Недельное обозрение Быки/Медведи: 18-22 апреля 2011 года

Быки

+ The Conference Board’s Index of Leading Indicators showed a larger than expected increase of +0.4%. Last month’s reading was also revised higher from 0.8% to 1.0%. The results point to strengthening economic activity and a sustained growth trajectory throughout the year.

+The Job market continues its recovery as the JOLT Survey shows increased job openings. Meanwhile, the Gallup Poll is signaling a decreasing unemployment rate. Its “Job Creation” survey notched its highest reading of the recovery this past week. Job gains will add cash to the economy and keep consumption growth sustainable.

+ Weekly consumption metrics show that US consumers have taken another leg up with regards to their spending habits. Higher oil prices haven’t affected the great American consumer to this point.

+ Improving confidence shows that US consumers are more comfortable in dealing with higher oil prices. Falling home values won’t have much of an effect anymore given that the bulk of the shock has already been taken. Consumer’s have come to expect that home values will remain low for sometime to come.

+ Eurozone economic numbers show that the region is recovering despite recent headwinds such as the Japanese earthquakes and higher oil prices. Continued steady growth will offset recent austerity measures on the periphery.

+ Intel results shine (a triple play!) and confirm continued growth in the global economy as businesses expand and require new equipment. Intel is a global bell weather so a positive report from the company is a harbinger of continued business spending. Guess who else tripled? IBM. (I don’t own any Intel or IBM nor am I shorting them).

+ If you look objectively, you can see signs that the manufacturing recovery is for real. A manufacturing renaissance is occurring in America fed by large emerging market demand. Jobs will be created and the virtuous cycle of jobs feeding consumption will help the recovery gain strength in the months ahead. (I don’t own nor am I shorting United Tech, or Eaton)

Медведи

- So the job market is getting better eh? Not from the looks of Jobless Claims reports. We have our second consecutive reading above 400,000. This hasn’t happened in over 2, close to 3 months. Job growth has effectively stalled and a major thesis point for the bulls is under increased scrutiny. Last week’s report was revised...(guess: up or down?).

-US “AAA” outlook is downgraded from stable to negative as per S&P. Politicians still haven’t put together a credible debt-reduction plan. It’s only a matter of time before investors seriously question the payment ability of the US. While the US is the monopoly issuer of its currency and will definitely pay back its obligations, rising commodity and precious metals prices signal that investors question whether they’ll be paid back with worthy dollars or just pieces of paper that can be burned for heat Weimar style.

- You’d figure the large plunge in the April reading of the Philly Fed Manufacturing Index was due to the disruptions in Japan, yet 80% of respondents said that recent developments in Japan had no affect on them or their customers, 10% said that there were “Possible Future Effects”, and 10% said there were “Some Current Effects”.

- The higher the markets go, the “stronger the recovery gets”, the tighter the noose of higher oil prices becomes. Eventually, the headwind will be too much for the US consumer to bear. Consumer Confidence according to the Gallup Poll continues its downward trend, not confirming the Bloomberg survey. It’s only a matter of when, not if.

- Things are apparently getting icky in China with increasing protests regarding inflation. Chinese officials are in a very tight spot and the situation closely resembles what I though would eventually happen when I wrote http://rcsinvestments.wordpress.com/2010/03/14/...’s-dilemma/">this article a little over a year ago. Worse even is that inflation will probably remain sticky in the months ahead. Will protests begin to have an effect on economic productivity? Very likely. It’s already causing some serious margin squeezes.

- The Finnish elections along with further rumblings of a Greek restructuring have sparked another scare for the Eurozone (saw that one coming as soon as the election results were being disseminated). While the news regarding Greece was bad, it was even worse for Spain as yield spreads are under upward pressure again after a substandard debt issue.

- While some housing reports may have come in better than expected recently, looking at the forest instead of the trees shows us that the housing market still flat out stinks. We officially have an “L-shaped recovery” in this sector. Sales remain depressed and there are no “move-up buyers”, only cash-deals by investors. Home Prices (the commoner’s largest asset) keeps on falling.