Durable Goods Orders Lays a Goose-Egg

Durable Goods Orders were reported unchanged in October. So is it a bad economic signal or just a monthly anomaly? You’ll find the answer in the paragraphs that follow.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Durable Goods Orders

Durable Goods Orders were unchanged in October, and September’s rapid rise was revised lower to +9.2%, from the initially reported +9.9%. No change month-to-month after such a huge increase the month before shouldn’t be something we complain about. It should in fact be expected, but there were several things that bothered me about the report and should also concern the rest of the investment community.

We always look beyond the headline figure in our study of the durable goods data, because of the high ticket costs of transportation goods. These high ticket prices skew the data. That is evident in the latest data, with durable goods orders less transportation up 1.5% month-to-month (versus the much bigger change in the headline figure), after marking a 1.7% (revised) increase in September. Considering the information less transportation, the report would seem much less concerning. It’s also notable that each discussed data point exceeded economists’ expectations, with the ex-transportation forecast average set at negative 0.4%.

However, all is not well. I say this because of the year-to-year change in durable goods orders less transportation. This data line was down 1.8% (revised) in September and lower by 2.3% in October. With the trend continuing through the two month period, we see that there is an issue year-to-year, and it likely marks important economic decline. I think it’s safe to say Europe has weighed against American multi-nationals more this year than last year, with Germany and France both contaminated now. It has also been evidenced by the reported numbers and warnings by industrial players including the likes of Caterpillar (NYSE: CAT). Caterpillar’s outlook and EPS estimates have come down substantially, and other stalwart industrials like General Electric (NYSE: GE) have seen analysts adjust EPS estimates downward as well.

Looking more closely at the data, we see that when excluding the defense industry, new orders only rose by 0.1%. Knowing that the fiscal cliff issue and sequestration pressures defense spending, this data proves meaningful as a predictor. It’s because defense spending is likely to decrease further, barring new and major war, and so some of the supports of durable goods orders and American industry could be removed. The earnings outlooks of Honeywell (NYSE: HON), General Dynamics (NYSE: GD) and others have seen appropriate adjustment as a result. More of the American manufacturing workforce may be displaced as a these companies act to protect the investment interests of their shareholder owners. It is concerning without a replacement channel for workers, and alternative energy is not filling production lines in the U.S. just yet, though domestic energy production is offering some support.

Nondefense new orders for capital goods, an area seen as an integral economic indicator and a measure of business capital investment, rose by 0.8% in October. Also, nondefense capital goods orders excluding for civilian aircraft from the likes of Boeing (NYSE: BA), which has done relatively well over the last few years, rose by a solid 1.7%.

Looking at industry specifics, orders for computers and electronic products increased by 0.9%, as Apple’s (Nasdaq: AAPL) reinvention of computing has driven demand for tablets and new types of computing products, supporting economic activity, but is creating more jobs overseas than at home in my view. Still, the quality of life at home has improved in some respect, and other ancillary job opportunities have resulted beyond the manufacturing of these goods; for instance, in the design and marketing of applications of these products. New order activity in this segment appears to be seasonal, given the prior two months of decline and on recent new product introductions from Apple and competitors ahead of the holiday shopping season. New orders for appliances and electronic equipment were up 4.1% after a similar decline the month before, certainly supported by reviving real estate and on demand for the appliances that fill homes. Demand for flat screen televisions is also robust, as homeowners replace old technology as product prices come down.

The auto industry saw a lull in October, with new orders down 1.6% after a 1.9% decline the month before. Still, Ford (NYSE: F) and General Motors (NYSE: GM) will continue to benefit from burgeoning demand for autos in Asia, especially as Japanese tensions are exacerbated with China over territorial issues.

In totality, I’m concerned about the latest durable goods orders data, especially when considering what the effects of likely higher taxes for some in the United States will have on demand. Europe’s ongoing decline and its lightening demand for American exports remain troubling as well. And so the answer to my rhetorical question is, yes, there is a negative signal in the latest Durable Goods Orders Report. Due to our regular coverage of economic issues, readers may follow this column if interested in similar research and analysis.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Stocks Face 2 Conflicting Factors

By "The Greek"

As stocks enter the final week of November, they face two conflicting factors which will pull on them until one is victorious in controlling market direction or is nullified. The best Black Friday on record, in terms of total sales, will now fight with reviving concerns about the fiscal cliff and also a resurfacing European financial crisis.

