Seeking Alpha

Wall Street Str...'s  Instablog

Wall Street Strategies
Send Message
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
My company:
Wall Street Strategies
My book:
Be Smart, Act Fast, Get Rich
  • Jealousy One's Envy By: Charles Payne 0 comments
    May 4, 2010 9:34 AM | about stocks: BRK, F, TM, DDAIF, HMC, NSANY, HYMLF, VLKAF, ANN, TGT, TIF, COH
    Over the weekend Charlie Munger, Vice Chairman at Berkshire Hathaway (BRK), mentioned that envy was more of a risk to the economy than greed. There were shockwaves around the country but this isn't the first time that Charlie has made such an observation. In fact, Mr. Munger has on several occasions credited Warren Buffett with saying "it's not greed that drives the world, but envy." From his point of view, Munger says that the origin of envy is desire for man to acquire scarce resources. The combination of failure to attain those resources and seeing someone else get them really stokes envy. I guess in some ways it means that you're lucky if someone envies you although it's not so flattering when they try to take what you have attained.

    "Eat your heart out son, you never was a friend to me" - Fat Joe "Envy"

    From Jesse James (the gunfighter) to Martha Stewart, envious friends have taken down the mightiest of all time. And, I mean the mightiest! The question is can envy take down an entire nation. I think that the answer is an empathic yes. Politics of envy put President Obama in office where I hoped, and even thought, he would change the tone of harsh criticism and anger. Instead, finger-pointing and the blame game are pitting American against American to a degree probably not seen since the eve of the Civil War. That's scary stuff. One of the Seven Deadly Sins, envy is already such a beast that it doesn't need to be fed, especially fed red meat and hot sauce. Yet we are told each day that someone or some entity has something we should have.

    Moreover, we are being told that we can get it, just by taking it. While I'm inclined to agree with Buffett, Munger, and Fat Joe I know when it comes to envy, resources don't have to be redistributed as long as they are taken from those that have them. This is also known as crabs in a barrel syndrome where crabs would deny freedom to one of their own even though pulling a fellow crab from the lip of a pail does nothing to ensure their survival. My cousin who works for Verizon (NYSE:VZ) told me over the weekend that the company is going to cut college reimbursement and free dental procedures because of a lack of takers. I went to college while in the Air Force, none of my friends did. If those things weren't offered at Verizon people would gripe and unions would scream bloody murder.

    Trying to keep up with the Joneses probably does drive the world, and that's a good thing. When we are told we are supposed to have what the Joneses have without applying the same elbow grease things become dangerous. Still, even with gentle nudging from powerful people Americans know it's wrong to take what they haven't earned. To that end, it has become necessary to portray those with the resources as being more than fortunate and hard working but as evil. When that happens, darker parts of our soul are given the green light to assuage our envious impulses by taking rather than working harder and smarter. Munger has long wondered why there isn't more research on this topic. He notes how scantly covered the topic is even in psychology books and studies.

    One of his theories is the subject of jealousy is seen as taboo. It is highly offensive to label someone jealous so people rather not discuss or study it. Yet, it's so obvious, and according to Munger, is fiercest among siblings at younger ages (you're not alone if you're thinking "Marsha, Marsha, Marsha") we need to confront it and understand it. But, mostly we shouldn't allow it to destroy the nation. A popular saying goes: "don't hate/envy the player hate the game." But I say don't hate the game either. Sure, we can tweak the game and the rules of the road but this nation is great because the envious have routes to get their own resources. If you really want it then go out and get it!

    The Market

    Speaking of hating and loving the game, the stock market is on an emotional rollercoaster. Yesterday's rebound reinforced one key fact about this rally, sellers are reluctant and buyers just need an excuse. I love the resolve as it suggests a major breakout is possible when the right news hits. In meantime, equities have been spinning their wheels as profits are being consolidated. The trading range is tight with solid support around 11,000 for the DJIA and stubborn resistance around 11,200. Right now it feels like a big move is right around the corner, but in which direction? You have to bet to the upside until it's clear that the direction has changed. Right now one could argue that stocks have entered into a secular bull market, but some believe equities are in a secular bear market.
    While investors await Friday's jobs data they will grab any news that could be construed as positive. That brings us to yesterday's auto sales results.

    Downshifting Into May
    By: David Silver, Research Analyst

    It was actually a tough call which pun we wanted to use for the title this month, but very few encompassed all the automakers. Ford (NYSE:F) continued on its stellar run while Toyota (NYSE:TM) and General Motors saw sales slow from the previous month. Most of the major automakers saw sales slow from the previous month, with Chrysler being one of the few to register a gain. For the month of April (compared to March), Chrysler saw its sales increase 3.3%, compared to 3.4%, 11.3%, and 15.7% declines for General Motors, Ford, and Toyota, respectively.

