The Fed & Bernanke's Economic Delusion

Bernanke's Vision

Federal Reserve Chairman Benjamin Bernanke delivered an important speech Friday. It was highly anticipated and critically important in the minds of market soothsayers. In the end, Bernanke did not really have much to say with regard to an imminent employment of quantitative easing measures. However, what he did have to say about the current state of economic affairs and the view he and the Fed have of the future troubled me greatly.

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.

(Relevant Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: SERAX, Nasdaq: SERBX, Nasdaq: SERCX, Nasdaq: SERNX, Nasdaq: FEUFX, Nasdaq: FEEEX, Nasdaq: FAEAX, Nasdaq: FBEAX, Nasdaq: FIEUX, Nasdaq: FECAX, Nasdaq: IERAX, Nasdaq: XRNEX, Nasdaq: PBEUX, Nasdaq: UEPIX, Nasdaq: UEPSX, Nasdaq: PEUGX, Nasdaq: RYAEX, NYSE: CEE, NYSE: RNE, NYSE: PEF, NYSE: GUR, NYSE: EPV, NYSE: VEA, NYSE: DFE, NYSE: DEB, NYSE: IEV, Nasdaq: ANEFX, Nasdaq: CNGAX, Nasdaq: HNEAX, NYSE: BAC, NYSE: GS, NYSE: AIG, NYSE: WFC, NYSE: MS, NYSE: C, NYSE: DB, NYSE: CS, NYSE: UBS, OTC: FNMA.OB, OTC: FMCC.OB, NYSE: MCG, NYSE: MCO, NYSE: TD, NYSE: PNC, NYSE: STD, AMEX: GLE, NYSE: BCS, NYSE: GLD, NYSE: XLE, NYSE: XLF, NYSE: BJV, NYSE: SZI, NYSE: BPD, NYSE: IEL, NYSE: PBN, NYSE: CGW, NYSE: LVL, NYSE: FRI, NYSE: PBP, NYSE: RSU, NYSE: RMM, NYSE: REA, NYSE: RFL, NYSE: RHM, NYSE: RTG, NYSE: RSW, NYSE: RMS, NYSE: REC, Nasdaq: PDOWX, Nasdaq: XDPOX, Nasdaq: XDPDX, Nasdaq: NDUAX, Nasdaq: NDUBX, Nasdaq: IDJAX, Nasdaq: NJCRX, Nasdaq: UDPIX, Nasdaq: UDPSX, Nasdaq: UWPIX, Nasdaq: RYLDX, Nasdaq: RYIDX, Nasdaq: RYCWX, Nasdaq: ONEQ, Nasdaq: QCLN, Nasdaq: QQEW, Nasdaq: QQXT, Nasdaq: QTEC, Nasdaq: NASDX, Nasdaq: NDXKX, Nasdaq: POTCX, Nasdaq: DXQSX, Nasdaq: DXQLX, Nasdaq: FNCMX, Nasdaq: INQAX, Nasdaq: MOTAX, Nasdaq: XQQQX)

The Fed & Bernanke's Economic Delusion

Fed Chairman Bernanke and Treasury Secretary Geithner reintroduced uncertainty into the market equation Friday. A slew of economic data hit the wire Friday morning, including a planned address by the Fed Chairman on the prospect of quantitative easing. However, the Chairman's speech seemed to work more towards preparing the market for what it already expects, than it did toward giving it what it wants.

Retail sales data for September proved stronger than expected, and inflation remained tame, so stocks sprinted into the open. However, it feels as though the delay in Treasury Secretary Geithner's report on our foreign trading partners, especially China, has kept fear alive in the hearts of traders. Geithner's delay certainly implies a harsh but true description of China's foreign currency manipulation could be due, though it is clearly not preferred by the government. The potential repercussions of this possibility has traders and investors of all sorts uncertain, and uncertainty acts as a weight on stocks.

Bernanke's Address

The Chairman's speech did not offer the rescue ship the investment community was counting on, but he said it was in nearby port if need be. He began by reassuring the community that the economy is still on pace for growth, with the "preconditions for it in place." He voiced expectations for moderate growth as time progressed.

The speech itself was intended to target the topic of monetary policy in a low inflation environment, and so the Chairman discussed the many nuances and difficulties in his current work. Indeed, while lowering the Fed's target rate to spur the economy, he would like to also see the bond market avoid disaster and equity values find further supports. While the Fed's mandate does not target stocks nor bonds, the economic play of the two is of course still important for consideration. And so, a little bit of inflation is now regarded a desirable spice for the economic gourmet. Bang!

What got me fired up to write this critical review of the Fed and Bernanke's economic vision is the deluded view the economic minders seem to have. The Fed has been one of the poorest forecasters of economic developments in recent times. After all, it failed to see the housing bubble it was building with its low rate policy. However, when cornered, Alan Greenspan will point to crooked mortgage brokers and greedy banks as the culprits. In more recent times, the latest Fed Chairman publicly stated that the mortgage and real estate crisis would be contained within the industry it served. That was a troubling failure of vision, and the disaster spread into a global financial crisis of fathomable (not by the Fed though) proportions. Or perhaps, US government advisors asked the Chairman to refrain from yelling "fire" in the theater… though flames were spreading at the time.

Once again, the Fed seems to have its blinders on, as the Chairman's speech was full of deluded impressions of the current economic environment. Hey, I'm not apologizing for telling the truth. This type of writing is why I have a following. It is because of our willingness to tell the story that bank and other institutionally paid economists and strategists are too afraid to tell. That's because it might lead you to take your capital out of the hands of their portfolio management team, and cost them their jobs.

Bernanke said that household spending should benefit from stronger household finances, further easing of credit conditions, and pent-up demand for consumer durable goods. I have issue with this statement.

Inadequate Income

The unemployment benefit compensation and emergency part-time work 17% of Americans find themselves surviving on now, are not likely strengthening their household finances. In fact, overleveraged Americans would be lucky if their income resources were even enough to stop the bleeding of their money. Under the illusion of continual employment and eventual prosperity, we have purchased homes, automobiles and all sorts of things we thought we needed with credit, and those payments likely now exceed the income generated by government supports and through the bussing of tables. Thus, can we really say household finances have strengthened? It's more like American families are facing a harsher reality day by day.

Unsteady Housing & Assets

Home prices look about ready to slip again, and without economic growth, equities might not even hold their ground, let alone appreciate further. So, with the wealth effect reversed, can we say household finances have strengthened, or that even the perception of household wealth has improved?

Credit Fallacy

Bernanke also stated that further easing of credit conditions were an aid to the consumer. So, why then does consumer credit contract almost each and every month it is reported? Credit has not eased, or else record low mortgage rates would be spurring the real estate market. Instead, underwater mortgages that near or exceed the value of the properties they stand against, and poorly rated credit risks (people), cannot even refinance their current loans, let alone buy a new one or purchase one for junior. Furthermore, banks have come under high scrutiny and broad regulation, so find me a banker these days who will go out on a limb now. I think they are as scarce as the pheasant are in my Pennsylvania hunting grounds.

Hopeful Demand

Thirdly, Bernanke talks about pent-up demand for household durables. You know, I think poor folk just call that wishing, and go on washing their clothes the old fashioned way. If the washing machine is broke, but Joey is still sitting idle, well than Susan will be washing the clothes in the bathtub. That is not pent-up demand; that's surviving, and nothing is going to lead a family without means to buy that new machine except a new job. Even then, the machine won't come until the refrigerator is full, the bills are caught up and some savings put in place. Pent-up demand? I call that wishing, because without a job, there will be no release of demand.

Greed is Good in the Corporate HQ

Bernanke says that similarly business investment in equipment and software should be driven rapidly by rising sales, the need to replace old equipment, strong balance sheets and low financing costs. In the case where the equipment is necessary for the generation of sales, it will be replaced and upgraded. But, you can count on corporate masters, those being you and me the shareholders, to demand EPS and dividends before new desks for the cubicle impaired. This is capitalism, where stocks are rewarded for making higher profits, not for making employees feel like human beings. Face it! That's the way you like it, so stop turning your eye from it. And don't be so surprised when you hear about some loose cannon doing in all his supervisors one angry afternoon. That said, I would still rather be working in a cubicle in Jersey City than in a sweat shot in Bangalore.

Companies will Acquire One Another

So I say don't look for "rapid" spending from corporations, except in the acquisition of each other. There will be more of that use of the over-cashed balance sheets than there will be of the addition of Windows 8 and the new desk machine with the paper thin monitor. Oh, and after these companies acquire one another, they go about the business of creating synergies, which usually includes the laying off of redundant responsibilities and the poor saps who fill them. Thus, that would seem to weigh against economic growth, and certainly against employment in the near-term. The long-term might offer another sunny story, but don't look for companies to place spending above higher profits, because this ain't heaven.

Also, low financing also goes a long way toward paying out dividends. It has been figured out long ago that a good bit of leverage adds value to an organization, when it is manageable. A low cost of capital, certainly creates economic value; but how will that economic value be distributed? So who gets richer? That's right, the rich. That is especially true now that the little guy has been near permanently scared out of the stock market. Hey, but it's a good thing right? After all, without the rich building companies, the little guys would not have work. I'm being cynical, in case you’re blind. Trickle down should not translate into look down, or beat down. History shows us that mindfulness of the peasants plays smartly too, since the masses are made of them (read us). In case you haven't noticed, we're growing restless. Meanwhile, bank managers paid back the government at the cost of equity holders so that they could pay themselves bonuses. Hey, Fed-provided liquid capital markets and solvency served them well.

Public Sector Farce

The Chairman says that the public sector is improving as well. He says tax receipts in state and local governments have started to recover, which should allow their spending to rise gradually. He says the contribution of federal stimulus to overall growth should decline at a pace that does not derail economic activity. Woe there horsey!

Since when have tax receipts improved? In New York City, we are seeing more crime in unattended subway stops, fires burning longer due to greater distances for scarcer firemen to travel, and even less charitable contributions to the stubbornly needy who refuse to leave Utopia like the mayor might prefer. Yet, major extraordinary projects like the second avenue subway and the new tunnel from Jersey somehow survive these tough times? Oh well, I guess that's thanks to poor Benjamin, who gives an arm each day to the MTA in order to travel into the city to make some money serving people. Hogwash Bernanke! Hogwash! You should have been with me the other night sitting with a hobo, once a handyman, in a coffee shop until two in the morning, so they would not kick him out into the rain, where nobody would find him until he had been long dead, since those jobs have been shed too.