Whether it is a good sign or not is debatable in my opinion, since heavy Black Friday shopping simply indicates how deal dependent Americans are these days. I discussed this in my Black Friday piece. Indeed, the busy bargain season drew out historic sales figures, up 13%, to record $59.1 billion in receipts. Discounters like Wal-Mart (NYSE: WMT) continued to do better than others, as Americans sought out value. Web marketers like Amazon.com (Nasdaq: AMZN) continued to steal market share with online sales topping $1 billion for the first time ever. Amazon.com was the most visited retail website on Black Friday, with Wal-Mart second and Best Buy (NYSE: BBY) third. But a Reuters/Ipsos poll discovered that a majority of shoppers kept to their budgets. So, are they shopping more, or simply shopping smarter? If it’s the latter, which is what I am confident of, then overall seasonal sales may disappoint econo-watchers when the data is cleaned of population growth. I suspect that as this view gathers popular steam, it will weaken in its support of stocks against its stronger opponent.

Meet Your New Boss, Same as the Old Boss
All the nice talk was great, but Congress had better quickly follow its congenial accounting with some significant break-through before too long. Otherwise, the market will rapidly (like an avalanche) run right over their collapsing cooperation. Stocks are starting this day lower on just that overhanging issue, and on a revival of financial crisis fear in Europe. Over there, where a grand idea proved more difficult to follow through on in tough times, it seems the voters of Spain and Greece are rising up against roughened rules declared to put things in order. If the people won’t agree, then you have no accord and no resolution to your financial crisis. What may follow remains the complete collapse of the union.

So investors have these important issues to consider today, and as we move forward without permanent fixes to the weights against stocks, the direction should turn sour. How long Congress takes to solve its fiscal cliff crisis might just depend on how fast investors begin to express such doubt in their ability to do so. After rallying on hope and promises last week, the market representative SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (Nasdaq: QQQ) are marking red ground ranging from 0.3% to 0.6% lower to start this week. Investors are advised here to begin revisiting hedges and counterweights against the market.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Jobless Claims Above 400K are Worth Worrying About

On Wednesday, when the Labor Department reported that Weekly Initial Jobless Claims stuck above 400K for a second straight week, it became harder to blame Hurricane Sandy for the issue. Indeed, we questioned whether the storm was completely to blame last week, and with each passing week, it will become a less important factor.

If over the next week or two claims stick above 400K, then the market will be forced to consider whether an important change is occurring in the economy and why. Stocks may have already started to worry about this specific measure, given the trend turning decline that occurred on Wednesday morning, before stocks closed fractionally higher. You can see this clearly in the activity of the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (Nasdaq: QQQ), with the morning dip visible on Wednesday within the 5-day chart. Of course, some of the decline could have been attributable to a miss in Consumer Sentiment against economists’ consensus expectations; on the slow pace of Leading Economic Indicators; or on some other factor including Middle East unrest. Resurfacing concern about Congress’ ability to mitigate the fiscal cliff should certainly be a consideration as we enter December.

Chart at Yahoo Finance

The latest jobless claims count, covering the period ending November 17, showed a 41,000 decrease from the Hurricane Sandy laden period of the week before, but claims still measured 410,000. Obviously, the storm destroyed property and life, and affected local economies in a meaningful way. Many small businesses were forced to lay off employees as a result. A lot of those employees are probably still unemployed today. So, for now, the four-week moving average of jobless claims matters more. The average, however, was approaching 400K as well, at 396,250 through the period. Over the weeks ahead, the storm related impact will dissipate, as New York and New Jersey residents recover.

However, what impact has the fiscal cliff had on hiring and firing? In my estimation the issue is affecting the economy right now. Many small businessmen have effectively frozen their expansion plans, given the uncertainty about forward tax rates and due to the healthcare burden some are being asked to pay now. We discussed this in detail in our report, Small Businessmen will Lose Hope into the Cliff.

The trouble extends beyond small business though, because of economic realities and due to changes in laws and regulations. Obviously, the Hostess Brands reorganization is going to cost America jobs, approximately 627 or so to be more precise. Among recent corporate layoff announcements were Smithfield Foods (NYSE: SFD), which is planning a closure and layoffs at a Virginia hot dog plant. Some operators like Papa John’s (Nasdaq: PZZA) and Applebee’s - of DineEquity (NYSE: DIN) - said new healthcare costs will impact how they manage their workforces.

