All American Investor

Showing posts with label sales. Show all posts

Thursday, May 20, 2010

Real Retail and Food Services Sales (Chart)

Deflated Using the Consumer Price Index for All Urban Consumers (1982-84=100)

Tuesday, November 17, 2009

Real Retail and Food Services Sales Still Dropping (Graph)

This should be disconcerting to investors. Could be an indication of storm clouds on the horizon.

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Original content Bob DeMarco, All American Investor

Friday, September 25, 2009

Investor Reading 925

Existing Home Turnover Ratio, and Distressing Gap

Although the turnover ratio has fallen from the bubble years, the level is still above the median for the last 40 years. This suggests 2009 is about a normal year for existing home turnover.
To continue reading go here.

Back from the Brink--GREG MANKIW'S BLOG

The latest speech from the CEA Chair.
To continue reading go here.

Paul Krugman: It’s Easy Being Green

It’s important, then, to understand that claims of immense economic damage from climate legislation are as bogus, in their own way, as climate-change denial. Saving the planet won’t come free (although the early stages of conservation actually might). But it won’t cost all that much either.
To continue reading go here.

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Friday, July 17, 2009

Total Business Inventories, Sales and Ratio (Graph)

The combined value of distributive trade sales and manufacturers' shipments for May, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $966.1 billion, down 0.1 percent from April 2009 and down 17.8 percent from May 2008.

Manufacturers' and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,368.1 billion, down 1.0 percent from April 2009 and down 8.0 percent from May 2008.

The total business inventories/sales ratio based on seasonally adjusted data at the end of May was 1.42. The May 2008 ratio was 1.27.

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Wednesday, May 20, 2009

Roubini on Gold, China, IMF Sales

Source RGE Monitor Newsletter and RGE Monitor

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

More from All American Investor

30 Year Conventional Mortgage Rate (Chart)
Top Hedge Fund Managers Make Billions in 2008
Systemic Risk Defined--Too Big to Fail
Ray Dalio on the current state of affairs in the market
Roubini Predicts U.S. Losses May Reach $3.6 Trillion
Option ARM--The Toxic Mortgage
Warren Buffett's Annual Letter to Investors (Cliff Notes Version)

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Wednesday, May 13, 2009

Retail Sales a Picture Worth a Thousand Words--UGH (Chart)

Retail sales dropped .4 percent for the month and are down 10.1 percent year over year. Retail sales account for two thirds of GDP. This report is bearish on the market.

There is a strong relationship between GDP and stocks. This report really puts pressure on relative valuations. The risk of owning stocks is mounting as we pointed out last week in our article --They called me crazy, S and P 900-1000 (Part Two)

The S and P was trading near 925 when we wrote that. Now down 4 percent.

We will update the S and P numbers shortly.

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Retail Sales Drop Disconcerting

Retail sales account for two thirds of GDP. Unemployment, falling home values, and massive drops in personal net worth are clearly effecting consumer buying ability and attitudes. This should not come as a big surprise, but it did. The recent news on credit card defaults is also another dark cloud looming on the horizon.

Source Census Bureau

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Friday, March 27, 2009

Vehicle Sales Plunge--Ugly Chart

Tuesday, March 10, 2009

Credit Crunch Are Credit Cards the Next Shoe to Drop-

I am reading stories about consumers complaining that their credit card limits are being reduced. In addition, I wrote recently about consumer complaints about sharp increases in the annual percentage rates they are paying on their credit card. It seems that credit lines are getting cut, and APRs are going up, regardless of the quality of the consumers' credit. It appears credit card companies are using zip codes to determine your credit worthiness. In other words, if the zip code you live in is experience high housing default rates or price deterioration--you are going to pay higher rates regardless of your credit history.

Today, Meredith Whitney is writing about the behavior of credit card companies. She says,

When you couple this with the rising savings rate, you could easily conclude that the economy is going to grow slowly for the foreseeable future.

You should read the article below carefully and to the end.

