NOTHING BUT BAD NEWS
The market is enjoying a bit of a relief rally this morning after yesterday’s disastrous session. Meanwhile, turmoil continues to brew in the underlying fundamentals of the economy. The ICSC reported retail sales were down 0.9% week over week and -0.6% year over year. This morning’s Redbook reading of -4.5% was also in-line with the very weak consumer trends.
In the housing front we could be seeing the first signs of seasonal deterioration. This would tend to rhyme with the recent downturn in consumer data. Econoday reports:
Homebuilding in July slipped from June’s gain but remained above recent lows. Also, the single-family component continued its uptrend. Housing starts in July decreased 1.0 percent, following a 6.5 percent boost the month before. The July pace of 0.581 million units annualized was down 37.7 percent year-on-year and was lower than the market expectation for 0.605 million units. The decline in July was led by the multifamily component which dropped 13.3 percent after plunging 26.1 percent the month before. However, the single-family component rose another 1.7 percent after gaining 17.8 percent in June. Single-family starts have risen five months in a row.
Continuing the onslaught of bad news is the PPI data which shows an uncomfortable level of deflation in a system that is supposedly in recovery mode. This morning’s reading was down 6.4% year over year and -0.1% month over month. Analysts were expecting a positive figure.
Makes no diff…Markets recover more than half of yesterdays warranted heavier volume loss on light volume today.
Relief rally. Nothing more.
I keep wondering who are the people buying at these inflated levels? Guess we’ll find out in a few months when they start pointing fingers at the dreaded “short-seller” who’s responsible for all their lost millions.
Financials are leading again. Anyone has any insights banks carrying the “toxic” loans vs their recovery? Price action thus far saying no problems with “toxic mortgages” …
Paul,
Financials are the primary battleground between the “Green Shoot – Recession is over – new bull mkt beginning” crowd vs those who believe this is a bear market rally. If the former group is correct, financials are still massively underpriced. However, according to the bears, financials will lead the next leg down as they have during every other drop due to their toxic assets. What seems like a bipolar market for financials (4% down yesterday, 1.7% up today) is really these two dueling viewpoints of how the world will look in six months. Once reality sets in that we’re in the eye of the storm, IMO financials will move significantly lower. The fact that their short interest is lowest out of any other group (per TPC’s earlier posting) gives me more confidence that they’re toast.
The short interest in financials is low because they are headed higher.
Every hedge fund is now long BAC, including the Paulson-type funds who were massively bearish on financials on the way down. They are not fools.
Sallie Krawcheck bought $1m of stock @ 15.97. I worked for her, and she is certainly not a fool
Insider buying in C yesterday @ 4$, though the insiders who bought @ 1.25-1.50 were even smarter
Improving housing, lower delinquencies, low interest rates, and a rebound in equity/debt markets will take them all higher
Well far be it from me to not be excited, but the bank earnings
are entirely fictional since we dispensed with market to
market rules. So take fictional earnings, add a big dose of commercial real estate losses through 2010 and 2011 and
whaddaya get? Not much.
You guys may already have seen this, “Four in Five Americans Made Cuts to Personal Spending” on the Business Wire. I don’t know that I would call this bad news as much as I would call it prudent news. Behavioral study formalized. http://app.quotemedia.com/quotetools/newsStoryPopup.go?storyId=24490600&topic=HPOL&symbology=null&cp=null&webmasterId=501 If you do informal surveys on your own, the consumer is turning more prudent than our financial media would have us believe. This is the more sustainable element, in all this: Noting the prudent behavior of consumers. Their spending is going to continue to be reined in – longer term.
Money-steroid-like-injections and accounting tricks are what the banks have been rallying on. Such knee-jerk high-level action/reactions do not make the argument valid for a sustainable rally.
Its like sport-related dignitaries for various countries, making decisions to dope a certain class of athletes, and then “coaching” them in how to cheat the tests they will face during the games, competitions and matches they enter. Behind the scenes, they are sprawled out on a mattress or sitting at a table with a tourniquet around their arm or leg, and “performance-enhancing” fluid being injected by their minders, supporters or coaches. The dignitaries standing in the same room watching and consulting with the attending physicians. Aside from these injections, not just one but many ongoing injections, they would not be competing in the same field with other clean athletes.
During this last rally, a lot of people coming out to say how marvelously financials have “performed” since March; compared to other sectors. We even see the dignitaries in their best suits and dresses, coming to speak to the media about how well these financial athletes have performed compared to technology and health related securities (which actually produce things of value in our society). The dignitaries speak and also give show of support, “Look how well our athletes perform in this leg of the race. … See how high they jump?” …
The essence of prudence is lost the moment dignitaries compromise themselves professionally, ethically or morally. They may not be fools, but to say they are not fools, does not address the question of whether or not they are compromised professionally, morally or ethically.
As with Olympic events, a countries dignitaries are lost when it is learned the athlete has won a competition or based a career on doping and lying to the public, cheating the tests, and basing their careers on this type of behavior. Such revelations, do not salvage the compromised reputation of the dignitary. They are merely forgotten, when the news surfaces. In silence which follows, they are still very much compromised.
The consumer is, four out of five, cutting back. This is the sustainable and more reliable component through all of what has happened. Through all the lies, the accurate news mixed with misinformation and some disbelief, a few material changes in accounting and some injections on the side, the consumer is fading the market.