In conclusion, this latest rise in Weekly Jobless Claims is noteworthy and should be watched as the effects of Hurricane Sandy fade. Especially as the fiscal cliff is resolved, we should see how satisfied businesses are based on their investment and hiring activity that follows. And yet, the burdensome economies of Europe will weigh; the disruption in the Middle East will frighten; and a slow moving domestic economy will continue to restrain the labor market.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Seeing a Busy Black Friday

The latest weekly chain store sales data, reported Tuesday, were unimpressive in my estimation. However, I expect that bodes well for Black Friday shopping activity, and for certain retailers in particular.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Black Friday

Heading into Black Friday, the state of shopping activity has been weak if not meek even. Year-to-year rates of activity have been barely edging out inflation. The latest data out of the International Council of Shopping Centers (ICSC) had the year-to-year pace up 2.5% for the week ending November 17, but some of those gains were due to Hurricane Sandy and its aftermath, with blockbuster business occurring in Northeast located Home Depot (HD) and Lowe’s (LOW) stores. We recommended those names, especially Lowe’s (LOW), just after the storm’s passing. After a Nor’easter struck just a week later, storm shocked residents of the highly populated region have certainly continued to stock up on emergency goods from Wal-Mart (WMT) and other big box stores so as to better prepare for the next big one.

Redbook also reports on year-over-year sales rates weekly, and had the same period pegged at an inflation trailing pace of 1.8%. Indeed, when looking back past the storm skewed data, this is the result we find. American consumers have slowed their spending, and where they haven’t slowed it, they’ve shifted it to better value, or discount stores like Wal-Mart (WMT) and Costco (COST), deep discount stores like Dollar Tree (DLTR), and bargain pushing web retailers like Amazon.com (AMZN) and eBay (EBAY).

Some might interpret the dragging rates of recent sales as a bad omen for the holiday shopping season. However, the promotional period, and especially its high profile Black Friday, should draw enormous numbers of shoppers this year because of it. In fact, I believe the soft rates of sales leading into the season are a positive indicator of what will happen on Black Friday. Bargain seekers will be out in force to get the best deals on the gifts they are compelled to buy for relatives and friends sometime before December 25th; so it might as well be Black Friday. The drop-off of activity leading into the sales season may simply be indicative of shoppers waiting for their big bargain opportunity.

Discounters like Dollar Tree (DLTR) have outperformed most department stores and specialty retailers over the last several years, which has led some stalwarts like Macy’s (M) and J.C. Penney (JCP) to strike out on strategic initiatives to save share. The results have been mixed, without a doubt. The issues of retail have been the result of the condition of the economy, with such long lasting excessive unemployment rates and underemployment realities. I’ve suggested that recent increases in consumer confidence indices have been superficial and questionable, and I believe those will fade if the fiscal cliff solution is not satisfactory for most Americans. I expect the fiscal cliff issue has damaged the economy already, and continues to do so with each passing day without an effective resolution.

In conclusion, I suggest investors take the latest slow rates of chain store sales as indicative of a positive result for Black Friday retailers, as long as those retailers effectively promote attractive sales and deals. The failsafe sellers will be those iconic brands shoppers have come to know as the deal-makers, including your Wal-Marts, Costco’s, eBays and Amazons of the space.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Congressional Leaders Offer Reassuring Fiscal Statements

A joint press conference that concluded just before noon, featuring Repre- sentatives John Boehner, Harry Reid, Nancy Pelosi and Mitch McConnell, offered hope that a fiscal cliff compromise might be accomplished. The conference was certainly geared toward appeasing populace and market concerns regarding Congressional intent in reaching a mutually acceptable agreement. Thus, stocks should be supported by the news at least heading into the close of trading Friday and possibly through next week, barring other catalysts.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Go Long Over the Short Short-Term

More than a hint of compromise was in the wind as the group congenially addressed the nation. House Speaker Boehner said that some revenues were on the table. House Minority Leader Nancy Pelosi said that some spending cuts were available. Democratic Party Senate Leader Harry Reid said the cornerstones of a deal were in place, and that they intended to close a deal rather than simply pass the buck forward. He added that the deal was a high priority focus, and that representatives were not going to wait until the last day of December, which was a concern of ours. He also noted that they might even work through a portion of the Thanksgiving Day recess, reflecting how important resolving the issue is to them. Finally, Senate Minority Leader McConnell concurred with the statements and closed, giving the public a sense of calm about the issue not previously existent.

