9/12/08

Economics

Recent Data

Weekly jobless claims fell 6,000 versus expectations of a drop of 9,000; the good news is that claims are down, the bad news is that this reports extends the recent pattern of declines being less than anticipated.

July’s international trade deficit jumped to $62.2 billion versus estimates of a $58.0 billion shortfall and $58.6 billion deficit in June. The major reason for the number coming in above expectations is....oil prices; ex oil the deficit shrank from -$32.5 billion to -$29.6 billion,

The July Federal budget deficit came in at $102.8 billion versus forecasts of $107 billion and $36.4 billion in July 2007.

August Producer Prices were reported down .9% versus estimates of down .4% (oil prices were the reason for the big difference); core PPI was up .2% in line with expectations. A break down of this morning’s report:

http://econompicdata.blogspot.com/2008/09/ppi-august-finally-some-relief.html

Other

A different take on income inequality:

http://www.american.com/archive/2008/september-october-magazine/how-china-helps-america2019s-poor

Chart porn on mortgage interest rates:

http://mjperry.blogspot.com/2008/09/mortgage-rates-fall-by-70-in-7-weeks.html

Politics

Domestic

Here is some advice for Obama on attacking Wall Street from one the more reasonable Democratic blogs that I read:

http://www.slate.com/id/2199595/#hedgefundcreeps

International War Against Radical Islam

Rising foreign investment in Iraq. Who woulda thunk?

http://www.usatoday.com/news/world/iraq/2008-09-09-iraqinvestment_N.htm?loc=interstitialskip

Rich Lowery summarizes Bob Woodward’s new book on the Iraq war. I am not a big W fan, but with the kind of advice he got from the CIA on WMD’s and the Joint Chiefs on Iraq, it is truly astonishing that the US has the remotest possibility of pulling off a victory in Iraq:

http://article.nationalreview.com/?q=ZGU4MDYwNDZiOWY3MmVlZDExM2IyZmU5NWM0M2ZmYjI=

The Market

Technical

An update on the percentage of stocks above their 50 day moving average:

http://bespokeinvest.typepad.com/bespoke/2008/09/percentage-of-s.html

Some technical perspective on yesterday’s intra day reversal:

http://bespokeinvest.typepad.com/bespoke/2008/09/positive-revers.html

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Yesterday’s yo-yo pin action changed nothing technically—both indices still trade within both downtrends, but the intraday turnaround did add strength to their late July low support levels (DJIA 11132; S&P 1209).

Fundamental

Late yesterday afternoon, the Washington Post reported that the Treasury and Fed were working on a private takeover of Lehman Bros and want to have it done by this weekend--certainly the reason behind the late afternoon stock price bounce. Were it to happen, the good news is that it would be yet another moment of clarity in the resolution of the financial crisis in which we find ourselves. Having said that Washington Mutual and American International Group are already waiting in the wings to take Lehman’s place as the latest disaster du jour.

http://bigpicture.typepad.com/comments/2008/09/put-some-more-l.html

From an investment strategy point of view, the question is how much have the collapse/recapitalization/acquisition/etc of Lehman and the remaining sores on the financial system been discounted in stock prices in general? My answer is as it always is that I don’t know. But I know that most investors are already worrying not only about the remaining problems relating to housing but also commercial real estate, auto loans and credit cards. In other words, I am not sure that there are any surprises left--every conceivable threat to the financial system gets beaten to death on CNBC daily. Threats and problems can be discounted, surprises can’t. That, of course, doesn’t mean that a Market bottom is near, it just means that there is a reasonable probability that a Market bottom is near.

A hopeful sign is that there is little turmoil in the credit markets:

http://www.thestreet.com/p/_htmlrmd/rmoney/tcrescenziblog/10436924.html

My biggest problem with that last statement is that every bear market that I have lived through (I have been doing this since 1966) either ended with (1) an emotional selling climax, (2) a series of sector related emotional selling climaxes or (3) there was an elongated painful period where stocks dwelled in the doldrums. We could be going through alternative #2, the July low looking increasingly like a selling climax in the financial stocks while the oil/commodity stocks seem to be currently working on one of their own. It could be argued that Tuesday was the selling climax for that group; but it just doesn’t feel done. I could be very wrong, but till the Market proves me so, we stay defensive.

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Twenty top dividend paying stocks:

http://seekingalpha.com/article/94880-20-top-high-dividend-growth-stocks?source=front_page_most_popular_articles

News on Stocks in Our Portfolios

A positive write up on Smith Int’l (Aggressive Growth Portfolio):

http://www.zacks.com/newsroom/commentary/index_pdf.php?id=8566

More Cash in Investors’ Hands