Small summary of today’s FED Beige Book

• Today’s FED Beige book noted that most of the twelve FED districts indicated that the pace of decline has moderated or that activity has begun to stabilize.
• Economic activity was described as “slow,” “subdued,” or “weak” by five of the districts. 
• Chicago & St. Louise reported that pace of decline appeared to be moderating.
• Most districts reported sluggish retail activity, with consumer spending in the early summer below year-ago levels. 
• Households are still continuing to be price conscious, several districts noted that consumers focused on purchasing less expensive necessities.
• Auto sales were mixed across the country, although the Philadelphia, Cleveland, Atlanta, Kansas City and San Francisco districts said that sales of used vehicles continued to be strong or were strengthening.
• Manufacturing ticked slightly positive compared to the previous beige Book report but remained bad…

"Many Districts characterized manufacturing activity as remaining depressed but with selected signs of modest improvement."

• All twelve districts indicated that the labor market remain slack, with most sectors either reducing jobs or holding them steady.

For a more nicer summary by districts visit this article by Seattletimes.

Source: RTT News

Long Sequenom, Inc (SQNM) @ 5.56

Bought SQNM @ 5.56 after huge mentions by people @ stocktwits and noticing a break out @ the $5.30 area after failing to break since April 30, 2009.  MACD is also showing that it may have a little more room to go on the upside even though Stochastics are showing oversold levels.  Short term target price set @ 7.02.  Stop loss set below $5.26.  

Existing home sales +8% better than expected

 

• Home resales in US rose in June for a 3rd consecutive month, spurred by tax incentives, lower borrowing costs and foreclosure-driven declines in prices.
• Purchases climbed 3.6% to an annual rate of 4.89 million, stronger than forecast and the highest level since October.
• Median prices still fell –15% compared to last year but improved on a MoM basis.
• Economist had forecasted existing sales to rise to 4.85 million from a previously reported 3.770 million in May. 

“We have finally bottomed out,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. Improved affordability “is stalemating the drag from higher unemployment.” Hoffman forecast sales would rise to a 4.9 million pace.

• Inventory levels still remain elevated, and the current pace of sales would take more than nine months to work through.
• Distressed sales retreated to just 31% of total activity, the lowest reading since NAR began reporting the statistic late last year.

   

Source: Bloomberg, Wells Fargo Economics Group & Barron's

Indexes that may help identify if the economy is improving

The Blackberry Index:

The mergers-and-acquisitions market doesn’t take a rest for the holidays. Blockbuster bids for the European fall are being plotted right now. M&A bankers working on a deal can’t afford to stay out of the loop for more than a few hours. If there are lots of people scrolling furiously on their BlackBerrys and wearing out their fingers composing memos on a tiny keypad, expect plenty of big deals in September. If the BlackBerrys remain silent, assume the markets are dead.

The Private-Jet Index:

After a couple of days, you will have a fair idea of when the scheduled planes land at the closest airport. But private jets operate on their own timetable, and the families traveling on them might show up anytime. The more people flying in privately, the better the markets are looking. This index can mainly be used as a measure of the private-equity industry. Those guys never fly public if they can help it.

The Towel Index:

Take a look at how many towels are left by the time you finally saunter down to the pool in the morning. If there are none to be had, that can only mean one thing: The Germans are back, and talk of the demise of Europe’s export machine will have been exaggerated. Conversely, if there are plenty of towels available, that means the heart of the European economy is still in terrible shape, and there is zero chance of a sustained recovery this year.

The Nanny Index:

Why exactly having a husband who works for a hedge fund means a woman can’t look after her own children is something even the most distinguished biologists have never been able to explain. It is, though, an indisputable fact. If you see a lot of stressed-looking women struggling to figure out how to get sun cream on a 2-year-old, assume redemptions at the hedge funds are still running high. If they are flanked by nannies taking care of everything while the woman of the house works on her tan, you can assume those long-short currency-commodity arbitrage strategies are raking in the cash again.

The Paperback Index:

Take a good look at what your fellow guests are reading around the pool. If they are gripped by some frightening-looking tome explaining why the world is heading for a new Stone Age, you can be sure their company/bank/fund is teetering on the edge of bankruptcy and they are trying to understand why. If they are just relaxing with the latest James Patterson, you can deduce that things aren’t so bad.

 

The Crane Index:

In the last decade, much of southern Europe, and Spain in particular, has been turned into a forest of cranes. New apartment blocks, preferably with views over the sea, were being thrown up every minute and sold just as quickly. From your pool, you may be able to count a dozen or more cranes. But is anyone working on them? If they are, credit must still be flowing through the system. If there are lots of abandoned cranes on building sites, there is only one conclusion: There is still a lot of pain ahead in the property market, more trouble for banks, and you need to scurry back into cash fast.