Stocks, which had been down after heading into the press conference with low expectations, immediately broke above break-even ground. The SPDR S&P 500 (NYSE: SPY), which was down 5.1% from the election through Thursday November 15, was approaching a half point gain at noon, as was the SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (Nasdaq: QQQ). Oil is benefiting from the news as well, with the United States Oil (NYSE: USO) security driving up over 1.3% at the hour of scribbling here. Even gold is benefiting from the clarity, and as pressure lessens from its sellers using capital to buy stocks viewed as too cheap. The SPDR Gold Shares (NYSE: GLD) has broken above break-even ground. I offer kudos to the congressional leaders for this expression, because if it is executed upon, it offers support to shares. It at least reverses the near-term downtrend, and so I advise investors to raise risk and remove hedges at least through next week, barring other factors.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

A Perfect Storm Threatens Stocks

As if the fiscal cliff folly in Congress was not enough, now war looms in the Middle East as well? It’s reminiscent of Superstorm Sandy (which oh by the way was a catalyst for recession too) with the confluence of a deep dip in the jet stream on an arctic low pulling in a hurricane into our most populous region. Seriously, the perfect stock market storm seems to be forming over the New York Stock Exchange (NYSE: NYX) and NASDAQ (Nasdaq: NDAQ).

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Perfect Storm

Earlier this week, I warned that the fiscal cliff issue is doing damage to the economy right now, as it stifles business investment. I said that we should be pushing for a compromise to be reached as soon as possible, because economic risk is not restricted to 2013 – the issue is hurting our economy today. Still, based on the initial posturing of both Democratic and Republican leadership, it appears to me they’ll hold course right on up to the deadline, if not beyond it, even despite the ratings warning from Standard & Poor’s (of McGraw-Hill (NYSE: MHP)).

With the next elections two years away, and the presidency not up for grabs for another four years, I suppose our elected officials believe there’s a cushion for us to forget any fumble that might occur in Washington this year. The President seems assured by his reelection, and seems to believe the American people have given him a mandate. So, he’s more likely to hold firmly to his position this time around, and not cave on the tax issues at hand. Meanwhile, Republicans are certain that their base must have those tax breaks, or else they risk losing seats to Tea Party Republicans or fracturing their own party. This issue has been enough to sink the stock market since the election, with the SPDR S&P 500 (NYSE: SPY) off 5.1% since. The SPDR Dow Jones Industrial Average (NYSE: DIA) and PowerShares QQQ (Nasdaq: QQQ) are down 5.0% and 5.6%, respectively.

Today, though, we have even more to worry about. As if the impending Iranian conflict was not enough, now we have a serious scuffle playing out in Gaza that could spark into something much larger if the newly seated leader (read radical) in Egypt, the desperate despot in Syria, and the Iranian madman get itchy trigger fingers. Despite economic concerns on the fiscal cliff issue, this geopolitical tension has oil prices holding up. The iPath GSCI Crude Oil TR Index (NYSE: OIL) is down by a relatively modest 3.3% since the election, though the shares of petroleum bellwether ConocoPhillips (NYSE: COP) are off 6.2% since.

So take shelter folks. Continue to reduce beta exposure and hedge against overall market decline. Despite the drop in gold of late, I continue to favor it along with silver and other hedging instruments for the longer term. I would rather withhold from discussion for now another short-term hedging instrument, which I will discuss very shortly (so follow my column to keep informed). I’ll dedicate a specific article to this very important instrument in the very near future, but at this point I’m not ready to discuss it. You should consider hard assets, including real estate and gold, and also instruments like the SPDR Gold Trust (NYSE: GLD) and the iShares Silver Trust (NYSE: SLV). I believe the concerns about deflation are overdone, as they ignore the damage that I expect to be inflicted upon the world’s fiat currencies ahead. Until the next time, keep your head down and your exposure hedged.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Is the Jobless Claims Surge on Sandy or Something More?

It happened! Jobless claims surged to over the psychological threshold of 400K. Some time back, we warned that one dreaded Thursday morning we would wake up to a stock market demise catalyzed by jobless claims over 400K. We even said that you might consider reducing risk on Wednesday afternoons as a hedge. Well, this report is not going to be the one to catalyze a slide, so you can contain your concern, though you still have plenty to worry about regarding the fiscal cliff right now. The reason this latest report shouldn’t overly concern investors is the media’s ready acceptance of a Hurricane Sandy impact, which very likely did affect filings in several ways. Since it will be difficult to pinpoint the impact, stocks should overlook the psychological break, at least for now. However, take note that the movement in the employment services companies this morning seems to indicate some market suspicion about the true driver of today’s reported surge in jobless claims.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Jobless Claims

Weekly Initial Jobless Claims surged by 78,000 to 439,000 in the week ending November 10, 2012, which was significantly more than the economists’ consensus for 376K. Still, Hurricane Sandy has added some significant noise to the data, as should be the case for economic reports across the board over the next month or two. A more reliable trend metric, the four-week moving average for weekly claims, increased by 11,750 in the reported period, to 383,750.

