The Greek's Week Ahead - The Father of the Next Recession
The Greek's Week Ahead has been engineered to prepare you for events that could impact your portfolio this week.
Happy Father's Day Mr. Consumer. Enjoy your surf 'n turf because next year's version will likely join Toyota in passing GM, in relation to the price of a Lincoln that is! I think there's a good chance the consumer could guide us into recession, but it's not his fault. He's done his best to spend all that he can and with all that he can borrow. He's just tapped out, plain and simple. Yes, you heard me correctly... during the same time span the stock market supposedly decided that there would not be a need for a Fed rate cut to stimulate economic growth, and that, in fact, the economy was ready to recover, Wall Street Greek is telling you the market got it wrong again. Yes, during the same seven-day period that included a better than expected May retail sales report, this crazy blog man is telling you the consumer is actually weakening and that the economy is on its way as well. But, there's a good chance I'm not insane, after all, I did get the housing double dip correct, and the subprime fallout. And, there was February 25th and 26th, when I warned about the domestic Chinese equity market, just a day before that memorable adjustment. And remember the day I correctly said oil had reached bottom; it was in the upper 40's and hasn't looked back. More recently, my theory on inflation, especially regarding food and energy seems to be gaining fans as well. So, give me the benefit of the doubt on this one.
Here's why I believe the May retail sales figure provided a false sense of security. April offered a very weak retail period, which was attributed to the timing of Easter and a relatively cold month. It only makes sense that May should make up for the weak spring/summer sales in April. May offered a beautiful period to go shopping, outside of rising gasoline prices. The fact is, the stock market climbed and consumer sentiment even blipped higher in May. Anecdotal evidence, including commentary from some of the reporting retailers this past period, pointed toward a weak June and next few months. A good deal of them recently missed same-store sales expectations as well. New hiring plans also indicated that the summer season would likely be one of tempered enthusiasm, especially within retail.
The signs are there, everywhere in fact, except in the May retail sales figure. Last week, in my article, "Mind the Signs of Consumer Softness," I offered up 2007's monthly down trend of the Michigan Consumer Sentiment Survey in full color. It basically shows that May was an anomaly, where I believe consumer sentiment, and spending, benefited from the rising stock market and maybe even the weather. However, if you look at the picture on the whole, it seems clear the consumer is getting wary of things.
And why shouldn't he? His gasoline, food, mortgage payments all cost more these days. I get tired of saying it, but the pressure is mounting on the consumer, and last week's rise of rates only added to the weight on that courageous Atlas. As enormous numbers of mortgage loans reset each month, the aggregate cost of home ownership rises, and meanwhile, home equity declines. Imagine the poor souls who bought in at the peak and now sit on loans that are larger than the value of their homes... They are still better off though, than the other souls down the street who joined the ranks of the foreclosed upon in May, some 90% more than a year ago. Foreclosures are now eating up some 0.58% of all home loans outstanding, a record total. It seems clear to me that this trend is only going to get worse as rates rise.
Forgive me for not adding further color on my inflation theory, which insists that the headline figures including food and energy should be the focus of our attention these days. Basically, my view is that the dynamic drivers behind rising prices now-a-days are secular factors, whereas in the past they were seasonal, and therefore less meaningful. I went into this topic in detail in my article, "Mind the Signs of Consumer Softness."
In surveying Barron's "Mid-Year Roundtable"I was pleased to see that Pimco's famous bond guru, Bill Gross, agrees with many of my views. One that I strongly believe in is that risk is going to be revalued. Currently, the spread between the typical high-yield index and 10-year treasuries is just about 180 basis points. The fact is, I anticipate geopolitical fires and a flailing economy will eventually drive consideration of risk back into securities and dry the excess liquidity within the market. I talked about this extensively in my weekly article two weeks ago, "When the Liquidity Dries," and I covered the rise of country risk in America in "Country Risk, is America Safe?" I plan on a new geopolitical article this coming week, so stay tuned.
Now, let's get a look at the week ahead shall we...
Monday looks like a rather light news day. At 1:00 p.m., the National Association of Home Builders reports its Housing Market Index, a sample of the consensus view on the current and future housing market. Needless to say, the reading has been pretty pathetic of late and is expected to stay so on Monday.
