Wednesday, October 06, 2010

6 October 2010 Where have all the paychecks gone?


6 October 2010 Where have all the paychecks gone?

We are all waiting for the jobs report from Labor on Friday. We had a taste of what we might see today with the mostly misleading ADP private sector report showing a negative job growth. There was an interesting note out today about temporary staffing being up 4%. That could be a tell of things to come or just retailers beginning to get temps for the holiday season. I am still sticking with my guess of a negative 25,000 jobs on Friday.

Give me an A, Give me another A, what’s that spell?

 AA reports tomorrow and although its late (and I may have been drinking  (a 2004 Paolo Scavino Barolo Bricco Ambrogio) we will give you till one hour before Alcoa reports to get your guesses in. I only have a handful including mine and from the looks of it, the numbers do not show any big surprises but a bias to a beat.

Can you hear me now?

With all the banter out there about smart phone wars, I ran across a techcrunch blog that actually shows the market share shifts in this segment. Many of you have investments in the sector so I thought it might be of interest.

Still on a Roll Baby

Sunday we took a dart throw at YUM Brands (not a candy company) and said they have a beat of 2 cents a share. Here was the post:

“Tuesday we have YUM Brands reporting. The consensus number is 72 cents a share. I like the stock and occasionally regret not getting into it in 08 and 09. If you got to FinViz and read all the reporting over the last three months, every post is good and they end in BUT, (Behold the Underlying Truth) the stock might have grown up to its potential. (The stock is at most analysts target at 46 a share.) I still thin there is room for a little positive surprise. Look for 74 cents a share.”

Well, we mailed another one this week. It hit 74 cents.

Monsanto was expecting a loss of 6 cents a share and we did not argue it because we do not follow the stock. They lost 9 cents a share.

We had projected a blow out for COST Costco. They were hoping for 95 cents a share income and I went way out there to 99 cents a share. Let’s split the difference as they hit 97. A beat is a beat.

There was a bit of a smudge on my crystal ball when it came to my call on RPM, parent company of the DAK and Rustoleum brands. I was looking for a three cent beat to 54 cents a share. They actually lost 57 cents a share. This is a perfect example of not staying in touch with your stocks. We got out of RPM in May. They incurred some large expenses from the deconsolidation of a bankrupt division. When you extract those charges, you are close to the 51 cents, but they would have missed anyway.

Q E II, Look it’s a boat, it’s a plan, no its lip service

If you have listened read or watched any business news in the last several days, there is a lot of interest in QE II. Did you know that on September 20, 1967 Queen Elizabeth used the same gold scissors to launch the Queen Elizabeth II as her mother and grand mother used to launch The Queen Elizabeth and the Queen Mary respectively? Those scissors must go into a very special junk drawer at the castle.  I've been in Buckingham and its a big place man.  We can’t seem to keep track of scissors for three weeks none the less three generations? Those Brits sure are organized. But I digress.

Anyway that is the most interesting thing you are going to learn about QE II. However I will give the briefest explanation of what it is and how it MIGHT impact the market. If and most probably, the job number sucks on Friday. The Fed has been telegraphing, hell they are broadcasting; they will do more quantitative easing again. If you missed the first round of QE I believe it took place in the weeks prior to June 26, 2010. The fed bought 1.5 trillion worth of US treasuries in the hopes of stimulating lending by lowering Treasury bond interest rates.

This is nothing unique to the US and it happens quite a bit, but the amounts are getting interesting. There is the possibility of between 1.5 trillion and 3 trillion on the block right now. Here is what they do in very very simplistic terms. Uncle Ben Bernanke calls up the Federal Reserve and says I want to buy 200 billion in 6 month, 2 year and 10 year treasury notes over the next 10 weeks, but I don’t have any money in my account (The GAO balance sheet), so just credit my account. That sucks up the supply of treasury notes for a while and the US Treasury auctions each weak will see a reduction in the yields of those treasury notes (At near all time lows now.) This should in effect lower the cost of borrowing on a broader scale, and increase the money supply in the system hopefully encouraging the lending of monies to large and small business alike.

Here is my read on the whole thing. There is not an issue with lending at the moment. There is an issue with borrowing. People and businesses do not want to borrow money because of a spooky economy, an unstable job market, a funky political environment, a crazy flash crashing stock market, and an ever expanding financial media zone (Fox Business, Bloomberg, MSNBC, CNBC, WSJ, etc) that love to just scare us to death with the very next scary data point. (Like Friday’s job market.) Mid size and large companies not flush with cash do not want to borrow to hire because they still don’t know how much the new employees are going to cost because of the new health care regulations. (One more reason why you may have seen the temporary worker number expand by 4%). Anyway, the market (Mr. Crazy Market) is seeing QE II as a dilution of the dollar (correct) the seeds for inflation or hyper inflation (maybe), and more money for banks to sit on to meet the next stress test and the new Basel III capital requirements. Henceforth (I just love using that word) QE II is lip service that just like the ship, should be mothballed.

From the White House Austerity Gallery

The President and First Lady decided to scale back on the Presidential Motorcade budget.
Salve Lucrum


Post a Comment

<< Home