 

The Natasha Index:

Anyone visiting a swank Mediterranean resort in the last few years will have noticed the way they have been taken over by Russian oil moguls, usually with a team of gorgeous, if slightly icy-looking, blond women in tow. With the commodity markets in freefall, many oligarchs have been canceling their holidays, or at least cutting back on the number of women they take with them. So take a close look (not too close -- these guys get jealous) at the throng of bikinis. The more Natashas you see, and the more stunning they look, the better the outlook for the oil and commodity markets.

Source: Bloomberg

Bought $YUM @ 33.39

Bought $YUM @33.39 after getting that the stock is reaching oversold conditions.  Hopefully it doesn’t break that $33.35 resistance as barely held into the close.  If it breaks & heads to $32.35 I might add some more positions to this one as this company is one of the very few bright spots in this economy.  No target price just yet, really like KFC. 

Comparing Poker with the stock market

They were really talking about the business world but I feel like these same concepts apply to trading the markets as well.  So if you replace the word “business” with “stock market trading” it applies really well too.  I just took two of the Q&A that I find relates to the markets.

An interview with Poker Pro Annie Duke

Q: What poker tools do apply to business?

A: In poker, you look for patterns from your opponents, how they behave in certain situations. How do the behave when they're comfortable or uncomfortable? How do they play when they're drawing for a hand? How do they play when they have a made hand? Gather data on your opponents so you can predict what they actually have. Understand how they perceive you. It's an extremely important tool in business negotiations. Poker is really just a negotiation. If I know people are perceiving me to be too conservative, then I'm going to play in an conservative manner until they readjust their perception of me.

Q: Business leaders wrestle with playing it safe vs. taking a risk. How do you decide when to fold or go "all in?"

A: It's mathematical. I'm much more likely to be risky when the return is huge. The smaller the return, the less risky my behavior. It has to do with pot size. People lose sight of that. They want to be right. They are afraid of being wrong. It's not about being right, it's about being right often enough. If you make a $1,000 investment and the return is $10,000, you need only be right 10% of the time. Shrug your shoulders when you are wrong. Great players free themselves from the worry about being wrong.

 

In Summary Business, like poker, is not always fair. Don't get upset about what you can't control. Long-term self-interest and short-term greed are not the same thing. Watch your ego. Successes, not just failures, are often dumb luck.

Source: USA Today

Bought UNH @ $25.01

Bought UNH @ 25.01.  Expecting a bounce on Monday and will probably sell there as 50DMA seems to be acting as very strong resistance around $25.99.  buy to cover @ $24.82.

Home Starts 582,000 vs. 530,000 consensus

 

• Housing starts in June unexpectedly rose in June as construction of single-family dwellings jumped by the most since 2004.
• This may signal that the market is stabilizing even though unemployment is still worsening.
• the 582,000 number was better than the 530,000 consensus.

“Builders are beginning to see some opportunities to get back to work,” said Mark Vitner (Senior economist at Wells Fargo Securities LLC)

• The increase in starts adds to signs that the housing slump may be nearing a bottom.  Combined sales of existing and new homes climbed to a 5.1 million annual rate in may, highest level so far this year.
• US homebuilders are becoming less gloomy about the real estate industry. 

“Foreclosures are the one part of the economy that’s getting worse right now, everywhere else the negative numbers are at least getting smaller every quarter.” said Patrick Newport (IHS Global Insight)

  

Source: Bloomberg, Wells Fargo Economics Group, Barron's & NY Times

June Unemployment Rate by State

Source: USA Today

Marc Faber: Bearish In the Long Term

Jobless claims 522,000 vs. 535,000 consensus

• First time claims for unemployment benefits continued to decrease in the week. 
• Report showed that jobless claims fell to 522,000 from the previous week’s revised figure of 569,000. 
• Economist had been expecting jobless claims to fall to about 530,000 from the 565,000 originally reported from the previous week.
• Jobless claims fell further below the 600,000 level.
• Seasonal issues in the auto sector have continued to impact jobless claims, skewing the data artificially lower. 
• Report also showed that the less volatile four-week moving average fell to 584,500 from the previous week’s revised average of 607,000.
• Excluding the auto sector, the declines may still generate some optimism about a stabilization in the labor market.