European Central Bank President Jean-Claude Trichet is scheduled to give the keynote address at a conference on "Succeeding Through Uncertainty." There are a handful of companies reporting earnings on Monday, including Ashworth (ASHW), Benihana Inc. (BNHNA), Casella Waste Systems, Inc. (CWST), China Medical Technologies, Inc. (CMED), Gerber Scientific (GRB), OMNOVA Solutions (OMN), Sharper Image Corp. (SHRP) and Zila (ZILA).
On Tuesday, the usual report from the International Council of Shopping Centers will provide insight into the weekly same-store sales of major retail chains. The Redbook Survey adds to the puzzle of consumer spending activity. We have already outlined our expectation that consumer spending will soon show significant weakness, a predecessor to new hiring weakness and layoffs within the space. Thus, we will be attentive to Tuesday's data.
At 8:30 EDT, the Commerce Department is scheduled to report May Housing Starts, and after a very weak new permits report last month, the consensus view for starts is just 1.47 million, versus 1.528 million in April. Logic points to a weak number, but other housing data such as mortgage application activity for new home purchases has not been too bad. The expectation for sales stands above the 1.429 permit figure reported in April as a result. With not much data available this week, this should catch plenty of attention and drive equities with conviction.
The State Street Investor Confidence Index will be posted at 10:00 a.m. State Street measures actual risk within investment portfolios, so we would not expect a negative measure on this one yet. The reading was 91.2 in May. Reporting earnings on Tuesday, look for Actuant Corp. (ATU), Best Buy Co. Inc. (BBY), Carnival Corp. and Carnival plc (CCL), CLARCOR (CLC), Darden Restaurants (DRI), FactSet Research Systems (FDS), FSI International (FSII), La-Z-Boy Inc. (LZB), Progress Software (PRGS) and a couple others. Darden's report could be interesting, since it recently announced plans to divest some of its less well-known chains. We wonder how investment company success is impacting data provider FactSet.
Bright and early on Wednesday morning, the Mortgage Bankers Association reports its regular assessment of Purchase Applications. The usual EIA Petroleum Status Report is due at 10:30, and eyes continue to monitor capacity utilization at refineries. There remains some concern about the ability of gasoline reserves to sustain any shock to the system, like perhaps a hurricane in the Gulf of Mexico or oil supply disruption, perhaps say within the Straight of Hormuz.
A ton of Fed representatives are scheduled to speak on Wednesday, including Timothy Geithner, Janet Yellen and Richard Fisher. Wednesday's earnings reports include CarMax, Inc. (KMX), Circuit City (CC), Commercial Metals (CMC), Comverse Technology (CMVT.PK), FedEx (FDX), Morgan Stanley (MS), Sonic Corp. (SONC) and a few others.
Weekly Initial Jobless Claims starts the day on Thursday with consensus expectations for a reporting of 311,000 newly unemployed, according to Bloomberg. We have noted recent expectations hovering near prior week results, but the reported data has also been reported very close to expectations, so there may be accuracy involved and not the guesswork we had implied previously. Eventually, we expect this metric to show an increasing trend, but it's probably still a bit early, in our view. At 10:00 a.m., The Conference Board reports the highly anticipated Leading Indicators data. Bloomberg's consensus is looking for a rise of 0.3% for May. April showed a decline of 0.5%, but we also expect an increase in the May data. May was not a relatively poor month on the whole, and the indicators should reflect a positive forward outlook as a result, however false we expect this to prove out. Finally, the Philly Fed is scheduled to report on manufacturing in the Philadelphia region. After a stellar Empire State report, Philly is expected to post a reading of 7.5 for June. May's figure was 4.2.
Internationally, the European Union begins a two-day meeting in Brussels. Also, the ECB Governing Council is meeting, but no interest rate announcements are scheduled. The longest day of the year and first day of summer includes earnings reports from American Greetings (AM), Cognos (COGN), H&R Block (HRB), J.M. Smucker Co. (SJM), Jabil Circuit (JBL), Pier 1 Imports (PIR), Tektronix (TEK) and a few others. It will be interesting to see how HRB's advertising campaign and intensification of competition with self-service foes panned out. Also, Pier 1 could provide an interesting report, considering the state of housing.
Friday ends the week with a light schedule that could lead to many spontaneous three-day weekends and light trading as a result. ECB President Jean-Claude Trichet is set to give a speech at Swiss National Bank's centennial celebration. There are no earnings reports scheduled. We hope you found value in our market-moving event planner, and look forward to providing you with our regular daily reports all week.
