Monthly Archives: November 2012

Financial Stocks – November 20, 2012 Update Concerning Poor “Price Action”

On June 29, 2011 I wrote a blog post titled “Financial Stocks – Notable Price Action.”  This post is the latest update of that message.

Although financial stocks have increased in price in 2012, I continue to believe that the longer-term “price action” of various financial stocks is disconcerting.  I view the poor performance of these financial and brokerage stocks to be one indicator among (very) many that serves as a “red flag” as to the financial markets and economy as a whole.

Here is an updated chart to that shown in the aforementioned June 29, 2011 post.  It shows the XLF (the financial ETF) on a daily basis since 2007.  As well, the S&P500 is plotted above it, with GS and JPM shown below it.  The blue line on each indicates the 200dma:

(click on chart image to enlarge)(chart courtesy of StockCharts.com; chart created by and annotated by author)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1385.84 as this post is written

Financial Stocks – Relative Price To Overall Stock Market – November 19, 2012 Update

In the June 29, 2011 post (“Financial Stocks – Notable Price Action”) I wrote the following:

I think that the relatively poor “price action” of various financial stocks is notable.  It is one of many current indications that overall stock market health is not as strong as a casual glance at the major indices would indicate.

I continue to believe that the lagging / “sagging” price of various financial stocks is highly notable.  Here is a chart that I created a while ago that provides another view of the poor “price action” of the financial stocks vs. that of the entire stock market, as depicted by the S&P500:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart created by and annotated by author)

The above chart is depicted on a daily basis, LOG scale, since 2007.   On each of the three plots, a blue line depicts the 50dma for perspective.

As one can see, there has been an interesting progression of the relative price of the XLF (Financial SPDR) vs. the S&P500, as seen in the top of the chart.  In the middle of the chart, the same can be seen in the $XBD (Broker/Dealer Index).  Generally, since mid-2009, the price of both the XLF and $XBD have been on a slow downward trajectory relative to the price of the S&P500.  The S&P500 is plotted on the bottom of the chart.

In my experience, any time the financials lag the general stock market for a considerable period, it is generally a “red flag” that should be closely monitored.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1359.88 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – November 16, 2012 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

The movement of the ECRI WLI and WLI, Gr. is particularly notable at this time, as ECRI publicly announced on September 30, 2011 that the U.S. was “tipping into recession,” and ECRI has reaffirmed that view since, most recently in a September 13 release titled “The 2012 Recession:  Are We There Yet?” and September 13 Bloomberg video titled “Recession Update.”

Other past notable 2012 reaffirmations of the September 30, 2011 recession call by ECRI were seen (in chronological order)  on March 15 (“Why Our Recession Call Stands”) as well as various interviews and statements the week of May 6, including:

Also, subsequent to May 2012:

Below are three long-term charts, from Doug Short’s blog post of November 16 titled “ECRI Weekly Leading Index:  The Slippage Continues.”  These charts are on a weekly basis through the November 16 release, indicating data through November 9, 2012.

Here is the ECRI WLI (defined at ECRI’s glossary):

This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

This last chart depicts, on a long-term basis, the WLI, Gr.:

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1355.42 as this post is written

St. Louis Financial Stress Index – November 15, 2012 Update

On March 28, 2011 I wrote a post (“The STLFSI“) about the  STLFSI (St. Louis Fed’s Financial Stress Index) which is supposed to measure stress in the financial system.  For reference purposes, the most recent chart is seen below.  This chart was last updated on November 15, incorporating data from December 31,1993 to November 9, 2012 on a weekly basis.  The November 9, 2012 value is -.196 :

(click on chart to enlarge image)

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1347.16 as this post is written

Markets During Periods Of Federal Reserve Intervention – November 15, 2012 Update

In the August 9, 2011 post (“QE3 – Various Thoughts“) I posted a chart that depicted the movements of the S&P500, 10-Year Treasury Yield and the Fed Funds rate spanning the periods of various Federal Reserve interventions since 2007.

For reference purposes, here is an updated chart from Doug Short’s blog post of November 15 (“Treasury Yields/Mortgage Rate Update:  Historic Low 30-Year Fixed“) :

(click on chart to enlarge image)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1351.25 as this post is written

Walmart’s Q3 2013 Results – Comments

I found various notable items in Walmart’s Q3 2013 earnings call transcript (pdf) dated November 15, 2012.  I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly conference call comments; these previous posts are found under the “paycheck to paycheck” tag.