Source: RTT News & Barron's

The reason for another leg up in mid-day.. Direct from CNBC

The US may need a second fiscal stimulus worth $200 billion to $250 billion around the end of the year, but the worst of the economic and the financial crisis is already behind us, leading economist Nouriel Roubini of RGE Global Monitor said on Thursday.

CNBC.com

Nouriel Roubini

Roubini, one of the few economists who foretold much of the current financial turmoil, said a second stimulus would be necessary to boost a deteriorating labor market.

The stimulus "can not bee too small, but it can not be too large," Roubini said, or financial markets will become too worried about the sustainability of the U.S. debt.

Source: CNBC

FOMC Minutes Meeting July 15, 2009

For immediate release

Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Source: Federal Reserve

Bought Bank of America (BAC) @ $12.94

Bought Bank of America @ 12.94 today after seeing it break yesterday’s key technical of the 200DMA, 50DMA, 20DMA & 10DMA.  On top of that after yesterday’s strong run, it managed to hold above today’s 200DMA @ 12.66 after yesterday’s strong run.  Stop loss placed below the $12.66 level with a short-term target price of $13.83.  Or hopefully the 52-week high @ 15.04. 

Bought Exon-Mobile (XOM) at $65.57

Bought XOM @ 65.67 with a stop loss @ $64.80 & a short term target price at $68.12.  Stochastics & MACD looks like it is ready for a run too and seems like its the end of the road for the H&S formed with the $74 peak as the head & the two $71 as the shoulders.

Long MSFT, SWY & PCX. Short POT

Long Microsoft @ $22.38 with a stop loss at 22.06.  target price $24.13 again for the short term.

 

  Long Safeway @ $19.37 with a stop loss @ 19.25.  target price, none so far, I think this is long term.

 

Short Potash @ 85.01, target price $78.70 and a stop buy to cover price $89.00. 

 

Finally long Patriot Coal PCX @ 5.38 with a stop loss @ $5.24.  No short term target price for this one either as I feel this is a good long term play.  

Consumer Confidence @ 64.6 vs. 71.5 consensus

• Consumer sentiment in the month of July fell again much more than expected, with the decrease likely due in part to concerns about the labor market.
• Report showed that consumer sentiment came in at 64.6 compared the final reading of 70.8 for June.  Economists had been expecting a more modest decrease to a reading of about 70.0.

"Consumers concluded that the economic downturn would last longer and their personal finances would not recover as quickly as they had previously expected." – Officials at the Reuters/University of Michigan Survey.

• Expectations fell to 60.9 in July from 69.2 in June.
• Current conditions index fell to 70.4 in July from 73.2 in the previous month.

"The drop in current conditions can be explained by disappointment over the unexpectedly big decline in June payrolls and the unemployment rate's rise to 9.5%, both of which received plenty of media attention. But expectations were down more than current conditions, suggesting the other big news story of the second half of May - the cap and trade and healthcare reform bills - may have been an even bigger factor in the confidence drop,"” - Chris Low, chief economist at FTN Financial

• Consumers are concentrated heavily on reducing outstanding debts.  Overextended finances and job and income uncertainty have made consumers much more saving minded.

Source: RTT News & Barron’s

U.S. consumer credit edges fell much less than expected in May

• Total US consumer credit fell by unexpectedly by $3.23 billion in May. 
• May consumer credit outstanding fell at a 1.5% annual rate to $2.5196 trillion from 2.5229 trillion in April as the US recession crimped borrowing.
• Analysts had forecast consumer credit to decline by $9.5 billion in May compared with April’s drop which was revised to show a record decline of $16.52 billion.  This was previously reported as a $15.7 billion fall.

"The figures show recession, but recession going to a period of stabilization, and then improvement," said Marshall Front, chairman of Front Barnett Associates LLC in Chicago.

• With credit card defaults at record highs, companies are slashing lending limits and closing accounts to curb losses.
• Non-revolving credit which includes closed-end loans for big-ticket items like cars, boats, college education and holidays, fell $400 million, or at a 0.3% annual rate.
• Revolving credit, made up of credit and charge cards, decline $2.9 billion, or at a 3.7% rate.

"The era of free money is over and consumers have a lot of debt balance sheet clean-up to perform," said Lindsey Piegza, analyst at FTN Financial in New York.

