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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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  • A Coin Flip By Charles Payne 0 comments
    Oct 27, 2011 10:09 AM
    For those Europeans that might feel slighted at the American media coverage of the Greek debt crisis, the chance to get in on the laughs has arrived. That's because the clock is ticking louder for our own Super Committee to come up with budget cuts that would stave off automatic cuts known as sequestration.

    Going into this Super Committee structure there was little hope anything could be done. The word "compromise" has become an insult in Washington DC and the sides are loaded more with bruisers than skilled negotiators known for deal cutting. Then there was the atmosphere, which felt like an arena headlining a professional wrestling event.

    I had very little hope, but the contrarian part of my thought process began to think maybe we'll get a surprise. Maybe these lawmakers elected to get things done will actually get things done. Maybe the fact there has been little news and few rumors could have been a good thing.

    Then, we found out that an early stumbling block amounts to chump change- in more ways than one. There is a battle going on over whether or not America should dump the paper dollar in favor of dollar coins. The battle is not only an embarrassment but underscores just how tall an obstacle this mountain will be to scale.

    And it's not that it boils down to party ideology, it's about protecting backyards and local constituencies. Case in point, John Kerry (D-MA) and Scott Brown (R-MA) are putting on a united front on this issue because the company that makes the paper for US currency, Crane, is located in the Bay State.

    John Kerry is a member of the Joint Committee on Deficit Reduction and is behind an effort to end $1.00 coin production saying it would save $37.0 million annually (and hundreds of jobs in Massachusetts). This effort is a counter to the bill co-sponsored by Jeb Hensarling (R- TX) that says America would save $5.6 billion over 30 years by dumping paper for coins (paper lasts on average 42 months). That's a lot more than $37.0 million a year, but a drop in the bucket when it comes to chipping away at that $1.2 trillion reduction mandate due by November 23.

    Of course we already have dollar coins thanks to the 2005 Presidential $1.00 Coin Act that mandates each past president gets a coin in his image.

    As it stands, the Federal Reserve says it has $1.2 billion in excess $1.00 coins stored in vaults, and by 2016 the government will have laid out $300.0 million to produce $2.0 billion worth. This whole debate is happening at the wrong time and place. Ironically, it's probably moot since one day children in this country will not know paper or coins, growing watching commerce happen via smart phones and tablets. Plus, I hate all those coins. They weigh too much, mess up your clothes, and it would take a wheel barrow of them to get me through one New York day that begins with a $12.00 toll to just enter the city.

    I can't believe the Super Committee has been fighting over something so harebrained. Of course it's not much different than what we got yesterday when Democrats proposed $3.0 trillion in deficit cuts from an array of areas known and unknown. Republicans drew a line in the sand on taxes, and yet, their counterparts lobbed out a plan that would cut $400 to $500 billion from Medicare and Medicaid while getting the rest from tax code changes (read tax hikes). That idea was rejected immediately as not even all six Democrats on the committee backed it anyway. This nonsense is unacceptable from both political parties.

    The clock is ticking and the kind of negative reactions that greeted investors at each stumble in Europe will be realized with our market but only magnified. These guys and gals have a month to figure it out and I can only hope they aren't fighting over things like aluminum cans versus plastic bottles when soft drinks are passed around.

    Dirty Fingernails Continue

    On television the focus will be on Europe and Greece but for me this rally is still about dirty fingernails and America clawing its way back. On that note, the earnings report of the day came out after the close last night. Norfolk Southern (NYSE:NSC) calls itself the thoroughbred, and in the last quarter it galloped to the beat of a different tune than what you have been reading and seeing and feeling. Heck, there were two big downgrades of the stock this month alone. Yet, the numbers achieved are worth cheering. The company posted earnings of $1.59, while the street was looking for $1.41. Not only was this a big beat, it is a convincing beat, too.

    * Rail operating ratio hit 67.5% from 69.5% q/q, 69.6% y/y, 72.8% 3Q09.
    * Record revenue per unit (RPU) in agriculture, metals, consumer, paper, auto and coal.
    * Operating margin edged up to 32.4% from 30.4%.

    This is great news for the company and country although it also reflects how strong the world is and why we need to stop mopping and get on the stick. Coal exports were up 23%, with 55% going to Western Europe, 20% to Asia and 25% to Latin America.

    Economic Data
    By David Urani, Research Analyst

    Q3 GDP is out, and on another day this may have been the big news item. Economic output rose by 2.5%, up from 1.3% in the second quarter, and in line with the 2.5% consensus estimate. That result included a nice 2.4% increase in personal consumption expenditures (PCE). It's funny to think that with the global markets crashing in August and September, Q3 GDP actually accelerated from the previous quarter.


    Weekly jobless claims really were just more of the same. Claims of 402k were slightly below the 405k consensus estimate and just below the 404k in the previous week. Not much to analyze here, as we are still lingering just above that 400k level, and we aren't going to start getting excited until we see at least a couple of weeks in a row below 400k.


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