Tuesday, January 12, 2010

No Fibbing: NFIB Shows No Real Improvement in a Miserable Time for Small Business; and Related Matters

NFIB announced today the results of its December survey of its members, which tend to be small. The title is a bit misleading: Small Business Owners End 2009 With A Thud. Really it ended with more of the same old bad times. Here are some of the "highlights".

Ten percent of the owners increased employment (the highest reading of 2009), but 22 percent reduced employment (seasonally adjusted).

The frequency of reported capital outlays over the past six months was unchanged at 44 percent of all firms, holding at a record low level (data first collected in 1979). Plans to make capital expenditures over the next few months rose two points to 18 percent, two points above the 35-year record low.

A net negative 28 percent of all owners reported gains in inventory stocks, a new monthly record. For all firms, a net-negative 4 percent (a two point deterioration) reported stocks too low, so stocks are still considered a bit excessive relative to expected real sales volumes (which are weak).

Ten percent of the owners reported raising average selling prices, but 33 percent reported price reductions yielding a net-negative 22 percent (seasonally adjusted) of owners who cut prices in December. Plans to raise prices fell one point to a seasonally adjusted net 3 percent of owners, 35 points below the July 2008 reading.

On the cost or input side, the percent of owners citing inflation as their number one problem (e.g. costs coming in the “back door” of the business) fell two points to 2 percent, and only 3 percent cited the cost of labor.

Reports of positive profit trends were unchanged at a net negative 43 percentage points.

Owners continued to reduce compensation at a record pace, with 10 percent reporting reduced worker compensation and 9 percent reporting gains, unchanged from November.

Regular borrowers (accessing capital markets at least once a quarter) continued to report difficulties in arranging credit at the highest frequency since 1983. A net 15percent reported loans harder to get than in their last attempt, unchanged from November.

Continuing the theme that something is rotten in the American economy, Labor Dept. reports the November "JOLTS" survey on job openings and labor turnover. It shows that job openings fell in November from October by 156,000 to 2.42 million.

I am bullish on dollar stores.

I would also be bullish on Treasuries if the Government were not issuing so darn many of them. But I'm not selling what I own. Investors interested in real return with limited duration may want to consider Agency mortgage-backed securities, which repay principal with interest. Of them, Ginnie Maes are explicit Federal obligations, while Fannies and Freddies remain implicitly guaranteed. They may come on budget, but you never know. The yield differential is vanishingly small, so I would stay with Ginnies.

Of course, the market knows all the above. The argument is made that the cycle is turning/has turned, so happy days will be here again soon with no inflation pressure, so Treasury issuance will decline a lot and demand f0r gold will decline a lot as well.

I remain bullish on dollar stores and want to own enough gold that that value will likely remain protected should massive inflation (or less likely deflation) eventuate.

Copyright (C) Long Lake LLC 2010

No comments:

Post a Comment