Insured unemployment edged up by a tenth of a percentage point to a 2.6% rate in the lagged November 3 ending period. The number of insured unemployed Americans increased by 171,000 in that same period, rising to 3.33 million. The number of Americans claiming benefits of some sort through all programs decreased by 100,423 in the period ending October 27, falling to 4.98 million. As we have noted in the past, there are of course two drivers of this trending decline. First, some Americans are finding work. However, many Americans are simply exhausting their allotted benefits and falling off the workforce radar.

Weekly jobless claims may very well rise legitimately above the 400K psychological threshold in 2013 for a variety of reasons. Still, the nation’s largest employers, including Wal-Mart (NYSE: WMT), Target (NYSE: TGT), McDonald’s (NYSE: MCD), Sears (Nasdaq: SHLD) and Kroger’s (NYSE: KR) are not likely to shed jobs anytime soon due to the necessities they provide at value. However, small businesses, which employ more Americans than any other sector of the economy, are likely losing confidence due to the fiscal cliff, and could very well cut workforce if their taxes rise.

For informational purposes, I always like to relay the state relative data for interested readers. The highest insured unemployment rates in the week ending October 27 were in Alaska (4.5), Puerto Rico (3.9), California (3.0), Oregon (3.0), Pennsylvania (3.0), Virgin Islands (2.9), Arkansas (2.7), Nevada (2.7), New Jersey (2.7), Illinois (2.6), New York (2.6), and North Carolina (2.6).

The largest increases in initial claims for the week ending November 3 were in Pennsylvania (+7,766), Ohio (+6,450), New Jersey (+5,675), Michigan (+2,373), and Connecticut (+1,783), while the largest decreases were in California (-8,149), New York (-2,241), Florida (-939), Georgia (-913), and Indiana (-603).

In closing, the shares of employment servicers are sensitive to this weekly report, and so the impact of the week’s change can best be read through their movement. The action in industry shares follows.

Company & Ticker	Thursday Morning Change
Robert Half (NYSE: RHI)	+0.15%
Korn Ferry (NYSE: KFY)	-0.51%
Monster Worldwide (NYSE: MWW)	-6.8%
Manpower (NYSE: MAN)	-1.5%
Kelly Services (Nasdaq: KELYA)	+0.15%
CTPartners Executive Search (NYSE: CTP)	-0.74%
On Assignment (Nasdaq: ASGN)	+1.3%

The wide variance in the movement of these shares is likely due to the noise in the weekly economic report discussed here, and also due to the dynamics of specific service providers. For instance, Kelly Services, a provider of mostly temporary workers, tends to move counter to the shares of executive search firms, some of which are listed here. This is because of the propensity of employers to choose between temporary and full-time workforce depending on their perspective of the economic outlook. I would say the stock action depicted here says investors are suspicious of how much impact Sandy has had to the week’s data and what is due to real ongoing economic issue. Only the weeks ahead and its less noisy data will give the market the answer it seeks today, so stay tuned as we cover it here.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Ticking Fiscal Cliff Clock Costing Economy Today

The likelihood of the American economy slipping into economic recession increases with each passing day. We are not okay up until the day tax rates increase and other stimulus disappear. No, rather, because of the stifling situation brought about by Congressional gridlock, businesses have frozen discretionary capital spending plans that are supportive to the economy. In the absence of such spending, economic growth is hampered today and every day heading into January 1st.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Fiscal Cliff

This article is not measuring the impact of falling off the fiscal cliff, which many experts say could drive the economy into recession and most agree will significantly hamper economic growth. Rather, I want to point out that the stifling impact on business plans is affecting the economy today and every single day in which this situation is not mitigated.

Now, let’s not ignore the philosophical differences of opinion with regard to taxes and economic drivers. Republicans and Democrats are not simply protecting constituents, at least not for the most part. They are also seeking to employ economic tactics which they believe will spur economic growth and help balance the budget at the same time. Opinions vary, and the philosophical divide is vast. Where should the threshold dividing the rich and the poor be marked, and at what point or income level does taxation stifle economic growth? What is fair and consistent with the ethos of American capitalism? These are important questions at the root of the argument and so the debate and discussion is at least somewhat just. Still, compromise is the key for our leaders to keep philosophical divide from damaging us all in their efforts to save America.