Here are various excerpts that I find most notable:

comments from Mike Duke, page 8:

Walmart U.S. posted a comp sales increase of 1.5 percent, and delivered approximately $2.3 billion in net sales growth.

also:

Price will continue to be a major factor for customers over the holidays. Our strong price position and broad assortment are clear competitive advantages in an economy where customers may still be cautious with their budgets.

comments from Mike Duke, page 9:

Across all of our markets, we are seeing the same price consciousness as we do in the U.S.

comments from Jeff Davis, page 11:

Consolidated gross profit rate was 24.5 percent, a 13-basis point reduction compared to the same time last year. You will hear more from our segment CEOs regarding their price investment in just a few moments.

also:

With respect to operating expenses, the company leveraged expenses by 17 basis points, which covered the 13-basis point investment in gross profit rate. We are pleased to have delivered operating leverage for the quarter, despite the $105 million in pre-tax items I mentioned earlier.

comments from Bill Simon, page 14:

The earlier launch of our expanded layaway program generated approximately $300 million in additional third quarter volume versus last year, most of which we will recognize in the fourth quarter when the customers pay for and pick up the merchandise.

comments from Bill Simon, page 16:

Gross profit increased $443 million versus last year to $18.3 billion.  During the third quarter, gross profit rate decreased 30 basis points year-over-year, as we continued to reduce margin and execute the strategic price investments.

We also continue to significantly leverage expenses. For the quarter, operating expenses grew only 1.8 percent, half the rate of sales growth. Even with the impact of higher field incentive payouts this quarter, our team leveraged operating expenses as a percentage of sales by 37 basis points.

comments from Charles Holley, page 36:

While we are optimistic about sales, we are also realistic. Current macroeconomic conditions continue to pressure our customers.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1352.93 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2012 & 2013 – As Of November 8, 2012

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings tag)

For reference purposes, the most current estimates are reflected below, and are as of November 8, 2012:

Year 2012 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $100.03/share

-From a “top down” perspective, operating earnings of N/A

-From a “top down” perspective, “as reported” earnings of $89.30/share

Year 2013 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $113.66/share

-From a “top down” perspective, operating earnings of $106.19/share

-From a “top down” perspective, “as reported” earnings of $99.74/share

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1369.71 as this post is written

The November 2012 Wall Street Journal Economic Forecast Survey

The November Wall Street Journal Economic Forecast Survey was published on November 9, 2012.  The headline is “Storm Expected to Trim Growth, not Spending.”

An excerpt:

On average, the economists see a small chance of recession over the next 12 months—at about 1-in-5, basically unchanged over the past five months. But most respondents still think that threats such as the fiscal cliff have the economy more likely to fall short of expectations than exceed them.

The current average forecasts among economists polled include the following:

GDP:

full-year 2012:  1.8%

full-year 2013:  2.4%

full-year 2014:  2.9%

Unemployment Rate:

December 2012: 7.9%

December 2013: 7.5%

December 2014:  7.0%

10-Year Treasury Yield:

December 2012: 1.78%

December 2013: 2.47%

December 2014:  3.06%

CPI:

December 2012:  2.1%

December 2013:  2.2%

December 2014:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2012: $88.72

for 12/31/2013: $92.73

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1380.03 as this post is written

Philadelphia Fed – 4th Quarter 2012 Survey Of Professional Forecasters

The Philadelphia Fed Fourth Quarter 2012 Survey of Professional Forecasters was released on November 9.  This survey is somewhat unique in various regards, such as it incorporates a longer time frame for various measures.

The survey shows, among many measures, the following expectations:

Real GDP: (annual average level)

full-year 2012 : 2.2%

full-year 2013 : 2.0%

full-year 2014 : 2.7%

full-year 2015:  2.9%

Unemployment Rate: (annual average level)

for 2012: 8.1%

for 2013: 7.8%

for 2014: 7.4%

for 2015: 6.9%

As for “the chance of a contraction in real GDP” in any of the next few quarters, estimates are 13.5%, 23.0%, 21.7%, 17.9%, and 16.4% for each of the quarters from Q4 2012 through Q4 2013, respectively.

As well, there are also a variety of time frames shown (present through the year 2021) with the expected inflation of each.  Inflation is measured in Headline and Core CPI and Headline and Core PCE.  Over all time frames expectations are shown to be in the 1.6%-2.35% range.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1379.85 as this post is written

Consumer Confidence Surveys – As Of November 11, 2012

Doug Short had a blog post of November 9 (“Michigan Consumer Sentiment:  Highest Level Since July 2007“) in which he presents the Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

There are a few aspects of the above charts that I find highly noteworthy.  Of course, the continuing subdued absolute levels of these two surveys is disconcerting.

Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)

While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this blog.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1379.85 as this post is written