Thursday, August 05, 2010

Headlines -- Morning Edition -- August 5

By Steve Cook
All American Investor

As reflected in yesterday’s Morning Call, ADP reported a positive employment number--but this is a secondary indicator and frequently deviates significantly from the Labor Department stat.

However, because there was no other economic data reported yesterday, the ADP report got more air time than it deserved. On the other hand, it set up the nonfarm payrolls figure which gets reported Friday morning and, as has been the case for the last two years, is widely anticipated.

In a referendum on key provisions of Obamacare in Missouri, voters rejected it 71% to 29%. While these issues are always subject to how the referendum is worded in the first place, that kind of margin suggests that barring outright deception on the ballot, the voters of Missouri (historically a swing state) are fairly united in opposition. Hopefully, another incentive for political moderation from the dems.

ObamaCare Meets the Voters


Goldman also announced late in the day that it was spinning off its proprietary trading desk. If so, that is a positive for the capital markets.

Zero Hedge Is Delighted To Hear That Goldman Plans To Spin Off Its Prop Trading Desk


Of a less positive nature is the recent heightening of tensions in the Middle East. I did not spend a lot of time at the beach listening to the nonfinancial news; but when shots are fired and rockets launched (as they have been), the risks of a significant flare up rise and that is not likely to be good for stocks.

Guest Post: Clash On Israel-Lebanon Border Holds Potential For Strategic Escalation


Bottom line: stock prices in general are close enough to Fair Value that there is little fundamental reason for a rush to Buy. To be sure, the fundamentals have been improving modestly of late; but then so have valuations. Barring a big positive exogenous event, the opportunity cost of holding cash is acceptable.

If any of you own municipal debt, you need to read this and do the homework on the securities that you own (medium):

The Next Sovereign Debt Crisis


I have on several occasions referred to the level of cash on corporate balance sheets as a positive for the economy in that it represents the source of future investments. This article pretty much destroys that argument (medium):


The latest data on this quarter’s earnings and revenue ‘beat’ rate (short):

Earnings and Revenue Beat Rates

Steve Cook earned an MBA at Harvard and did post graduate work in economics and financial analysis at New York University. He earned his Chartered Financial Analysts designation in 1973. Steve has 40 years of investment experience including institutional portfolio management at Scudder Stevens and Clark and Bear Stearns. He managed a risk arbitrage hedge fund and an investment banking boutique specializing in funding second stage private companies. Steve now manges Strategic Stock Investments which focuses on wealth building through strategic investments.A potpourri of lesser items to write about.

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Original content Steve Cook, All American Investor