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Tuesday, January 31, 2012

Stocks Should Drop with Investor Sentiment

wall street stock exchangeThe Dow just closed out the best January in 15 years, but the latest investor confidence survey may foreshadow a different sort of February and full 2012. State Street’s Investor Confidence Index declined, driven by European risk reduction, but U.S. investors are the most cautious of all these days. That stands in perfect contradiction to January’s performance.

stock brokerOur 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.

Relative tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: ETFC, Nasdaq: SCHW, Nasdaq: AACC, NYSE: AMG, NYSE: AMP, Nasdaq: AMTD, Nasdaq: BGCP, NYSE: BK, NYSE: BLK, NYSE: CIT, Nasdaq: CLMS, NYSE: CME, NYSE: CNS, Nasdaq: COWN, Nasdaq: DHIL, Nasdaq: DLLR, Nasdaq: DUF, Nasdaq: ECPG, Nasdaq: EF, NYSE: EFX, Nasdaq: EPHC, NYSE: EVR, Nasdaq: EZPW, Nasdaq: FBCM, Nasdaq: FCFS, NYSE: FII, NYSE: FMD, NYSE: FNF, Nasdaq: FNGN, Nasdaq: FXCM, NYSE: GBL, Nasdaq: GCAP, Nasdaq: GDOT, Nasdaq: GFIG, NYSE: GHL, Nasdaq: GLCH, NYSE: GS, Nasdaq: IBKR, Nasdaq: INTL, Nasdaq: INTX, NYSE: ITG, NYSE: IVZ, NYSE: JEF, NYSE: JMP, NYSE: JNS, NYSE: KBW, NYSE: KCG, NYSE: LAZ, NYSE: LM, Nasdaq: LPLA, AMEX: LTS, NYSE: MA, NYSE: MCO, NYSE: MF, NYSE: MGI, Nasdaq: MKTX, Nasdaq: MRLN, NYSE: MS, Nasdaq: MSCI, NYSE: MTG, Nasdaq: NEWS, NYSE: NFP, NYSE: NNI, Nasdaq: NTRS, Nasdaq: NTSP, NYSE: OCN, NYSE: OPY, Nasdaq: OXPS, Nasdaq: PICO, NYSE: PJC, NYSE: PMI, Nasdaq: PNSN, Nasdaq: PRAA, NYSE: RJF, Nasdaq: SEIC, NYSE: SF, NYSE: SFE, NYSE: STT, NYSE: SWS, Nasdaq: TROW, NYSE: V and Nasdaq: VRTS.

Stocks Should Drop with Investor Sentiment



State Street’s (NYSE: STT) survey published Tuesday serves as a sort of confirmation of what I see developing for U.S. markets. The financial company’s measure of investor confidence showed its Investor Confidence Index fell to a mark of 92.4 globally in January, from 94.5 the month before. The decline was mostly driven by Europe, which we recently argued is already affecting the U.S. economy. Investor sentiment across the pond nearly drowned in it, sinking 10.1 points, to a mark of 91.6 in January. The reasons here are clear, as the euro area is near certainly in recession. Greece definitely is, with its GDP sinking in the mid-single digits at last check. But the trouble extends beyond Greece, as evidenced by the broad-ranging set of sovereign debt downgrades by S&P recently. The pain has already been felt across European shares, as the EURO STOXX 50 Price EUR gained 0.5% Tuesday and the iShares S&P Europe 350 Index ETF (NYSE: IEV) gained 0.7%.

birthday cakes Brooklyn NY NYCAsian investors are apparently feeling a bit better about stocks, with that segment measure up 3.3 points to 96.9 in January’s survey. Still, while the index is sitting below 100, it means even Asian investors are cutting back on risky assets. What troubles me most is what I see developing for U.S. stocks. The Investor Confidence’s North American component index showed the most risk aversion, with a measure of 89.8, down 0.1 from December. The way economic data has been unfolding of late, investor confidence should wane further alongside consumer confidence, which was reported lower Tuesday. In my view, deteriorating data should also turn the tide on the market rally that started in early October 2011. Tuesday’s performance by asset managers seems to agree, with the shares of T. Rowe Price (Nasdaq: TROW), Legg Mason (NYSE: LM), Janus Capital (NYSE: JNS) and Calamos Asset Management (Nasdaq: CLMS) each in the red Tuesday.

State Street’s commentary seems to confer with my view, stating that investors in North America and Europe are maintaining “equity positions that can best be described as defensive.” For as long as the driver of caution was exogenous, despite Europe’s consumption of 20% of U.S. exports, I suppose American stocks could rise. But as the impact of European economic deterioration hits home, and as the ongoing realities within the U.S. economy once again become clear post holiday cheer, I expect further investor confidence deterioration to coincide with real capital damage.

Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

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.

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Manufacturing Points to Weakening Economy

manufacturing weaknessThe Chicago Purchasing Managers Index carried a clearly negative message Tuesday, with the Institute for Supply Management (ISM) saying, "key aspects of the report pointed towards a weakening economy." While the sector of the American economy remains secondary to services, it still offers insight into the domestic economy.

University Pittsburgh Katz Business School Alumnus Alumni AlumnOur 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.

Relative Tickers include NYSE: BA, NYSE: RTN, NYSE: DGI, NYSE: GY, NYSE: GD, NYSE: GR, NYSE: NOC, NYSE: HON, NYSE: LMT, NYSE: COL, NYSE: LLL, NYSE: ERJ, Nasdaq: FLIR, Nasdaq: BEAV, NYSE: TDG, NYSE: SPR, NYSE: CAE, NYSE: ATK, NYSE: HXL, NYSE: TGI, NYSE: ESL, NYSE: MOG-A, NYSE: HEI, NYSE: TDY, NYSE: CW, Nasdaq: CVCO, NYSE: SKY, Nasdaq: NOBH, Nasdaq: PHHM, NYSE: MHK, Nasdaq: IFSIA, NYSE: AIN, NYSE: UFI, NYSE: ITW, NYSE: TYC, NYSE: CMI, NYSE: KUB, NYSE: IR, NYSE: DOV, NYSE: ITT, NYSE: FLS, NYSE: PLL, NYSE: DRC, NYSE: SPW, NYSE: GDI, NYSE: IEX, Nasdaq: NDSN, NYSE: GGG, NYSE: ATU, Nasdaq: MIDD, NYSE: ABB, NYSE: ETN, NYSE: NJ, NYSE: ROK, NYSE: AME, NYSE: RBC, NYSE: TMB, Nasdaq: WGOV, NYSE: CAT, NYSE: DE, NYSE: CNH, Nasdaq: JOYG, Nasdaq: BUCY, Nasdaq: AGCO, NYSE: EMR, NYSE: PH, NYSE: ROP, NYSE: PNR, NYSE: WM, NYSE: RSG, Nasdaq: FAST, NYSE: VMC, NYSE: MDU, NYSE: MLM, NYSE: OC, NYSE: VAL, NYSE: PCP, NYSE: X, NYSE: RS, NYSE: NVR, NYSE: DHI, NYSE: PHM, NYSE: TOL, NYSE: HOV, NYSE: CRH, NYSE: CX, NYSE: EXP, NYSE: FLR, NYSE: MDR, Nasdaq: FWLT, NYSE: ICA, NYSE: SWK, NYSE: TKR, NYSE: KMT, NYSE: LUK, NYSE: MAS, NYSE: WY, NYSE: PWR, NYSE: CBI, NYSE: EME, NYSE: SNA, NYSE: TTC, NYSE: GM, NYSE: F.

Manufacturing Economy Weakening



The Chicago PMI Business Barometer Index dropped to 60.2 this month, from 62.2 in December. It was yet another economic data point leaving economists looking lost. Economists surveyed by Bloomberg were expecting the index to rise to 63.0. More importantly, the decline leaves them to survey whether indeed the economy is slipping into just a slow slug growth rate like the Federal Reserve expects or into a legitimate recession.

The service sector continues to dominate the American economy, and so the manufacturing sector remains secondary today. It also has been buoyed by global demand, and so is an imperfect measure of domestic well-being. Still, however loose a tie manufacturing has to the domestic marketplace, it represents a great hope for many. President Obama, for one, is hopeful America might move forward to restore its industrial base, with a keen eye toward alternative energy. Mitt Romney, who appears set to win the Florida GOP debate, is willing to go a step further to ensure American companies have a better footing with perennially accused trade cheater China. Manufacturing is clearly an important cog for American economic progress. The leaner sector, which clearly benefited from the financial crisis and recession driven restructuring of organized labor contracts like those at General Motors (NYSE: GM) and Ford (NYSE: F), might just have a chance given some of these described actions and other plans for it.

Looking at the Chicago PMI Report, each component measure declined to a less expansionary point, with the seasonally adjusted New Orders Index falling to 63.6, from 67.1 in December. New Orders are of course a critical indicator of the road ahead. Because of the slower pace of ordering, Order Backlogs fell into territory marking economic contraction, with that component index at 48.3 now, from 57.3 in December. The shares of important industrials General Electric (NYSE: GE), Honeywell (NYSE: HON), Caterpillar (NYSE: CAT) and Deere (NYSE: DE) were all in the red Tuesday as a result.