As far as the government stilts being slowly taken away as to avoid derailing the economy:

Well, the Chairman must bed early, because he seems to be missing the political campaign that clutters the airwaves. It harps on wasteful spending and fiscal prudence, and it scares even those bold enough to consider change from changing the tax code for the rich. The wealthy are not putting those costly (to us) dollars back to work in the economy, as one might hope. That's because they don't need another yacht as badly as we need another loaf of bread. Democrats need to drum up one more ounce of courage before their party ends, and allow the Bush tax cuts to expire on income earned above $250K. At least address the higher end, with consideration for small businessmen. Why can't we let them expire on the super-wealthy, and pass a new bill at the same time, giving tax breaks to small businessmen earning up to a million? Why hasn't a compromise come about!!!? It's because politicians care more about their seats in DC than they do about you and me.

I also believe the Chairman must have missed the fact that housing is about to double-dip in the absence of the homebuyers' tax credit. Cash-for-Clunkers was a hit too, but I don't see car sales running near 14 million today with it gone. And some of these government aids were corrupted along the way, and so efforts to keep people from devastating foreclosure instead allowed predators to misguide and steal from the needy.

Foreign Trade Supports?

Doesn't Bernanke hang out with Geithner anymore, since the G-man moved on to head the Treasury? Otherwise, why would the Chairman include continued support from our foreign trading partners as a catalyst for growth, given Geithner's engagement of China on the yuan. There's no guarantee when it comes to the Chinese; there's a reason we've been so cautious to begin with.

A Hint of an Idea

Finally some sobriety, as the Chairman addressed the modest economic growth he sees, and the jobless recovery it entails. And so, further monetary stimulus remains under consideration. He did not say much more than before, in repeating that the Fed is considering expanding its stake in long-term securities. Did you note though, that the Chairman used the qualifier "if warranted?" This suggested that QE2 is by no means a done deal. Lest we remind you that the market thinks it is, and that a letdown seems in store in one way or another.

A Shotgun of a Tool to Use

Empirical evidence suggests QE2 should act as effective economic stimulus, we agree. But Bernanke warned that we have little experience in this means of action, and so we translate to read, we might overshoot. The risk of this is that our conservative Fed might err greatly with its new weapon and unleash an uncontainable virus upon us all by charging the economy up and inflation out of control. This is why many Fed members are openly talking about a careful ratcheting up of quantitative easing. While this makes sense, it also seems to offer the risk of adding less than enough boost to the economic engine.

Either way, we see volatility increasing and uncertainty overwhelming the market, which is bad news for stocks. Only the economic life we pursue can rescue us, and perhaps this can only come naturally and with time, or by means of further creative thinking. Maybe quantitative easing will work, and maybe it will not. One thing is certain, that man will go on making monsters and monstrous mistakes. It's all we can do to try. I've been critical of the Fed today, but I've also been supportive of it in the past. We call it like we see it.



(Article should interest: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: SERAX, Nasdaq: SERBX, Nasdaq: SERCX, Nasdaq: SERNX, Nasdaq: FEUFX, Nasdaq: FEEEX, Nasdaq: FAEAX, Nasdaq: FBEAX, Nasdaq: FIEUX, Nasdaq: FECAX, Nasdaq: IERAX, Nasdaq: XRNEX, Nasdaq: PBEUX, Nasdaq: UEPIX, Nasdaq: UEPSX, Nasdaq: PEUGX, Nasdaq: RYAEX, NYSE: CEE, NYSE: RNE, NYSE: PEF, NYSE: GUR, NYSE: EPV, NYSE: VEA, NYSE: DFE, NYSE: DEB, NYSE: IEV, Nasdaq: ANEFX, Nasdaq: CNGAX, Nasdaq: HNEAX, NYSE: BAC, NYSE: GS, NYSE: AIG, NYSE: WFC, NYSE: MS, NYSE: C, NYSE: DB, NYSE: CS, NYSE: UBS, NYSE: FNM, NYSE: FRE, NYSE: MCG, NYSE: MCO, NYSE: TD, NYSE: PNC, NYSE: STD, AMEX: GLE, NYSE: BCS, NYSE: GLD, NYSE: XLE, NYSE: XLF, NYSE: BJV, NYSE: SZI, NYSE: BPD, NYSE: IEL, NYSE: PBN, NYSE: CGW, NYSE: LVL, NYSE: FRI, NYSE: PBP, NYSE: RSU, NYSE: RMM, NYSE: REA, NYSE: RFL, NYSE: RHM, NYSE: RTG, NYSE: RSW, NYSE: RMS, NYSE: REC, Nasdaq: PDOWX, Nasdaq: XDPOX, Nasdaq: XDPDX, Nasdaq: NDUAX, Nasdaq: NDUBX, Nasdaq: IDJAX, Nasdaq: NJCRX, Nasdaq: UDPIX, Nasdaq: UDPSX, Nasdaq: UWPIX, Nasdaq: RYLDX, Nasdaq: RYIDX, Nasdaq: RYCWX, Nasdaq: ONEQ, Nasdaq: QCLN, Nasdaq: QQEW, Nasdaq: QQXT, Nasdaq: QTEC, Nasdaq: NASDX, Nasdaq: NDXKX, Nasdaq: POTCX, Nasdaq: DXQSX, Nasdaq: DXQLX, Nasdaq: FNCMX, Nasdaq: INQAX, Nasdaq: MOTAX, Nasdaq: XQQQX)

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.

House Prices Sink & Confidence in Government Failing

Morning Greek
Greek Factor: -1

The day has a solid negative tone to it, given poor data out for housing prices, mortgage activity and crude and gasoline storage. Meanwhile, the demise of the President's economic team is furthering a case against the Administration's ability to give life to the economy. All the while, Ben Bernanke said the "D" word, or implied it anyways. The "Greek Factor" ranges from +3 to -3, and is a subjective measure of The Greek's view of the market impact of individual and aggregate news and the day's scheduled events.

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.

(Relevant Tickers: NYSE: GS, NYSE: NYT, NYSE: S, NYSE: TWC, NYSE: AOL, NYSE: SNI, Nasdaq: CMCSA, NYSE: TRI, NYSE: PCS, Nasdaq: THQI, NYSE: CBS, Nasdaq: EQIX, NYSE: MHP, NYSE: UBS, Nasdaq: IMMU, Nasdaq: LMNX, Nasdaq: ALKS, Nasdaq: LIFE, Nasdaq: SPPI, NYSE: STE, Nasdaq: AMGN, Nasdaq: THOR, Nasdaq: ARTC, Nasdaq: BRKR, Nasdaq: CADX, Nasdaq: ICUI, Nasdaq: SUPG, Nasdaq: ALOG, NYSE: DHR, Nasdaq: GERN, Nasdaq: GTXI, Nasdaq: IART, Nasdaq: HITK, Nasdaq: INFY, NYSE: WST, Nasdaq: HALO, NYSE: ALR, Nasdaq: MATK, Nasdaq: AMRN, Nasdaq: ANDS, NYSE: MDT, Nasdaq: VVUS, Nasdaq: AFFX, Nasdaq: NBIX, Nasdaq: OGXI, NYSE: MRX, Nasdaq: KNSY, Nasdaq: MDCI, Nasdaq: SNTS, Nasdaq: MDCO, Nasdaq: EXEL, Nasdaq: ONXX, Nasdaq: SCLN, Nasdaq: AVNR, Nasdaq: QCOR, Nasdaq: KERX, Nasdaq: INTU, NYSE: FLO, NYSE: BBY, NYSE: GIS, NYSE: KMX, Nasdaq: CPRT, NYSE: DRI, Nasdaq: DYNT, Nasdaq: EGAN, NYSE: IHS, NYSE: JEF, Nasdaq: LYRI, AMEX: PHC, Nasdaq: PSDV, NYSE: RHT, AMEX: VSR, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

House Prices Sink, Confidence in Government Failing

Talk about trouble. "You picked the wrong time to leave me Larry," are the words the President might be saying this day and moving forward. With the flow of economic data still troubling, any further loss of consumer confidence seems certain to drive this economy into double-dip recession. Meanwhile, the Democrats might rather an aluminum bat to the brain then the departure of a critical economic advisor from the administration ahead of the November elections. You can mail it home now; the Republicans seem sure to take over Congress, unless more kooks turn up in the Tea Party.

FHFA Price Index
Greek Factor: -2

The FHFA posted its House Price Index today, which showed prices fell 0.5% from June to July. What's worse is that June's 0.3% decline was revised to a 1.2% drop. Price decline, which you will recall has been predicted within these pages for months now, is the natural consequence of sickly demand. Record low mortgage rates have thus far not been enough in an economic environment that struggles with soaking unemployment, restrictive lending, deteriorated credit ratings and a flood of low priced distressed property. Note that for the 12 months ended in July, prices are down 3.8%. We remind readers though, that the FHFA data is limited to the purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae (OTC: FNMA.OB) or Freddie Mac (OTC: FMCC.OB). This is still important news, and a heavy negative for stocks today. Looks like housing shares might soon give back the gains made earlier this week.

Mortgage Activity
Greek Factor: -1

The latest Mortgage Applications Survey for the week ending September 17 shows mortgage volume fell, but don't read too much into the data point. The Mortgage Bankers Association has been imperfect in its adjustment efforts around holidays, and this particular report adjusts against Labor Day, which fell within the compared against prior week.

Thus, the seasonally adjusted Market Composite Index fell 1.4%, while the unadjusted measure gained 22.9%. As you can see, there's a lot of room for error here. Mortgage rates fell during the period, with contracted rates on 30-year and 15-year fixed rate mortgages falling to 4.44% (from 4.47%) and 3.88% (3.96%), respectively. Despite the decrease, the Refinance Index fell 0.9% in the period. The index measuring purchase activity decreased 3.3% on an adjusted basis, and rose 18.9% on an unadjusted basis.

This week, more than ever, we should rely on the four week moving average. The four week moving average for the seasonally adjusted Market Index is down 2.3 percent. The four week moving average is up 1.0 percent for the seasonally adjusted Purchase Index, while this average is down 3.0 percent for the Refinance Index. Finally, real estate investors will be well aware of the 38% deficit that exists in the volume of purchase activity against last year's period.

Bernanke's Shift
Greek Factor: -1

Yesterday's FOMC Monetary Policy Statement offered some interesting wording that seemed to focus attention to deflation risk. The Fed's statement specifically stated: "The Committee… is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." That statement seems to prepare the market for future accommodative policy that may irk some hawks, like dissenter Thomas Hoenig. It certainly raises concern about the economic recovery, which should be the most important takeaway here.