It is clear by the actions of the stock market that this fiscal cliff issue is important for tomorrow but also for today. The SPDR S&P 500 (NYSE: SPY) is down 7.4% since its September peak, and I expect it will continue downward without resolution to the fiscal cliff issue. The industrials are lower as well, with the SPDR Dow Jones Industrial Average (NYSE: DIA) down 7.1% since its fall peak, and the PowerShares QQQ (Nasdaq: QQQ) is lower 11% from its top mark. The message has been multi-fold, beginning with the realization that corporate earnings season would not support the valuations achieved by stocks on central bank fluffing. The second hit came with the reelection of President Obama, which was clearly a let down to the investment community. And now it is the lock-on focus of investors and businessmen on the critical economic change in store for the close of the year.

Small businessmen were reported to be more optimistic lately, but that was based on a survey taken before the election and likely on the expectation of a different result. Consumers, less sophisticated and sensitive to economic warnings, will react to higher taxes and deteriorated economic conditions should they dawn in 2013. The Consumer Discretionary Select Sector SPDR (NYSE: XLY) is only off its high for the year (trailing 52 weeks) by 5.6%, but retailers are bearing the cost of long-lasting soft economic conditions and tighter competition for fewer dollars. The SPDR S&P Retail (NYSE: XRT) is off by 7.1%, and there is a clear shift in spending accelerating toward discounters like Wal-Mart (NYSE: WMT) and Amazon.com (Nasdaq: AMZN) away from the traditional stores and marketplaces.

In times past, we could look overseas for support to American exports for companies like Caterpillar (NYSE: CAT) and bellwethers like General Electric (NYSE: GE), but Europe is actually deteriorating, not improving. China’s growth is volatile due to its ties to the west, and its data is questionable due to corruption and inadequate reporting. The last thing we need today is a severe disruption to domestic business activity, and so some sort of compromise must be accomplished. In addition, I believe that any support to the budget garnered from revenue generation (taxes) should be cautiously undertaken, limited in reach and focused to avoid damage. It’s not yet time to put broad belts across the waist of the economy, but rather to cure inefficiencies in capital distribution toward economic growth initiatives. I’ll continue to independently cover this critical issue and aspects of the economy for the sake of all Americans, so stay tuned.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Mortgage Application Relief Post Sandy

The Mortgage Bankers Association (MBA) today reported that mortgage application volume increased substantially, but for what reason. Well, there appear to be two, one important economic driver and another extraordinary catalyst. Rates declined through the week ending November 9, offering an important driver for activity. However, the passing of Hurricane Sandy seems to have led to pent-up demand in the highly populated Northeast, which unraveled last week and skewed the data.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

The MBA’s Market Composite Index increased by 12.6% against the immediately preceding week. Growth had balanced support between refinancing activity and mortgage applications on the purchases of homes. The Purchase Index, which measures applications filed for home purchases, increased 11% against the prior week on a seasonally adjusted basis. The Refinance Index likewise rose, increasing by 13% in the reported period.

We can look to mortgage rate activity for a catalyst for refinancing, as effective rates decreased across the range of mortgage loan types. Conforming loan mortgage rates for 30-year fixed rate mortgages even set a new record, falling to 3.52% from 3.61% in the prior week. The average contracted rates for each type of mortgage loan balance follow below. However, in some cases the change was not substantial. There certainly seems to be another catalyst, as further evidenced by a change in trend. This was the first increase in the Refinance Index in 6 weeks.

Loan Type	Rate & Change
30-Yr. Conforming Balance	3.52% (down 9 Basis Points)
30-Yr. Jumbo Loan	3.83% (down 5 BPs)
30-Yr. FHA Sponsored	3.34% (down 3 BPs)
15-Yr. Fixed	2.88% (down 7 BPs)
5/1 ARMS	2.6% (down 1 BPs)

The other catalyst is clear, and it will be affecting economic data for a good time forward, as monthly reports begin to reach the wire for the relative period. It was Hurricane Sandy and the storm’s stifling of business activity. The seasonally adjusted Purchase Index improved by 11%, and the unadjusted measure rose by 8%, obviously adjusted for the storm. The MBA, in my observation, has been imperfect in its seasonal adjustments, and seems to have also understated the impact of the storm here.

