February 2009
February 26, 2009 –
Back in early Feb you read that good news was now on a roll... Well, don't just take it from me. I can't keep up now with all the positives being posted out there... In fact in just 30 minutes tonight, I'm up to 101... Check out ten on the The Calafia Beach Pundit's List: 1. Commodity Prices Stabilizing 2. TED spread decline 3. Rise in T-bill yields 4. The dollar is not collapsing 5. Swap spreads have declined significantly 6. Shipping rates have bounced 7. Agency spreads are down 8. Consumer Loans are Up 9. Total Bank Lending is Up 10. Treasury bond yields are up Nice Job Scott. Or check this out from Irwin Kellner, chief economist for MarketWatch. He provides 21 reasons that the worst of the recession may be behind us. Nice Job Irwin. Or have a look at these seven indicators. Nice Job Mark. In a super surprise today, CNNMoney actually headlined the one positive piece of news in their story. Even though the story didn't point to all good news, they pulled the positive piece to headline! Nice Job CNN. And there are ten more positive economic headlines here. Nice Job Barry. You'll find 29 recent positive economic stories here. Nice Job Fisher. You'll find three more interesting ones here. Nice Job Geri. And several more on the housing market recovery, here, here and here. Nice Job Dr. Perry. And five recent reasons for economic optimism posted here. Nice Job Mark. And of course let's not leave out the dozen or so bounces that we've already tallied... and our count today stands at 101. Perhaps some of the stories report duplicate data, but the fact remains that there is a tremendous uptick in good news reporting. You may just observe that some type of tipping point is upon us. Who knows what tomorrow might bring. [more]
February 25, 2009 –
As you've read here there is no credit crunch at most banks. [more]
February 24, 2009 –
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RELATED TICKERS: SPY
You may recall reading the "slasher" headlines last week. [more]
February 23, 2009 –
Are any of you hearing arguments that credit markets are still frozen? If indeed they are, it is currently very difficult to find any real evidence to support that claim. That is great news for the economy. In fact there are some reports now that commercial debt sales are ongoing at record levels. In a recent report at Bloomberg the assertion is that "companies are selling debt at an unprecedented pace this year as they take advantage of a rally in credit to raise cash." Ashish Shah, of Barclays Capital agrees, "This year’s record bond issuance shows that government steps to stabilize the financial system are boosting highly rated debt markets." 
Stuart Hosansky, at Vanguard Group, also observes that currently, "If a single-A rated company or above comes to market, there is significant demand." "You’ll see continued strength in investment-grade bonds, Shah continued. "The demand is there. Liquidity continues to improve across the credit markets." In fact according to the Bloomberg data, daily debt issuance is smashing records week after week this year. On Jan 29th, companies issued paper to raise a record $17.5B in cash for their books breaking the early January record. As you can see from the Bloomberg chart, on Feb 19th that number was beat handily. Add to this the details that you have read here: that there is no credit crunch at most banks. And that several additional sources recently have revisited that assertion and verified the growing consumer loan data here and here. One must come to the conclusions that: 1) Commercial debt sales are now ongoing at increasingly record levels. 2) Consumer loans continue at a healthy rate. With perhaps the exception of some larger elite banks with continued junk on their books, the majority of US banks have been immune to this toxicity and the credit markets are now for the most part all thawed out. These conclusions are significant pieces of further evidence and positive bounce that point to increased economic health later this year. [more]
February 20, 2009 –
Several of you have recently ask where the stock market is heading and when will it rebound. You probably know however that I am not an investment adviser. There are several investment firms however that are worth a close look if you are seeking investment counsel: [more]
February 19, 2009 –
It was another "slasher" headline... I am not sure who first "broke" the story, but it was almost humorous to watch all the mainstream media outlets follow each other using that worn out verb. [more]
February 18, 2009 –
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RELATED TICKERS: WMT
, RTH
, XRT
Last week the government released retail sales numbers and they showed a 1% jump in retail sales. [more]
February 17, 2009 –
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RELATED TICKERS: WMT
, WAG
, AMZN
It has been an amazing two weeks of positive bounces. Here are the top dozen: [more]
February 15, 2009 –
"The American Recovery and Reinvestment Act of 2009" will be signed into law on Tuesday by President Obama. It looks like he plans to get out of Washington and travel to Denver... an area that indeed has been hit hard economically in recent times. The Denver area will see job growth from this Act almost immediately.
While many still question whether or not this government initiative is the right thing to do long term, let's highlight the positives of what will happen with this massive funding effort.