Thank you for your interest in our articles. (disclosure)
Happy Father's Day Mr. Consumer. Enjoy your surf 'n turf because next year's version will likely join Toyota in passing GM, in relation to the price of a Lincoln that is! I think there's a good chance the consumer could guide us into recession, but it's not his fault. He's done his best to spend all that he can and with all that he can borrow. He's just tapped out, plain and simple. Yes, you heard me correctly... during the same time span the stock market supposedly decided that there would not be a need for a Fed rate cut to stimulate economic growth, and that, in fact, the economy was ready to recover, Wall Street Greek is telling you the market got it wrong again. Yes, during the same seven-day period that included a better than expected May retail sales report, this crazy blog man is telling you the consumer is actually weakening and that the economy is on its way as well. But, there's a good chance I'm not insane, after all, I did get the housing double dip correct, and the subprime fallout. And, there was February 25th and 26th, when I warned about the domestic Chinese equity market, just a day before that memorable adjustment. And remember the day I correctly said oil had reached bottom; it was in the upper 40's and hasn't looked back. More recently, my theory on inflation, especially regarding food and energy seems to be gaining fans as well. So, give me the benefit of the doubt on this one.
Here's why I believe the May retail sales figure provided a false sense of security. April offered a very weak retail period, which was attributed to the timing of Easter and a relatively cold month. It only makes sense that May should make up for the weak spring/summer sales in April. May offered a beautiful period to go shopping, outside of rising gasoline prices. The fact is, the stock market climbed and consumer sentiment even blipped higher in May. Anecdotal evidence, including commentary from some of the reporting retailers this past period, pointed toward a weak June and next few months. A good deal of them recently missed same-store sales expectations as well. New hiring plans also indicated that the summer season would likely be one of tempered enthusiasm, especially within retail.
The signs are there, everywhere in fact, except in the May retail sales figure. Last week, in my article, "Mind the Signs of Consumer Softness," I offered up 2007's monthly down trend of the Michigan Consumer Sentiment Survey in full color. It basically shows that May was an anomaly, where I believe consumer sentiment, and spending, benefited from the rising stock market and maybe even the weather. However, if you look at the picture on the whole, it seems clear the consumer is getting wary of things.
And why shouldn't he? His gasoline, food, mortgage payments all cost more these days. I get tired of saying it, but the pressure is mounting on the consumer, and last week's rise of rates only added to the weight on that courageous Atlas. As enormous numbers of mortgage loans reset each month, the aggregate cost of home ownership rises, and meanwhile, home equity declines. Imagine the poor souls who bought in at the peak and now sit on loans that are larger than the value of their homes... They are still better off though, than the other souls down the street who joined the ranks of the foreclosed upon in May, some 90% more than a year ago. Foreclosures are now eating up some 0.58% of all home loans outstanding, a record total. It seems clear to me that this trend is only going to get worse as rates rise.
Forgive me for not adding further color on my inflation theory, which insists that the headline figures including food and energy should be the focus of our attention these days. Basically, my view is that the dynamic drivers behind rising prices now-a-days are secular factors, whereas in the past they were seasonal, and therefore less meaningful. I went into this topic in detail in my article, "Mind the Signs of Consumer Softness."
In surveying Barron's "Mid-Year Roundtable"I was pleased to see that Pimco's famous bond guru, Bill Gross, agrees with many of my views. One that I strongly believe in is that risk is going to be revalued. Currently, the spread between the typical high-yield index and 10-year treasuries is just about 180 basis points. The fact is, I anticipate geopolitical fires and a flailing economy will eventually drive consideration of risk back into securities and dry the excess liquidity within the market. I talked about this extensively in my weekly article two weeks ago, "When the Liquidity Dries," and I covered the rise of country risk in America in "Country Risk, is America Safe?" I plan on a new geopolitical article this coming week, so stay tuned.
Now, let's get a look at the week ahead shall we...
Monday looks like a rather light news day. At 1:00 p.m., the National Association of Home Builders reports its Housing Market Index, a sample of the consensus view on the current and future housing market. Needless to say, the reading has been pretty pathetic of late and is expected to stay so on Monday.
European Central Bank President Jean-Claude Trichet is scheduled to give the keynote address at a conference on "Succeeding Through Uncertainty." There are a handful of companies reporting earnings on Monday, including Ashworth (ASHW), Benihana Inc. (BNHNA), Casella Waste Systems, Inc. (CWST), China Medical Technologies, Inc. (CMED), Gerber Scientific (GRB), OMNOVA Solutions (OMN), Sharper Image Corp. (SHRP) and Zila (ZILA).