Summers' Departure
Greek Factor: -1

The market is abuzz about the departure of President Obama's top economic advisor, Larry Summers, but I suspect there is less to this than it seems. Bloomberg Radio reported this morning that Summers' tenure would expire at Harvard, should he stay away for more than two years. While he could reapply, this fact might have played a small role in his decision. It is possible he and the President felt he could still be an important guide from outside the White House.

Maybe Summers just got frustrated with the scene in Washington, and the difficulty in getting economic policy through Congress. It is also possible that Summers sees the writing on the wall for the upcoming November elections, and has decided the Administration will have less sway with a Congress that might shift to the right. Still, the market is going to read into the departure as a sign President Obama's team is falling apart and that the Administration cannot cure what ails us economically speaking.

EIA Petroleum Status Report
Greek Factor: -1

The EIA reports every Wednesday on the flow of petroleum goods into and out of inventory. For the week ending September 17, crude oil inventory increased by 1.0 million barrels and gasoline stores increased by 1.6 million barrels. Both crude and gasoline stocks stood above the upper limit of the average range. Beware, though, crude shorters, because even as crude future prices on nearest expiration sit in the mid to upper $70s, the market is being reminded now of the great risk threatening over the next year or so… Iran conflict. Prices should be supported at least in the very near-term as the UN General Assembly meetings play out. The build up in inventory though, says something about economic demand.

DC Doings

The Senate Banking Committee is at work reviewing the government's response to the economic crisis, while a House Financial Services subcommittee is busy looking through the jobs bill.

Corporate Wire

The Goldman Sachs (NYSE: GS) Communacopia XIX Conference highlights presentations by New York Times (NYSE: NYT), Sprint Nextel (NYSE: S), Time Warner Cable (NYSE: TWC), AOL (NYSE: AOL), Scripps Networks (NYSE: SNI), Comcast (Nasdaq: CMCSA), Thomson Reuters (NYSE: TRI), MetroPCS (NYSE: PCS), THQ (Nasdaq: THQI), CBS (NYSE: CBS), Equinix (Nasdaq: EQIX), McGraw Hill (NYSE: MHP).

The UBS (NYSE: UBS) Global Life Sciences Conference includes presentations by Immunomedics (Nasdaq: IMMU), Luminex (Nasdaq: LMNX), Alkermes (Nasdaq: ALKS), Life Technologies (Nasdaq: LIFE), Spectrum Pharmaceuticals (Nasdaq: SPPI), Steris (NYSE: STE), Amgen (Nasdaq: AMGN), Thoratec (Nasdaq: THOR), ArthroCare (Nasdaq: ARTC), Brukur (Nasdaq: BRKR), Cadence Pharmaceuticals (Nasdaq: CADX), ICU Medical (Nasdaq: ICUI), SuperGen (Nasdaq: SUPG), Analogic (Nasdaq: ALOG), Danaher (NYSE: DHR), Geron (Nasdaq: GERN), GTx (Nasdaq: GTXI), Integra LifeSciences (Nasdaq: IART), Hi-Tech Pharmacal (Nasdaq: HITK), Infinity Pharma (Nasdaq: INFY), West Pharmaceutical Services (NYSE: WST), Halozyme (Nasdaq: HALO), Inverness Medical (NYSE: ALR), Martek (Nasdaq: MATK), Amarin (Nasdaq: AMRN), Anadys Pharmaceuticals (Nasdaq: ANDS), Medtronic (NYSE: MDT), Vivus (Nasdaq: VVUS), Affymetrix (Nasdaq: AFFX), Neurocrine Biosciences (Nasdaq: NBIX), Oncogenex (Nasdaq: OGXI), Medicis (NYSE: MRX), Kensey Nash (Nasdaq: KNSY), Medical Action (Nasdaq: MDCI), Santarus (Nasdaq: SNTS), The Medicines Co. (Nasdaq: MDCO), Exelixis (Nasdaq: EXEL), Onyx Pharma (Nasdaq: ONXX), SciClone (Nasdaq: SCLN), Avanir (Nasdaq: AVNR), Questcor (Nasdaq: QCOR), Keryx (Nasdaq: KERX).

Intuit (Nasdaq: INTU) and Flowers Foods (NYSE: FLO) have analyst meetings scheduled for today. The earnings schedule includes Bed, Bath & Beyond (NYSE: BBY), General Mills (NYSE: GIS), CarMax (NYSE: KMX), Copart (Nasdaq: CPRT), Darden Restaurants (NYSE: DRI), Dynatronics (Nasdaq: DYNT), eGain Communications (Nasdaq: EGAN), IHS (NYSE: IHS), Jefferies (NYSE: JEF), Lyris (Nasdaq: LYRI), PHC (AMEX: PHC), PSIVIDIA (Nasdaq: PSDV), Red Hat (NYSE: RHT), and Versar (AMEX: VSR).

Markets are closed in China, South Korea, Taiwan and Israel today.



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.

The Recession is Over!

The Recession is Over. Yeah, and?

We're glad you got over your depression, Mr. Market, but we are very worried about your new case of amnesia! The market rallied Monday because an economic authority declared the recession to be over, or to have been concluded for some time now. Hello! Where have you been, every trader who bought on that news! Yes, the recession is over, but we all knew that already. The actionable news for the last month or two has been that the economy is slowing again, and threatening entering into recession once more.

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.

(Relevant Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: SERAX, Nasdaq: SERBX, Nasdaq: SERCX, Nasdaq: SERNX, Nasdaq: FEUFX, Nasdaq: FEEEX, Nasdaq: FAEAX, Nasdaq: FBEAX, Nasdaq: FIEUX, Nasdaq: FECAX, Nasdaq: IERAX, Nasdaq: XRNEX, Nasdaq: PBEUX, Nasdaq: UEPIX, Nasdaq: UEPSX, Nasdaq: PEUGX, Nasdaq: RYAEX, NYSE: CEE, NYSE: RNE, NYSE: PEF, NYSE: GUR, NYSE: EPV, NYSE: VEA, NYSE: DFE, NYSE: DEB, NYSE: IEV, Nasdaq: ANEFX, Nasdaq: CNGAX, Nasdaq: HNEAX, NYSE: BAC, NYSE: GS, NYSE: AIG, NYSE: WFC, NYSE: MS, NYSE: C, NYSE: DB, NYSE: CS, NYSE: UBS, NYSE: FNM, NYSE: FRE, NYSE: MCG, NYSE: MCO, NYSE: TD, NYSE: PNC, NYSE: STD, AMEX: GLE, NYSE: BCS, NYSE: GLD, NYSE: XLE, NYSE: XLF, NYSE: BJV, NYSE: SZI, NYSE: BPD, NYSE: IEL, NYSE: PBN, NYSE: CGW, NYSE: LVL, NYSE: FRI, NYSE: PBP, NYSE: RSU, NYSE: RMM, NYSE: REA, NYSE: RFL, NYSE: RHM, NYSE: RTG, NYSE: RSW, NYSE: RMS, NYSE: REC, Nasdaq: PDOWX, Nasdaq: XDPOX, Nasdaq: XDPDX, Nasdaq: NDUAX, Nasdaq: NDUBX, Nasdaq: IDJAX, Nasdaq: NJCRX, Nasdaq: UDPIX, Nasdaq: UDPSX, Nasdaq: UWPIX, Nasdaq: RYLDX, Nasdaq: RYIDX, Nasdaq: RYCWX, Nasdaq: ONEQ, Nasdaq: QCLN, Nasdaq: QQEW, Nasdaq: QQXT, Nasdaq: QTEC, Nasdaq: NASDX, Nasdaq: NDXKX, Nasdaq: POTCX, Nasdaq: DXQSX, Nasdaq: DXQLX, Nasdaq: FNCMX, Nasdaq: INQAX, Nasdaq: MOTAX, Nasdaq: XQQQX)

The Recession is Over!

It was as if the entirety of the investment community took a hit to the head, perhaps by an IBM mainframe computer of olden year, given IBM's deal news (NYSE: IBM). The National Bureau of Economic Research issued a paper Monday reporting the trough of the economic cycle was June of 2009. In other words, the recession officially ended 15 months ago. The historians also traced the start of the recession to December of 2007, which makes it an 18 month long wonder, the longest recession since World War II. Woo hoo, the king is dead!

Long live the king!

Sorry to spoil the party, but much of the more recent economic data reaching the wire has had a bitter taste to it. The time to celebrate the end of this recession was wisely already partied up by a smart group of stock investors in 2009, from the stock market trough in March of that same year. Rather, Monday's rally in the Dow of 1.4% was likely a foolhardy endeavor, simply following Tea Party inspired rise of last week. I refer to the NBER report itself to make my point, and I quote: "Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion." Sometimes applies to this time perky people.

Importantly, the NBERs noted, any recession that were to occur now would be a new one, independent from the old. I beg to differ fellas! Any recession that occurs now is directly tied to the last one, and a result of it even. You know, the other day I heard PIMCO's El-Erian call unemployment a leading indicator, and he emphasized it as if he were the first to say such a thing. Does he think that nobody reads Wall Street Greek? Sure, I once called a guy a bozo (in 2008) for saying the same thing, but I figured out pretty early that unemployment this time around would be heavy and anchored, thanks to technology gains both on the production floor and tied to the efficiency achieved in many management processes due to new software and other wisdom. That's not to mention all the changes that occurred within the financial sector, and all those mortgage brokers learning new skills (panning the beach and pick pocketing very likely). And what about the return of unretired seniors who need to pay the electric bill sans 401K savings.

Unemployment is a leading indicator, and without a doubt, it will bring us down. And though this sentence fits better in an article currently in process for you, President Obama had better play hardball with China on fair trade and its currency play. Otherwise, we will be lucky if we export long into the behemoth, because it will cut us out as it steals our ideas, learns our methods and replicates our operations, if not outright takes them over in China. China is not importing any windmills nor solar panels today, nor will it in the future. In fact, we will be buying their stuff, if we do not level the playing field today.

OECD Chimes In

The economic expert analysis did not stop at the NBER today. In fact, embers also burned at the Organization for Economic Co-Operation & Development (OECD). The OECD concurred on the other's finding of economic growth since mid-year 2009. The OECD pointed toward 2.6% GDP expansion in 2010 even. Though, it offered conflicting news on employment, reporting an improving situation while also stating the unemployment rate did not reflect that, or some sort of nonsense like that. Our economy needs to grow faster than 3% or so in order to add jobs, and so the group rightly noted that long-term employment remained concerning.

