Think 20/20 Research
Subscribe
- PCs and their makers trying to morph to more - mobile, pads, storage, what next? More M&A - http://bit.ly/aFGWAK $DELL $GOOG $MSFT $AAPL
- Launching The Thematic Investor newsletter - take a look here http://bit.ly/bLO1H7 $KOPN $EQIX $CSCO $CL $K $PG $AAPL $NFLX $RIMM $SVVS $T
- Tune in to Chris Versace on America's Morning News....http://bit.ly/cta0IQ #economy #investing #politics
- $KOPN: Solid 2Q10 Lays the Ground for a Better 2H10 http://bit.ly/bPNFIU
- Getting ready for the July employment report http://bit.ly/aadu2D
- $IIVI Bookings for the quarter increased 120% to a record $125,985,000 compared to $57,245,000 in the fourth quarter of last fiscal year
- Big Lots 2Q revenue comparison rises http://bit.ly/cSdVvJ $BIG
- Smartphone demand drives 54% year-on-year growth in Kopin’s III-V revenue in Q2 http://bit.ly/cGKhkB $KOPN $SWKS
- Commented on: "Universal Display: Showing a Less Than Promising Future" http://soc.li/k0PiaxO $PANL
- Since when does #SmarTrend call EPS upside? showing consensus # is not the same as calling for upside http://bit.ly/9QMdoe $PANL
- Powered by WordPress Twitter Widget Pro
Posts Tagged ‘Federal Reserve’
What a difference a week or so makes. July was a pretty good month for stocks and capped off a strong rally that began in mid-May. I say capped off because so far in August, the market, as measured by the Standard & Poor’s 500 index, is down 1.5 percent as I type this. The movement in recent days has been fast and furious, ignited by the growing realization that the economic recovery is losing steam. Hardly news to a regular reader of this column, but the number of concurring data points has grown over the past several days.
Consider the following:
Last week’s July employment report of 131,000 jobs lost was worse than expected.
Non-farm business productivity for the second quarter came in at an unexpected -0.9 percent. This not only marked the first decline since the fourth quarter of 2008, when productivity fell by 0.1 percent, but also was in sharp contrast to the metric for the first three months of the year, which was up 3.9 percent. As I have said many a time, perspective is key, so some context and a quick thought…
Chris Versace, the Thematic Investor and Think 20/20’s Director of Research, will be on America’s Mornings News this Monday (August 9th) morning to talk the economy and the employment report, the stock market and investing, and whatever else hosts John McCaslin and Amy Holmes can cook up.
Chris Versace, the Thematic Investor, will be on America’s Morning News this Monday, August 2, to talk the economy, budget deficits, , housing, unemployment, investing, other financial topics and whatever else hosts John McCaslin and Amy Holmes want to talk about.
The debate between corporate earnings growth and the economy raged this past week as companies such as FedEx Corp., Equinix Inc. and E.I. du Pont de Nemours & Co. delivered significant earnings growth year on year and compared with Wall Street’s expectations.
A notable characteristic of this earnings period thus far is the relatively low number of negative disappointments on the earnings front. The key phrase in that prior sentence is “thus far,” but more on this later. At face value, positive surprises when it comes to earnings are good, but as I have said many a time, we need to dig deeper, below the headlines, to understand what is really going on.
Upon closer examination, more than a few companies delivered better than expected performances for the June quarter on what we would call in-line or only slightly better than forecast revenues. Connecting the dots, this means we need to look at the cost side of the equation - raw materials, services and labor - that has improved for companies. Said another way, companies are reaping the benefits of productivity gains from not only technology but also squeezing incremental productivity from the existing work force.
Corporate earnings continued at a fast and furious pace this week, and we started to hear from a wider variety of companies.
Again, however, it was a mixed bag. Solid earnings and outlooks from the likes of Apple Inc., Qualcomm Inc., Morgan Stanley and eBay Inc. were offset by disappointing earnings, outlooks or both by Yum Brands, Starbucks, IBM, Goldman Sachs Group and others. This resulted in a topsy-turvy stock market, which should be expected. Not only is that one of the trials and tribulations of any earnings season, but it is amplified by where we are in the domestic economic recovery.
Or not.
While some may cut to the quick and ask, “How can he say that?” I would quickly point to Federal Reserve Chairman Ben S. Bernanke’s semiannual report to the Senate Banking, Housing and Urban Affairs Committee on Wednesday. At the heart of Mr. Bernanke’s testimony, he stated that the Fed continues to forecast moderate growth for the domestic economy this year despite a “somewhat weaker outlook.”
Mr. Bernanke went on to pronounce the outlook as “unusually uncertain.”
With the stock market coming under increasing pressure as concerns about the viability of the economic recovery rise, several people have e-mailed me asking how they can protect themselves. The short answer is you can, and the more complicated answer is there are several ways to do so - some simpler ones and some that are more complex and better suited for more risk-tolerant investors.
Without question, there is growing concern that the economic recovery is losing steam. While we can point to several economic data streams over as many weeks, headlines on the Web, in magazines and in other publications are raising the issue if not stoking it. In the past week, some headlines have been: “U.S. Needs ‘Bright Star’ to Stimulate Economy,” “Federal Reserve weighs steps to offset slowdown in economic recovery,” “CBO tells Obama deficit panel that forecast remains bleak,” and “U.S. Jobs Picture Darkens.”
On Thursday, we received several new and unsettling updates, including one from the International Monetary Fund (IMF), which raised concern that risks to the speed of the global recovery are mounting.
Compared with the past few weeks, the earlier part of this week was rather quiet in terms of fresh economic data. Later in the week, we’ll get renewed views on the industrial economy and housing, but anecdotal evidence from companies that have reported their earnings suggests the former to be good while the latter may be tepid.
But I digress. As I started to say, there has been a lack of economic data and while the current earnings season has started to pick up steam, the slow news cycle early in the week focused attention on Goldman Sachs and what it may or may not have done regarding mortgage-related instruments.
Personally, I try to invest in industries and companies that I can understand, and candidly the financial industry is not one of them. I know, I know, it sounds strange thinking that a person in the financial world does not invest in financial companies, but what can I say.
I have never been a fan of deposits, credits, buybacks and book value, not to mention trying to figure out how to foresee what a bank can do on its proprietary trading or derivatives desk. I prefer data points that I can track, be they economic, demographic or some other. But again, that’s me. With financial companies making up roughly 20 percent of the S&P 500, there clearly is no shortage of investors for those companies and their corresponding securities.
What I can say is that the flare-up surrounding Goldman Sachs seems fairly well timed to coincide with the Obama administration’s efforts to reform the financial industry. Whether or not Goldman Sachs is guilty I have no idea, but more likely than not the civil charges filed against Goldman Sachs last week will lead to closer scrutiny of the way financial firms conduct their business. Transparency is good, in my view, as long as it does not interfere from a competitive perspective.
The question to be raised is who will watch the watchmen? Not so much the actual “who” per se but what kind of background should these overseers and regulator have? I mean, didn’t we have a cast of characters overseeing these institutions previously and how did that turn out?
Reregulating simply to do so is one thing, but it is quite another to have the foresight and understanding as to where the financial industry is going or needs to go in order to head off any new fiascoes. Will any reregulation be all-inclusive and prevent any further crisis from happening? Doubtful in my view. As my dad used to say, when you spend too much time watching the left hand, the right hand tends to get into trouble.