There are going to be investment opportunities based on this trend. For example, is it a good idea to be short the major credit card companies? Are travel companies going to get "killed"? While it is not well known, a large fraction of senior citizens use credit cards to purchase their medication, is this trend going to effect the health of older people and retiring baby boomers? Or, the earnings of pharmaceutical companies?

Are you listening? Your thoughts?

Credit Cards Are the Next Credit Crunch

Washington shouldn't exacerbate the looming problem in consumer credit lines.
By MEREDITH WHITNEY

Few doubt the importance of consumer spending to the U.S. economy and its multiplier effect on the global economy, but what is underappreciated is the role of credit-card availability in that spending. Currently, there is roughly $5 trillion in credit-card lines outstanding in the U.S., and a little more than $800 billion is currently drawn upon. While those numbers look small relative to total mortgage debt of over $10.5 trillion, credit-card debt is revolving and accordingly being paid off and drawn down over and over, creating a critical role in commerce in America.

Just six months ago, I estimated that at least $2 trillion of available credit-card lines would be expunged from the system by the end of 2010. However, today, that estimate now looks optimistic, as available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone. My revised estimates are that over $2 trillion of credit-card lines will be cut inside of 2009, and $2.7 trillion by the end of 2010.

Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy. Lenders, regulators and politicians need to show thoughtful leadership now on this issue in order to derail what I believe will be at least a 57% contraction in credit-card lines.

There are several factors that are playing into this swift contraction in credit well beyond the scope of the current credit market disruption. First, the very foundation of credit-card lending over the past 15 years has been misguided. In order to facilitate national expansion and vast pools of consumer loans, lenders became overly reliant on FICO scores that have borne out to be simply unreliable. Further, the bulk of credit lines were extended during a time when unemployment averaged well below 6%. Overly optimistic underwriting standards made more borrowers appear creditworthy. As we return to more realistic underwriting standards, certain borrowers will no longer appear worth the risk, and therefore lines will continue to be pulled from those borrowers.

Second, home price depreciation has been a more reliable determinant of consumer behavior than FICO scores. Hence, lenders have reduced credit lines based upon "zip codes," or where home price depreciation has been most acute. Such a strategy carries the obvious hazard of putting good customers in more vulnerable liquidity positions simply because they live in a higher risk zip code. With this, frequency of default is increased. In other words, as lines are pulled and borrowing capacity is reduced, paying borrowers are pushed into vulnerable financial positions along with nonpaying borrowers, and therefore a greater number of defaults in fact occur.

Third, credit-card lenders are currently playing a game of "hot potato," in which no one wants to be the last one holding an open credit-card line to an individual or business. While a mortgage loan is largely a "monogamous" relationship between borrower and lender, an individual has multiple relationships with credit-card providers. Thus, as lines are cut, risk exposure increases to the remaining lender with the biggest line outstanding.

Here, such a negative spiral strategy necessitates immediate action. Currently five lenders dominate two thirds of the market. These lenders need to work together to protect one another and preserve credit lines to able paying borrowers by setting consortium guidelines on credit. We, as Americans, are all in the same soup here, and desperate times are requiring of radical and cooperative measures.

And fourth, along with many important and necessary mandates regarding fairness to consumers, impending changes to Unfair and Deceptive Acts or Practices (UDAP) regulations risk the very real unintended consequence of cutting off vast amounts of credit to consumers. Specifically, the new UDAP provisions would restrict repricing of risk, which could in turn restrict the availability of credit. If a lender cannot reprice for changing risk on an unsecured loan, the lender simply will not make the loan. This proposal is set to be effective by mid-2010, but talk now is of accelerating its adoption date. Politicians and regulators need to seriously consider what unintended consequences could occur from the implementation of this proposal in current form. Short of the U.S. government becoming a direct credit-card lender, invariably credit will come out of the system.

