Punch Drunk Recession Love

By The Greek - Economy & Markets:

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Forgive me readers, for I have grinned. As I reread through my work today, I realized I'm a bit "recession punch drunk" (all rights reserved). You know you're in trouble with a blog post when you apologize for it in the first sentence. Anywho, I think you'll enjoy it, especially if you're drunk. As a matter of fact, get drunk first... and be sure to read through the entire piece. Thank me later.

Today's Employment Report clearly dictated trading, but it did so all week long up until today. As often occurs, we buy or sell on the rumor and reverse the trade on the news. At the point of publishing, the employment report would have had to have stated, "We have one month before an asteroid collides with the earth and annihilates the human race," for the market to have taken the news poorly today. Needless to say, that didn't happen and the market experienced a relief rally, sort of. We were up fractionally on the Dow, which is better than another decline. "Whew!" said the chicken on the chopping block as the butcher walked away to sharpen his blade.

Economic Reports Analysis

Employment Situation Report

The highly anticipated Employment Report for February was at least as catastrophic as expected, though the unemployment rate was two-tenths of a percentage point higher than foreseen. In any event, after ADP's data, this report would have had to have shown 700+ nonfarm payrolls lost to have moved the already sunken market even lower. Thus, we got a relief rally instead.

Unemployment jumped up to 8.1% in February, a giant half point leap from January's 7.6% rate. The layoffs are coming hot and heavy now, and no let up is in sight. The unemployment rate not only surpassed consensus expectations for a 7.9% marking, but topped even the high end of the range, which according to Bloomberg's survey of economists, stood at 8.0%.

Nonfarm Payrolls shed 651K jobs in February on net and adjusted for the phantom birth/death rate, which was especially shady during the Bush Administration's term. It's still a sneaky factor that Barron's Alan Abelson likes to pick on once a month, always bringing a smile to The Greek. Thanks Al for helping to make the nightmarish comical.

Consumer Credit Report

Consumer Credit data arrived at 3:00 PM ET. By the way, don't forget to turn your clocks forward this weekend folks. Credit has been contracting sharply as lending standards have tightened. Also, many folks are just plain no longer qualified for the same credit they were while employed and when their homes were worth 20-40% more. It was not so long ago that credit was defying logic and still growing, and your favorite blogger was warning of what was to come... Do you remember the times? Check these two articles out from June 2007. (2nd: Most Important Article You Ever Read) By the way, I still view Iran as the catalyst that does us in.

Still, credit actually grew in January, shocking economists far and wide. The consensus expected credit to contract by $4.8 billion, and it instead expanded by $1.8 billion. Is this perhaps a sign that the financial system is intact and that stimulus efforts are working? You'll read further down this article that several banks are seeking to return TARP funds. Are these signs of stability? It would seem so...

Senate Holds Up Spending Bill

The $410 billion spending bill is held up in the Senate without the full support of the Democratic party. The Dems are now seeking Republican support, and offering concessions in the form of $8 billion in earmarks. Yes, these are the kind of earmarks Obama has spoken out about, which might lead to the bill's eventual veto. So far, I've found Obama to be more of a malleable man than a Centrist. I think he can be swayed and influenced, and that is what brings him toward center. For this reason, I pray he really does have the best of advisers.

I think there's a decent chance Obama does not veto this bill as a result, but instead signs it earmarks and all, noting that the money is needed now and that he will not hold it up for $8 billion in spending he does not agree with. I have a question for you now... Would this be a political mistake on his part, because the Republicans will label him a liar in 2012. It'll be "read my lips" all over again.

Obama's Health Care Hopes

Despite other pressing needs, the President is pushing forward with his health care reform effort, God bless his soul. You see, The Greek doesn't have health care. Luckily I don't get sick or develop cavities either. I just have one concern that you conservatives are going to like (by the way, I'm an American and will not label myself a conservative or a liberal or anything else ever again). I'm sick of your tribal grouping! Evolve already human race!