The OECD Secretary-General, Angel Gurria, repeated what is now considered common knowledge (though once only included our voice here), that the economy has hit a soft patch. Still, he sees no chance of a double-dip recession (that is because it's not occurring now; otherwise he would be presciently forecasting it I'm sure), but also finds inadequate economic growth to heal the labor market.

I think instead of having children, I'll raise a parrot. They seem to do very well on Wall Street and at global non-profits. This is the kind of feedback I regular note from the IMF, World Bank and OECD space fillers. The first word I teach my parrot will be "Yes," and I'm absolutely certain it will take him far.

Gurria seems to be a certified socialist (not that there's anything wrong with that), as he strongly backed the American health care plan (as do I for different reasons) and President Obama's every action toward economic improvement. Wait a second, he was simply repeating things again… Basically, everything people are doing toward a fix is supported by parrots, without any critical analysis of the fixes. What a job! Parrots retire in Boca, while independent grunts like me never die (or get a chance to rest).

In any event, the market soared Moday on this news, on a lesser loss at Lennar (NYSE: LEN) and another tech takeover. Meanwhile, the Housing Market Index was stuck in the pits. Don't worry though, the rest of the week will offer adequate economic data to knock the amnesia out of the market. Considering this gain came on light volume, and remembering last week's consumer sentiment disaster, I would say now is a good time to take your short-term profits and some DHA for your memory issue, Mr. Market. By the way, in case you forgot, the recession is over.



Article should interest investors in: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: SERAX, Nasdaq: SERBX, Nasdaq: SERCX, Nasdaq: SERNX, Nasdaq: FEUFX, Nasdaq: FEEEX, Nasdaq: FAEAX, Nasdaq: FBEAX, Nasdaq: FIEUX, Nasdaq: FECAX, Nasdaq: IERAX, Nasdaq: XRNEX, Nasdaq: PBEUX, Nasdaq: UEPIX, Nasdaq: UEPSX, Nasdaq: PEUGX, Nasdaq: RYAEX, NYSE: CEE, NYSE: RNE, NYSE: PEF, NYSE: GUR, NYSE: EPV, NYSE: VEA, NYSE: DFE, NYSE: DEB, NYSE: IEV, Nasdaq: ANEFX, Nasdaq: CNGAX, Nasdaq: HNEAX, NYSE: BAC, NYSE: GS, NYSE: AIG, NYSE: WFC, NYSE: MS, NYSE: C, NYSE: DB, NYSE: CS, NYSE: UBS, NYSE: FNM, NYSE: FRE, NYSE: MCG, NYSE: MCO, NYSE: TD, NYSE: PNC, NYSE: STD, AMEX: GLE, NYSE: BCS, NYSE: GLD, NYSE: XLE, NYSE: XLF, NYSE: BJV, NYSE: SZI, NYSE: BPD, NYSE: IEL, NYSE: PBN, NYSE: CGW, NYSE: LVL, NYSE: FRI, NYSE: PBP, NYSE: RSU, NYSE: RMM, NYSE: REA, NYSE: RFL, NYSE: RHM, NYSE: RTG, NYSE: RSW, NYSE: RMS, NYSE: REC, Nasdaq: PDOWX, Nasdaq: XDPOX, Nasdaq: XDPDX, Nasdaq: NDUAX, Nasdaq: NDUBX, Nasdaq: IDJAX, Nasdaq: NJCRX, Nasdaq: UDPIX, Nasdaq: UDPSX, Nasdaq: UWPIX, Nasdaq: RYLDX, Nasdaq: RYIDX, Nasdaq: RYCWX, Nasdaq: ONEQ, Nasdaq: QCLN, Nasdaq: QQEW, Nasdaq: QQXT, Nasdaq: QTEC, Nasdaq: NASDX, Nasdaq: NDXKX, Nasdaq: POTCX, Nasdaq: DXQSX, Nasdaq: DXQLX, Nasdaq: FNCMX, Nasdaq: INQAX, Nasdaq: MOTAX, Nasdaq: XQQQX.

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.

GDP Revision Concerns Us Still

Investors were not surprised when GDP was revised lower Friday, but as the data is digested, we suspect it will be regurgitated. Stocks closed higher Friday, as press and pundits positioned the message positively. We prefer you not rest comfortably though, because there's a bear lurking. In fact, our analysis turns up an interesting aspect with regard to the trade deficit between the US and China, and a conflict between the trade data and lower private inventory investment in Q2. Meanwhile, some of the factors that propped up GDP in Q2 are clearly falling apart in Q3 and Q4.

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.

Tickers: NYSE: BAC, NYSE: JPM, NYSE: GS, NYSE: MS, NYSE: C, NYSE: TD, NYSE: WFC, NYSE: PNC, NYSE: GE, NYSE: LII, NYSE: SPB, Nasdaq: HELE, NYSE: NPK, Nasdaq: IRBT, NYSE: XRX, NYSE: PBI, NYSE: PAY, NYSE: DBD, Nasdaq: CSTR, NYSE: HNI, Nasdaq: MLHR, NYSE: SCS, NYSE: KNL, NYSE: FO, NYSE: LEG, NYSE: TPX, NYSE: AYI, NYSE: ETH, Nasdaq: SORL, NYSE: UTX, NYSE: MMM, NYSE: DHR, NYSE: PPG, NYSE: IX, NYSE: CBE, NYSE: TXT, NYSE: CR, NYSE: HON, NYSE: GD, NYSE: GR, NYSE: LLL, NYSE: ERJ, Nasdaq: FLIR, NYSE: TDG, Nasdaq: BEAV, NYSE: CAE, NYSE: ATK, NYSE: TGI, NYSE: CAT, NYSE: WHR, NYSE: F, NYSE: HMC, NYSE: TM, NYSE: BA, Nasdaq: AAPL, Nasdaq: MSFT, Nasdaq: DELL, Nasdaq: CSCO, NYSE: TSM, Nasdaq: INTC, NYSE: RTP, NYSE: BHP, Nasdaq: VALE, NYSE: CAT, NYSE: LMT, NYSE: COL, NYSE: NOC, NYSE: X, NYSE: AZN, Nasdaq: SCHW, NYSE: BA, Nasdaq: SYMC, NYSE: S, NYSE: IP, Nasdaq: CTXS, NYSE: EK, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE

GDP Revision

The Bureau of Economic Analysis published its first revision to second quarter GDP Friday. We were one of the first publishers warning that GDP would be cut in half upon revision, once international trade data were published in early August. Gradually, as economists revised their forecasts lower over the weeks that followed, investor perception was well-prepared for the BEA's news release.

The economists consensus was set for a deep downward adjustment, to +1.3%, from the initially reported 2.4% growth. So, when the data showed a gain of +1.6%, the market was unaffected. Stocks had been moving lower in the days and weeks ahead of the news already. Stocks still dove though once 10:00 AM rolled around, when investors found less than reassuring words in a speech given by Federal Reserve Chief Bernanke in Jackson Hole, Wyoming. However, the Dow moved 1.65% higher by the close.

What investors, or the press at least, liked about the latest take on GDP was that a greater level of imports drove the redesign. However, most of the issues that concerned us about the data detail in the first place were still problematic at its revision.

First of all, there's a misconception about the international trade data that needs to be cleared up. We reported on this upon the early August release. Normally, the deficit is characterized by a higher level of imports-to-exports, but both usually increase. This time around, while imports increased by $5.9 billion, exports dropped $2.0 billion against May levels. The drivers included a seasonal adjustment to petroleum trade, but also a significant deficit expansion between the US and China. Also take note of the fact that the details of the report show that the deficit was mostly driven by decreases in the export of capital goods ($1.4 billion), industrial supplies and materials ($1.0 billion) and increases in the import of consumer goods ($3.1 billion), automotive vehicles and parts ($1.3 billion), other goods ($0.6 billion) and capital goods ($0.5 billion). The decrease in exports helps to create an illusion of stronger imports. And we have a theory on the imports gain as well.

Here's a bit of golden theory you've heard nowhere else, not even from your highly paid economic resources. The increase in import demand from China seems to run counter to signs of decreased consumer spending here at home. I think I know why.

Your Greek Wisdom:

I suspect retailers are demanding more low-priced goods to stock their shelves with and distributors are providing them more Chinese goods as a result. That's not the positive signal the data would seem to offer, and which the popular press and most market strategists promoted Friday. Yes, reporters were painting the drop in GDP with a bright color, saying it was due to higher imports. We're saying that's not the case at all, that there is simply a shift toward lower priced goods that has fogged the view of the novice audience. Our theory makes perfect sense and fits the broader economic puzzle better. Need a market strategists or representative partner for your investment or consulting firm?

Take note also that the BEA said the second most important factor in the GDP revision was a sharp drop in private inventory investment. Might that have had more to do with the lower price of the inventory being added (from China) versus the aggregate inventory investment in terms of quantity? I think this is probably partly to blame, and is the only way I can tie the two conflicting components of GDP together. How else could imports be rising and inventory investment be decreasing? Demand for US goods is slipping too, as seems clear by the manufacturing slow down.

Here's another crack in the foundation you should note. GDP growth was greatly aided by an upturn in residential fixed investment. That's right, so the market's hopes were propped up by second quarter housing strength. Well, we know that temporary strength, if we can even call it that, hinged on the special tax incentive. We also know very well that housing has collapsed since the expiration of that deadline. So, what then does all this information portend about Q3 and Q4, if not serious trouble? Also, federal, state and local government spending helped fuel growth, and we do not see that lasting either.

Thus, the market's high hopes expressed Friday by the Dow reversal seem based on unstable footing. This portends serious economic trouble for Q3 and Q4, so beware the bear. The economy, including both real estate and the stock market remain vulnerable, and so double-dip recession or something similarly sinister threaten. Here's some more good news. With the Iraq draw down about to get going, and with oil prices relatively low, the president's men might soon get the bright idea to begin a war with Iran.