On Tuesday, the usual report from the International Council of Shopping Centers will provide insight into the weekly same-store sales of major retail chains. The Redbook Survey adds to the puzzle of consumer spending activity. We have already outlined our expectation that consumer spending will soon show significant weakness, a predecessor to new hiring weakness and layoffs within the space. Thus, we will be attentive to Tuesday's data.
At 8:30 EDT, the Commerce Department is scheduled to report May Housing Starts, and after a very weak new permits report last month, the consensus view for starts is just 1.47 million, versus 1.528 million in April. Logic points to a weak number, but other housing data such as mortgage application activity for new home purchases has not been too bad. The expectation for sales stands above the 1.429 permit figure reported in April as a result. With not much data available this week, this should catch plenty of attention and drive equities with conviction.
The State Street Investor Confidence Index will be posted at 10:00 a.m. State Street measures actual risk within investment portfolios, so we would not expect a negative measure on this one yet. The reading was 91.2 in May. Reporting earnings on Tuesday, look for Actuant Corp. (ATU), Best Buy Co. Inc. (BBY), Carnival Corp. and Carnival plc (CCL), CLARCOR (CLC), Darden Restaurants (DRI), FactSet Research Systems (FDS), FSI International (FSII), La-Z-Boy Inc. (LZB), Progress Software (PRGS) and a couple others. Darden's report could be interesting, since it recently announced plans to divest some of its less well-known chains. We wonder how investment company success is impacting data provider FactSet.
Bright and early on Wednesday morning, the Mortgage Bankers Association reports its regular assessment of Purchase Applications. The usual EIA Petroleum Status Report is due at 10:30, and eyes continue to monitor capacity utilization at refineries. There remains some concern about the ability of gasoline reserves to sustain any shock to the system, like perhaps a hurricane in the Gulf of Mexico or oil supply disruption, perhaps say within the Straight of Hormuz.
A ton of Fed representatives are scheduled to speak on Wednesday, including Timothy Geithner, Janet Yellen and Richard Fisher. Wednesday's earnings reports include CarMax, Inc. (KMX), Circuit City (CC), Commercial Metals (CMC), Comverse Technology (CMVT.PK), FedEx (FDX), Morgan Stanley (MS), Sonic Corp. (SONC) and a few others.
Weekly Initial Jobless Claims starts the day on Thursday with consensus expectations for a reporting of 311,000 newly unemployed, according to Bloomberg. We have noted recent expectations hovering near prior week results, but the reported data has also been reported very close to expectations, so there may be accuracy involved and not the guesswork we had implied previously. Eventually, we expect this metric to show an increasing trend, but it's probably still a bit early, in our view. At 10:00 a.m., The Conference Board reports the highly anticipated Leading Indicators data. Bloomberg's consensus is looking for a rise of 0.3% for May. April showed a decline of 0.5%, but we also expect an increase in the May data. May was not a relatively poor month on the whole, and the indicators should reflect a positive forward outlook as a result, however false we expect this to prove out. Finally, the Philly Fed is scheduled to report on manufacturing in the Philadelphia region. After a stellar Empire State report, Philly is expected to post a reading of 7.5 for June. May's figure was 4.2.
Internationally, the European Union begins a two-day meeting in Brussels. Also, the ECB Governing Council is meeting, but no interest rate announcements are scheduled. The longest day of the year and first day of summer includes earnings reports from American Greetings (AM), Cognos (COGN), H&R Block (HRB), J.M. Smucker Co. (SJM), Jabil Circuit (JBL), Pier 1 Imports (PIR), Tektronix (TEK) and a few others. It will be interesting to see how HRB's advertising campaign and intensification of competition with self-service foes panned out. Also, Pier 1 could provide an interesting report, considering the state of housing.
Friday ends the week with a light schedule that could lead to many spontaneous three-day weekends and light trading as a result. ECB President Jean-Claude Trichet is set to give a speech at Swiss National Bank's centennial celebration. There are no earnings reports scheduled. We hope you found value in our market-moving event planner, and look forward to providing you with our regular daily reports all week.
Thank you for your interest in our articles. (disclosure)
Labels: Week Ahead
posted by The Greek | 2:11 PM
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