Further inspection of the data shows the Production Index eased to 63.8 from 64.9 in December. The Inventories Index likewise fell to 51.6 from 52.0 in December. Perhaps of greater interest to most, the Employment Index declined to 54.7 from 59.2 in December, showing less propensity to hire among manufacturers. This certainly played a role in the slippage of employment services stocks Tuesday, with Monster Worldwide (NYSE: MWW), Korn Ferry (NYSE: KFY) and Manpower (NYSE: MAN) down approximately 2% to 3% each.

Supplier Deliveries improved, but this only says to me that there exists an environment of less demand. However, Production Material lead time lengthened significantly, which would counter that argument unless production material capacity has been left idle due to slowing demand. I expect there are some seasonal issues at play here, for instance, with regard to irregular maintenance of facilities and plants that may be occurring now.

Further observance of the manufacturing sector is advised now, as it may show the impacts of European strife and the global slowing described, warned of, and expected by the World Bank and IMF, not to mention by yours truly. Wednesday, we’ll receive the ISM Manufacturing Index, which will offer a better national view, where the Chicago PMI measures the Midwest. With regard to ISM’s report for January, economists are once again looking for improvement, with the index seen rising to 54.5, from 53.9 in December. I expect another let down is pending, and that manufacturing is indeed finding a slower growth point for now.

There are all sorts of pressures on the sector, especially within defense, where the U.S. and many other nations are reducing funding. Though shares of Raytheon (NYSE: RTN), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC) and Alliant Techsystems (NYSE: ATK) traded mixed Tuesday. Still, with fewer orders coming to manufacturers from both private and public sectors, it seems the world may take a break from its fantastic global development of the last decade.

This article should interest investors in Boeing (NYSE: BA), Raytheon (NYSE: RTN), Digital Globe (NYSE: DGI), GenCorp (NYSE: GY), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), Northrop Grumman (NYSE: NOC), Honeywell (NYSE: HON), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR Systems (Nasdaq: FLIR), BE Aerospace (Nasdaq: BEAV), TransDigm (NYSE: TDG), Spirit Aerosystems (NYSE: SPR), CAE (NYSE: CAE), Alliant Techsystems (NYSE: ATK), Hexcel (NYSE: HXL), Triumph Group (NYSE: TGI), Esterline Technologies (NYSE: ESL), Moog (NYSE: MOG-A), Heico (NYSE: HEI), Teledyne (NYSE: TDY), Curtiss-Wright (NYSE: CW), Cavco (Nasdaq: CVCO), Skyline (NYSE: SKY), Nobility Homes (Nasdaq: NOBH), Palm Harbor Homes (Nasdaq: PHHM), Mohawk Industries (NYSE: MHK), Interface (Nasdaq: IFSIA), Albany International (NYSE: AIN), Unifi (NYSE: UFI), Illinois Tool Works (NYSE: ITW), Tyco International (NYSE: TYC), Cummins (NYSE: CMI), Kubota (NYSE: KUB), Ingersoll-Rand (NYSE: IR), Dover (NYSE: DOV), ITT Corp. (NYSE: ITT), Flowserve (NYSE: FLS), Pall (NYSE: PLL), Dresser-Rand (NYSE: DRC), SPX (NYSE: SPW), Gardner Denver (NYSE: GDI), IDEX (NYSE: IEX), Nordson (Nasdaq: NDSN), Graco (NYSE: GGG), Actuant (NYSE: ATU), Middleby (Nasdaq: MIDD), ABB (NYSE: ABB), Eaton (NYSE: ETN), Nidec (NYSE: NJ), Rockwell Automation (NYSE: ROK), Ametek (NYSE: AME), Regal Beloit (NYSE: RBC), Thomas & Betts (NYSE: TMB), Woodward Governor (Nasdaq: WGOV), Caterpillar (NYSE: CAT), Deere (NYSE: DE), CNH (NYSE: CNH), Joy Global (Nasdaq: JOYG), Bucyrus (Nasdaq: BUCY), Agco (Nasdaq: AGCO), Emerson Electric (NYSE: EMR), Parker Hannifin (NYSE: PH), Roper Industries (NYSE: ROP), Pentair (NYSE: PNR), Waste Management (NYSE: WM), Republic Services (NYSE: RSG), Fastenal (Nasdaq: FAST), Vulcan Materials (NYSE: VMC), MDU Resources (NYSE: MDU), Martin Marietta Materials (NYSE: MLM), Owens Corning (NYSE: OC), Valspar (NYSE: VAL), Precision Castparts (NYSE: PCP), United States Steel (NYSE: X), Reliance Steel (NYSE: RS), NVR (NYSE: NVR), DR Horton (NYSE: DHI), Pulte (NYSE: PHM), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), CRH (NYSE: CRH), CEMEX (NYSE: CX), Eagle Materials (NYSE: EXP), Fluor (NYSE: FLR), McDermott International (NYSE: MDR), Foster Wheeler (Nasdaq: FWLT), Empresas ICA (NYSE: ICA), Stanley Black & Decker (NYSE: SWK), Timken (NYSE: TKR), Kennametal (NYSE: KMT), Leucadia National (NYSE: LUK), Masco (NYSE: MAS), Weyerhaeuser (NYSE: WY), Quanta Services (NYSE: PWR), Chicago Bridge & Iron (NYSE: CBI), EMCOR (NYSE: EME), Snap-on (NYSE: SNA), Toro (NYSE: TTC), GM (NYSE: GM) and Ford (NYSE: F).

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.

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Friday, January 27, 2012

Q4 GDP Growth Severely Flawed

Q4 GDP warningFourth quarter Gross Domestic Product (GDP) was reported higher, but the growth rate fell short of economists’ views. Stocks started lower on the news Friday and kept that way as a closer look at the data shows it has gaping holes in it. Thus, American economic activity may not be as supportive of stocks as valuations had accounted for up to today. Our analysis of the GDP report and our global economic outlook certainly advise for investor restraint.

Temple alumn alumni alumnisOur 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.

Q4 GDP Warning



The government reported Friday that fourth quarter GDP grew 2.8%, which was well above the third quarter growth rate of 1.8%. Yet, stocks fell at the start of trading, leaving casual observers wondering what gives. Just ahead of closing, the SPDR Dow Jones Industrial Average (NYSE: DIA) was still roughly 0.6% lower, while the SPDR S&P 500 Index (NYSE: SPY) was off by 0.2%. That can be partially explained by the shortfall of Q4 growth to economists’ expectations, which were set at a +3.1% consensus based on Bloomberg’s survey. Still, you would think the much better growth would outweigh a few tenths of a point here or there. Well, that would be a correct assessment, so the reaction of stocks must be defined by a more complex set of factors, and those can be found in the details of the data.

The two most significant issues detracting from the best quarterly GDP growth since Q2 2010 both tie into consumer spending. First, and most importantly, GDP was lifted 1.94 percentage points by a build in inventories. Some are saying that this is okay, since third quarter growth was penalized by 1.35 percentage points due to an inventory draw down, however, I see no relevance. Despite the promotional environment of the fourth quarter, the aggregate performance of retailers was poor. This was also apparent by the December Retail Sales data. In other words, discounters like Wal-Mart (NYSE: WMT) and Costco (Nasdaq: COST) may have continued to steal market share alongside bargain online salesmen like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY), while general operators like J.C. Penney (NYSE: JCP) and poor performers like Sears (Nasdaq: SHLD) now employ reinvention strategies to save themselves. In electronics, the success of Apple (Nasdaq: AAPL) and Amazon seems to come at the cost of Research in Motion (Nasdaq: RIMM) and Hewlett-Packard (NYSE: HPQ). Thus, on the whole, a soft economy leaves a competitive environment that can no longer support all players.

The other point that I see as significant came from the growth of the services sector in Q4, which only managed 0.2%, according to the government. Our services dominant economy cannot sustain significant economic growth without robust activity in services. Also, as I’ve pointed out in the past, the sales galore and holiday imploring environment of Q4 is likely to cost consumption in Q1, if not further. Without demand for services, what then will drive our economy?

Regarding the sustainability of economic growth, we also find issue in another factor that helped to drive spending in Q4. Americans dipped into their savings in order to fund consumption. The government noted that the personal savings rate, which measures savings as a percentage of personal income, fell to 3.7% in Q4, from 3.9% in Q3. Clearly, there’s only so far Americans can dip into savings, and considering the private debt problem that our nation still faces, there’s only so far this factor can drive our economy.

Therefore, and in conclusion, the market is just in its determination to penalize stock valuations now. Also, given the pitfalls that litter our path forward, including European economic recession (20% of American exports sold there) and geopolitical deterioration (Iran et al), investors are correct to proceed with caution.

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.

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Wednesday, January 25, 2012

Federal Reserve Stays Dovish as Europe Threatens

Federal Reserve buildingWhat follows is the verbatim copy of the Federal Reserve's Federal Open Market Committee (FOMC) Monetary Policy Statement.