Over the past 20 years, Americans have also grown to use their credit card as a cash-flow management tool. For example, 90% of credit-card users revolve a balance (i.e., don't pay it off in full) at least once a year, and over 45% of credit-card users revolve every month. Undeniably, consumers look at their unused credit balances as a "what if" reserve. "What if" my kid needs braces? "What if" my dog gets sick? "What if" I lose one of my jobs? This unused credit portion has grown to be relied on as a source of liquidity and a liquidity management tool for many U.S. consumers. In fact, a relatively small portion of U.S. consumers have actually maxed out their credit cards, and most currently have ample room to spare on their unused credit lines. For example, the industry credit line utilization rate (or percentage of total credit lines outstanding drawn upon) was just 17% at the end of 2008. However, this is in the process of changing dramatically.

Without doubt, credit was extended too freely over the past 15 years, and a rationalization of lending is unavoidable. What is avoidable, however, is taking credit away from people who have the ability to pay their bills. If credit is taken away from what otherwise is an able borrower, that borrower's financial position weakens considerably. With two-thirds of the U.S. economy dependent upon consumer spending, we should tread carefully and act collectively.

Ms. Whitney is CEO of Meredith Whitney Advisory Group, LLC.

Bob DeMarco is a citizen journalist, blogger, and Caregiver. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. His content has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites (15). Bob is actively seeking syndication and writing assignments.

Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now

Monday, February 23, 2009

Avalanche of Treasuries to Hit Market this week

An avalanche of treasuries are set to hit the market this week. The Treasury Department plans to auction $40 billion of two- year notes tomorrow, $32 billion of five-year securities and $22 billion of seven-year this week. This will be an important test of the market and its ability to absorb government debt, but it is only the beginning of a long series of massive auctions of treasury securities.

In a separate news item Hillary Clinton was calling on China to keep buying Treasuries this weekend.

This weeks Treasury auctions will be watched closely in the markets. A bigger issue moving forward is whether or not this avalanche of treasury sales is going to crowd corporation, states and municipalities out of the market. I think that is likely and we will be following that closely in the weeks and months ahead.

Treasuries Fall on Speculation U.S. to Increase Citigroup Stake

Treasuries fell, paring two weeks of gains, as stocks rose on speculation the U.S. is planning to boost its stake in Citigroup Inc., increasing the likelihood of additional debt sales as borrowing soars.

Ten- and 30-year securities led the declines as the MSCI World Index snapped nine days of losses after the Wall Street Journal reported Citigroup is in talks with federal officials. The U.S. is planning to sell a record $94 billion of notes this week, raising speculation investors will demand higher yields to purchase the securities.

“We’ve got supply coming back into the market all this week,” said Padhraic Garvey, head of investment-grade debt strategy in Amsterdam at ING Groep NV. “We’re also seeing a reversal of the large risk aversion trade this week.”

Ten-year yields increased five basis points to 2.84 percent as of 11:15 a.m. in London, according to BGCantor Market Data. The price of the 2.75 percent security due in February 2019 fell 13/32, or $4.06 per $1,000 face amount, to 99 8/32. A basis point is 0.01 percentage point.

The yield, which touched a record low of 2.04 percent on Dec. 18, has averaged 4.65 percent during the past decade. Yields slid 10 basis points last week as falling stocks drove investors to bonds.

The U.S. government may end up with as much as 40 percent of Citigroup’s common stock, the Wall Street Journal said citing people familiar with the matter.

‘Wall of Supply’

“Treasuries face a wall of supply and the fact that Citigroup may need more government intervention means there may be more sovereign bond issuance to come,” said Nick Stamenkovic, a fixed-income strategist in Edinburgh at RIA Capital Markets, a securities broker for banks and institutional investors. “That’s unnerving investors.”

Banks may have to be nationalized for “a short time” to help lenders such as Citigroup and Bank of America Corp. survive the U.S. economic slump, Senate Banking Committee Chairman Christopher Dodd said Feb. 20.

U.S. yields indicate bets on inflation have been rising over the past three months.

The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, was 115 basis points. The spread climbed from minus eight basis points in November, and the six-month average is 95 basis points.

Stocks Advance

Consumer prices were unchanged over the last 12 months, a Labor Department report showed Feb. 20, meaning bond investors aren’t losing anything to inflation. The so-called real yield of 2.81 percent is close to the most since 2006.

