Wednesday, June 09, 2010

BAGAKOAA June 9, 2010 What the good Ben giveth, the good Ben taketh away.


June 9, 2010 What the good Ben giveth, the good Ben taketh away.

First off, Happy Birthday Bro. He doesn’t read the blog but what the hay.

Yesterday we gave credit to Uncle Ben for being the catalyst for our wee small rally. And despite more credit worries in Europe and draconian austerity programs in the UK, that rally, endorphed by some good export news out of Asia, continued for the first couple of hours today. Then some of the talking heads at the US House of Rep. budget hearing committee got Uncle Ben to say some negative comments about the recovery. They really didn’t ask him any relevant questions, that talked at him about all the negative stuff to which he could only marginally temper.

So now we are down .4% on the week at the kinda halfway mark. Remember we were predicting a 3.5% drop by Friday here in Salve Lucrum Land.

I actually took a look at the Federal Beige Book and there is no relevant news that might shake the market tomorrow. Overall it clearly indicates economic growth, be it slow, employment growth be it slow, and no inflation anywhere.

In the category of one man’s trash is another man’s gold, an interesting article came out today on Bloomberg showing an interesting analysis of number of rail cars carrying waste in comparison to early time frames. When you look at rail cars carrying waste and rail cars carrying iron ore, rail cars carrying coal, and about 16 other categories, the closest correlation to GDP movement is number of rail cars carrying waste. Whoda thunk? That’s right, there is an 82% correlation between the change in rail cars carrying waste and GDP growth or retraction and it is a leading indicator. That fancy economic talk for it tells the future.

And what does this incredible metric tell us about the future. Last year (May 2009), there were 25,402 rail cars carrying waste. This year, there were 34,816 rail cars carrying waste. That is the fastest jump since 1994, a 37% increase. It is even more impressive when you compare April and May figures. The Association of American Railroads publishes monthly economic data in 17 categories which you fledgling economists might be interested in.

I promised one of our readers I would share another interesting economic tell. You hear it referenced with some regularity by the talking heads on Bloomberg and MSNBC. It is called the Baltic Dry Index. Unfortunately I have lost the link to the actual index itself so I cannot post it here. It is an economic indicator derived from a global network of ship brokers and how much freight they are hauling on any given day. You can get a lot of information from the Baltic Exchange, but the numbers I occasionally pull are not available there anymore.

We were glad to see some reversal on the free fall of FLS, Flowserve. I did some homework last night and a bit tonight to make sure I am not missing anything. Not that I would know if I was. But all of this drop seems to be just a sector downdraft. The cheaper this stock get’s the better it looks. Just look at the analysts target prices over the last three months 120-150 (Thank you Credit Suisse for the great write up today.)

We did not add to our FLS position, but did pick up more BAC, WFC, and C on their dips. The fact that Senator Blanche Lincoln of Arkansas won a primary run off yesterday brought most of the financials down as she has promised to rip the guts out of all financial institutions. There is prevailing confidence that our friend US Rep. Barney “Elmer” Frank will come to a reasonable approach and the financials will be allowed to operate in these United States. We were buying on the small dips. We know a few of you hold COP, Conoco Phillips. I just wanted to let you know you have a fellow investor. No it’s not me as our only oil stock is CVX. Cramer was pimping COP today. Can’t say anymore or he will not read my blog.

Salve Lucrum


Post a Comment

<< Home