Release Date: January 25, 2012

For immediate release

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee's dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), BB&T (NYSE: BBT), CIT (NYSE: CIT), Bank United (NYSE: BKU), First Citizens (OTC: FCNCA.PK), Synovus (NYSE: SNV), United Bankshares (Nasdaq: UBSI), Hampton Roads Bankshares (Nasdaq: HMPR), WesBanco (Nasdaq: WSBC), City Holding (Nasdaq: CHCO), Sandy Spring (Nasdaq: SASR), First Citizens (OTC: FCBN.OB), SCBT Financial (Nasdaq: SCBT), Wilmington Trust (NYSE: WL), WSFS Financial (Nasdaq: WSFS), Southside Bancshares (Nasdaq: SBSI), Stellar One (Nasdaq: STEL), Union First Market (Nasdaq: UBSH), Eagle Bancorp (Nasdaq: EGBN), First Bancorp (Nasdaq: FBNC), Ameris (Nasdaq: ABCB), The Bancorp (Nasdaq: TBBK), First Community (Nasdaq: FCBC), Capital City (Nasdaq: CCBG), Financial Institutions (Nasdaq: FISI), National Bankshares (Nasdaq: NKSH), Citizens & Northern (Nasdaq: CZNC), Charter Financial (Nasdaq: CHFN), Seacoast Banking (Nasdaq: SBCF), TIB Financial (Nasdaq: TIBB), American National (Nasdaq: AMNB), United Community (Nasdaq: UCBI), Middleburg Financial (Nasdaq: MBRG), Heritage Financial (Nasdaq: HBOS), Zions Bancorp (Nasdaq: ZION), East West Bancorp (Nasdaq: EWBC), City National (NYSE: CYN), Bank of Hawaii (NYSE: BOH), SVB Financial (Nasdaq: SIVB), Westamerica (Nasdaq: WABC), Cathay General (Nasdaq: CATY), Umpqua (Nasdaq: UMPQ), Glacier Bancorp (Nasdaq: GBCI), Pacific Capital (Nasdaq: PCBC), PacWest (Nasdaq: PACW), Western Alliance (NYSE: WAL), First National Alaska (OTC: FBAK.OB), First Interstate Bancsystem (Nasdaq: FIBK), Nara (Nasdaq: NARA), West Coast (Nasdaq: WCBO), TriCo (Nasdaq: TCBK), Territorial (Nasdaq: TBNK), Washington Banking (Nasdaq: WCBO), Bank of Marin (Nasdaq: BMRC), Hanmi (Nasdaq: HAFC), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), United Bankshares (Nasdaq: UBSI), Bank of New York Mellon (NYSE: BK), MB Financial (Nasdaq: MBFI), Astoria Financial (NYSE: AF), New York Community (NYSE: NYB), Hudson City (Nasdaq: HCBK), People’s United (Nasdaq: PBCT), First Niagra (Nasdaq: FNFG), Capitol Federal (Nasdaq: CFFN), Washington Federal (Nasdaq: WFSL), Investor’s Bancorp (Nasdaq: ISBC), Northwest Bankshares (Nasdaq: NWBI), Sterling Financial (Nasdaq: STSA), Ocwen (NYSE: OCN), Flagstar (NYSE: FBC), Provident (NYSE: PFS), Colombia Banking (Nasdaq: COLB), Kearny (Nasdaq: KRNY), Brookline (Nasdaq: BRKL), Dime Community (Nasdaq: DCOM), Flushing Financial (Nasdaq: FFIC), Danvers (Nasdaq: DNBK).

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.

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Noise Still Drowns Out Housing Data

economic data noise housing real estateOver the last month or so the weekly mortgage activity data produced by the Mortgage Bankers Association has been choppy to say the least. That is because of the imperfect adjustment for holidays, including Christmas, New Year’s and in this week’s data, Martin Luther King Day. However, moving forward, except for President’s Day on February 20, there should be very little noise in the data, barring wild swings in weather. Therefore, we should be able to get a clearer sense of the trend in housing, and as the weather warms, an early idea about the spring surge some real estate pundits expect.

financial geniusOur 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.

Relative tickers: NYSE: AF, NasdaqCM: ASBI, Nasdaq: ABCW, AMEX: BKJ, Nasdaq: BKMU, NYSE: BBX, Nasdaq: BFIN, Nasdaq: BANR, Nasdaq: BCSB, Nasdaq: BFED, Nasdaq: BHLB, Nasdaq: BOFI, Nasdaq: BYFC, Nasdaq: BRKL, Nasdaq: BFSB, Nasdaq: CAFI, Nasdaq: CFFN, Nasdaq: CARV, Nasdaq: CLFC, Nasdaq: CFBK, Nasdaq: CBNK, Nasdaq: CSBC, Nasdaq: CSBK, Nasdaq: COLB, Nasdaq: DCOM, Nasdaq: EBTC, Nasdaq: ESBF, Nasdaq: ESSA, Nasdaq: FFCO, Nasdaq: FFDF, Nasdaq: FBSI, Nasdaq: FCAP, Nasdaq: FCLF, Nasdaq: FDEF, Nasdaq: FFBH, Nasdaq: FFCH, Nasdaq: FNFG, Nasdaq: FSGID, Nasdaq: FSBK, NYSE: FBC, Nasdaq: FFIC, Nasdaq: GCBC, Nasdaq: HFFC, Nasdaq: HMNF, Nasdaq: HBCP, Nasdaq: HOME, Nasdaq: HFBC, Nasdaq: HCBK, Nasdaq: INCB, Nasdaq: ISBC, Nasdaq: JXSB, Nasdaq: JFBI, Nasdaq: KFFG, Nasdaq: KRNY, Nasdaq: KFFB, Nasdaq: LSBK, Nasdaq: LABC, Nasdaq: LSBI, Nasdaq: MLVF, Nasdaq: EBSB, Nasdaq: CASH, Nasdaq: NASB, Nasdaq: NVSL, Nasdaq: NEBS, Nasdaq: NHTB, NYSE: NYB, Nasdaq: FFFD, Nasdaq: NECB, Nasdaq: NWBI, Nasdaq: OCFC, NYSE: OCN, Nasdaq: ONFC, Nasdaq: PFED, Nasdaq: PVSA, Nasdaq: PBHC, Nasdaq: PBCT, Nasdaq: PCBS, Nasdaq: PROV, NYSE: PFS, Nasdaq: PBNY, Nasdaq: PBIP, Nasdaq: PSBH, Nasdaq: PULB, Nasdaq: PVFC, Nasdaq: QCCO, Nasdaq: RIVR, Nasdaq: RVSB, Nasdaq: ROMA, AMEX: SAL, Nasdaq: SIFI, Nasdaq: SMBC, Nasdaq: STSA, AMEX: TSH, Nasdaq: THRD, Nasdaq: TSBK, Nasdaq: UCBA, Nasdaq: UCFC, Nasdaq: UBNK, Nasdaq: VYFC, Nasdaq: WFSL, Nasdaq: WSBF, Nasdaq: WAYN, Nasdaq: WSB and Nasdaq: WVFC.

Noise Drowned Housing & Economic Data



This week’s Weekly Application Survey, covering the week ending January 20, included the Martin Luther King Jr. holiday. It was a bank holiday, and so comes to play in mortgage activity. For the week, the MBA’s Market Composite Index fell by 5% from the week before, handicapped by what we see as inadequate adjustment for the business drop-off that occurs on the Friday before and the Tuesday that follows every three day weekend. I’ve originated this viewpoint and continue to put it forth here.

Purchase Activity, which measures mortgage application activity tied to the purchase of homes, fell by 5.4% from the week just prior. I again attribute this decline to the holiday impact, despite the adjustment by the MBA. On an unadjusted basis, this index fell by 9.7%. However, we still cannot use this data in pure form in our forecasting or investment assumptions, for the reasons aforementioned.

The Refinance Index fell by 5.2%, again on the holiday noise. Mortgage rate direction varied across mortgage categories. For instance, the average contracted rate on 30-year fixed rate mortgages with conforming loan balances (417,500 or less) increased to 4.11% from 4.06% the week before. While the points decreased for 80% loan to value ratios, the effective mortgage rate still rose. As for jumbo loan balances (greater than conforming), the average contracted rate for same term fixed rate mortgages fell slightly to 4.39%, from 4.4%. While points rose here, the effective rate still decreased. FHA sponsored loans saw the average contracted rate on 30-year fixed rate loans rise to 3.97% from 3.91% the week before. Average contracted rates on 15-year fixed rate mortgages rose to 3.4% from 3.33%.

Even the four-week moving average of the Market Composite Index seems to me seasonally skewed as it moves out of the holiday inclusive period. For the latest period, this average was up 4.12%, and it should continue higher as it leaves the holiday season behind.

As we move forward, the weekly data faces little distraction, except for what may come from weather and also President’s Day in February. Thus, those of us studying this data point, and others, will get a clearer view to which to base more solid forecasts upon. That said, this benefit will not account for what may lie ahead of us, which I’ve begun talking about in recent columns. In fact, in my latest article, I based a sell call on paper profit rich homebuilders on this view. Today’s mortgage activity data, along with the Pending Home Sales Index decline and FHFA House Price Index’s monthly price increase have the relative shares of Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), J.P. Morgan Chase (NYSE: JPM) and K.B. Home (NYSE: KBH) trading mixed at this hour. K.B. Home was up 2.9% near noontime, while J.P. Morgan and Wells Fargo were lower by about 1%.

