Archive for June, 2009

Serve and Folly

Friday, June 19th, 2009

The equity markets seem to be caught between two conflicting emotions, a quandary that may be resolved before I can even get these comments posted. On one hand we see gloom and doomers calling the upswing since early March a bear market rally, one soon to fail. The optimists talk of green shoots and imminent recovery, expecting a continued march higher. But neither camp has much conviction. Last Friday saw the lowest amount of trading volume yet year-to-date on the NYSE. It’s like two tennis players who each have a ball and are contemplating their first serve. Both seem more concerned about what will happen on the return after they commit. Will they serve up an ace or will the other side boom a passing shot right by them? I don’t know the answer, but I wish someone would hit the ball; this is getting boring. Still, don’t forget the old Wall Street maxim: Never sell a dull market short.

May Retail Sales

Thursday, June 18th, 2009

The headline Retail Sales report for May was reported last week by the Census Bureau. It showed a welcome jump, slight though it may be, at up .5%.  Unfortunately, higher gasoline sales, no doubt fed in part by higher energy prices, led to most of the gains.  Still, the core number, which excludes motor vehicles and gasoline, was up .1%.  We’ll take it; there has been too long a string of negatives in this data point.  Down 9.6%, the year-over-year total improved slightly from -10% posted in April.  Here at Atlas we see this as adding slightly to some of the positive wiggles we’ve been picking up from other data.

April U.S. Trade Deficit

Wednesday, June 17th, 2009

According to the U.S. Department of Commerce which published the figures last week, our April trade deficit came in at the higher end of expectations, taking us $29.2 billion deeper into the hole. They also confirmed that March saw a $28.5 billion shortfall. Exports declined -2.3% but our imports fell just -1.4%. You have to look hard to find any silver linings in this report although a second monthly increase in consumer goods imports is taken by some to signify expectations of future retail demand. We’ll see. Here at Atlas we question how a brisk recovery can occur when domestic demand still appears relatively weak. Additionally, continuing to fall deeper in the hole is hardly the way to export ourselves to economic health. The hours worked figure from future monthly employment reports will, in our opinion, likely hold the answer as it will be a leading indicator that disposable incomes are beginning to increase.

May Unemployment Numbers

Tuesday, June 16th, 2009

May unemployment numbers are best described as confusing.  Payroll employment, according to figures released by the Bureau of Labor Statistics early this month, showed 345,000 jobs were lost in May, substantially less than expected.  Further, the March and April figures were revised to show 82,000 fewer jobs were shed than originally reported.  The losses spread across a wide spectrum of occcupations.  Teenagers are the hardest hit demographic,  while adult men are more likely than women to be without a job by roughly a two-percent factor.  Despite this decrease in the rate of unemployment, the percentage unemployed per the household survey rose strongly, up .5% to a 9.4% total, the highest level seen since August of 1983.  Average hourly earnings rose just .1%, while the average work week fell by .1 to 33.1 hours.

Problems With Timing

Monday, June 15th, 2009

 I have several problems with time, not the least of which is it sometimes takes too long.  Consider the issue of inflation for example.  Here at Atlas Indicators our clients appear almost unanimous in their expectations for increasing inflation going forward.  Fed governors past and present also discuss it.  The Treasury says it may be an issue some day.  Bernanke suggests it will be dealt with in time, once fears of deflation are laid to rest.  If there is to be a day of reckoning, it seems to be somewhere off in the future.  But some investment arenas don’t seem to be willing to wait.  I wonder if we will look back at precious metals, oil, and interest rates later this year and say, “Wow, that was fast!”

Breeding Hummers

Friday, June 12th, 2009

As far as dogs go, the Pekingese usually can’t.  After all, what’s with a dog that licks his own nose every time it gets excited?  That tiny body, scrunched-up face, funky little twist of a tail, and frenetic nature all point to a long history of patient inbreeding.  Such patience is often attributed to the Chinese.  And they seem to enjoy owning and watching malformed items.  Look at their famous goldfish: bubble-eyed, hump-backed, bloated, barely able to wiggle (you can’t call it swimming).  Whether exceptionally large or small, the Chinese seem to have a special admiration for those things some others might occasionally describe as grotesque.  So when people ask me why, in difficult times like these, fraught with ecological dangers, would a Chinese company buy the Hummer brand from General Motors, I am surprised.  The car, and I use that term loosely, is so grossly overstated it looks like a perfect fit to me.

When Loss Is More

Thursday, June 11th, 2009

Many of the indicators we follow at Atlas have been hit hard at some point in this remarkable decade.  The NADSAQ’s plummet in the first few years is a case in point.  But check out one indicator we follow, the Baltic Dry Index, at Bloomberg.com.  It seems to have set the record, falling about 95% from peak to trough in less than one year.  It measures the cost of sending dry goods via ship from one country to another, like iron ore from Brazil to China for example.  This same index has recently surged, gaining more than 600% in the last few months.  Sounds good, but consider:  if something you bought for $100 loses 95%, that puts it at $5.  If it doubles to $10, you have still lost 90%.  If it redoubles to $20, now a 400% recovery, you’re still in the hole by 80%.  We all want to see a recovery take place, but keep it in perspective.  Any “complete” recovery is likely well down the road.  An 80% loss is more than an 80% recovery.  That also means, starting from here, that the potential for profit is huge.  An investment that may double or triple deserve a second look.