1. Upgrades to our Transportation Systems
‐ $27.5B for highway investments.
‐ $8.4B for public transportation.
‐ $1.5B for additional state and local governments for transportation.
‐ $1.3B for air transportation systems.
‐ $9.3B for rail transportation.
In the suburbs of Denver plans have long been in place to build out rail in all directions. Lack of funding has always hindered those efforts. Perhaps one of these days we'll understand why those in Europe prefer the rail to our single occupant cars and no doubt the public in suburban Denver will also.
2. Massive Energy Investments
- $4.5B to repair fed buildings and increase energy efficiency.
- $3.4B for Clean Fossil Fuel R&D.
- $11B for smart-electric grid and modernization related activities.
- $2B to advance vehicle battery systems.
- $6 billion in new loans for renewable energy projects such as wind or solar.
You may recall reading about the City of LA's shovel ready project, "Solar LA," the largest solar project undertaken by any single city in the world. Tuesday will mark good news for LA's mayor whose office has long been championing this massive energy project.
3. Unprecedented Funding for State and Local Government Budgets
-$53.6B for the State Fiscal Stabilization Fund
-$39.5B to local school districts using existing state funding formulas to:
+prevent school cutbacks,
+prevent teacher layoffs,
+modernize buildings
-$8.8 billion to states for highest priority needs such as public safety system upgrades.
This funding is great news for state legislatures grappling with severe budget gaps in fiscal 2009 and public safety officials struggling to meet the public's demand for better disaster continengcy plans and systems.
4. Broadband Internet Expansion
$7.2B will be spent to increase broadband access and usage in unserved and under-served areas of our country. Not only will this better position us for economic growth and innovation, but broadband service provider firms (who already have geographic coverage strategies ready to implement), will begin hiring on those expansion blueprints this week.
5. Tax breaks
- Most individuals will get a $400 tax credit, and most couples an $800 credit.
- Many students will get a $2,500 tuition tax credit.
- First-time home buyers may qualify for a tax credit of up to $8,000.
- People who receive Social Security will get a one-time payment of $250.
- In total, $212B will get passed onto individuals and small businesses.
6. And of course Jobs Creation (Directly and Indirectly)
The Congressional Budget Office predicts that the plan all told will create between 1 million and 3 million jobs. Any opposition to that if it works out?
So, the stimulus plan has now passed. On Tuesday the spending begins. And although economists will argue about its long term benefits to the US economy, it is highly likely that vast majority of those pundits will be wrong.
[more]
February 14, 2009 –
esterday you read about consumer spending rising in January and foreclosures plummeting. That's good news for home owners looking to stay in their houses or needing to sell in this housing market. [more]
February 13, 2009 –
On Friday two weeks ago, you read that the propensity to report good news was on the rise. This week, and this Friday in particular, are no exception.
To review:
1. A closer look at jobs data revealed that companies are indeed hiring again and that the dismal unemployment reports are largely a result of November/December actions.
2. Three major retailers demonstrated by their January sales announcements that its not all dismal in the retail segment.
3. The ISM's reports for January show deceleration of business activity declines, with some industry segments now reporting grow.
4. Some emerging international markets are rebounding sharply to start the new year.
But perhaps the most dramatic piece of good news this week were two reports out yesterday:
1. The government reported that indeed the US retail segment as a whole rebounded by 1%! (a "surprise" to those gloomsters who had forecast a decline.)
2. In the housing market in January foreclosures have slowed dramatically. The total foreclosure numbers were down 25% in January with "pre-foreclosure" filings down 12%. Further, California foreclosures are at their lowest level in over a year.
Happy Friday. [more]
February 12, 2009 –
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RELATED TICKERS: GM
GM Brazilian sales jump 30% in January
You many have seen a glimmer of hope for GM in an otherwise gloomy "Q4 2008 Global Sales Call Transcript."
GM reported there that they are finding some growth success in 26 targeted "emerging markets." In these global markets, GM has a 12% market share, but in 16 of 26 of them they either held share or gained in 2008.
Particularly noteworthy in 2008 over 2007: Brazilian GM sales was up 10%. Russian sales up 30%. And sales in India up 9%. On sales of 1,090,000 vehicles, Chinese sales were up 30%.
And suddenly this week the report from Brazil is that the car market there seemed to rocket out of the gates for 2009. Production (although jumping 92%) could not keep pace with sales of 197,000 vehicles in January.