On a year-over-year basis, the Purchase Index was 22% higher than the same week a year prior. Obviously, the housing market is healthier this year than last, and some of that improvement is reflected here, but we might look to data from weeks prior to see how the year-to-year difference differs. In this report from October 3rd, we see that in a period of rate driven gains, the year-to-year improvement in the Purchase Index was just +11% versus this week’s +22% increase. I think this comparison clearly exposes the Hurricane impact and imperfect adjustment for it.

As a result, we’ll need to temper our enthusiasm for the housing and banking industries that may have resulted from this report. You can see today’s morning changes in relative stocks here.

Relative Housing & Finance Stocks	Wednesday Morning Change
Financial Select Sector SPDR (NYSE: XLF)	+0.2%
SPDR S&P Homebuilders (NYSE: XHB)	+0.3%
Bank of America (NYSE: BAC)	+0.1%
Citigroup (NYSE: C)	+0.5%
J.P. Morgan Chase (NYSE: JPM)	+0.3%
Wells Fargo (NYSE: WFC)	+0.4%
PulteGroup (NYSE: PHM)	-1.6%
Toll Brothers (NYSE: TOL)	-0.8%
Hovnanian (NYSE: HOV)	-0.8%

We can see that while homebuilders are up generally, the shares of these three relative players are lower today, perhaps correcting for earlier gains or for other very relative reasons. The financial shares listed here are up modestly, despite ongoing fiscal cliff pressures but perhaps in correction to previous decrease. It’s hard to say what the impact of this data is, but, with regard to Sandy, I believe investors are realizing that while reconstruction efforts will be broad, the benefits will be widespread among independent construction companies and perhaps minimal to a handful of publicly traded builders. I reiterate my favor of building supply stores for investors seeking a storm play.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Small Business Optimism Fading Into Fiscal Cliff

When small businessmen responded to the survey of the National Federation of Independent Business (NFIB) President Obama had not yet been reelected. Judging by the reaction of the stock market, I expect it’s safe to say that a good deal of businessmen were surprised by the result. So, in a few weeks, when they are asked again about how they feel, I likewise expect the slightly improved optimism that small businessmen expressed in October’s Small Business Optimism Index will disappear.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Reported Tuesday, the NFIB’s Small Business Optimism Index gained by 0.3 points, rising to a mark of 93.1. Despite the improved headline figure, concern was clearly evident in the record high percentage (23%) of business owners expressing uncertainty about business conditions six months forward. NFIB Chief Economist William Dunkelberg noted that the stalemate in Congress and the same government balance (read loggerhead) that existed before November 5th will probably paralyze business activity through the close of the year. As the fiscal cliff approaches, the same stubborn stances that led Standard & Poor’s (of McGraw-Hill (NYSE: MHP)) to downgrade the United States last year seem likely to pervade again. As a result, Dunkelberg says not to expect small businessmen to invest capital or to hire employees.

It’s my view that heading into the election, small businessmen and Americans generally did not consider fully what they might find on the other side. Now that nothing has changed with regard to the stalemate in Washington D.C., fear is the main driver of capital preservation. That means money is coming out of risky investments and being kept from new investment in assets and people.

The report that is the focus of this article seems to reflect that view. It shows October increases in inventory, and expected improvement in sales and plans to make capital outlays six months out. But the gains were minute, and given the decreased probability of satisfactory result now, businessmen are likely to lose hope.

In an earlier article, we noted that stocks should now be moved here and fro by developments in Washington D.C. The SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY) and the PowerShares QQQ (Nasdaq: QQQ) are relatively unchanged heading into the close of trading Tuesday. The SPDR S&P 600 Small Cap Index ETF (NYSE: SLY) is lower by 0.4%. Efforts to resolve the issue have only just begun, with Congress convening today for the first time since before the election. President Obama met with labor union bosses today to discuss the issue with them.