    General Motors estimates that the industry's seasonally adjusted annual rate of sales (SAAR) was approximately 11.1 million vehicles; that is up from the 9.2 million registered last year (in one of the worst months) but was lower than March's 11.8 million vehicle figure. Most automakers reported another strong month, but it is coming from extremely easy comparisons. In March of 2010, almost every automaker increased its incentives to combat the Toyota recall; however, many automakers lessened the amount of incentives during April and their sales suffered. In my opinion, Ford is the only company that really maintained some strong momentum as its F-150 was a big seller. For General Motors, the actual increase of 19.7% at its Core 4 brands should be what is grabbing the headlines. For Chevrolet, Buick, GMC, and Cadillac, sales increased 19.7% compared to April of 2009; GM's other brands which are being sold or dismantled sold only 906 vehicles during the month compared to more than 20,000 in the year ago month.
    As we mentioned earlier, the Ford F-150 had a strong month, with sales increasing more than 42% compared to last year. This could be a good sign for the economy as a whole, as contractors and builders favor the pick-up truck and had been delaying purchases until the economy began to improve.
     
    Moving through the next few months, the industry will continue to see strong year over year growth (Chrysler entered bankruptcy at the end of April 2009 and GM followed suit in June) as the industry is cycling easy comparisons. The real litmus test for the industry will be sequential improvement and incentives. If sales improve sequentially while incentives taper off that is an extremely positive point for the industry. However, if the growth continues to be fueled by incentives, it could eat into the profitability of the automakers.

    Ford reported a strong first quarter, and expects to be "solidly profitable" for 2010. Sales in the Middle East, Asia, and South America continue to be strong for the industry as a whole; however, the next problem area will be Europe. Over the weekend, the IMF and European Union announced its bailout of Greece, with a big drop in government spending required for Greece. Many European countries still have their own government incentive programs (think cash for clunkers) which are scheduled to expire between now and the end of 2010. Germany already ended its incentive program and has seen sales drop approximately 20% in each month since.

    Sales were strong for the industry as a whole, and Ford is still our favorite, and appears to be the only company with any momentum right now. After months of bad news, Chrysler is finally able to put one in the "plus column" and hopefully it will not be short-lived. The industry is chugging along right now, but there are going to be speed bumps in the future, and we expect the first month to see a bump will be June. May will still have enough incentives to generate sales and it will be cycling easy comparisons.

    Morning Musings
    By: Brian Sozzi, Research Analyst

    The After Effects of an Overly Positive March

    The market's mood following the March same-store sales releases was by and large euphoric. Specialty apparel retailers right on down to discounters posted outsized comp gains in March through a still existent favorable comparison backdrop, the calendar shift of Easter, and the continued reawakening of the U.S. consumer. Our thinking on what is playing decisive roles in the renewed consumer vigor is expressed below.

    1. Those who navigated the jobs downturn in 2009 are in a stronger position to consume goods and services. This subset of the population not only feels more secure in their net wealth (they have a job, home prices have stopped falling, retirement portfolios are no longer in the gutter) but may have an employer now open to issuing incentive-based compensation for a job well done in 2009. Spending by this percentage of the population extends beyond the aisles of Target (NYSE:TGT), reaching places along the lines of Tiffany & Co. (NYSE:TIF), Coach (NYSE:COH), and Ann Taylor (NYSE:ANN).
    2. Reconfiguring of one's finances, such as mailing in the key to the underwater home or receiving a mortgage modification is freeing up cash flow to be allocated to other areas. Whether this form of consumption is sustainable is certainly open to a hearty debate.
    3. The whittling down of savings to consume everyday essentials and satisfy hunger for non-essentials after a year of prudently storing cash in the mattress. The savings rate as a percentage of disposable income has dipped below 3.0%.

    Please visit www.wstreet.com to read the remainder of the piece.

    Can Investors Get Comfortable Investing Alongside Home Sales Data?

    Suffice it to say, the expiration of the first-time homebuyers tax credit ended with a proverbial boom (though we have yet to obtain April home sales data). Leading up to the conclusion of the $8,000 tax credit on April 30, market chatter centered on whether those in the U.S. were simply ignoring the stronger affordability of owning a residence. Not only were mortgage rates enticing compared to historical norms, but the economy had turned the corner and the tax credit was a known quantity (it was heavily marketed by real estate brokers, with good reason).

    March new home sales increased noticeably, with sizable gains in the Northeast (+36%) and the South (+43.7%). The median price of a new home fell 3.16% in March as builders maintained a move inventory first and foremost mindset. Importantly, the stronger dynamics helped to bring month's supply down to the lowest point since January 2006, establishing a platform for builders to do what they do best...build! This was on display in the March permit data, where permits rose 7.5% from February. As for existing homes, sales gains have been more muted relative to new homes (using that tax credit for a fresh, new home is a wise choice). March existing home sales showed strong sales gains in the Midwest and South, as well as a 3.2% increase in the median home value.

    Please visit www.wstreet.com to read the remainder of the piece.

    Morning Summary
    Charles Payne

    Equities are looking lower and nobody is sure why. This is how the script goes on weeks employment data is released. There is a healthy angst that sees a lot of wheel-spinning. I wouldn't panic but I want everyone to have more cash than they've had at any point this year.
     


    Disclosure: None
Back To Wall Street Strategies' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.