Article should interest investors in Savings & Loan stocks including Alaska Pacific Bankshares (OTC: AKPB.OB), Allied First Bancorp (OTC: AFBA.OB), Astoria Financial (NYSE: AF), AMB Financial (OTC: AMFC.OB), Ameriana Bancorp (NasdaqCM: ASBI), Anchor Bancorp Wisconsin (Nasdaq: ABCW), Bancorp of New Jersey (AMEX: BKJ), Bank Mutual (Nasdaq: BKMU), BankAtlantic (NYSE: BBX), BankFinancial (Nasdaq: BFIN), Banner (Nasdaq: BANR), BCSB Bancorp (Nasdaq: BCSB), Beacon Federal (Nasdaq: BFED), Berkshire Hills (Nasdaq: BHLB), Blackhawk Bancorp (OTC: BHWB.OB), Blue River Bancshares (OTC: BRBI.OB), Bofi (Nasdaq: BOFI), Broadway Financial (Nasdaq: BYFC), Brookline (Nasdaq: BRKL), Brooklyn Federal (Nasdaq: BFSB), Camco Financial (Nasdaq: CAFI), Capitol Federal (Nasdaq: CFFN), Carver (Nasdaq: CARV), Cecil Bancorp (OTC: CECB.OB), Center Financial (Nasdaq: CLFC), Central Federal (Nasdaq: CFBK), Chicopee (Nasdaq: CBNK), Citizens South (Nasdaq: CSBC), CKF Bancorp (OTC: CKFB.OB), Clarkston Financial (OTC: CKFC.OB), Clifton Savings (Nasdaq: CSBK), Close Brothers (OTC: CBGPY.PK), Columbia Banking (Nasdaq: COLB), Consumers (OTC: CBKM.OB), Dime Community (Nasdaq: DCOM), Enterprise (Nasdaq: EBTC), ESB Financial (Nasdaq: ESBF), ESSA Bancorp (Nasdaq: ESSA), Eureka Financial (OTC: EKFC.OB), FedFirst Fin’l (Nasdaq: FFCO), FFD Fin’l (Nasdaq: FFDF), FFW (OTC: FFWC.OB), First Bancorp of Indiana (OTC: FBPI.OB), First Bancshares (Nasdaq: FBSI), First Capital (Nasdaq: FCAP), First Clover Leaf (Nasdaq: FCLF), First Defiance (Nasdaq: FDEF), First Federal Bancshares of Arkansas (Nasdaq: FFBH), First Financial Holdings (Nasdaq: FFCH), First Independence (OTC: FFSL.OB), First Investors Fin’l Services (OTC: FIFS.PK), First Niagara (Nasdaq: FNFG), First Robinson (OTC: FRFC.OB), First Security Group (Nasdaq: FSGID), First South (Nasdaq: FSBK), Flagstar (NYSE: FBC), Flatbush Federal (OTC: FLTB.OB), Flushing Financial (Nasdaq: FFIC), Greene County (Nasdaq: GCBC), HF Financial (Nasdaq: HFFC), HMN Fin’l (Nasdaq: HMNF), Home Bancorp (Nasdaq: HBCP), Home Federal (Nasdaq: HOME), HopFed (Nasdaq: HFBC), Hudson City (Nasdaq: HCBK), Indiana Community (Nasdaq: INCB), Investors Bancorp (Nasdaq: ISBC), Jacksonville Bancorp (Nasdaq: JXSB), Jefferson Bancshares (Nasdaq: JFBI), Kaiser Federal (Nasdaq: KFFG), Kearny Fin’l (Nasdaq: KRNY), Kentucky First Federal (Nasdaq: KFFB), Lake Shore Bancorp (Nasdaq: LSBK), Louisiana Bancorp (Nasdaq: LABC), LSB Fin’l (Nasdaq: LSBI), Malvern Federal (Nasdaq: MLVF), Meridian Interstate (Nasdaq: EBSB), Meta Fin’l (Nasdaq: CASH), NASB Fin’l (Nasdaq: NASB), Naugatuck Valley (Nasdaq: NVSL), New England Bancshares (Nasdaq: NEBS), New Hampshire Thrift (Nasdaq: NHTB), New York Community (NYSE: NYB), North Central Bancshares (Nasdaq: FFFD), Northeast Community (Nasdaq: NECB), Northwest Bancshares (Nasdaq: NWBI), OceanFirst (Nasdaq: OCFC), Ocwen (NYSE: OCN), Oneida (Nasdaq: ONFC), Park Bancorp (Nasdaq: PFED), Parkvale Fin’l (Nasdaq: PVSA), Pathfinder Bancorp (Nasdaq: PBHC), People’s United (Nasdaq: PBCT), Provident Community (Nasdaq: PCBS), Provident Fin’l (Nasdaq: PROV), Provident Fin’l Services (NYSE: PFS), Provident New York (Nasdaq: PBNY), Prudential Bancorp of PA (Nasdaq: PBIP), PSB Holding (Nasdaq: PSBH), Pulaski Fin’l (Nasdaq: PULB), PVF Capital (Nasdaq: PVFC), QC Holding (Nasdaq: QCCO), River Valley Bancorp (Nasdaq: RIVR), Riverview Bancorp (Nasdaq: RVSB), Roma Fin’l (Nasdaq: ROMA), Salisbury Bancorp (AMEX: SAL), SI Financial (Nasdaq: SIFI), Southern Missouri (Nasdaq: SMBC), Sterling Fin’l (Nasdaq: STSA), Teche Holding (AMEX: TSH), TF Fin’l (Nasdaq: THRD), Timberland Bancorp (Nasdaq: TSBK), United Community (Nasdaq: UCBA), United Community Fin’l (Nasdaq: UCFC), United Fin’l Bancorp (Nasdaq: UBNK), Valley Fin’l (Nasdaq: VYFC), Washington Federal (Nasdaq: WFSL), Waterstone Fin’l (Nasdaq: WSBF), Wayne Savings (Nasdaq: WAYN), WSB Holdings (Nasdaq: WSB) and WVS Financial (Nasdaq: WVFC).

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.

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Monday, January 23, 2012

The Greece Iran Oil Connection

Greece Iran oil connectionAs the west prepares a steep set of sanctions geared to stifle Iran, Greece raises an important query. The debt laden Hellenes would like to know what will happen to their vulnerable economy if the nation’s preferable Iranian oil supply contracts are replaced with more costly sources? Furthermore, if its GDP is impacted as a result of the untimely action, causing it to fall short of qualifying thresholds for its foreign funding, would that be overlooked by its critical debt holders?

Greece expertOur 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.

Relative tickers: NYSE: NBG, NYSE: OTE, NYSE: CCH, NYSE: TK, NYSE: NM, NYSE: NNA, NYSE: NMM, NYSE: TNP, NYSE: OSG, NYSE: ISH, NYSE: EXM, NYSE: SB, NYSE: SEA, NYSE: GNK, NYSE: DSX, NYSE: DAC, NYSE: TNP, NYSE: SFL, NYSE: NAT, NYSE: SSW, NYSE: GMR, NYSE: DHT, NYSE: MPX, Nasdaq: DRYS, Nasdaq: TOPS, Nasdaq: EGLE, Nasdaq: SINO, Nasdaq: PRGN, NYSE: KSP, Nasdaq: ESEA, Nasdaq: SBLK, Nasdaq: ONAV, Nasdaq: VLCCF, Nasdaq: TBSI, Nasdaq: GLNG, Nasdaq: XSEAX, Nasdaq: ACLI, NYSE: DB, Nasdaq: ITUB, NYSE: STD, NYSE: WBK, NYSE: UBS, NYSE: LYG, NYSE: BCS, NYSE: CS, NYSE: AIB, NYSE: BLX, NYSE: BAC, NYSE: C, NYSE: GS, NYSE: JPM, NYSE: MS, NYSE: EEA, Nasdaq: VEURX, NYSE: PEF, NYSE: EKH, NYSE: GUR, NYSE: EPV, NYSE: VEA, NYSE: DFE, NYSE: DEB, NYSE: IEV, NYSE: RNE, Nasdaq: SERAX, Nasdaq: SERBX, Nasdaq: FEUFX, Nasdaq: FIEUX, Nasdaq: IERAX, Nasdaq: PBEUX, Nasdaq: UEPIX, Nasdaq: PEUGX, Nasdaq: RYAEX

The Greece Iran Oil Connection



It’s a fair question for Greece to ask with its economic growth already under drag by the austerity demanded by the International Monetary Fund (IMF) and its European brothers. Greece sourced a significant 14% of its imported oil from Iran in the first half of 2011, and has sourced up to 23% of its oil imports from its ancient counterpart at times. According to a Bloomberg article quoting an anonymous Greek diplomat, Greece wants to ensure that if that oil is replaced, it will receive identical terms, which exclude financial guarantees.

Under normal circumstances, such a condition would not even be considered, but while Greece is under the economic microscope of the IMF, it wants to avoid new obstacles to reaching already challenging goals set by its lenders of last resort. Thus, last week, Greece held up the EU’s sanctions which would stop the flow of Iranian oil to the region. Agitated European officials have indicated that assurances will be made to Greece, but that the details will be worked out after this week’s agreement on sanctions is in place. It’s unclear whether such hastily made promises will be adequate for Greek politicians who cannot afford to place a single new burden on the shoulders of Greece’s aggravated populace.

