasonally adjusted) reveals December and November are the biggest months of the year. This could push the unemployment rate (U2) up to 10.7% by December. Corporations will be coming back for more layoffs when the consumer spending is revealed to be down after Thanksgiving more than expected.

The Recession Reaches Home Depot and Lowe's

I believe their profits fell by the percentages you mentioned not revenues.

Friday Failures

The link leads one to the disclosure the estimated loss to the FDIC will be $2.5b. That is more than 5% of the recently approved three year prepay of FDIC dues. At this pace they will use up the three year pre-pay in about four months. And if the FDIC's loss estimates are low, whcih they probably are, even shorter. We are in deep on this.

This Recession Ain’t Over

Great article Steve - keep up the excellent work. Here is a companion piece to your views:

US Government: The Cat in the Hat

Most of us should remember the story of the Cat in the Hat. The kid (Wall Street and the banking industry) makes a mess and creates a stain and the Cat in the Hat (The US Government) tries one thing after another but can get rid of the problem. The cat simply transfers the stain from one article to another actually making it far worse in the process. Morale of the story: One can't run from or hide from problems - we have to deal with them.

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This describes the economic mess we are in and have been for the last two plus years. Consider the deep systemic problems we have with toxic assets, still overleveraged banks, under regulated and under restricted financial institutions, too big to fail firms, an American consumer with a disseminated balance sheet, a dysfunctional credit market, horrendous job and housing markets.

It would be nice to think we just had the worst recession in 100 years (excluding the depression) and we have quickly bounced back and will enjoy a typical "V" recovery. Only this downturn was far worse than a garden variety recession so the recovery should not be typical. We all hope for a quick recovery but it won't be.

To make matters far worse, consider what the US government has actually done to fix the underlying problems.

Nothing

In fact the government has put the same punch bowl out that got us into the mess in the first place. More debt and consumption and don't worry about paying it back.

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In our case the US Government has deposited the stain on the taxpayers. Some of us don't see it because we are wearing it. But it is there, just repackaged.

Problem substitution is not economic resolution.

Better Housing Numbers Could Boost GDP Growth

The decreasing supply of homes for sale is not the market clearing itself but people pulling their home from the market because it was listed for too long and has gone stale. They don't like the price it must be sold at. This is not a healthy sign. The decrease in supply of for sale homes needs to match up with the increase in sales for this to be a true clearing.

Earnings Beat Rate off the Charts

Who cares what estimates are. Companies did not give much uidance so analysts went really low. CNBC focuses on expectations and little attention is given to the fact most of the companies are down in revenues by 10%, 20% or 30% or more as compared to the prior year Look at CAT today. Revenues down 40% and people are celebrating. The market needs to focus on revenues as cost cutting is a limited game and demonstrating a pulse is not much better.

Redbook Retail Index Plunges Again

Tyler

I agree with your overall views as you will see from my articles. On the Redbook numbers, it seems from the below story that this drop has more to do with the exclusion of Walmart from the results. Still a bad data point for the economy but if Walmart is up 2 -3% and the rest of the retailers are down 4% it put things in perspective. Keep up the good work.

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Redbook: US Retail Sales -4.4% First 3 Weeks June Vs May

NEW YORK (Dow Jones)--National chain store sales fell 4.4% in the first three weeks of June versus the previous month, according to Redbook Research's latest indicator of national retail sales released Tuesday.

The latest numbers are starkly different from recent weeks because they don't include Wal-Mart Stores Inc. (WMT), which said last month it would no longer provide monthly sales figures.

The fall in the index was compared to a targeted 4.1% drop.

The Johnson Redbook Index also showed seasonally adjusted sales in the period were down 4.5% compared with June 2008, against a targeted 4.2% fall.

Redbook said that on an unadjusted basis, sales in the week ended Saturday were down 4.2% from a year ago after a 4.8% decline the prior week.

The group said sales for the week were helped by Father's Day promotions, and retailers said traffic picked up toward the end of the week approaching Father's Day. Men's apparel and other gift categories such as tools, grills and coolers were active.

Redbook said business is expected to be slightly better in the remainder of June because of warmer weather and the Independence Day holiday falling on a weekend.

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; [e-mail]

Three TARP Banks Already Classified as Deadbeats? Uh-Oh

One only needs to follow the Case Shiller index which continues to decline at 2% per month. Measuring residential real estate values, this index is central to the balance sheet health of both the banks and American households as I have posted in my recent articles.

One more thing. Let's not give the Treasury the benefit of the doubt. They already missed this issue once - what credibility do they have that they have quickly fixed that which they did not see coming?

Glen Neely Sees S&P 500 Below 500 This Year

Interesting - he was recently named the best S&P market timer and has a good track record over the past decade based on his company's web site.

Wells Fargo: Show Me the Money, Please

Wasn't this the company that boasted it had avoided the subprime issues and credit meltdown and the market bought it? Is the early release of Q1'09 much the same. Apparent good news that will be followed by bad news?

Insurance Companies: First in Line for Nothing

Short is taking longer to materialize but I still have my convictions


On Apr 10 03:42 PM Stone Fox Capital wrote:

> Not really that much about Ins companies in this article. The TARP
> has plenty of money left for them. Heck, GS could pay enough money
> back to pass it out to the Ins companies. How is that short going?

Why Was the PPIP Extended Today?

One of the loopholes in the PPIP is the bank's buy each other's toxic assets through PPIP and the government underwrites the risk - it is like taking your toxic assets through the car wash. Just another example of a Treasury led taxpayer funded giveaway.


On Apr 06 02:51 PM Lonestar1 wrote:

> AS FASB has revised MTM accounting rule, the seller side (banks)
> has no incentive to sell those toxic assets any more. Perhaps hedge
> funds know this, and thus do not want to participate. But the funniest
> thing is that big banks are very interested in setting up PPIP funds.
> I guess the end result is these guys can swap toxic assets at much
> higher prices ?

Winners and Losers from Oil Contango

Contango is still there but it has been almost cut in half in just the last two weeks suggesting a more bullish move towards backwardation.

Non-Farm Payrolls Rebound, Slightly

I believe your 5 decade lookback used final revised numbers. Friday's initial reported loss of 524K is likely to be revised to a greater loss of 750K or more so I don't see any rebound here. Look at the past 4 months - the BLS's inital number is 1/2 to 2/3 the final.