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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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  • Memories Too Short… By: Charles Payne 0 comments
    Nov 17, 2009 11:19 AM | about stocks: SCSS
    When I was growing up my family moved around a fair amount, and when

     
    I was in fourth grade my father was stationed in Okinawa, Japan. It was a wondrous place that seemed to be on a different planet. The pace of traffic, the size of cars and trucks (some with just three wheels), the aromas, and the size of the people and the foods were so unlike anything I'd ever seen. Many things stayed with me from those days, including the friends I used to meet at the fence. Japanese students older than me who were learning English via "Dick and Jane" books would ask me questions and teach me their language in return.

    Unfortunately, I stopped meeting them and only recall a couple of bad words. Perhaps nothing left a greater impression on me than a place called "Suicide Cliff." On the edge of the ocean, the cliff was the scene of a massive suicide including all the students of an all-girls school. There were never-ending caves that seemed to move deeper and deeper into the earth where we were told Japanese soldiers would descend to avoid capture to Allied troops. Even as a young boy I could hear the screams and feel the agony.

    The story of Suicide Cliff popped into my head yesterday when I read that Japan is considering yet another stimulus plan. The nation that brought us quantitative easing that resulted in the infamous "Lost Decade" (I say it's a lost two decades) is ready to pull the trigger again. Apparently, the government there is looking to stimulate the economy by $30.0 billion (will get money from cuts in the budget). It's really interesting that the Japanese economy grew 1.2% in 3Q09 and exports climbed 6.4%. Yet, in a move that could be economic Hari-kari, it seems to be fait accompli. I really don't get it as it seems like panic but then again Japan has been a rudderless ship for a long time. Of course, the one constant from the President's trip is the pledge by nations to stay the course and borrow and spend their way back to prosperity.

    It's getting so stupid that General Motors is talking about paying back taxpayer money...with taxpayer money and the government is talking about paying down the deficit through...deficit spending.

    Because we are panicking and politicizing all decisions the U.S. dollar has fallen off a cliff and at some point could drag the entire economy with it.

    "What's too painful to remember
    We simply choose to forget"
    - Barbara Streisand

    Once again, when faced with the prospects of mixed news the market reacted to the better developments. It reminds me of the Barbara Streisand hit "Memories" where investors only remember and see the laughter. So, while banks saw charge-offs decline in October from September, at the same time delinquencies increased month to month, suggesting higher charge-offs in the future. Bank stocks were actually higher, nonetheless until late in the day when an analyst made disparaging comments.

    TARP Update: Neil Barofsky reported yesterday what even the causal observer alrerady knew, the government spent much more money than they had to as they rescued the banks. This time the focus was on AIG and the Fed's reluctance not to identify which banks were in trouble until it finally pushed by Congress, but by then the entire industry was being painted with the same brush. In the meantime, AIG doled out cash when it didn't have to, including massive payments to French financial companies after arm twisitng by French regulators. From my perspective, AIG was just a conduit to funnel money to large banks and foriegn entities, and all of that cash came out of the pockets of U.S. taxpayers.

    Case Study

    Yesterday on my weekly radio hit with Bill Handle on KFI AM640, he brought up Select Comfort (SCSS) and said he could have made much money buying the stock on weakness. But, the stock was falling apart so fast along with the rest of the market that investors were too afraid. It is hard to imagine a comapny with 471 company-owned stores was being treated as it was on death's door, but in some ways it was with the housing market imploding and access to capital completley shut off. But, there was value there as well. The point was, when would someone pull the trigger?

    A) March 2, company postponed 4Q and FY earnings results, B) March 19, 4Q and FY results posted, C) April 29, 1Q09 released, D) July 23, 2Q09 results posted, and E) October 22, 3Q09 out.

    Economic Data

    Producer Price Index

    Input prices for producers rose by 0.3% from September to October, mainly as a result of higher prices for energy and food, which each increased by 1.6%. The two main components of the increases were gasoline, which increased by 1.9%, and vegetables, which jumped by 24.2%. Without food and energy, prices fell by 0.6%, largely as a result of falling prices for trucks and cars.   

    Themes: PPI, Delinquencies Stocks: SCSS
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