Given Greece’s poor credibility, it is unlikely to find better terms on the open market than it gets from its likewise desperate Iranian trading partner. So, the question posed to Europe is, will it subsidize the difference in cost to Greece? Otherwise, some leeway must be given Greece, with regard to the steep economic goals it’s been forced to set.

What we are seeing in this latest situation is similar to the chaos that ensued when the former Greek Prime Minister proposed a referendum for the Greek people to decide for themselves whether their future would be with or without the euro currency. It shows that Europe is no stronger than its weakest link, and that the Greeks have more bargaining leverage than most understand. Finally, Greek politicians seem to be realizing that Europe needs Greece to stay solvent as much as Greece needs its financial assistance. Clearly, the most obvious concern to Europe is how a disorderly disposition of Greece would reel Portuguese, Spanish and Italian debt markets.

The current situation also highlights the important position Iran holds in the stability of the already shaky global marketplace. As the U.S. and Europe gear to pressure the Iranians, the question raised by Greece presents Iran with interesting information. Every plan to cut off Iranian oil is civil and arranged to ease the process, but the situation is not civil, if it is not economic warfare. So I have a question: What if the Iranians were to realize the plan set for them and understand their current position. They might just do the unexpected and cut off their own oil flow abruptly, and so, disruptively to Greece, Europe and the civilized world. Perhaps Greece’s negotiations with the EU in this regard should have been kept in closed quarters.

Editor's Note: This article should interest investors in National Bank of Greece (NYSE: NBG), Hellenic Telecommunications (NYSE: OTE), Coca-Cola HBC (NYSE: CCH), Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI), Deutsche Bank (NYSE: DB), ITA (Nasdaq: ITUB), Banco Santander (NYSE: STD), Westpac Banking (NYSE: WBK), UBS (NYSE: UBS), Lloyd’s Banking Group (NYSE: LYG), Barclay’s (NYSE: BCS), Credit Suisse (NYSE: CS), Allied Irish Banks (NYSE: AIB), Banco Latinamerican (NYSE: BLX), Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Morgan Stanley (NYSE: MS), European Equity Fund (NYSE: EEA), Vanguard European Stock Index (Nasdaq: VEURX), Powershares FTSE RAFI Europe (NYSE: PEF), Europe 2001 (NYSE: EKH), S&P Emerging Europe (NYSE: GUR), Ultrashort MSCI Europe (NYSE: EPV), Vanguard Europe Pacific (NYSE: VEA), Wisdomtree Europe SmallCap (NYSE: DFE), Wisdom Tree Europe Total Div (NYSE: DEB), iShares S&P Europe 350 (NYSE: IEV), Morgan Stanley Eastern Europe (NYSE: RNE), DWS Europe Equity A (Nasdaq: SERAX), DWS Europe Equity B (Nasdaq: SERBX), Fidelity Europe (Nasdaq: FEUFX), Fidelity Europe (Nasdaq: FIEUX), ICON Europe A (Nasdaq: IERAX), Pioneer Europe Fund (Nasdaq: PBEUX), ProFunds Europe 30 (Nasdaq: UEPIX), Putnam Europe A (Nasdaq: PEUGX), Rydex Europe 1.25x (Nasdaq: RYAEX).

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.

Phillip Phillips

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Tuesday, January 17, 2012

WARNING - Europe is Already Costing the U.S. Economy

Europe EU hurting U.S. economyWhat is vague is often ignored, and what is possible is sometimes given no weighting by investors, instead overlooked for what is most tangible and certain today. In this regard, so has the threat of European impact to the U.S. economy proven impotent to U.S. stock direction through late 2011 and so far in 2012. However, there exists tangible impact to the U.S. economy that is directly attributable to the nascent trouble in Europe. I suggest investors take note as well, since the impacts should only grow more obvious with time, with their effects eventually burdening U.S. GDP, and finally given credit in the valuation of American stocks.

economic geniusOur 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.

EU Hurting U.S. Economy



The evidence I point to, which shows the impact of European weakness on the U.S. economy, has come in two forms of late. We’ve seen it in the latest trade data and also in the actions of European companies operating in the U.S. Those actions have included the consolidation of American operations or other reorganization, and the laying off of American workers. That contribution to an already laboring labor market should be felt and understood for its seriousness.

The direct impact, though, is more clearly seen in the latest international trade data, reported last week for the month of November. The U.S. international trade deficit widened by 10.4%, to $47.8 billion, which was far more than economists surveyed by Bloomberg foresaw (consensus -$45 billion). While November imports were $2.9 billion higher, reflective of high season demand perhaps, exports were lower by $1.5 billion. That drop in exports was mostly attributable to goods, as the change in service exports was virtually unchanged. The decrease also countered the year-over-year trend, which showed exports up 10.3% from November of 2010. Certainly, Europe has endured a good deal of pain over the course of those twelve months, and it may be starting to cost U.S. exporters today.

According to the Department of Commerce, the decrease in exports was mostly seen in lower industrial supplies and materials demand ($1.6 billion); and also in capital goods ($0.2 billion) and other areas. That drop in industrial goods demand was counter to the year-over-year trend as well. Somewhat surprisingly, and perhaps contradicting this report, an increase of $0.8 billion occurred in consumer goods exports. Though, this could have been due to seasonal driver.

The most telling of the data came when comparing the month’s trends between Europe and China. While the trade deficit with China narrowed to $26.9 billion, from $28.1 billion in October, the deficit with the European Union widened to $9.7 billion, from $8.0 billion in October. It was the most marked increase in deficit among America’s trading partners.

While what we’ve just discussed is direct and clear, what is developing anecdotally is concerning due to its concealed nature. It thus has the ability of sneaking up on economists and strategists who may not be paying the closest of attention to peripheral information. Therefore, it could bite analysts, brokers and finally retail investors in the behind. Take note that my followers will not be found within that grouping.

While authoring my report on the Ugly Truth About the Economy, I took note of the number of announced corporate layoffs coming from European based firms over a very short recent time span. It was difficult not to notice given my bead on the newswire. Since the turn of the year, we’ve seen American worker layoffs by European based firms: Novartis (NYSE: NVS), Vestas Wind Systems (OTC: VWSYF.PK), RBS (NYSE: RBS), Delhaize (NYSE: DEG) and others. When pressure mounts on a European company, it must look more closely at the ROIC of its projects. While you would expect European based projects to be hit most severely, early stage efforts in the States that are not going to return on investment soon, must also be curtailed in many cases. That means American jobs are lost, despite the government’s declaration of domestic economic gains. It contributes to unemployment, and it depletes tax revenues, curtails consumer spending and costs us in unemployment benefit payouts. It will affect our GDP.

Meanwhile, money center banks with global operations are pointing to Europe as the source of their earnings disappointments, as rumors of related layoffs swirl. The latest to blame the European crisis for its direct and indirect impacts on its operations was Citigroup (NYSE: C) Tuesday. Analysts expect a fourth quarter loss from Morgan Stanley (NYSE: MS) in its upcoming report this week, on market and regulatory pressures. Goldman Sachs (NYSE: GS) will also report later this week. Citi’s Chief Executive, Vikram Pandit, shed light Tuesday saying, ”Clearly, the macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment.” Citi is cutting 5,000 jobs away, which is more than the 4,500 it said it would in December; that might reflect a deteriorating trend more so than discovered inefficiencies. Despite the already significant job cuts across major international banks with U.S. operations, we very well could see more from the likes of those already mentioned, Credit Suisse (NYSE: CS), UBS (NYSE: UBS) and the rest.

In conclusion, the impacts of European weakness on the U.S. economy are currently visible and already measurable. Yet, the U.S. stock market has reflected enthusiasm tied to a synthetically driven consumer sector and a misleading employment situation, which we discussed here previously. Considering that the struggling region accounts for 20% of American exports, and given its trajectory, it is capable of diverting American recovery and deserves more attention in the weightings of valuation and scenario analysis. The signs of this effect had until now been somewhat vague to see, but they are growing clearer with time, and I expect they will eventually be impossible for the stock market to ignore.

Article is relevant to Deutsche Bank (NYSE: DB), Banco Santander (NYSE: STD), ITA (Nasdaq: ITUB), UBS (NYSE: UBS), Westpac Banking (NYSE: WBK), Lloyds Banking Group (NYSE: LYG), Barclays (NYSE: BCS), Credit Suisse (NYSE: CS), Allied Irish Bank (NYSE: AIB), Banco Latinamericano (NYSE: BLX), National Bank of Greece (NYSE: NBG), Royal Bank of Canada (NYSE: RY), BBVA Banco Frances (NYSE: BFR), The Bank of Ireland (NYSE: IRE), Bank of Montreal (NYSE: BMO), Canadian Imperial Bank of Commerce (NYSE: CM), ING Groep (NYSE: ING), Citigroup (NYSE: C).

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.

martirika

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Saturday, January 14, 2012

Bad Signs for Greece

Greece default GreekThe latest days’ news wire has been full of bad signs for Greece. While you have to infer a bit and see implications to developments in order to say so, it’s not too far a reach to see what could be stewing for Greece this winter is not a warming trend.