• Analysts expect the rate of industrywide losses from credit cards to peak at 12 percent to 14 percent in 2010, up from 10 percent now, pushing annualized losses close to $100 billion.
• The industry may not be profitable again until 2011

Source: Reuters

June same store sales

• Ross +1%
• JC Penny –8.2%
• Kohl’s –5.6%
• Saks –4.4%
• JWN –10%
• Limited Brands –7.9%
• Children's Place –12%
• The Buckle +9.6%
• Stage Stores –12.6%
• Destination maternity –10.7%
• Stage stores –12.6%
• Costco –6%

Source: Marketwatch

Short Randold Gold resources @ $61.22

Shorted Randolg Gold Resources at $61.22.  Since the June 23, 2008 bounce off its key trendline, the stock has failed to break through the 20 DMA.  Stochastics are also confirming the cross to the downside as well.  Stop loss placed at $62.36.  Target price $56.15. 

Non-Farm Payroll WAY.. Worst than expected..

• US employers cut 467,00 jobs in June, which was far more than the expected 350,000. 
• The report showed a labor market that continues to struggle with a deep recession.
• June job losses were more than 30% greater than the consensus.

"It looks like the economy was still losing substantial momentum as the second quarter came to a close. This report is weak across the board. The only saving grace is that the decline in payrolls may not be as large as we saw at the start of the year." - William Sullivan (chief economist at the JVB Financial Group in Boca Raton, Florida)

• Steepest declines were in services, which fell 244,000 after a 107,000 drop in May.
• Professional and business services fell 118,000, while government employment fell 52,000.
• Manufacturing was one of the few sectors to show a smaller drop in June falling 136,000 after a 156,000 fall in May.
• Education and health services was the only industry to add jobs, with employment increasing by 34,000 jobs.

Source: Reuters, RTT News, Barron's, Bloomberg & FXDD

ADP Total private sector employment dropped –473,000 in June

• Private sector job cuts fell by –473,000 in June. 
• Expected loss exceeds the 400,000 drop forecast by economist.
• The new ADP report showed large businesses with 500 employees or more shed 91,000 jobs and medium-size businesses lost 205,000 jobs last month.
• Small businesses that employ fewer 50 workers cut 177,000 jobs in June.
• Service sector jobs dropped 223,000 in June, while factory employment dropped 146,000

"Job losses slowed temporarily in May as consumers benefited from income tax refunds, President Obama's tax credit, low interest rates, and low energy costs.  With the exception of the tax credit, all of those factors have disappeared or reversed." – Charles Biderman (Chief executive TrimTabs)

Source: WSJ, Reuters, Bloomberg & Barron's

Construction spending dropped –0.9%

• Construction spending fell more than expected again May.  The drop was largely contributed by the drop in homebuilding construction.
• Construction spending fell –0.9% in May, following a revised following a revised +0.6% rise in the previous month.
• Economist had expected the construction spending to fall by –0.6%  following a rise of +0.8% in April.
• Compared with the same period last year, May’s construction spending was down –11.6% for the first 5 months of the year.  The figure is off 11.7% from 2008.
• Government-sponsored construction dipped 0.6 percent in May. Educational building rose 0.5 percent, but highway construction dropped 1.3 percent.
• Spending on private construction fell –1% in May compared to April.
• This includes a –3.4% decline in residential construction.
• Non-residential construction was up +0.5%

Source: RTT News & Barron's

ISM manufacturing index showed a slower pace of contraction

• The pace of contraction slowed in the month of June compared to the previous month in the middle of some encouraging signs for the manufacturing sector.
• ISM said its index of activity in the manufacturing sector rose 44.8 in June from 42.8 in May.
• A reading below 50 indicates a contraction.
• The economist came pretty much inline with the expectations of economist, who forecast a reading of 44.6

"Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June.” – Norbert J. Ore (Chair of the ISM Manufacturing Business Survey Committee)

• Turnaround in production was the most encouraging sign, with the production index jumping to 52.5 in June from 46 in May.
• With the increase, the index rose above 50 for the first time Since July 2008 and reached its highest level since January 2008.
• Employment index rose rose 40.7 in June from 34.3 in the previous month.
• Employment showed some improvement in the month, although it continued to contract.
• New orders index slipped back below 50, dipping to 49.2 in June compared to 41.1 in May
• With regards to inflation, ISM said that the prices index jumped to 50 in June from 43.5 in May, with the increase reflecting the recent increase in commodities prices.
• Inventories index fell to 30.8 in June from 32.9 in May, indicating a faster pace of contraction in inventories.

"Inventory correction should now be near its end. After a violent draw-down of inventories, firms will have to restock in the not-too-distant future." – Bernd Weidensteiner (Analyst, Commerzbank)

• On top of that, government efforts to revive auto sales may give manufacturing and the economy a boost in the third quarter.  The “cash for clunkers” bill that passed congress in June gives consumers as much as $4,500 to trade in their old cars for more fuel-efficient vehicles.

