More Money Monday – Corporate America’s $2Tn Pile of Cash
by Phil - July 12th, 2010 7:22 am
$2,000,000,000,000 is a lot of cash.
That’s about how much America’s 500 largest NON-FINANCIAL companies have on their books. This is up about $500,000,000,000 from last year as 2010 has been very, very good for corporate profits, which are growing at a 36% pace this year and we’ll get a better insight into that this earnings season. Right now, our biggest problem is a lack of faith in the economy. As we noted last week, temp hiring is near records but real hiring is not there at all – companies are using what turnaround there is to save up for the next rainy day.
Sales are still weak but profit margins have expanded tremendously and Poor Sales is still listed as the single most important problem by 30% of the CEO’s surveyed, followed by Taxes (22%) and Regulations (13%). If poor sales to the consumer are the main problem, then what is the logic of laying off more workers and lobbying against more stimulus? As Brett Arends noted this weekend, we are hardly sliding into Socialism with Federal Spending at 25% of the economy this year vs. 23.5% under Reagan – and he didn’t have a $1Tn annual military budget (his was $200Bn and was considered out of control at the time) nor did he have a $400Bn annual interest payment on existing debt (Reagan pretty much invented modern debt – before him, we had the same debt since WWII).
Lack of consumer spending is the prime factor holding back the recovery at the moment and who can blame them. Unemployment has sidelined 22% (not a typo) of the men aged 25-65 in America. That does not count those who are working part-time or full-time at low-paying jobs – that is 18M men between 25 and 65 in the United States of America who have no jobs at all! And what does our government do about it? They cut off their unemployment benefits – as if there are 18M job openings and these guys are just lazy…
There were, in fact, 3.1M job openings in April and that was up 24% from last year so that means that "just" 14.9M American men of working age are structurally unemployed. Structural unemployment is joblessness caused not by lack of demand, but by changes in demand patterns or obsolescence of technology, and requiring retraining of workers and large investment in new capital…
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DiggTesty Tuesday Morning – Big Data Day
by Phil - November 24th, 2009 8:26 am
Busy, busy today with lots of data!
At the moment (8am), I only know that retail sales were flat to last week, which was 1% better than last year but this week is 3.3% better than last year because LAST YEAR TOTALLY SUCKED! That’s right, we are now comping to numbers that are so atrocious that in order to miss them we would have to all dig holes in our backyards, cover them with tarps (no, not the bailout package but a good conceptual image) and drink only rainwater and eat earthworms. Anything better than that will give us more economic activity than we had last November, when the market was completing a 50% dive off the previous year’s highs and we weren’t sure there was going to anything to be thankful for on November 27th.
Our market hit rock bottom on November 21st, the Friday before Thanksgiving (and an option expiration day) at about 7,500 on the Dow. People were generally shell-shocked but we did bounce back to 8,500 and drifted around there through Jan 1st (9,000) before plunging to 6,500 by March 9th. THAT my friends, is the period we are comping against! So beware "improvements" being sighted in the MSM as we are now comparing our weak recovery to a total train wreck and yes, it’s much better now, but better in the way that the Chicago Bears (4-6) are better than the Detroit Lions (2-8), not the way the Minnesota Vikings (9-1) are better than the Lions.
Later today we have an update (and downgrade) of our Q3 GDP followed by Redbook Chain Store Sales and Case-Shiller Home Prices at 9. At 10 we get Consumer Confidence (or lack thereof), the FHFA Housing Price Index, the Richmond Fed Report and State Street’s Investor Confidence Index. Later today we have the results of a massive $39Bn 3-year Note Auction, the Fed Minutes at 2pm along with Industry Charge-offs and, finally, at 5pm we get the ABC Consumer Confidence (if any) Index.
It’s a very brave bunch of bulls who have run the futures up half a point off their lows this morning with all that data coming up. When I say brave of course, I mean the disgustingly manipulative and should be thrown in jail kind of brave but, since none of our regulators seem to care about the nonsense that goes on every day at the commodity and futures exchanges – I guess they are…
Which Way Wednesday – The Beige Book Boogie
by Phil - October 21st, 2009 8:14 am
The last Beige Book report was on September 9th.