Article should interest investors in Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup (NYSE: C), J.P. Morgan Chase (NYSE: JPM), TD Bank (NYSE: TD), PNC Bank (NYSE: PNC), Caterpillar (NYSE: CAT), Whirlpool (NYSE: WHR), Ford (NYSE: F), Honda (NYSE: HMC), Toyota (NYSE: TM), Boeing (NYSE: BA), Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Dell (Nasdaq: DELL), Cisco Systems (Nasdaq: CSCO), Taiwan Semi (NYSE: TSM), Intel (Nasdaq: INTC), Rio Tinto (NYSE: RTP), BHP Billiton (NYSE: BHP), Vale (Nasdaq: VALE), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), Northrop Grumman (NYSE: NOC), United States Steel (NYSE: X), Symantec (Nasdaq: SYMC), Sprint (NYSE: S), International Paper (NYSE: IP), Citrix Systems (Nasdaq: CTXS), Eastman Kodak (NYSE: EK), General Electric (NYSE: GE), Lennox (NYSE: LII), Spectrum Brands (NYSE: SPB), Helen of Troy (Nasdaq: HELE), National Presto (NYSE: NPK), iRobot (Nasdaq: IRBT), Xerox (NYSE: XRX), Pitney Bowes (NYSE: PBI), VeriFone (NYSE: PAY), Diebold (NYSE: DBD), Coinstar (Nasdaq: CSTR), HNI (NYSE: HNI), Herman Miller (Nasdaq: MLHR), Steelcase (NYSE: SCS), Knoll (NYSE: KNL), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur Pedic (NYSE: TPX), Acuity Brands (NYSE: AYI), Ethan Allen (NYSE: ETH), SORL Auto Parts (Nasdaq: SORL), United Technologies (NYSE: UTX), 3M (NYSE: MMM), Danaher (NYSE: DHR), PPG Industries (NYSE: PPG), ORIX (NYSE: IX), Cooper (NYSE: CBE), Textron (NYSE: TXT), Crane (NYSE: CR), Honeywell (NYSE: HON), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR (Nasdaq: FLIR), Transdigm (NYSE: TDG), BE Aerospace (Nasdaq: BEAV), CAE (NYSE: CAE), Alliant Tech Systems (NYSE: ATK), Triumph (NYSE: TGI).

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.

Durable Goods Orders Doomsday Prophecy

Durables Doomsday Prophecy

Take heed, oh ye market mavens, for the directive issued by July's Durable Goods Orders is clear. Sell, says this barometer of economic demise, or rather demand! Sell, sell and sell some more, because your favorite modern day Greek oracle has prophesied yet another doomsday precisely.

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.

(Tickers: NYSE: GE, NYSE: LII, NYSE: SPB, Nasdaq: HELE, NYSE: NPK, Nasdaq: IRBT, NYSE: XRX, NYSE: PBI, NYSE: PAY, NYSE: DBD, Nasdaq: CSTR, NYSE: HNI, Nasdaq: MLHR, NYSE: SCS, NYSE: KNL, NYSE: FO, NYSE: LEG, NYSE: TPX, NYSE: AYI, NYSE: ETH, Nasdaq: SORL, NYSE: UTX, NYSE: MMM, NYSE: DHR, NYSE: PPG, NYSE: IX, NYSE: CBE, NYSE: TXT, NYSE: CR, NYSE: HON, NYSE: GD, NYSE: GR, NYSE: LLL, NYSE: ERJ, Nasdaq: FLIR, NYSE: TDG, Nasdaq: BEAV, NYSE: CAE, NYSE: ATK, NYSE: TGI, NYSE: CAT, NYSE: WHR, NYSE: F, NYSE: HMC, NYSE: TM, NYSE: BA, Nasdaq: AAPL, Nasdaq: MSFT, Nasdaq: DELL, Nasdaq: CSCO, NYSE: TSM, Nasdaq: INTC, NYSE: RTP, NYSE: BHP, Nasdaq: VALE, NYSE: CAT, NYSE: LMT, NYSE: COL, NYSE: NOC, NYSE: X, NYSE: AZN, Nasdaq: SCHW, NYSE: BA, Nasdaq: SYMC, NYSE: S, NYSE: IP, Nasdaq: CTXS, NYSE: EK, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE)

Durable Goods Orders Doomsday Prophecy

Cataclysmic...Dire...Gloomy...Doomsday! Jim Cramer says those of us who use these types of words are drama kings & queens and fear mongers or bloggers. It's the safe thing to say, you know, that things are not that bad. It's easy to be the voice of reason, especially when history is on your side as you do so. This is why so many market strategists and television pundits missed the financial crisis of our generation, and why the courageous among us who do not fear speaking the ugly truth are now globally syndicated.

People like The Greek do not have seven digit TV contracts to guard, nor big bonus paying jobs to protect. We have not the worry of maintaining busty blond arm candy, nor the tie to image that the big snots are bound by. Heck, I am not even capable of lying, not even for my own sake. And so, I speak. In Cramer's defense, he also wields a special power and influence over masses. The big, bald & bold bad-man from Philly town (my brother) has the ability to spawn a flash-crash by his mere utterance of the wrong word. This great responsibility calls for cautious speak, and requires wisdom to pull off. So, give him some credit today for keeping the peace. He probably played a role in the market's recovery yesterday, as a matter of fact. Lucky for the few of you reading along with our little blog, we exist, providing you the opportunity to diverge from the herd of sheep, and to find higher ground in times of trouble (and Easter if you graze in Greece).

Make no mistake about it, today's durable goods orders report was meaningful, and heavily slanted toward the dark-side. It was perhaps a doomsday prophecy. We warned about it in our premarket report yesterday, but view it so important, we've decided to remind you again here. By the way, we were also warning about it last month, as seen via this link.

Back to Doom

First of all, durable goods orders were soft in aggregate, increasing substantially less than economists had expected. The 0.3% rise matched against economists' consensus expectations for a 2.5% leap. What were they thinking?! Well, the difference certainly was not explainable by transportation, considering that the transportation segment saw a 13.1% jump in orders, and nondefense aircraft soared 75.9%. Therefore, the miss must be explainable by economists' clinging to a baseline forecast that is simply flawed. They have followed historic trend and the guidance of an admittedly poor forecaster, the Federal Reserve and its chief, Ben Bernanke.

This is the problem with most gurus found by business television producers for their loud voices first and their minds second. They base all forecasts on historical trend, clinging to it like a crack addict to his pipe. I would venture to say too many of them are incapable of thinking outside the box. In times like these, you have to find yourself a source like Wall Street Greek, an expert voice off-Wall Street, to get a truly independent, unbiased and correct view of the situation.

Where market mavens got it wrong with this particular report was in what really matters. Excluding transportation, which can skew the measure due to its big ticket products, new orders fell 3.8%. The problem is that the deeper we dig into the data, the more fundamental flaws we find with our nation's economic situation.

Let's start with the meat of the matter of concern. An important component of durables orders is the line item found way down towards the bottom of the spreadsheet provided by the Department of Commerce. Orders for Capital Goods Ex-Aircraft and Defense is seen as an accurate measure of business investment, which reflects how companies feel about expanding their labor force as well as end market demand. What happened in this key segment is therefore troubling. In the most recent two months of measurement, this important barometer showed increases of 4.7% and 3.6%. Those results, however, were forgotten today, as July marked an 8.0% decrease in orders. Businesses may be retrenching, is the fear.

A look deeper only reveals more blood, infection and economic rejection. Manufacturing orders fell 0.5%, the third sequential showing, as far as we could tell by this latest spreadsheet. Machinery orders collapsed 15%! Over the last few months, the President and his friends at the Treasury and Federal Reserve have harped on the fact that software and hardware demand seemed solid. Not no more! Forgive my return to a slang from another life.

Orders for computers and electronic products fell 2.4% in July, with orders for computers and related products specifically falling 12.7%. Perhaps there's more reason to sell Dell (Nasdaq: DELL), than the potential impact to capital that might result from an acquisition of 3Par (NYSE: PAR). Maybe Hewlett-Packard (NYSE: HPQ) should hold on to its wondrous wealth as well. Tech firms might find even better pricing sometime soon.

In every story, there's a silver lining. It seems the Internet can't be stopped. Expanding uses of broadband and expanding demand for it have communications equipment orders up 3.9%, so Cisco Systems (Nasdaq: CSCO) may just be the Gillette of our generation. God knows, I've stopped shaving and live in the etherworld.

There was more good news delivered to Detroit as well, as motor vehicle and parts orders increased 5.3%. I ran into my brimstone tempered cousin this weekend, the one who has been transported to Detroit by the auto industry Gods. You remember him, the guy who talks too loudly, but also works too hard. Can you imagine driving from New York to Detroit after an intercontinental flight, because weather delay rerouted you ,and threatened to have you home a day late? That's what Iron Mike did so that he would not have to explain to his bosses the loss of a day, a legitimate reason mind you. I can't give credit to Detroit for making the guy so tough, because I witnessed Philly do it to us all. Well, Mike tells me Motor City is running at proper capacity now, so perhaps this is the difference between its economic development and the rest of the nation.

Maybe Detroit will fit a strange analogy some day, it being to us what Germany is to Europe. God knows, that day has not come yet, but she may be on her way. I think the combined efforts of our last two presidents got the D-town fix right, and you should agree, whatever one might say regarding Wall Street.

Found a video with a smart title, but a boring introductory speaker, that might evidence that the President has a clue about how to fix our economy. It's called Transforming the American Economy Through Innovation, and its found via the link here. I think you should fight the urge to fade into dreamland, and watch it. By the way, the follow up to the introductory speaker, is Joe Biden, so good luck with that! Actually, Biden will keep us on our toes, with his unpredictable tongue. So I expect you'll be glued to your screen. It's a solid speech, once you get past the political pokes.

Importantly, we must understand that this new paradigm that has infected our economy can only be cured with special medicine. As we've seen, blank checks sent to mail boxes nationwide, shovels of money to financiers on Wall Street, blind incentives to small businessmen, and intravenous to the unemployed are not going to solve what ails us now. What we need now is a new New Deal, and we need public works projects to build parallel energy resources that will eventually free us from our dependence on foreign oil. This will lead me into my next major project. For now, understand that this Durable Goods Orders data demands your attention, and offers yet another signal this week, to coincide with the coming revision downward of GDP, that our economy is diving into double-dip recession.



