As a small investor blog, this week was not the best thing to happen, for from the Mississippi to the Atlantic Ocean the entire eastern half of the US has been in a take cover and hold position beneath a pile of two blizzard snow storms. As the local news and weather just announced: almost every state in the US (except two) are now covered in snow.
So I ask the question: how has this terrible weather effected our Economy, Government spending and first quarter earnings?
On the surface, the news and business channels speak of the snow removal taking days. Therefore, we know that local economies and major cities are affected, not just due to the week of storms, but the clean-up to come which will delay consumer discretionary spending, possibly another week. Due to the adverse weather conditions consumer discretionary spendingcould be more than likely slightly down for this quarter, in 2010 affecting the major Department Stores like Macys, SEARS, etc . .. which could be a buying oportunity after this quarter's numbers come out. However, if the same quarter in 2011 is milder, then those sales and earnings will have a good year to year comparison.
Of course, you can argue that the supermarkets and Super Stores, like Wal-Mart, who sell bread, milk, eggs, and toilet paper could really cleaned up. This is the simplistic view, for even these stores will be affected due to the poor traffic conditions delaying and postponed shipments which caused many empty shelves, and the consumers stayed home off the roads, lower discretionary spending at Depatment Stores such asTarget or JC Penney. The Market has a short memory, too.
For those stores catering to Home Repair and fix-up projects, Home Depot and Lowes might get a small bounce out of these storms. Some how I don’t expect much of a bounce though because of shortened hours or closings.
More seriously, out side of the consumer sectors is the real affect of the storm on Federal Government spending, we all know the trillion dollar budget we have, what is 1/52 of it, or maybe 2/52?
I ask because, in the Washington D. C. Metro area the Federal Government has been closed for 4 days and Friday with "liberal leave", and Congress mostly gone for the week. This is the big affect on the economy, for a one week stop/delay in Government spending means a minimum of a one week stop in the government procurement process, and possibly a longer delay to get proposal paperwork and meetings back on track. This will delay all government procurements across every government agency, so if you are looking for a major corporate supplier to be awarded a major contract later in this first quarter, don’t be surprised if it does not happen until the second quarter of 2010.
Those in the market who only look at quarter to quarter results might be disappointed in the corporate awards for this quarter, and will expect the backlog to grow in the second quarter. However, only so many proposals can be processed in a month or during a quarter. A one week delay is across not just the quarter; but could adversely affect the next two or three quarters. We will just have to wait and see how fast the government processes the awards, for we all know that the job is not completed until the paperwork is done.
Disclosure: no positions
Disclosure: no positions