In my opinion, this should be the top priority of every government representative every single day, and resolution should be targeted for sooner rather than later. Each day that businessmen lack clarity on the tax and economic outlook is another day of economic damage done to the economy, ironically in the name of that same economy. The seriousness of this issue cannot be overstated, and so I suggest every reader who cares about his country call his Congressman and demand a compromise be worked out immediately. Let us take this opportunity to discuss and debate specific ideas for compromise.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Eye DC for Direction Today

As Syria and Israel trade fire, Greece is suddenly at play again due to IMF static, and the fiscal cliff remains unresolved. For these reasons and the other potential catastrophes they could catalyze down the road, stocks were lower in Asia and Europe in Tuesday trade. Early published U.S. economic data might help hold American stocks up this morning, but the speeches of President Obama and Congressional leaders will likely dictate how it closes. In early trading, the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (Nasdaq: QQQ) were modestly lower.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

International Indexes

EUROPE	ASIA
EURO STOXX 50: -0.6%	Hang Seng: -1.1%
FTSE 100: -0.6%	Nikkei 225: -0.2%
German DAX: -0.9%	S&P/ASX 200: -1.5%

The IMF is playing hardball with Greece, demanding a better long-term debt management plan be worked out to ensure its repayment. Greece’s European partners, dependent on the future of Greece, have given it a couple more years to meet budget goals. That’s something we suggested more than a year before Europe realized it would be necessary. Perhaps, eventually, the IMF and EU will realize that forced austerity during deep recession was not a good idea to promote economic growth and recovery as well; and hopefully it won’t be before Greeks vote in a government that will make a new path first. In any event, European shares are struggling today due to the re-born issue that is Greece and the European domino demise effect waiting to be set off if Greece should fail (by its creditors’ standards).

U.S. Drivers
Thanks to a duo of benign to slightly positive American economic data points, and some select earnings reports, American stocks have some support this morning and are only slightly in the red broadly speaking.

The National Federation of Independent Business (NFIB) Small Business Optimism Index improved by 0.3 points in October, to 93.1. Make no mistake, the index continued to reflect a pessimistic attitude among small businessmen at the latest level. Also, the survey was closed before the presidential election, and likely reflects some perspective of the result that conflicted with how things played out. If taken today, I expect this index would deteriorate substantially. Still, it acts as a support for as long as investors don’t realize this at the majority. This can last from a matter of minutes to a period of weeks, depending on how widely followed the topic is by media and pundits. However, the market’s disappointment with the presidential result has already been discounted and well documented.

The International Council of Shopping Centers (ICSC) recovered post Hurricane Sandy. The latest reporting for the period ending November 10th showed the index improved to report growth of 0.7%, versus the prior week’s contraction of 0.2%. That left the year-over-year growth rate improved to a still mediocre 1.8%, versus the prior week’s 1.4%. Redbook marked that year-to-year rate at 1.6%, versus 0.8% from the week before. No matter which reading you believe, the message is the same. Still, Home Depot (NYSE: HD) lifted the housing and retail group, as the company raised its full year outlook on improved real estate investment and the impact of Hurricane Sandy reconstruction efforts. Lowe’s (NYSE: LOW) was likewise lifted on the news, and is the company we favored most in a recent report. It just goes to show that one company’s pain can be another’s gain.

Later today, at 2:00 PM ET, the Treasury Department will report on the monthly Treasury Budget. A seasonal September surplus of $75 billion is expected (by economists) to be followed by an October deficit of $113 billion. Year-to-date, the deficit stands at $1.3 trillion, with October set to close out the fiscal period. This should only serve to remind the market of the issues we have with the budget, and the long-term ramifications that remain threatening.

Federal Reserve Vice Chair Janet Yellen will discuss central bank communications and take questions during a visit to Berkley’s Haas School of Business. I do not expect much of a market impact from her comments.

The corporate wire has Best Buy (NYSE: BBY), Humana (NYSE: HUM), Mattel (NYSE: MAT), Xerox (NYSE: XRX), Boeing (NYSE: BA), Celgene (Nasdaq: CELG) and Red Hat (NYSE: RHT) discussing operations with investors or analysts. As these events are better described as sales pitch than operations analysis, the stocks might get some lift generally speaking. The day’s earnings wire highlights reports from Cisco Systems (Nasdaq: CSCO), Dick’s Sporting Goods (NYSE: DKS), Home Depot (NYSE: HD), Idera Pharmaceuticals (Nasdaq: IDRA), Navios Maritime Acquisition (NYSE: NNA), Renren (Nasdaq: RENN), TJX Cos. (NYSE: TJX) and many more names.

Before the day closes, I expect stock action will be dictated by the discussion of the Democratic and Republican Congressional leaders and their marking of the “lame duck session”. Obviously, it shouldn’t be called that this year, but it continues to be referred to as such in the media. The President may also find a microphone today after he meets with labor leaders to discuss the fiscal cliff. The market will be betting broadly long or short on the day-to-day developments regarding the fiscal cliff, so keep your eyes on Washington.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.