Article should interest investors in Caterpillar (NYSE: CAT), Whirlpool (NYSE: WHR), Ford (NYSE: F), Honda (NYSE: HMC), Toyota (NYSE: TM), Boeing (NYSE: BA), Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Dell (Nasdaq: DELL), Cisco Systems (Nasdaq: CSCO), Taiwan Semi (NYSE: TSM), Intel (Nasdaq: INTC), Rio Tinto (NYSE: RTP), BHP Billiton (NYSE: BHP), Vale (Nasdaq: VALE), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), Northrop Grumman (NYSE: NOC), United States Steel (NYSE: X), Symantec (Nasdaq: SYMC), Sprint (NYSE: S), International Paper (NYSE: IP), Citrix Systems (Nasdaq: CTXS), Eastman Kodak (NYSE: EK), General Electric (NYSE: GE), Lennox (NYSE: LII), Spectrum Brands (NYSE: SPB), Helen of Troy (Nasdaq: HELE), National Presto (NYSE: NPK), iRobot (Nasdaq: IRBT), Xerox (NYSE: XRX), Pitney Bowes (NYSE: PBI), VeriFone (NYSE: PAY), Diebold (NYSE: DBD), Coinstar (Nasdaq: CSTR), HNI (NYSE: HNI), Herman Miller (Nasdaq: MLHR), Steelcase (NYSE: SCS), Knoll (NYSE: KNL), Fortune Brands (NYSE: FO), Leggett & Platt (NYSE: LEG), Tempur Pedic (NYSE: TPX), Acuity Brands (NYSE: AYI), Ethan Allen (NYSE: ETH), SORL Auto Parts (Nasdaq: SORL), United Technologies (NYSE: UTX), 3M (NYSE: MMM), Danaher (NYSE: DHR), PPG Industries (NYSE: PPG), ORIX (NYSE: IX), Cooper (NYSE: CBE), Textron (NYSE: TXT), Crane (NYSE: CR), Honeywell (NYSE: HON), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR (Nasdaq: FLIR), Transdigm (NYSE: TDG), BE Aerospace (Nasdaq: BEAV), CAE (NYSE: CAE), Alliant Tech Systems (NYSE: ATK), Triumph (NYSE: TGI).

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.

WalMart's (NYSE: WMT) Same-Store Sales Red Flag

What Your Keen Eye Found in Today's Wire

The day's news wire included two troubling bits of information you may have missed. Thanks to a flood of mostly positive news, an important message was smothered. Both the ICSC and Wal-Mart same-store sales data showed an important and intensified negative trend, but thanks to WMT's better than expected EPS report, the red flag provided to the retail sector Tuesday was missed by the popular press.

Markos N. Kaminis 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, and Mr. Kaminis has appeared across major media. While writing for Wall Street Greek, he presciently predicted the financial crisis in detail.

(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, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

WalMart's (NYSE: WMT) Same-Store Sales Red Flag

WalMart (NYSE: WMT) reported street exceeding EPS of $0.97, besting the experts' view by a penny. The nation's top retailer did not stop there though. WalMart also raised its guidance range for the full year by five cents. As a result, the stock is up 2% at the hour of this scribbling.

The S&P Retail SPDR (NYSEArca: XRT) is up nearly 2% too, since WalMart is a dominant component of every retail index, except the ex-WalMart portfolios (assuming at least one exists; obviously it should). Here's why I think you should use this momentary pull up of retail stocks to sell, in case you missed that message here over the last few months. The rise of retail indices today is completely due to Wal-Mart's EPS beat and guidance hike, but within WalMart's report there is an important poison pill for the US retail sector to swallow. That same information came across again today in the ICSC Weekly Same-Store Sales Report, and it's a glaring red flag for retail sector investment.

WalMart's Report Break-Down

We offered WalMart's earnings release highlights earlier today, and you can find that here: WMT Q2 EPS Report.

You heard the good news already, but what you did not get is how WalMart averted industry obstacles presented by a weak US market. Basically, the company overcame an apparent major stumbling block via its growth overseas and tight operational management. It also employed a good deal of cash in share repurchases, which can lift a bottom line.

Net sales increased 2.8%, to $103 billion, but look closely. Eight-tenths of that growth came on currency exchange, and that hints at another key catalyst. Sixty percent of the company's square footage increase came from international growth in Q2. WalMart leveraged operating expenses and expanded its ROI to 19%, versus 18.4% in last year's quarter. However, even as WalMart impressively created value, its report warns of trouble for other less perfect retailers.

WalMart's US operations saw stagnant sales year-to-year in Q2, while its International segment grew sales by 11%, including the currency gains. Sam's Club contributed a 2.2% increase on a smaller sales figure. While WMT's international growth benefited from robust activity in Mexico, Brazil and China, its US namesake division saw a 1.8% decrease in same-store sales. Take note, because this is a store that appeals to price-seekers. This is where poor people shop and where middle and formerly upper class Americans facing tough times trade down to. WalMart has been stealing market share from a broad spectrum of retailers over recent years, and especially during the recession; and now even it cannot grow them. That is saying something rather dire about American consumption. Do you know what else WalMart has been seeing an increase in? Food stamp usage. Now, the company said traffic trends improved toward the end of the 13 week's measured for Q2, but retail stock buyer beware nonetheless, because that is a very vague statement and can mean or not mean a lot.

ICSC Weekly Same-Store Sales Concur

Tuesday's International Council of Shopping Centers (ICSC) data covering the period ended August 14 concurred with WalMart's results and differed from its vague offsetting statement. So which do you want to base your investment decisions on then? Sales deteriorated further in the August 14 period, with the week-over-week comparison losing 1.3%. The yearly comparison still shows 3.3% growth, but that's down from last week's 3.7% change. We also remind that last year's comparable economic activity was simply the worst in generations, and so easy to beat in comparison. Redbook showed a 2.7% increase in sales against the prior year, versus 3.0% last week (another sign of deceleration against normalizing comparables with time). The result? We have a stagnant state of consumption developing, if not a deteriorating state.

Arbitrage Opportunity

I think today's mixed message from WalMart is providing noise to the real retail sector story. Disregarding valuation and stock specific characteristics that may surface a handful of winners, the general retail sector trend is being skewed today because WalMart is such an important part of all retail indices. The company represents a major portion of the American retail sector, and is huge based on market capitalization; thus, it is weighted heavily in these indices. So, as WalMart goes, so go the industry indices. Given this skew, many retail players are likely benefiting today without reason. So I see this an opportunity to save a few dollars by reducing weight in the sector.

Take note that the sensitivity of the sector today to the positive news may also reflect a valuation test, as retail stocks have already seen some downgrades and share price drops since spring and again this month. Yes, stocks will also move ahead of economic data (and I mean recover eventually), but I believe we are still in a period of realization of a new economic paradigm I've been trying to lay out for you to see over recent weeks and months. This economy will not be the same again, at least not for a long while. Regulation and common sense have trimmed that negligent and even criminal lending that had Americans living beyond their means for years. I realized that problem ten years ago, when my little sister without a college degree and with a mall job managed to buy a new car. I knew I couldn't afford one with an MBA, and so something was clearly wrong with the system. I talked about that here before the financial crisis; long-time readers will remember it. Money was too easy to get, clearly. We all knew it, but we blew it off.

There's no blowing it off anymore. New laws and new internal banking rules and reserve requirements are playing an important role in changing all that. 16.5% under-employment is playing a major role in keeping consumption tame as well. Panicked people living on unemployment while Congress debates cutting it off are getting a grip on it too. Welcome to the new economy, not like the old one. In this one, productivity brought on by technological advancement is not a good thing. In the past, it was noted for its role in allowing companies to expand margins. Now, it is also responsibile for keeping companies from hiring workers that are not really needed. It's amazing how a change in the labor market can affect views on unions, immigration and maybe even robotics... isn't it.

Over recent weeks, we have learned that Q2 GDP will get a shaving at its next revision, and it looks as if we might flirt with economic contraction in the second half of the year. Economists cannot imagine that, but the American economy is a consumer driven one. We don't export yet, and even if we did, Chinese domestic growth looks poised for a hurdle of an asset and real estate bubble burst sometime soon. So, can we really count on China and Europe (ex-Germany) to keep buying whatever we do sell? That's rhetorical...

So, my friends, I say take this rally and shove it. The Dow is up 1.0% at this hour (down from +2% earlier); I would sell it. The S&P Retail SPDR (NYSE: XRT) is up 1.5% (down from earlier as well); I would sell it! I think what we have here is an opportunity... to get out.



This article should prove interesting to investors in 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.

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.

Q2 GDP Revision Coming

Today's Coffee

The day's data produced an International Trade Report that has economists flipping papers and erasing projections. The vast expansion of the trade deficit portends a sharp downward revision to Q2 GDP. Wednesday's news also included the monthly Treasury Budget, EIA Petroleum Status Report and the MBA's Weekly Applications Survey, all found here.

Markos N. Kaminis 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, and Mr. Kaminis has appeared across TV & radio. While writing for Wall Street Greek, he presciently predicted the financial crisis in detail.

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Q2 GDP Revision Coming

Stocks dropped like a ton of bricks after the International Trade Report showed a vastly different degree of deficit than was anticipated by economists. An article at Bloomberg shows two economists revising their Q2 GDP estimates down a full percentage point, to +1.3% and +1.4%, respectively. This is why stocks are down today, and at the hour of this scribble, the Dow Jones Industrials Index was 2.5% lower. However, stocks were lower in Asia already, based on the FOMC statement yesterday, within which the Fed men looked at tough times ahead.

Our work on the Advance GDP Report questioned whether GDP was slowing or crashing. Well, it looks like we have the answer to that rhetorical question this morning. Stocks are selling off globally and the dollar and treasuries are benefiting from a flight to quality. The MSCI World Index experienced its biggest drop since June. The NIKKEI 225 slid 2.7%; the DAX fell 2.1%; the FTSE 100 skidded 2.44%; and the Nasdaq fell 3%.

You can read our coverage of the International Trade data via the link above. There were several other economic data points today that we will cover here.

Treasury Budget

The Treasury's report for July showed a monthly budget deficit of $165 billion in July. Bloomberg's consensus of economists saw a monthly deficit of $170 billion for July, and last year's comparable deficit was $180.7 billion. July's figure follows June's $68.4 billion deficit (months vary for seasonal reason). July's result took the year-to-date deficit to $1.169 trillion, which in comparison to last year's $1.416 trillion... ain't bad?

The deficit was composed of receipts of $155.5 billion ($151.5 bln. last year) and outlays of $320.6 billion ($332.2 bln.). Social Security, Defense and Health and Human Services were the eaters of income. We expect though, that given intensifying economic concerns, the budget debate will fizzle out.

Mortgage Applications

The Mortgage Bankers Association reported on mortgage application activity for the week ended August 6. The Mortgage Bankers Association website had not updated for the latest report as we wrote here, and so our data is limited to the reports of others. The Market Composite Index gained slightly 0.6%, on Purchase Index increase of 0.3% and Refinance Index improvement of 0.6%. The average contracted rate for 30-year fixed rate mortgages eased 3 basis points to 4.57%. Low rates should persist in the months ahead, given the latest Fed announcement and with little sign of inflation to fear.