Stocks in Europe and Asia climbed, pushing the MSCI World Index higher for the first time in 10 days, with a gain of 0.7 percent.

“It’s an unwinding of the flight to quality,” said Kazuaki Oh’e, a Tokyo-based debt salesman at Canadian Imperial Bank of Commerce, Canada’s fifth-biggest bank.

Government efforts to support the banking system will help corporate bonds outperform Treasuries, David Kotok, chief investment officer at Cumberland Advisors Inc. in Jersey City, wrote in a report today.

“The story circulating about Citigroup is a way for the idea of nationalization to get vetted,” wrote Kotok, who oversees $1 billion.

Treasuries have handed investors a 2.7 percent loss so far in 2009, while U.S. company bonds returned 1 percent, according to indexes complied by Merrill Lynch & Co.

The Treasury Department plans to auction $40 billion of two- year notes tomorrow, $32 billion of five-year securities on Feb. 25 and $22 billion of seven-year debt on Feb. 26.

Higher Yields

“That’s a lot of bonds that need to be sold,” said Peter Jolly, head of market research at National Australia Bank Ltd.’s investment-banking unit in Sydney. “The bias this week will be for yields to rise.”

The U.S. will probably borrow $2.5 trillion during the fiscal year ending Sept. 30, according to Goldman Sachs Group Inc., one of the 16 primary dealers required to bid at U.S. debt sales. The figure is almost triple the $892 billion in notes and bonds it sold in the previous 12 months.

Treasuries rose initially after U.S. Secretary of State Hillary Clinton said China, the largest foreign holder of Treasuries, should keep buying to help fund President Barack Obama’s economic-stimulus plans.

“It would not be in China’s interest” if the U.S. were unable to finance deficit spending to stimulate its economy, Clinton said yesterday in an interview in Beijing with Shanghai- based Dragon Television.

‘Good for Treasuries’

“Clinton’s statement is good for Treasuries,” said Takashi Yamamoto, chief trader in Singapore at Mitsubishi UFJ Trust & Banking Corp., part of Japan’s largest bank. “It will make yields decline.”

Fund managers became less bearish on Treasuries last week, a survey by Ried, Thunberg & Co. showed.

The company’s index measuring the investor outlook through the end of March rose to 44 in the seven days ended Feb. 20 from 43 the week before. The economic analysis firm in Jersey City, New Jersey, surveyed 25 fund managers controlling $1.39 trillion. A reading below 50 means investors expect prices to fall.

For all the $9.7 trillion pledged by the U.S. to combat the financial crisis, money markets show the world’s biggest banks see no recovery before 2010.

‘Barometer of Fears’

The premium banks charge each other for short-term loans, the so-called Libor-OIS spread, rose above 1 percentage point last week for the first time since Jan. 9. Contracts traded in the forward market indicate the gauge, which measures banks’ reluctance to lend, will remain higher for the rest of the year than before Sept. 15, when the bankruptcy of Lehman Brothers Holdings Inc. froze credit markets.

“Libor-OIS remains a barometer of fears of bank insolvency,” former Federal Reserve Chairman Alan Greenspan said in an interview. “That fear has been substantially reduced since mid-October, but the decline has stalled well short of any semblance of normal markets.”

The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, rose to 98 basis points from 91 basis points on Feb. 10.

Thirty-year fixed mortgage rates rose to 5.04 percent in the seven days ended Feb. 19 from 4.96 percent in the middle of January, according to loan finance company Freddie Mac. Rates are about 2.25 percentage points higher than 10-year Treasury yields, widening from 1.48 percentage points five years ago.

To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.

More from All American Investor

Ray Dalio on the current state of affairs in the market
Homebuyer Credit Won’t Stabilize Market, Analysts Say
Roubini Predicts U.S. Losses May Reach $3.6 Trillion
Six Errors on the Path to the Financial Crisis
Who Caused the Financial Crisis?
Option ARM--The Toxic Mortgage
Debt Binge--The Perfect Financial Storm

Restoring Financial Stability: How to Repair a Failed System (Wiley Finance)