My concern is that free health care will develop into what I see in Greece and especially Georgia (a poorer country), disinterested doctors unless they get a little extra payoff. The sick also find less than stellar hospital care, so everyone outside of France and the U.K. goes to Germany for serious problems.

The Germans are so unique a people, even their public restrooms are spotless. I can't imagine what a German thinks of us after attending a pro football game in the states. Heck, even I am uncomfortable at the stadium and I only have ancestry from Europe. But, how can the Germans have a social health care system that runs so well? So, if they can, why can't the U.S. program stay top notch despite being government run? Answer me this great anti-health care reform oracle.

Philly Fed President Plosser Speaks

Philadelphia Fed President Charles Plosser took part in a panel discussion at NYU at noon on Friday, but his prepared statement was made available this morning. The topic of his discussion was "Redesigning Financial System Regulation." Of course you are well aware of The Greek's criticism of the rating agencies, which I feel were the one most culpable party for this entire house of cards and resulting financial catastrophe. Therefore, I say yes, redesign the damn thing.

President Plosser starts his speech with a cautionary note, warning that we should not act in a reactionary manner we may some day regret. In the heat of battle, as we are all well aware, we might do things that are counterproductive for the long run. He used one of my favorite terms of all time in his statement, "dynamic," in describing the type of reforms and style we need to approach reform with. Loved that, and this guy is quickly becoming a favorite of mine on the Fed staff. That might also have something to do with the start of spring training for the Major League Baseball Champion Philadelphia Phillies yo!

President Plosser went on to discuss the "too big to fail" problem, as well as the idea of tweaking the Fed to make its future decision making options transparent to the marketplace. He wants to take away the incentive for corporate managers to take risk, specifically, he wants to remove the "moral hazard" concern from the equation. Finally, Mr. Plosser sets the table for us, giving us a vision of the future Fed, as he would like to see it. Though we know you like it when we do the reading for ya, this one is worth a read folks.

Corporate News Drivers

Coca-Cola Invests in China

While every nook of corporate America is slashing capital expenditures, lookie-see what Coca-Cola (NYSE: KO) just announced. Coke is investing $2 BILLION dollars in China, and that's over and above the money put forth to acquire China's largest juice maker. Looks like Coke really is it after all!

But who could doubt this is not a good investment... After all, this is China we're talking about. The largest country in the world, and still developing, would sure seem like top priority for companies like Coca-Cola. The mature markets of the developed world do not offer nearly as much growth opportunity for the established and successful products and brands of Coca-Cola. China - this is where cash cows go to solve mid-life crises.

Wells Fargo Slashes Dividend

Wells Fargo (NYSE: WFC) cut its dividend 85%, to a nickel. Guess why... Well you see, Wells, like other firms duped into participating in the TARP program when maybe they didn't really need it, wants out of TARP now. Why does everybody want out of TARP all of a sudden? Gee, I wonder if it has anything to do with the new rule about limiting bonuses when your company is on the government payroll... My how hard some corporate execs will work to save their millions, at the expense of shareholders mind you (their getting a nickel a share now in dividend). Hey, we may have finally found the right incentive to save the financial sector!

To the defense of the executive class, many of whom read the blog (and we love you dearly), TARP is a costly form of financing that should only be tapped by the desperate, and by those whose peers spread rumors all about the marketplace to force them into bankruptcy. Too bad we will never know the true reason why WFC is doing this, and it's all C-SPAN's fault for televising the Congressional hearings and castrations of other executives on the take. Now the only way to know what's going on is to commission one of those drones we're using to take out Afghan Chieftains, and to divert it to the elite golf courses of North Carolina and California. Instead of delivering silent death, we can fire indictments down upon them!

Some of the other banks pulling similar measures include J.P. Morgan Chase (NYSE: JPM) and PNC Financial (NYSE: PNC), two significant beneficiaries of government "bailout" programs.

