We got AA’s earnings (or lack thereof) yesterday.
They were a disappointment at just a penny a share, less than the 5 cents officially expected and far less than expected by the endless stream of buyers who took AA from $13 in early December all the way to $17.50 yesterday (where we shorted them in Member Chat!). Alcoa’s earnings were, in part, impacted by higher energy prices and unfavorable exchange rates – things that are likely to affect many of our industrial corporations this quarter.
Which brings us to the Beige Book – The last Beige Book was released on Dec 2nd and we thought it sucked. The one before that was October 21st and that one sucked too. As usual, on BBook days, I sent out an afternoon Alert to Members analyzing the report and it’s about 6 pages long so I won’t reprint it here but these are some of the highlights from the my last report (my comments are in bold):
You have to read into this report as it’s anecdotal and the Fed is very free to spin the report to get what they want. The key words are the couching language like "SOME pickup in activity OR improvement" as well as "GENERALLY improved MODESTLY" – is some, or, generally, modestly a good reason to pay 20% more for stocks than we did at the last BBook. Markets don’t go up 20% in 2 years in the real world so for 20% in 2 months I expect to hear words like TOTALLY, INCREDIBLY IMPROVED IN ALL DISTRICTS.
Most Districts reported some pickup in home sales, though prices were generally said to be flat or declining modestly; residential construction was characterized as weak, but some Districts did note some pickup in activity. Commercial real estate markets and construction activity were depicted as very weak and, in many cases, deteriorating. – OK, it’s official. Steve Leesman is a moron! (CNBC was touting this as a "very bullish" Beige Book by 2:02 pm, 2 minutes after the release)
While some Districts reported upward pressure on commodity prices, they saw little or no indication of upward wage pressures or of any significant increase in prices of finished goods. – Rising commodity prices cannot be passed on. That means profits are impacted.
Commercial real estate conditions were widely characterized