At the time the Dow was looking toppy at 9,650 and we had poor consumer confidence numbers (just like yesterday) and poor consumer credit number (no change) and the book had very little "good" news to report (see my analysis) - Yet the market broke over 9,600 again that day and then took off all the way to 9,900 a week later. At the time, we were looking for any excuse to go higher on the hopes that this earnings period will look like last one but have we now come too far, too fast?
It seems we are finally hitting the point of diminishing returns for earnings. Expectations have finally gotten so high that even big beats aren’t enough to keep the momentum going.
Last earnings Q, we were down from 8,900 in June to 8,100 on July 9th as companies began reporting and we had a nice, 1,000-point relief rally over the first two weeks of earnings. This time, we went up an additional 500 points in the past two weeks, over our 9,600 line and that has been in anticipation of a repeat of last earnings but the circumstances are very different this time and it takes a lot to justify a 20% run off the July lows.
Keep in mind that, looking at the sector charts, Energy, Materials and Tech are leading us. Since semiconductors are simply another form of commodity – this is almost entirely a commodity rally in the midst of a recession with Consumer Staples, Financials, Health Care, Industrials, Telcom, Utilities and Transports all underperforming the rest of the S&P. As I keep saying – if no one is shipping anything, how the hell can we be having a proper recovery?
The Beige book is an anecdotal view of the economy gathered roughly through the middle of October and we’ve seen no improvement in Jobs since the Sept 9th report, Cash for Clunkers ground to a halt and, just this morning, we got a horrific 13.7% decrease in the number of mortgage applications from the previous week. That number includes "seasonal adjustments," without adjustments, morgage apps plunged 22.4% despite record low rates as government assistance begins to peter out. The Refinance Index, also adjusted for the holiday, decreased 16.8 percent from the previous week and the seasonally adjusted Purchase Index decreased 7.6 percent from one week earlier. …
Thank Jobs It’s Friday
by Phil - August 7th, 2009 8:23 am
Well, yesterday was fun!
As we expected, the massive pre-market pump job failed once again to push our breakout levels and that led to 6 of our 7 day trades coming out winners in Member Chat. We’re still waiting on the 7th, our MOS puts that were meant to be a weekend hold anyway so not really a day-trade but it was lots of fun after sitting mainly on the sidelines this week waiting for a good opportunity to jump in. Our plan from the morning post to buy out our DIA putters worked perfectly as well and we even went bullish on the DIA’s into yesterday’s stick save so we’re not even going to complain about that nonsense today!
It will take more than a stick to save the markets today if the jobs report is a disappointment. GS, BCS and JPM have all lowered their loss predictions from around 370,000 lost jobs to 250-275,000 job losses and DB has gone completely off the wall with a prediction of just 150,000 losses! As the US is gearing up for the 2010 census and as no one understands the mystical "seasonal adjustment" game and as GS pulls all the strings in government, we are hard-pressed to dismiss this seemingly ridiculous prediction. What do the big 3 market manipuluators have to gain by raising expectations so high just ahead of the actual numbers? Perhaps they have already finished their selling and have now fipped negative, looking to initiate a massive sell-off as jobs disappoint? Or, perhaps, they are brilliant analysts who are well ahead of a number that will, finally, give us our long-awaited break out.
![[Total workers on nonfarm payrolls]](http://s.wsj.net/public/resources/images/MI-AY121_AOT_NS_20090806184812.gif)
If the figures do surprise, it won’t be in a statistically significant way. A payroll decline of 450,000, which would mortify Wall Street, would mean a 0.3% decline in total payrolls. A market-friendlier decline of 150,000, on the other hand, would represent a 0.1% decline. Percentage-wise, the difference is a crapshoot. At some point, jobs data should improve meaningfully. The four-week moving average of new jobless claims is down 10% from late June. That translates into about 200,000 fewer job cuts a month, estimates High Frequency Economics economist Ian Shepherdson. "The risk of a substantial upward surprise on payrolls over the next few months has risen," Deutsche Bank economist Joseph LaVorgna wrote recently.
China lost a little faith this morning as the…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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