H&R Block Posts Profit

They say there are two things you can count on in life (and in recession), death and taxes (especially if you are a couple making over $250K). H&R Block (NYSE: HRB), therefore, is a staple stock, and made for the day. In case you thought it was a fallacy, HRB reported quarterly results today that topped analysts expectations. Guess what though, tax filings were down! Seems unemployed folks have more time to figure out how to do their own taxes. We should also note that filing gets a whole lot simpler when you DON'T MAKE MONEY! Also, all the black market activity we poor people do to survive is better-than-deductible, if you know what I mean... Who needs tickets?

I'm lucky though, because along with no health care, I don't have taxes to bother with either. Yeah, I live on a small island in the middle of the East River. It's not even listed or named on any map, so I claimed it by squatting for 21 years! My plan is to eventually build a casino called Swamp Palace. I know what you're thinking, "that Greek is clever." You get the play on words right? Trump...Swamp...Trump... They don't let you into business school for NOT being smart... For now though, the good news is the fishing is decent, but the bad news is that global warming will put my living room four feet under sea level in twenty years. You know what I say though, live for the day! No taxes baby! (This is a test to see if anybody is really reading)

K.B. Home CEO Indicted

I admit to placing this story here so that I could get cheap publicity by including this link. That said, K.B. Home's (NYSE: KBH) old CEO got shackled to a 16" cement block today. Not really... He was indicted though for backdating options, and all the lying and cheating that goes along with doing that sort of thing. The good news is that if convicted on all counts, and assuming he receives the maximum sentence for each, he should be out around the time the housing industry recovers, some 415 years from now.

EPS Schedule

Friday's EPS schedule includes AnnTaylor Stores (NYSE: ANN), Centerstate Banks of Florida (Nasdaq: CSFL), Cytori Therapeutics (Nasdaq: CYTX), Endocare (Nasdaq: ENDO), HealthTronics (Nasdaq: HTRN), H&R Block (NYSE: HRB), Hudson Technologies (Nasdaq: HDSN), Logility (Nasdaq: LGTY), MetroGAS (NYSE: MGS), National Healthcare (AMEX: NHC), Northern Financial (Nasdaq: NSFC), Perficient (Nasdaq: PRFT), Petrobras (NYSE: PBR), Pinnacle Entertainment (NYSE: PNK), Regent Communications (Nasdaq: RGCI), Rex Energy (Nasdaq: REXX), Tasty Baking (Nasdaq: TSTY), Urstadt Biddle Properties, Inc (NYSE: UBA), and Veolia Environnement (NYSE: VE).

Greek Trivia: As I placed Veolia Environnement upon the pages of The Greek, it brought a very fond memory to mind. My brother and I developed a code word, "Frank Viola," for very specific emergency situations. You'll recall Frank Viola was a Cy Young Award winning pitcher for the stinkin Mets and some other ball clubs. To this day, "Frank Viola" has a very special meaning for my brother and I, and that is "get ready to hightail it out of here." We developed the term after an incident in Athens, as young travelers on our first trip abroad together. After descending from Mount Lykavittos, which amusingly enough means Mountain of Wolves, we were invited by a nice gentleman (read wolf) into his bar to rest our tired feet. Crossing the threshold from the brightest of light into pure darkness, several cameras dangling from here and there (giving us away as naive young tourists), he ordered us a couple of beers without even asking, which we assumed were gifts from our new buddy. Not a few minutes later and he suddenly disappeared, replaced by two middle-aged prostitutes who asked very intimate questions about our personal wealth back in the States. As we understood the trap we stood within, my brother and I decided we had better be leaving. There was just one problem... seems the bartender wanted us to pay about $30 for two beers we never even asked for. As I threw a ten-spot over the bar at him and yelled, "Run Mike run!" we realized we might need to plan ahead for any future trouble. And thus the code words, "Frank Viola" were born. If you're wondering why Frank Viola of all the possibilities, well, the truth is we didn't really have a good reason for it, unless Mike remembers it. Still, he was a crafty left-hander noted for his changeup, whose nickname was "sweet music." Most importantly, to this day, I will never forget how my brother and I discovered our favorite beer, Amstel. Important note, it's Amstel, not Amstel Light.


(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK). Please see our disclosures at the Wall Street Greek website and author bio pages found there.