Petroleum Report

For the week ended August 6, crude oil inventory decreased by 3.0 million barrels. Total motor gasoline inventory increased by 0.4 million barrels. Both crude oil and total motor gasoline inventory remain above the upper limit of the average range for this time of year. However, the average world crude oil price increased $4.10 since last week, to $78.79. The spot price for conventional gasoline in the New York Harbor was 204.84 cents per gallon, 1.23 cents less than last week's price but 12.59 cents over this time last year.

Corporates

In corporate news, Rockwell Collins (NYSE: COL) presented at the Jefferies & Co. Conference. The big EPS releases came from Macy's (NYSE: M), Cisco Systems (Nasdaq: CSCO), Computer Sciences (NYSE: CSC), Advanced Life Sciences (Nasdaq: ADLS), Aegean Marine Petroleum (NYSE: ANW) and AirMedia Group (Nasdaq: AMCN).

The rest of the corporate EPS schedule includes news from 7 Days Group (NYSE: SVN), Advance Auto Parts (NYSE: AAP), American Biltrite (AMEX: ABL), American BioMedica (Nasdaq: ABMC), American Medical Alert (Nasdaq: AMAC), APAC Customer Services (Nasdaq: APAC), Arbinet (Nasdaq:ARBX), Archipelago Learning (Nasdaq: ARCL), Arden Group (Nasdaq: ARDNA), Asure Software (Nasdaq: ASUR), Attunity (OTC: ATTUF.OB), AutoInfo (Nasdaq: AUTO), Avnet (NYSE: AVT), Barnwell (AMEX: BRN), Better Online Solutions (Nasdaq: BOSC), CAE (NYSE: CAE), Cardiome Pharma (Nasdaq: CRME), CECO Environmental (Nasdaq: CECE), China Grentech (Nasdaq: GRRF), China Nepstar (NYSE: NPD), China Real Estate (Nasdaq: CRIC), Colony Financial (Nasdaq: CLNY), Command Security (AMEX: MOC), Companhia Paranaense de Energia (NYSE: ELP), Copa (NYSE: CPA), Core Molding Tech (AMEX: CMT), CPFL Energia SA (NYSE: CPL), Crown Crafts (Nasdaq: CRWS), Deer Valley (Nasdaq: DVLY), deltathree (Nasdaq: DDDC), Document Capture (Nasdaq: DCMT), Dot Hill Systems (Nasdaq: HILL), Edgar Online (Nasdaq: EDGR), Education Management (Nasdaq: EDMC), E-House Holdings (NYSE: EJ), Excel Trust (NYSE: EXL), ExpressJet (NYSE: XJT), Given Imaging (Nasdaq: GIVN), Glowpoint (Nasdaq: GLOW), Henry Bros. Electronics (Nasdaq: HBE), Higher One (NYSE: ONE), Huaneng Power (NYSE: HNP), I.D. Systems (Nasdaq: IDSY), IAMGold (NYSE: IAG), ICOP Digital (Nasdaq: ICOP), ING Groep NV (NYSE: ING), inTEST Corp. (Nasdaq: INTT), Jacada (Nasdaq: JCDA), Jeffersonville Bancorp (Nasdaq: JFBC), Kelly Services (Nasdaq: KELYA), Kent Financial (Nasdaq: KENT), Lakes Entertainment (Nasdaq: LACO), Mahanagar Telephone Nigam (NYSE: MTE), Maidenform Brands (NYSE: MFB), Manitex (Nasdaq: MNTX), Medquist (Nasdaq: MEDQ), Metalink (Nasdaq: MTLK), Middleby (Nasdaq: MIDD), Netlist (Nasdaq: NLST), Newtek Business (Nasdaq: NEWT), NN Inc. (Nasdaq: NNBR), Nortech (Nasdaq: NSYS), Northeast Bancorp (Nasdaq: NBN), NTS Realty (AMEX: NLP), OmniAmerican Bancorp (Nasdaq: OABC), Pan American Silver (Nasdaq: PAAS), PFSWEB (Nasdaq: PFSWD), PNI Digital Media (Nasdaq: PNDMF), RELM Wireless (AMEX: RWC), Resolute Energy (NYSE: REN), Retalix (Nasdaq: RTLX), RXi Pharma (Nasdaq: RXII), Scientific Learning (Nasdaq: SCIL), SeraCare Life Sciences (Nasdaq: SRLS), Silver Wheaton (NYSE: SLW), Somaxon Pharma (Nasdaq: SOMX), SRA Int'l (NYSE: SRX), Stallion Oilfield (Nasdaq: SOFS), Susser (Nasdaq: SUSS), Sutron (Nasdaq: STRN), Synthemed (Nasdaq: SYMD), Teekay (NYSE: TK), Teekay Tankers (NYSE: TNK), Telanetix (Nasdaq: TNXI), Tengion (Nasdaq: TNGN), Trailer Bridge (Nasdaq: TRBR), Triad Guaranty (Nasdaq: TGIC), Tucows (AMEX: TCX), Ultrapar (NYSE: UGP), Universal Power (AMEX: UPG), Verso Paper (NYSE: VRS), Vision-Sciences (Nasdaq: VSCI), WebMediaBrands (Nasdaq: WEBM), World Heart (Nasdaq: WHRT), X Rite (Nasdaq: XRIT) and Xerium Tech (NYSE: XRM).



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.

Trust Consumer Spending Data Over the Services Report

Critical Analysis

Consumer Spending data disappointed investors Tuesday, leading the Dow down fractionally, but stocks are up some today. The Greek tells you why investors would be better served following their first impression on consumer spending, and ignoring today's Non-Manufacturing Index from the Institute for Supply Management.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, the global economy & financial markets, real estate, shipping, fine art & antiquities and global affairs.

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Consumer Spending Data Rules

You heard this here before. The American economy has a consumption driven engine, and within that consumption, it is the consumption of services that drives most of the motor power. Well, the latest reading on personal spending, released Tuesday morning, showed American restraint, if not constraint, in spending in June. Without consumer spending folks, we are lost! However, this mornings ISM Non-Manufacturing data showed a gain in the services measure. So what's up then?

Personal Income & Outlays

Investors keyed on Personal Spending Tuesday, and so shares slipped on the day when the outlays data showed an increase of just 0.1% on the price adjusted measurement. The slight gain met economists' views for the same in June. Bad news resulted in the revision of May's spending activity though, with the month's measure revised down to +0.1%, from the initially reported gain of 0.2%. Considering April showed no change in activity, future spending is in question. We showed Friday, in our analysis of the Advance GDP Report for Q2, that the spending driver might be dissipating on persistent unemployment and fading government stimulus.

The spending measure is composed of durable and nondurable goods purchases and also the purchases of services. Durable goods met decent demand, increasing 0.4%, but the measure is volatile due to the high-ticket of items included (aircraft etc.). Still, the increase compared against a May decrease of 0.1%. Spending on nondurables increased just 0.1% in June, but that compared against a May decline of 0.2%. Purchases of services was the source of concern for the market, because this very important segment saw an increase of just 0.1%, versus May's gain of 0.3%. This comparison fits with the relative drop-off we have noted in other economic metrics.

PCE Price Index

The Fed's favored gauge of inflation is found in this report. The Core PCE Price Index is therefore closely followed. Core PCE was about unchanged (less than 0.1%) in June, versus May's 0.1% rise, stirring up concern for deflation. Some economists have been warning that the US may be precariously close to following the path of Japan's lost decade. That said, there is little standing in the way of Fed driven stimulus to economic activity now, and FOMC board members are openly talking about just that. Just a few months ago, the Fed's discussion was completely centered around exit strategy. Only Wall Street Greek was warning about premature departure. Economists were looking for a 0.1% increase in the Core PCE for June, but those guys are paid by investment houses to keep cash interests, where we are your street-level independent resource both reporting and analyzing for you, and in expert fashion (and for free!). God bless the Internet.

Personal income was about unchanged in June, versus the consensus forecast increase of 0.1% and against May's revised 0.3% increase. Income was impacted by fluctuations in the number of temporary census workers through the periods measured.

ISM's Non-Manufacturing Index

Reported as a positive surprise, ISM's Non-Manufacturing Index improved to 54.3% in July, from 53.8% in June. The result came against economists' consensus expectations for a reading of 53.0. Services are very likely seasonally impacted by hiring along America's beaches, mountains and resorts, and though this may be seasonally adjusted, we doubt it's capturing the change coming off significantly low and abnormal levels of activity. You're not hearing this anywhere else, and it takes out-of-the-box thinking to come up with this type of analysis. You cannot get out of the box thought from within the box shops.

Taking this into account, we are not at all excited by the very slight gain in services activity. Looking at the details, Business Activity posted a lower measure of 57.4, versus 58.1 in June. New Orders improved to 56.7, from 54.4, while Employment edged into positive territory, rising to 50.9, from 49.7 in June. Seasonal hiring characterizes the types of businesses we expect are driving much of these gains.

Take note of where the gains and losses were recorded. The 13 industries reporting growth in July based on the NMI composite index — listed in order — are: Real Estate (come on! this is highly suspect), Rental & Leasing; Arts, Entertainment & Recreation; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade (sure!); Information; Other Services; Transportation & Warehousing; Public Administration; Mining; Health Care & Social Assistance; Educational Services; and Wholesale Trade. The four industries reporting contraction in July are: Construction; Utilities; Accommodation & Food Services; and Finance & Insurance.

While Retail Trade is reported as an expanding sector, the report offers a warning from one survey respondent, "Concerning forecasts and the instability in markets are continuing our focus on cautiousness." We also suggest that the fact that this is a survey, where the results are known to be published, leads many respondents to favor an optimistic answer. In order to achieve successful results, one must look successful, and so we suggest respondents are careful of making negative statements and offering answers along those lines. Plus respondents are afraid to lose their jobs by answering truthfully. I have to handicap the ISM data because of this bias.



The corporate news wire offered the introduction of Research in Motion's (NYSE: RIMM) new smartphone. Rumor has it that RIM also has a product in development to compete against Apple's (Nasdaq: AAPL) iPad. Abbott (NYSE: ABT) presented at the Wedbush Morgan Securities Life Sciences Best Ideas Conference. Corning (NYSE: GLW) and National Instruments (Nasdaq: NATI) met with investos. The earnings schedule highlighted news from Anadarko Petroleum (NYSE: APC), Chesapeake Energy (NYSE: CHK), Baker Hughes (NYSE: BHI), Pfizer (NYSE: PFE), Procter & Gamble (NYSE: PG), Duke Energy (NYSE: DUK), Emerson Electric (NYSE: EMR), The Dow Chemical Co. (NYSE: DOW), Marsh McLennan (NYSE: MMC) and Mastercard (NYSE: MA).