The already firm GM sales numbers there surged by 30% from the end of December through the end of January.
As my friend Stephen C Kanitz who operates the blog, "Betting on Brazil" points out, "Don't start out your phone call with your Brazilian partner on a negative note. Optimism is building here."
Some additional global evidence that a return to economic growth by summer is not out of the question. [more]
February 10, 2009 –
Many of you enjoyed yesterday’s positive summary of the Institute for Supply Management's report on January manufacturing. [more]
February 09, 2009 –
As many of you know the Institute for Supply Management (ISM) releases two significant reports each month. The reports measure, index, and correlate manufacturing and non-manufacturing activities with other measurement readings from the government and elsewhere. [more]
February 08, 2009 –
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RELATED TICKERS: T
, IBM
, INTC
Two economists now claim that the credit crisis fear last fall may have been the primary reason for many of the layoffs that we are now seeing. Like you've read here in recent weeks, they agree that indications point to a moderation of the those job losses in the coming months. In fact, as you've read here, companies may be looking to get those workers right back. [more]
February 07, 2009 –
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RELATED TICKERS: WMT
, TGT
, AMZN
Do you remember how that gloomy GDP number was calculated last week?
In Q3 to Q4 the economy contracted by 0.9%. Take that times 4 and you get a 3.6% contraction for a full year.
Okay so do you want to have some fun? Look at just how ridiculous that is by applying similar logic to recent small "successes" in the retail segment... (The hype in the headlines is that consumers are not buying.) Really?
Many retailers (RLX) reporting earnings this past week actually beat their numbers. Not all the numbers were glowing, but some of the major players stand out.
You may have seen Walmart (WMT) for instance report that Jan. 2009 sales increased 1.8% from Dec. So annualized that 1.8 percent multiplied by 12 is a 21.6% growth in 2009.
Next Target (TGT) reports Jan. sales increased 0.8% Dec. to Jan. Do the math... 9.6% growth for the year.
And Amazon (AMZN) recently estimated that its Q1 sales will be up 9 to 19%. So for the year sales will be up a whopping 36% to 76%! Right?
Okay so even I'll admit that it is not that rosy. But hey, it is not that gloomy either. [more]
February 06, 2009 –
Again the headlines were pre-printed. The employment numbers had to be grim right? So let's go ahead and print the story... even though the real underlying data is not there to support the gloom.
We already documented last week (with all your primary research) that firms indeed are hiring. And now the details of the Initial Claims report helps us further make the claim:
Firms announced the layoffs to satisfy shareholders, then turned right around and started hiring again.
Where's the data?
First let's remember this. Initial claims for unemployment are just that, initial claims. For those of you who have gone through the process, you know that frequently an initial claim is never converted to payment (or eligibility). The most common reason? Because you find a new job.
So here's the punch line (thanks to reader John C for catching this on Bloomberg), the unemployment rate among people eligible for benefits, which tends to most closely track the actual jobless rate, held at 3.6 percent in the week ended Jan. 24.
Digging a bit deeper into the report we find:
Forty-eight states and territories had a decrease in new claims for the week ended Jan. 24, while only five reported an increase.
Two more pieces of evidence pointing to this downturn's end by independence day.
(Did you catch a good news story on the economy today like John C.? Keep those emails, comments, and statistics coming this way.)
[more]
February 05, 2009 –
There now seems to be enough evidence mounting. This recessionary cycle will likely be over by July.
You first heard that level-headed prediction from Mark Hirschey, Professor of Business at the University of Kansas back in November. He called all the dire commentary back then "overblown." Further he confidently stated, "If you look at history as a guide here, it would suggest that sometime between now and the Fourth of July in 2009, you’d expect business to once again turn up."
The evidence is now building that Hirschey may be right on the mark:
1. Macro uncertainty is subsiding quickly. In their excellent paper on economic uncertainty, Economists Bloom and Floetotto of Stanford University, propose uncertainty shocks as one of the primary impulses that drives business cycles. It is indeed these shocks in uncertainty that cause business to delay production cycles or trim staffing levels. But as uncertainty subsides, businesses re-deploy.
As you know many pundits are still warning that a dire recession is in the offing. Bloom and Floetotto would have been among them three months ago, but now, "based on the analysis of 16 previous economic shocks... and using the latest data on uncertainty measures, our model predicts that the worst has been avoided."
Further, they now claim that according to their model economic uncertainty is dropping so rapidly that "we believe growth will resume by mid-2009."