Greek financial crisisOur 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.

Relative tickers: NYSE: NBG, NYSE: OTE, NYSE: CCH, NYSE: TK, NYSE: NM, NYSE: NNA, NYSE: NMM, NYSE: TNP, NYSE: OSG, NYSE: ISH, NYSE: EXM, NYSE: SB, NYSE: SEA, NYSE: GNK, NYSE: DSX, NYSE: DAC, NYSE: TNP, NYSE: SFL, NYSE: NAT, NYSE: SSW, NYSE: GMR, NYSE: DHT, NYSE: MPX, Nasdaq: DRYS, Nasdaq: TOPS, Nasdaq: EGLE, Nasdaq: SINO, Nasdaq: PRGN, NYSE: KSP, Nasdaq: ESEA, Nasdaq: SBLK, Nasdaq: ONAV, Nasdaq: VLCCF, Nasdaq: TBSI, Nasdaq: GLNG, Nasdaq: XSEAX, Nasdaq: ACLI, NYSE: DB, Nasdaq: ITUB, NYSE: STD, NYSE: WBK, NYSE: UBS, NYSE: LYG, NYSE: BCS, NYSE: CS, NYSE: AIB, NYSE: BLX, NYSE: BAC, NYSE: C, NYSE: GS, NYSE: JPM, NYSE: MS, NYSE: EEA, Nasdaq: VEURX, NYSE: PEF, NYSE: EKH, NYSE: GUR, NYSE: EPV, NYSE: VEA, NYSE: DFE, NYSE: DEB, NYSE: IEV, NYSE: RNE, Nasdaq: SERAX, Nasdaq: SERBX, Nasdaq: FEUFX, Nasdaq: FIEUX, Nasdaq: IERAX, Nasdaq: PBEUX, Nasdaq: UEPIX, Nasdaq: PEUGX, Nasdaq: RYAEX

Greece May Yet Default



The latest omen came last week, when negotiations broke off between the Greek government and private bondholders. The effort is geared to liquidate about half of Greece’s private debt or 100 billion euros worth at the cost of the bondholders. It’s a lesser evil choice for the bondholders, which is only acceptable because it may help preserve the remaining portion of their investment in or loans to Greece.

This very important effort for Greece’s recovery is now also a critical step for its short-term survival. This is because it must be accomplished in order for Greece to qualify for its next tranche of aid funding from the international community. Representatives of the bondholders stated that they were stepping away in order to “pause for reflection.” The quandary is created because of math and capital markets, as the Greeks are really seeking more than the 50% cut discussed, because the effective market value of the bonds will likely drop immediately when the bond swap takes place. That said, if Greece recovers, the contract value should be approximated by market interest.

Clearly, if Greece defaults, bondholders will be left with empty hands, so Greece does have some negotiating power. However, the bondholders also know that Greece wants to avoid default and that they are needed for that process. It seems to me that whatever will satisfy the IMF is what should be adopted at this point.

Compounding the problem, Greece just reported that its budget deficit expanded in 2011 by 0.8%, to 21.64 billion euros. It was a bit better than the government’s revised forecast, but its details reflect fundamental obstacles to Greece’s economic and fiscal recovery. Despite all the government’s new taxes to lift revenues, and its expense reduction efforts, the budget still widened. That was because personal income tax collection actually softened and its ordinary budget revenue generation fell by 1.7%. Meanwhile, despite its cost cutting efforts, spending rose by 2.8% on the significantly increased debt service costs that plague the embattled nation. There should be no surprise here for readers of my column, as I’ve argued readily against the logic of harsh short-sighted austerity.

The budget deficit is supposed to have shrunk to a smaller portion of Greece’s gross domestic product. How you get there with GDP declining and the deficit rising defies my understanding. Maybe it’s European math. In any event, there’s very little here to reassure the troika nor the capital markets that Greece is making progress, and so the pressure remains.

It seems to me, given Standard & Poor’s sovereign debt slashing of much of the euro zone Friday, that it is hedging if not forecasting Greek default or some sort of unsavory result. Nine countries were downgraded in total, with the most damage done to France and Austria, which lost their top grades. Germany was spared, with its constitutional construct cited as a safety against its government’s potential for making poor decisions.

This coming week, the IMF resumes debt talks with Greece, sending a “mission team” to Athens as part of the review process. All the above discussed matters will be reviewed. Perhaps the presence of the IMF and renewed understanding of the criticality of “private sector involvement” will bring a conciliatory and cooperative tone and progress for Greece. However, the signs are bad.

Editor's Note: This article should interest investors in National Bank of Greece (NYSE: NBG), Hellenic Telecommunications (NYSE: OTE), Coca-Cola HBC (NYSE: CCH), Teekay Corp. (NYSE: TK), Navios Maritime Holdings (NYSE: NM), Navios Maritime Acquisition (NYSE: NNA), Navios Maritime Partners L.P. (NYSE: NMM), Tsakos Energy Navigation Ltd. (NYSE: TNP), Overseas Shipholding Group (NYSE: OSG), International Shipholding (NYSE: ISH), Excel Maritime Carriers (NYSE: EXM), Safe Bulkers (NYSE: SB), Claymore/Delta Global Shipping ETF (NYSE: SEA), Genco Shipping & Trading (NYSE: GNK), Diana Shipping (NYSE: DSX), Danaos (NYSE: DAC), Tsakos Energy Navigation (NYSE: TNP), Ship Finance Int'l (NYSE: SFL), Nordic American Tanker (NYSE: NAT), Seaspan (NYSE: SSW), General Maritime (NYSE: GMR), DHT Maritime (NYSE: DHT), Brunswick (NYSE: BC), Marine Products Corp. (NYSE: MPX), DryShips (Nasdaq: DRYS), Top Ships (Nasdaq: TOPS), Eagle Bulk Shipping (Nasdaq: EGLE), Sino-Global Shipping (Nasdaq: SINO), Paragon Shipping (Nasdaq: PRGN), K-SEA Transportation Partners (NYSE: KSP), Euroseas (Nasdaq: ESEA), Star Bulk Carriers (Nasdaq: SBLK), Omega Navigation (Nasdaq: ONAV), Knightsbridge Tankers Ltd. (Nasdaq: VLCCF), TBS Int'l (Nasdaq: TBSI), Golar LNG (Nasdaq: GLNG), Claymore/Delta Global Shipping (Nasdaq: XSEAX), American Commercial Lines (Nasdaq: ACLI), Deutsche Bank (NYSE: DB), ITA (Nasdaq: ITUB), Banco Santander (NYSE: STD), Westpac Banking (NYSE: WBK), UBS (NYSE: UBS), Lloyd’s Banking Group (NYSE: LYG), Barclay’s (NYSE: BCS), Credit Suisse (NYSE: CS), Allied Irish Banks (NYSE: AIB), Banco Latinamerican (NYSE: BLX), Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Morgan Stanley (NYSE: MS), European Equity Fund (NYSE: EEA), Vanguard European Stock Index (Nasdaq: VEURX), Powershares FTSE RAFI Europe (NYSE: PEF), Europe 2001 (NYSE: EKH), S&P Emerging Europe (NYSE: GUR), Ultrashort MSCI Europe (NYSE: EPV), Vanguard Europe Pacific (NYSE: VEA), Wisdomtree Europe SmallCap (NYSE: DFE), Wisdom Tree Europe Total Div (NYSE: DEB), iShares S&P Europe 350 (NYSE: IEV), Morgan Stanley Eastern Europe (NYSE: RNE), DWS Europe Equity A (Nasdaq: SERAX), DWS Europe Equity B (Nasdaq: SERBX), Fidelity Europe (Nasdaq: FEUFX), Fidelity Europe (Nasdaq: FIEUX), ICON Europe A (Nasdaq: IERAX), Pioneer Europe Fund (Nasdaq: PBEUX), ProFunds Europe 30 (Nasdaq: UEPIX), Putnam Europe A (Nasdaq: PEUGX), Rydex Europe 1.25x (Nasdaq: RYAEX).

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.

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Thursday, January 12, 2012

Stock Apocalypse Now - Updated Technical View

stock chartistSince our 2012 technical forecast was issued earlier this year, S&P prices have closed right at key resistance of 1292. Apart from the further maturation of the current rally, not much else has changed.

Figure 1 below divides intermediate Elliot Waves into sub-waves in order to illustrate further the maturity of the current rally:

SP500 Index meeting resistance

  • Intermediate Wave 1 down, shown with black dotted line, consisted of five sub-waves (i) through (v), each of which is depicted with a red dotted line

  • Note that sub-wave (iii) down was the largest in magnitude

  • Countertrend rallies consist of three-wave movements, in this case shown
    as A through C, and depicted with blue dotted lines

  • Sub-wave C can be further subdivided into 5 smaller waves (not shown)


stock apocalypseIt would appear that the S&P is completing the fifth of five sub-waves within wave C of intermediate Wave 2. Note that daily stochastics are overbought at 94% and that S&P prices closed right at key resistance of 1292.

Once this move is complete, Intermediate Wave 3 down should begin. According to Elliot Wave theory, the magnitude of this wave will exceed that of Wave 1 down, which featured a 300 point drop.

