Wednesday, December 07, 2011

Morning Journal Out of Control Deficits


Economics
This Week’s Data


The International Council of Shopping Centers reported weekly sales of major retailers down 2.3% versus the prior week but up 3.8% versus the comparable period a year ago--the poor weekly number is related to seasonal (Black Friday) factors; Redbook Research reported month to date retail chain store sales were up 3.2% on a year over year basis.

In the week following Thanksgiving, weekly mortgage applications bounced back, up 12.8% while purchase applications rose 8.3%.


Other

Housing affordability at a high (short):
http://mjperry.blogspot.com/2011/12/housing-affordability-at-record-high-in.html


The out of control US deficits (medium):
http://www.theglobalist.com/printStoryId.aspx?StoryId=9461

Wall Street recidivists (short):
http://www.ritholtz.com/blog/2011/12/wall-street%E2%80%99s-recidivists/

The bail out of the banks and what it cost (medium):
http://www.ritholtz.com/blog/2011/12/yes-virginia-the-banks-really-were-bailed-out/

International

The latest out of Iran (medium):
http://www.zerohedge.com/news/iran-moves-forces-war-alert

News on Stocks in Our Portfolios

12:48 PM Sanford Bernstein analyst Tim Anderson's take on Eli Lilly (LLY,  +3.3%) offers a surprisingly candid view on the roulette-like risks involved in betting on drug company stocks with his estimate that LLY could clear $9B in sales of solanezumab by 2020 or misfire completely with its investment. Anderson on the sector: "Eli Lilly and several of its competitors are willing to spend hundreds of millions of dollars on what is essentially a massive lottery ticket." Comment!

10:56 AM Boeing's (BA, +0.3%) financial arm warns that airliners are likely to face using the bond market more often for financing purchases with European banks dramatically scaling back their lending to the sector. The company estimates that 10% of plane deliveries in 2012 will be financed through bond and equity issuance, up from 5% in 2011. Potential winners in the transition could be companies on the leasing end of the business, as buying planes becomes a trickier process for companies both large and small: AL, AYR, ACY, AER, FLY. Comment!

07:41 AM ConocoPhillips (COP) CEO Jim Mulva says the firm has restarted drilling operations in Libya as it aims to shoot even higher than its pre-war production over the next couple of years. "We think we can get back to 350,000 (barrels a day) and then go back to our initial plans and hopefully restore it by as much as even double." Comment!

07:12 AM Chinese police say the death of a child in China after drinking a Coca-Cola (KO) product is a case of deliberate poisoning after tests showed no toxicity in samples from the same batch of the drink. The report should help Coca-Cola avoid a broad recall of its products in the northeast region of China. Comment!

07:10 AM 3M (MMM) affirms its 2011 EPS outlook of $5.85-$5.95, and expects 2012 profits of $6.25-$6.50 on sales of $30.2-$31.5B. Consensus estimates are for earnings of $6.28 and sales of $30.59B. An investor/analyst meeting is scheduled for 8 ET. Listen live here. (PR) Comment!

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.