2. Credit is Flowing Again. In his excellent post on credit markets, Prieur du Plessis concludes that "the credit market tide seems to be turning." His in-depth look at worldwide credit indicators points to significant warming conditions since the "big chill" last October.
3. Global Commerce is On the Rise. The Baltic shipping indices are coming to life again. According Scott Grannis, the Dry index "has just about doubled from its early December low." Grannis further explains, that this closely watched shipping index is a high level indicator of trends and associated strengths on a global scale. Dr Mark Perry shares details about the index here.
4. The Consumer is Ready for Spring. You've also recently read that consumer confidence is now "surprisingly" up. The US Consumer when re-awakened will discover that all the commentary in October and November was overblown. Their spending this spring, will re-ignite any remnants of winter slowness in the retail segments.
5. Firms are Hiring. Although many companies announced layoffs as part of their year-end earnings announcements, these actions were largely to placate their stockholders. A vast number of them are now quickly reversing course and hiring aggressively. Indeed, several high profile private firms who don't have to bow to short sighted stockholders, have taken the opportunity to declare "No Layoffs -- Ever!"
Clearly the evidence for the end of this recession is mounting. As we actually approach the turn-around point, the increase in good news will be followed by the inevitable up-turn. Probably between now and independence day.
Hirschey will be proud and continue his calm analysis of economic cycles from his classroom. And Warren Buffett, will be raking it in yet again. [more]
February 04, 2009 –
Last week you saw a significant increase in coverage of good news. This week that trend continues. [more]
February 03, 2009 –
“Were it not for the Internet, Barack Obama would not be president." - Arianna Huffington, editor in chief of The Huffington Post. [more]
February 01, 2009 –
"Enthusiasm is Contagious, And So Is The Lack Of It" - Unknown
You've recently read that consumer confidence is now "surprisingly" up. You also may have already noticed that the propensity to report good news also seems to be increasing slightly. (At least in the blogsphere)
Why is this? Because of at least these five factors:
1. There was a basic mistrust of our past president and his administration's ability to do anything meaningful. The honeymoon may be over soon for Obama, but no one can deny that the majority of the US population (and quite possibly the world's) is still enamored with their new bride. The president's job approval ratings are in the 60s, nearly double that of Bush's when he left office several days ago.
2. Since the "big chill" in October, consumers have had plenty of time to re-adjust their spending patterns and reexamine their budgets. Now that they are confident that their personal small town bank is not going to fail and that their fuel and transportation bills are drastically lower, they're able to look beyond the gloomy media headlines and make their own forward-looking judgments. When looking at their personal budgets there is a lot less uncertainty than in October -- no significant new reason to "wait and see," like there was back then.
3. Even as many corporations announced their restructuring plans this past week, significantly more than 90% of people still have their jobs. Additionally for those jobs that are being cut, many carry extended severance payouts that can last for months. If you work in a corporation, you were waiting for the next shoe to fall right before the holidays or right after. You've seen it before during recessions. (and expansions) Year-end is typically when more than any other time all eyes are on the books and human assets get "re-deployed" or cut. For those who have now made the cut, year-end is behind you and the 2008 full-year earnings season is also past. But perhaps more noteworthy is that corporate job holders are currently now observing their internal and external job boards swell with openings for talent that will match corporate growth and income goals for 2009.
4. Beyond just the Obama motorcade, the wheels in DC are turning again. Even though their is political partisan's opposition to the stimulus package, the average US citizen just wants something to get done. Given the make-up of the house and senate, much new legislation no doubt will become law. The public is willing to wait to see if the new policies work, but in the meantime, confidence will improve merely because something -- anything -- is getting done by a new administration and congress.
5. There is growing belief that new energy policy could be just as significant as the computer boom, the Internet boom, or Y2K consumption driver. That burgeoning innovation is making its way into:
More efficient and plug-in cars
Hybrid car batteries.
Decreasing photovoltaic solar costs.
Steadily increased manufacturing of wind farm componentry.
Clean coal advances.
New electrical, transmission, aggregation and right of way assurance planning and implementation.
Obama has an incredible opportunity to demonstrate trustworthiness and speak with clarity to improve consumer confidence. His vision of how to improve the US economy -- perceived or actual -- can have an immediate, on-going and growing impact on public morale.
No doubt you believe it is just fine for us to publicly call on Obama to assist with the psychology of consumer sentiment. Kennedy did it, Reagan did it, and there is every indication that Obama can do it too. [more]
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