I believe investors should consider taking trading profits from this recent rally to avoid the coming “stock-apocalypse.”

This article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), PowerShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short QQQ (NYSE: QLD), ProShares UltraShort S&P 500 (NYSE: SDS), iShares Russell 2000 (NYSE: IWM).

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.

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Wednesday, January 11, 2012

Mortgage Activity No Reason to Rally

stock rallySeasonal influences are still at play in the weekly mortgage application data produced by the Mortgage Bankers Association (MBA), but soon, we should see real improvement. That said, the latest reported increase is no reason to get giddy about a real estate recovery.

stock market bearOur 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.

No Reason to Rally



Over the course of the last several weeks, we’ve continuously pointed out the seasonal noise we see in the data produced within many economic metrics. One of the data points we’ve keyed on has been the MBA’s Weekly Applications Survey. Activity dropped off significantly in the weeks of December, as Americans were too busy shopping, preparing their homes, visiting with friends, baking and cooking to spend time applying for a mortgage. Even despite the lowest mortgage rates of the year, they kept from refinancing, and certainly there were some refinancing opportunities created by those historical troughs.

However, now that we’re fully immersed in 2012, the data should begin to reflect economic value adding opportunities like those offered in the mortgage market. The latest period, reported today, still included the New Year’s Day holiday, and so is not clean of noise. For the week ended January 6, though, the MBA’s Market Composite Index (of mortgage activity) picked up 4.5% on a seasonally adjusted basis.

Besides discussing the seasonal influences on data in recent weeks, we’ve also discussed the imperfect work of seasonal adjustment, especially in dynamic periods like the current times. You can see just how hard it must be to make this adjustment based on historical data by simply looking at the unadjusted change, which this week marked a 34.4% increase against the week just prior.

We’ve noted that three-day holidays likely give adjusters a problem because they fail to fully account for the soft business activity that occurs the day before the weekend begins and the day after the holiday. There is certainly a slacking of business activity during those crossover periods as people prepare for the holiday and also return from a tiring or relaxing weekend and reenter into “work mode.”

Alas, all that noise will be going away over the weeks ahead, and the market should begin to take advantage of low mortgage rates, though depending upon weather now. Many strategists, economists and housing specialists are pointing to a true spring selling season this year, given supply rundown and employment improvement (so called). I’m a skeptic with regard to labor, again due to seasonal ringers in the data and other issues described in my labor market work.

Rounding out the most recent week’s data for financial sector and housing enthusiasts, the seasonally adjusted Purchase Index increased 8.1%. Remember, the Purchase Index measures activity tied to the purchase of a home. Homebuilder investors will likely add this news to their lists of reasons to rally the industry’s shares, but it’s not a solid data point to build on in that regard. Filling in the rest of the data, the unadjusted Purchase Index increased 41.9%. The MBA’s Refinance Index increased 3.3% from the week before.

Take note now, dear smoke and mirror crew, because what is useful here is the year-to-year comparisons. In that regard, the Purchase Index was severely lower against the prior year period, down 17.9%. That doesn’t sound like a reason to buy homebuilders to me, but you won’t find that information in the current frenzied flurry of news on the industry, except from me. I’ll have more to say on the homebuilders specifically in the near future, so stay tuned.

Homebuilders are up again today despite insight like this, with the SPDR S&P Homebuilders (NYSE: XHB) up 1.4% in late afternoon trading Wednesday. The shares of K.B. Home (NYSE: KBH) and Hovnanian (NYSE: HOV) are up near 13% on the day, with shares of Lennar (NYSE: LEN) up 6.1% partly on its own news. Financials are not missing a beat either, with big home financer Bank of America (NYSE: BAC) up 3.3% and the Financial Select Sector SPDR (NYSE: XLF) up 0.8%.

Be warned though, because the latest days' rise has been driven more by greed than by reason, in my view. Don't label me as a perennial pessimist though, because I suggested investors get into homebuilders last year. I see the latest move as indicative of subtle signs for housing, ample hope for investor profit and complete ignorance of the importance of Europe to the U.S. economy and the growth of emerging markets.

Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), BB&T (NYSE: BBT), CIT (NYSE: CIT), Bank United (NYSE: BKU), First Citizens (OTC: FCNCA.PK), Synovus (NYSE: SNV), United Bankshares (Nasdaq: UBSI), Hampton Roads Bankshares (Nasdaq: HMPR), WesBanco (Nasdaq: WSBC), City Holding (Nasdaq: CHCO), Sandy Spring (Nasdaq: SASR), First Citizens (OTC: FCBN.OB), SCBT Financial (Nasdaq: SCBT), Wilmington Trust (NYSE: WL), WSFS Financial (Nasdaq: WSFS), Southside Bancshares (Nasdaq: SBSI), Stellar One (Nasdaq: STEL), Union First Market (Nasdaq: UBSH), Eagle Bancorp (Nasdaq: EGBN), First Bancorp (Nasdaq: FBNC), Ameris (Nasdaq: ABCB), The Bancorp (Nasdaq: TBBK), First Community (Nasdaq: FCBC), Capital City (Nasdaq: CCBG), Financial Institutions (Nasdaq: FISI), National Bankshares (Nasdaq: NKSH), Citizens & Northern (Nasdaq: CZNC), Charter Financial (Nasdaq: CHFN), Seacoast Banking (Nasdaq: SBCF), TIB Financial (Nasdaq: TIBB), American National (Nasdaq: AMNB), United Community (Nasdaq: UCBI), Middleburg Financial (Nasdaq: MBRG), Heritage Financial (Nasdaq: HBOS), Zions Bancorp (Nasdaq: ZION), East West Bancorp (Nasdaq: EWBC), City National (NYSE: CYN), Bank of Hawaii (NYSE: BOH), SVB Financial (Nasdaq: SIVB), Westamerica (Nasdaq: WABC), Cathay General (Nasdaq: CATY), Umpqua (Nasdaq: UMPQ), Glacier Bancorp (Nasdaq: GBCI), Pacific Capital (Nasdaq: PCBC), PacWest (Nasdaq: PACW), Western Alliance (NYSE: WAL), First National Alaska (OTC: FBAK.OB), First Interstate Bancsystem (Nasdaq: FIBK), Nara (Nasdaq: NARA), West Coast (Nasdaq: WCBO), TriCo (Nasdaq: TCBK), Territorial (Nasdaq: TBNK), Washington Banking (Nasdaq: WCBO), Bank of Marin (Nasdaq: BMRC), Hanmi (Nasdaq: HAFC), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), United Bankshares (Nasdaq: UBSI), Bank of New York Mellon (NYSE: BK), MB Financial (Nasdaq: MBFI), Astoria Financial (NYSE: AF), New York Community (NYSE: NYB), Hudson City (Nasdaq: HCBK), People’s United (Nasdaq: PBCT), First Niagra (Nasdaq: FNFG), Capitol Federal (Nasdaq: CFFN), Washington Federal (Nasdaq: WFSL), Investor’s Bancorp (Nasdaq: ISBC), Northwest Bankshares (Nasdaq: NWBI), Sterling Financial (Nasdaq: STSA), Ocwen (NYSE: OCN), Flagstar (NYSE: FBC), Provident (NYSE: PFS), Colombia Banking (Nasdaq: COLB), Kearny (Nasdaq: KRNY), Brookline (Nasdaq: BRKL), Dime Community (Nasdaq: DCOM), Flushing Financial (Nasdaq: FFIC), Danvers (Nasdaq: DNBK).

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.

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Tuesday, January 10, 2012

How the 24-Hour Retail Cycle Skewed Labor Data

stores open 24 hoursOn almost all accounts, December’s Employment Situation Report was interpreted as good news. However, I see a problem that was only partially broached by the popular press last week. I think a seasonal and unique to 2011 factor supported the labor market last month. This, combined with other seasonal factors I’ve been pointing out throughout December, could be exaggerating job gains. If I’m right, given the short-term nature of this impact, we’ll see some counteracting data in early 2012. Compounding this contrary view of the economic situation, the recession overcoming Europe and the economic growth decay in China are not going to pass without impact to a vulnerable American economic state.

retail industry bloggerOur 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.

Relevant Tickers: NYSE: XRT, NYSE: WMT, NYSE: PIR, NYSE: ETH, Nasdaq: HOFT, NYSE: HD, NYSE: LOW, Nasdaq: AAPL, NYSE: BBY, NYSE: LTD, NYSE: CHS, NYSE: ANN, NYSE: GPS, NYSE: M, NYSE: JCP, NYSE: JWN, NYSE: TJX, NYSE: KSS, Nasdaq: COST, NYSE: TGT, NYSE: WMT, Nasdaq: WTSLA, Nasdaq: HOTT, NYSE: AEO, NYSE: ARO, NYSE: ANF, NYSE: SAK, NYSE: TIF, NYSE: TLB, NYSE: LL, Nasdaq: BLDR, NYSE: FO, NYSE: LEG, NYSE: TPX, NYSE: AYI, NYSE: LZB, Nasdaq: SCSS, NYSE: ZZ, NYSE: FBN, NYSE: NTZ, Nasdaq: SHLD, NYSE: DDS, Nasdaq: BONT, Nasdaq: CPWM, Nasdaq: BKRS, Nasdaq: BEBE, NYSE: BKE, Nasdaq: CACH, Nasdaq: CMRG, Nasdaq: CATO, NYSE: CBK, Nasdaq: CTRN, NYSE: PSS, Nasdaq: DEST, Nasdaq: DBRN, NYSE: DSW, Nasdaq: FINL, NYSE: FL, Nasdaq: GYMB, NYSE: GES, NYSE: JCG, NYSE: JNY, Nasdaq: JOSB, NYSE: NWY, NYSE: JWN, NYSE: MW, Nasdaq: SYMS, Nasdaq: PLCE.

