Wednesday, July 22, 2009

Some New Data Not Colored Green as in Green Shoots

Data points we are noting:

1. From TrimTabs July 21:

The disconnection between perception and reality about the U.S. economy is stunning. As Wall Street gains confidence that the economy is recovering, declines in wages keep accelerating. Adjusting for the “Making Work Pay” tax credit, income tax withholdings plunged 9.6% y-o-y in the past week and two days (Friday, July 10 through Monday, July 20) and 6.8% y-o-y in the past three weeks and two days (Friday, June 26 through Monday, July 20). These declines are much steeper than the drop of 5.3% y-o-y in the past three months. Both we and our favorite official Washington economist are unaware of any calendar quirks skewing the data.

July 22 (Bloomberg) -- Standard & Poor’s again boosted its projections for losses from U.S. subprime mortgages backing securities, reflecting increasing delinquencies and defaults amid slumping home prices and growing unemployment.

Losses on loans backing 2006 securities will reach an average of about 32 percent of the original balances, while losses for similar 2007 bonds will total about 40 percent, the New York-based ratings firm said in a statement today. In February, S&P said the losses would total an average of 25 percent for 2006 bonds and 31 percent for 2007 securities.

3. Gallup has a nice graph reflecting polling on how people see their companies: Hiring, laying off, or neither.

I am unable to cut and paste it; click HERE to view it. Per the home page, 4% fewer respondents reported that their employer was hiring on the last survey. A look at the graph (first link) shows stability between percent of employers expanding/hiring vs. shrinking their workforces/firing, from December 2008 till now. Of course, during this time unemployment has been soaring. I'm not loving this trend, especially given the reality of a work force that is growing steadily and thus requires net hiring to keep the unemployment rate from rising, and the "New Normal" that older people are deferring retirement. I know of one local MD in his 70s who had to go back into practice due to investment losses. I'm sure he's not the only professional in that situation.

4. Larry Summers gave some downbeat comments within the past few days, suggesting that he was uncertain as to the pace of the expected economic upturn.

5. From a technical basis, here's a 3-month chart of GE, with the red line representing the 50 day simple moving average and the green line the 200 day sma. Bad news:
GE has moved below its 50 day ma, which has begun to descend. It never reached its 200 day sma. Concurrently, Yahoo reports that analyst estimates for GE's 2010 earnings have also begun to descend, from 95 cents 3 months ago, to 94 cents 7 days ago, to 92 cents currently. BofA ("BAC") has a stronger pattern but is not all that different, and perhaps ominously, 2010 earnings estimates for BAC keep dropping; click HERE to view them and scroll down to view EPS trends, "Next year/Dec.-10".
Meanwhile, CNBC may now be reporting that something like 200% of all reporting companies have beaten "estimates" from the group of deep thinkers laughingly called "analysts". No matter that IBM had to somehow lower its SG&A an astounding 19% to wow these seers on the bottom line while missing shrunken revenue estimates. (Note: DoctoRx is no longer long IBM, having sold it on strength this week.) Someone should tell someone else that a company can't starve itself and yet win either an endurance running race or a strength contest.
Nonetheless, what we also somewhat laughingly refer to as "money" has to go somewhere if one has investable funds. People who can afford the risk probably should have some money apportioned into dividend-paying stocks with strong short-term and long-term charts and a history of being shareholder friendly.
EBR will discuss its favorites over coming days: in its estimation, these are among the best of a mangy lot of pre-owned "in"-securities.
Copyright (C) Long Lake LLC 2009

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