ORDER BACKLOG INDEX 47.5 VS 48.0 PRICES-PAID INDEX 50.0 VS 43.5 INVENTORIES INDEX 30.8 VS 32.9 EMPLOYMENT INDEX 40.7 VS 34.3 PRODUCTION INDEX 52.5 VS 46.0 NEW ORDERS INDEX 49.2 VS 51.1

Source: RTT, FXDD & Bloomberg

YoY US Car sales performance by manufacturer

Car sales by company YoY:

• Honda –29.5%
• BMW –20.3%
• GM –33.6%
• Nissan –23%
• Toyota –32%
• Chrysler –42%
• Ford –10.9%
• Volvo –0.6%
• Daimler Mercedes –26.5%
• Porsche –66% (Ouch!!)
• Mitsubishi –41.7%
• Hyundai –24%

Source: Marketwatch

Pending home sales up +0.1% in May

 

• Pending home sales index rose 0.1% in May after a revised 7.1% in April.
• Pending home sales in may were mixed regionally
• +3.1% Northeast
• +2.2% in West
• -1.7% in South
• -1.3% in Midwest

"Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade," - Lawrence Yun (NAR's chief economist)

• The federal government’s $8,000 tax credit for first time home buyers appear to be working, which can be used for the down payment.  On top of the other incentives offered by state & local governments.
• Housing affordability index fell to 171.6 in May from a revised 178.8 in April.  The April reading was the highest on record dating back to 1970.
• Index remains at historic highs.

"Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," Lawrence Yun

Source: MarketWatch, CNBC, RTT News & Reuters

S&P Home price index drop narrows to -0.6% in April.

• MoM, prices in 20 selected countries fell –0.6% in April, with declines in 11 cities, compared with a decline of –2.2% in March.
• Overall annual pace of decline has slowed.

"Thirteen of the 20 metro areas also saw improvement in their annual return compared to that of March. Furthermore, every metro area, except for Charlotte, recorded an improvement in monthly returns over March. While one month's data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions.” – David Blitzer (chairman of the index committee for Standard & Poor's, which compiles the Case-Shiller index)

Change for the month for the 20 Largest Metro Areas.

Dallas                        1.74% Denver                       1.48% Cleveland                   1.25% Washington DC           0.83% San Francisco             0.61% Boston                       0.43% Atlanta                      0.28% Seattle                       0.23% Chicago                    -0.03% San Diego                 -0.09% Charlotte                  -0.51% Portland                    -0.56% Minneapolis              -0.66% Tampa                      -0.68% Los Angeles              -0.94% Detroit                     -1.49% New York                  -1.67% Miami                       -2.02% Phoenix                    -2.23% Las Vegas                 -3.48%

Source: Marketwatch, CNN Money & FXDD

Consumer Confidence fell back fell –10.2% in June

• Consumer confidence unexpectedly dropped in June. 
• The decrease reflected less favorable assessments of both current conditions and the near-term outlook.
• Conference board said its consumer confidence index fell to 49.3 in June from a revised 54.8 in May. 
• The decrease surprised economist, who had expected the index to edge up to 55.3 from 54.9 originally reported from the previous month.

"The recent increase of gasoline prices and a more pessimistic take on the labor market obviously prevented a further improvement of consumer sentiment.” – Bernd Weidensteiner (Analyst, Commerzbank)

• Present situation index fell to 24.8 in June from 29.7 in May. 

"continues to imply that economic conditions, while not as weak as earlier this year, are nonetheless weak.” – Lynn Franco (Director of the Conference Board Consumer Research Center)

• Those claiming business conditions are “bad” rose to 45.6 in June from 44.5 in may.
• While those claiming conditions are “good” fell to 8.0% from 8.8%
• Consumers also had less favorable assessment of the labor market, with those saying jobs are “hard to get” rising to 44.8% in June from 43.9% in May. 
• Those saying jobs are plentiful fell to 4.5% from 5.8% in May.
• Report also showed a deterioration in consumer’s short-term outlook, as the expectations index fell to 65.5 in June from 71.5 in May.
• Those expecting conditions to worsen over the next 6 months rose to 20.2% in June from 18% in May, while those anticipating an improvement in conditions fell to 21.2% from 22.5%.
• Consumers were also pessimistic about the job outlook.  Those anticipating fewer jobs in the months ahead increased to 27.3% in June from 25.6% in May, whole those expecting more jobs fell to 17.4% from 19.3%.

Source: RTT News & FXDD