How the 24-Hour Retail Cycle Skewed Labor Data



The Labor Department reported the unemployment rate fell two-tenths of a point to 8.5%, from 8.7%. December’s report also showed an addition of 200K nonfarm payrolls. Both data points represented improvement and both reached above the expectations of economists, who were reportedly looking for an 8.7% unemployment rate and the addition of 150K jobs, based on Bloomberg’s survey. So why did economists fall short?

I think evidence of this is readily available in the report itself. What caught my eye initially was the increase in the average workweek, which was lauded by many talking heads in the popular press. Average hours worked rose to 34.4 hours, up from 34.3, marking an unexpected increase against economists’ views.

We know the retail sector added another 28,000 jobs in December, but the reason behind it was simply attributed to the holiday shopping season. However, there were dynamic factors at play that reached beyond normal seasonal trend. Many stores stayed open 24 hours or otherwise extended their hours of operation through the holiday shopping period of 2011. It was a trend that was initiated by Target (NYSE: TGT) and Wal-Mart (NYSE: WMT) at the formal start of the shopping period, which this year even preceded Black Friday. Operating managers kept the lights on at select Macy’s (NYSE: M), Toys “R” Us and Old Navy, which is owned by The Gap (NYSE: GPS), among other stores. Clearly, doing so requires additions to the workforce count, which would boost December employment beyond the usual seasonal additions at retailers. However, those extraordinary additions would be quickly let loose post the holidays, and so do not present as strong an economic signal as perhaps some see in the December data.

A portion of the holiday’s temporary additions to the employed pool is also notable in the Transportation and Warehousing segment, where the courier and messenger industry contributed 42,000 of the segment’s 50K in workforce growth in December. UPS (NYSE: UPS) and FedEx (NYSE: FDX) each make public notice of the increase on seasonal demand. With this regular trend well understood by the market, it seems to be overlooking the dynamic change in the creative marketing and operation of the retail industry, which I believe also drove increased workforce counts.

What’s not accounted for in this argument is the 23,000 job increase in manufacturing. I suspect this growth is being driven by the increasing effort in domestic energy production, which is a secular trend and a real driver for ongoing employment. Likewise, the long-term growth in health care has been driven by secular demand on the aging demographics of America, and this would also support manufacturing. I see the mining increase driven by the rising prices of commodities, including gold, silver and rare earth metals. Again, manufacturing is indirectly aided.

Jobs have been created over the course of the year, which is reflective of the slowly improving economic environment. There’s no denying that. However, my concern is that new burden lies ahead, driven by deep recession in Europe and related slowing growth in the domestic economies of the emerging markets. Given that the late 2011/ early 2012 market has fed off what has been viewed as a healthy holiday shopping period, I worry about a different reality that could be reported by retailers for the quarter. That reality should reflect leaner profit margins and many earnings shortfalls on the stores’ deep discounting and long hours of operation, as desperate retailers sought any pull possible to lure market share. Thus, I suggest investors take the holiday-relative economic data for what it is, full of noise and distortion.

Article interests investors in: S&P Retail ETF (NYSE: XRT), Wal-Mart (NYSE: WMT), Pier 1 Imports (NYSE: PIR), Ethan Allen (NYSE: ETH), Hooker Furniture (Nasdaq: HOFT), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Apple (Nasdaq: AAPL), Best Buy (NYSE: BBY), The Limited (NYSE: LTD), Chicos (NYSE: CHS), Ann Taylor (NYSE: ANN), The Gap (NYSE: GPS), Macy’s (NYSE: M), JC Penney (NYSE: JCP), Nordstrom (NYSE: JWN), TJX Company (NYSE: TJX), Kohls (NYSE: KSS), Costco (Nasdaq: COST), Target (NYSE: TGT), Wet Seal (Nasdaq: WTSLA), Hot Topic (Nasdaq: HOTT), American Eagle Outfitters (NYSE: AEO), Aeropostale (NYSE: ARO), Abercrombie & Fitch (NYSE: ANF), Saks (NYSE: SAK), Tiffany (NYSE: TIF), Talbots (NYSE: TLB), Lumber Liquidators (NYSE: LL), Builders Firstsource (Nasdaq: BLDR), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur-Pedic International (NYSE: TPX), Acuity Brands (NYSE: AYI), La-Z-Boy (NYSE: LZB), Select Comfort (Nasdaq: SCSS), Sleepy’s (NYSE: ZZ), Furniture Brands (NYSE: FBN), Natuzzi (NYSE: NTZ), Sears (Nasdaq: SHLD), Dillard’s (NYSE: DDS), Bon-Ton (Nasdaq: BONT), Cost Plus (Nasdaq: CPWM), Baker’s Footwear (Nasdaq: BKRS.OB), Bebe Stores (Nasdaq: BEBE), The Buckle (NYSE: BKE), Cache (Nasdaq: CACH), Casual Male (Nasdaq: CMRG), Cato (Nasdaq: CATO), Christopher & Banks (NYSE: CBK), Citi Trends (Nasdaq: CTRN), Collective Brands (NYSE: PSS), Destination Maternity (Nasdaq: DEST), Dress Barn (Nasdaq: DBRN), DSW (NYSE: DSW), Finish Line (Nasdaq: FINL), Footlocker (NYSE: FL), Gymboree (Nasdaq: GYMB), Guess (NYSE: GES), J. Crew (NYSE: JCG), Jones New York (NYSE: JNY), Jos. A Banks (Nasdaq: JOSB), New York & Co. (NYSE: NWY), Men’s Wearhouse (NYSE: MW), Syms (Nasdaq: SYMS), The Children’s Place (Nasdaq: PLCE).

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.

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Wednesday, January 04, 2012

Mosaic Earnings Should Prove Interesting

Mosaic Corp.Mosaic (NYSE: MOS) will report earnings after the close of trading Wednesday, and the report portends to be interesting. Furthermore, the forward outlook is likely to be confused by a confluence of market factors contending against one another and the company.

agriculture analystOur 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.

Mosaic Study



When Mosaic reports its results at the close Wednesday, both its quarterly results and forward outlook may confound investors. The stock already took a hit on its announcement that it would cut its output by as much as 250,000 metric tons through the first quarter of 2012. That decline capped off a poor showing for 2011, with MOS shares handing shareholders a 34% loss in value, after adjustment for dividends. However, since the warning, the shares have recovered, closing Tuesday 4.3% higher. So it would appear that capital allocation and technical factors would like to support the shares if the fundamentals will hold up.

Mosaic President and CEO, Jim Prokopanko, stated within the company’s announcement that "Isolated phosphate market spot prices have become disconnected with the underlying agricultural fundamentals. As dealers and distributors focus on the macroeconomic uncertainty and delay purchases for the North American Spring Season, near term supply of phosphate barges on the Mississippi River has exceeded near-term demand. The current spot prices in this market do not reflect our outlook for the business, nor do we think they are sustainable. In response, we have decided to cut planned production by 250,000 tonnes over the next three months."

My concern is that the production cut was driven by pricing that has been short of the company’s forecasts. It’s clear to me that Mosaic has offered investors insight into the quarter it will report on Wednesday evening and/or the guidance it will provide for the forward quarter. If pricing has been short of forecasts, then Mosaic’s profit margins should also fall short and its earnings might miss the analysts’ consensus view as well. However, Mosaic did not offer new earnings guidance alongside this production warning, stating that its results would fall within its guidance range. That said, there remains risk the company might miss Wall Street’s expectation, unless they have been adjusted.

Company’s management seems to me to be engaged in a dangerous game, splitting hairs on a timeline, managing economic value it expects to create no matter, just at a later date. But in a competitive environment, this may be a game best not played. That issue is debatable, given the price parallel movement in the shares of Potash Corp. of Saskatchewan (NYSE: POT) around the Mosaic announcement. It seems the Mosaic team expects to garner the same sales it expected before announcing the production cut, but at prices it sees worthy.

It’s my view that the uncertainty introduced into the equation is not supportive of near-term stock price revival, though if management does come through and preserve and create economic value as it plans, it would later benefit. As a result of the uncertainty increase, and the technical and capital allocation factors that seem in opposition of the fundamental question, I would not enter into a new position heading into this earnings report despite my general favor of the agriculture sector.

This article should interest investors in agricultural plays Mosaic (NYSE: MOS), Monsanto (NYSE: MON), Potash Corp. of Saskatchewan (NYSE: POT), Intrepid Potash Inc. (NYSE: IPI), Deere (NYSE: DE), Caterpillar (NYSE: CAT) and others.

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.

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