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Seeking Alpha

Friday, December 07, 2007

Morning Report: The Set Up


(Stocks in this article: NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, NYSE: MT, Nasdaq: NEWS, Nasdaq: MVSN, Nasdaq: GMST, NYSE: NSM, Nasdaq: PALM, Nasdaq: PZZA, Nasdaq: MPEL, Nasdaq: COMV, NYSE: STP, Nasdaq: SPWR)

We got a mild, bullish jobs report this morning, and while it offers perfect news to top off the bullish week, it's also the perfect set up for a Fed induced disappointment next week. Only The Greek is forecasting inaction to result from the December 11 FOMC Announcement. The Street and media are all in league looking for a 25 point move, to as much as a 50 point cut seen by the headless chickens. Bernanke was well aware of Paulson's plan before you were notified my friends, and this is why he has been walking tall, and even shed the usual tremor in his voice recently. The Fed is NOT going to act next week. It's moved 75 basis points already, is waiting to see the impact, is concerned about inflation and could add a discount rate cut to Paulson's move in order to cure the illness in the credit markets.

Remember, my forecast for the Fed action does not coincide with what I view as necessary from the Fed. While I see the group playing the neutral wait and see game, I also expect them to be confronted next year by hot energy and food induced inflation, higher unemployment, lighter consumer spending, recession and a war in the Middle East. There are plenty of reasons for concern, but I also can't blame the Fed for its current position, as these forecasts of mine are not certainties. I'm not in league with consensus, and the Fed adores consensus, as do most investors and institutional players. Going out on a limb based on conviction is only something independent out-of-the-box thinkers are willing to risk, because they can't fire themselves you see.

Greekism: No economist on the Street is going to say what I just did, because his boss is listening and his boss's boss does not want his firm to be an outlier and miss out on a piece of today's pie for the potential of owning tomorrow's bakery.



  1. Employment Situation Report - At 94,000, November's reported nonfarm payroll increase exceeded the 65K consensus view, and eased concern about the economy. Unemployment even held at 4.7%. So is all well then? Nada. Job losses should increase as last quarter's weak corporate results meet this quarter's poor expectations. GDP growth is expected to ease dramatically from Q3's revised higher strength. Average hourly earnings rose 0.5%, ahead of the consensus 0.3% view. This leaves inflation concerns solidly in place. This report is actually bearish, as a result. If employment is seemingly holding, while inflation remains a thorn and a concern, then the case for Fed cut is damaged, if it existed at all outside of headless chicken commentary and media reflections. Remember The Greek after this call proves out, because while it won't be the first time, it's significant.

  2. RBC Cash Index - This measure of consumer confidence came in at 65.9 for December, compared to 64.0 in November. Despite its rise, the figure continues to describe American lack of confidence.

  3. U. Michigan Consumer Sentiment - Expectations are for a reading of 76, compared to November's 76.1 (revised from 75). We would not look for significant improvement in sentiment, despite the potential for some glee derived from the holiday spirit. Yes, there is definitely something to the warmth of the holiday season, especially while people are still employed, so confidence should not dip significantly this month either.

  4. Consumer Credit - Topping off the week's economic news at 3:00 p.m., Consumer Credit is seen increasing by $9.0 billion in October. That's a hot number I totally agree with. September's increase was $3.7 billion. Market concern should soon turn to other credit instruments, and Congress has already directed some of its scrutiny in this direction. Congress is looking into credit card practices of raising rates on distressed borrowers, which only succeeds in pushing them into deeper distress. The Greek says, it's about time the government stops these lenders from exploiting America's weak and poor! Many of you have likely never been raped by a credit card company and cannot relate, but the same company that can be your best friend when you are in good standing will turn on you like a frenzied shark the minute you bleed. The Greek hears your plea exploited America, and we back Congress' review of this broad reaching topic.

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posted by The Greek | 9:00 AM

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