The remainder of the schedule included news from Accuride (Nasdaq: ACUZ), Acorda Therapeutics (Nasdaq: ACOR), Actions Semiconductor (Nasdaq: ACTS), AGA Medical (Nasdaq: AGAM), Akorn (Nasdaq: AKRX), Allied Healthcare (Nasdaq: AHCI), Allis-Chalmers Energy (NYSE: ALY), Alterra Capital (Nasdaq: ALTE), American Capital (Nasdaq: ACAS), American DG Energy (Nasdaq: ADGE), American Medical Systems (Nasdaq: AMMD), American Reprographics (NYSE: ARP), American Tower (NYSE: AMT), AmeriCredit (NYSE: ACF), AmTrust Financial (Nasdaq: AFSI), Approach Resources (Nasdaq: AREX), Archer Daniels Midland (NYSE: ADM), Arena Pharmaceuticals (Nasdaq: ARNA), AthroCare (Nasdaq: ARTC), ArvenMeritor (NYSE: ARM), Atlas Air (Nasdaq: AAWW), Atlas Energy (Nasdaq: ATLS), ATS Corp. (Nasdaq: ATSC), Avalonbay Communities (NYSE: AVB), Axis Capital (NYSE: AXS), B Communications (Nasdaq: BCOM), Balchem (Nasdaq: BCPC), Banco de Chile (NYSE: BCH), Bill Barrett (NYSE: BBG), Bio-Rad Laboratories (NYSE: BIO), Black Box (Nasdaq: BBOX), Blonder Tongue Labs (AMEX: BDR), Boise (NYSE: BZ), Boston Beer (NYSE: SAM), Boyd Gaming (NYSE: BYD), BRE Properties (NYSE: BRE), Bridgepoint Education (NYSE: BPI), Brigham Exploration (Nasdaq: BEXP), BTU International (Nasdaq: BTUI), Buckeye Technologies (NYSE: BKI), CAI Int'l (NYSE: CAP), Calgon Carbon (NYSE: CCC), Caliper Life Sciences (Nasdaq: CALP), Cambrex (NYSE: CBM), Cape Bancorp (Nasdaq: CBNJ), Cascade Microtech (Nasdaq: CSCD), CBL & Associates (NYSE: CBL), CBS Corp. (NYSE: CBS), Cedar Fair (NYSE: FUN), Celera (Nasdaq: CRA), Celsion (Nasdaq: CLSN), Clorox (NYSE: CLX), Coach (NYSE: COH), Cognizant Technology (Nasdaq: CTSH), Cohen & Co. (Nasdaq: COHN), CommVault (Nasdaq: CVLT), CNO Fin'l (NYSE: CNO), CorVel (Nasdaq: CRVL), Credit Acceptance (Nasdaq: CACC), CTC Media (Nasdaq: CTCM), Curis (Nasdaq: CRIS), D.R. Horton (NYSE: DHI), Dean Foods (NYSE: DF), Dendreon (Nasdaq: DNDN), Denny's (Nasdaq: DENN), DexCom (Nasdaq: DXCM), DigitalGlobe (NYSE: DGI), Discovery Communications (Nasdaq: DISCK), Dole Food (Nasdaq: DOLE), Dollar Thrifty Automotive (NYSE: DTG), Douglass Emmitt (NYSE: DEI), drugstore.com (Nasdaq: DSCM), Dupont Fabros Tech (NYSE: DFT), DUSA Pharma (Nasdaq: DUSA), Echelon (Nasdaq: ELON), Echo Global (Nasdaq: ECHO), Electronic Arts (Nasdaq: ERTS), Emergency Medical Services (NYSE: EMS), Emerson Electric (NYSE: EMR), Entergy (NYSE: ETR), Enzon Pharma (Nasdaq: ENZN), ESCO Technologies (NYSE: ESE), Evercore Partners (NYSE: EVR), Exactech (Nasdaq: EXAC), EXCO Resources (NYSE: XCO), FelCor Lodging Trust (NYSE: FCH), First American Financial (NYSE: FAF), First Fin'l Bancorp Ohio (Nasdaq: FFBC), FirstEnergy (NYSE: FE), Force Protection (Nasdaq: FRPT), Forestar Group (NYSE: FOR), Franklin Street Properties (AMEX: FSP), Fresh Del Monte (NYSE: FDP), Gafisa SA (NYSE: GSA), Gaylord Entertainment (NYSE: GET), Genesee & Wyoming (NYSE: GWR), Getty Realty (NYSE: GTY), Gladstone Commercial (Nasdaq: GOOD), Glatfelter (NYSE: GLT), Global Indemnity (Nasdaq: GBLI), GLU Mobile (Nasdaq: GLUU), Government Properties (NYSE: GOV), Graham Packaging (NYSE: GRM), Great Lakes Dredge & Dock (Nasdaq: GLDD), Great Wolf Resorts (Nasdaq: WOLF), Harris (NYSE: HRS), HCC Insurance (NYSE: HCC), HCP, Inc. (NYSE: HCP), Headwaters (NYSE: HW), Health Net (NYSE: HNT), Hercules Offshore (Nasdaq: HERO), Hertz Global (NYSE: HTZ), Hudson Highland (Nasdaq: HHGP), Impax Laboratories (Nasdaq: IPXL), Inland Real Estate (NYSE: IRC), Innospec (Nasdaq: IOSP), InSite Vision (Nasdaq: INSV), Internet Gold (Nasdaq: IGLD), Inuvo (Nasdaq: INUV), IPG Photonics (IPGP), iStar Fin'l (NYSE: SFI), Itau Unibanco SA (Nasdaq: ITUB), j2 Global Communications (Nasdaq: JCOM), Jarden (NYSE: JAH), John Bean Technologies (NYSE: JBT), KAR Auction Services (NYSE: KAR), Kenexa (Nasdaq: KNXA), Kforce (Nasdaq: KFRC), Kopin (Nasdaq: KOPN), Landauer (NYSE: LDR), Landec (Nasdaq: LNDC), Leap Wireless (Nasdaq: LEAP), Lear (NYSE: LEA), LECG (Nasdaq: XPRT), Lexington Realty (NYSE: LXP), Liberty Global (Nasdaq: LBTYA), Liquidity Services (Nasdaq: LQDT), LookSmart (Nasdaq: LOOK), Magellan Midstream (NYSE: MMP), MAKO Surgical (Nasdaq: MAKO), Marathon Oil (NYSE: MRO), Market Leader (Nasdaq: LEDR), Martin Marietta Materials (NYSE: MLM), Masimo (Nasdaq: MASI), Matrixx Initiatives (Nasdaq: MTXX), McCormick & Schmick's (Nasdaq: MSSR), MDU Resources (NYSE: MDU), MEDNAX (NYSE: MD), Mercer Int'l (Nasdaq: MERC), Mercury Computer (Nasdaq: MRCY), MFA Financial (NYSE: MFA), MGM Resorts (NYSE: MGM), Mitsui (Nasdaq: MITSY), Molex (Nasdaq: MOLX), Molson Coors (NYSE: TAP), Morton's Restaurant (NYSE: MRT), Motricity (Nasdaq: MOTR), Mueller Water Products (NYSE: MWA), National CineMedia (Nasdaq: NCMI), National Financial (NYSE: NFP), National Interstate (Nasdaq: NATL), National Research (Nasdaq: NRCI), New York Mortgage Trust (Nasdaq: NYMT), NewMarket (NYSE: NEU), NICE Systems (Nasdaq: NICE), Nicor (NYSE: GAS), NiSource (NYSE: NI), Nova Measuring (Nasdaq: NVMI), Novatel (Nasdaq: NVTL), NYSE Euronext (NYSE: NYX), Och-Ziff Capital (NYSE: OZM), Ocwen Financial (NYSE: OCN), OfficeMax (NYSE: OMX), Oil States Int'l (NYSE: OIS), ONEOK (NYSE: OKE), OpenTable (Nasdaq: OPEN), Oriental Financial Group (NYSE: OFG), Orient Express Hotels (NYSE: OEH), Otelco (Nasdaq: OTT), Overseas Shipholding (NYSE: OSG), Papa John's (Nasdaq: PZZA), Parker Hannifin (NYSE: PH), Peet's Coffee & Tea (Nasdaq: PEET), Pennsylvania Real Estate Investment Trust (NYSE: PEI), PHH Corp. (NYSE: PHH), Philippine Long Distance (NYSE: PHI), Pinnacle Airlines (Nasdaq: PNCL), Pinnacle West Capital (NYSE: PNW), Pitney Bowes (NYSE: PBI), POZEN (Nasdaq: POZN), Priceline.com (Nasdaq: PCLN), Primerica (NYSE: PRI), QuickLogic (Nasdaq: QUIK), Radian (NYSE: RDN), RAM Energy (Nasdaq: RAME), RehabCare (NYSE: RHB), Rentrak (Nasdaq: RENT), Republic Airways (Nasdaq: RJET), REX Energy (Nasdaq: REXX), Rodman & Renshaw (Nasdaq: RODM), Rowan (NYSE: RDC), RTI Int'l Metals (NYSE: RTI), Savient Pharmaceuticals (Nasdaq: SVNT), Sempra Energy (NYSE: SRE), Sirona Dental (Nasdaq: SIRO), Smith Int'l (NYSE: SII), Smurfit-Stone (Nasdaq: SSCC), Solar Capital (Nasdaq: SLRC), Solarfun Power (Nasdaq: SOLF), Solta Medical (Nasdaq: SLTM), Sonic Foundry (Nasdaq: SOFO), Sonus Networks (Nasdaq: SONS), Spirit AeroSystems (NYSE: SPR), SS&C Technologies (Nasdaq: SSNC), STAAR Surgical (Nasdaq: STAA), Star Gas (NYSE: SGU), STEC (Nasdaq: STEC), Steris (NYSE: STE), Stone Energy (NYSE: SGY), Super Micro (Nasdaq: SMCI), Superconductor Tech (Nasdaq: SCON), Tandy Leather (Nasdaq: TLF), Team (Nasdaq: TISI), Techne (Nasdaq: TECH), Tenet Healthcare (NYSE: THC), Ternium (NYSE: TX), Dow Chemical (NYSE: DOW), The Pantry (Nasdaq: PTRY), Tollgrade Communications (Nasdaq: TLGD), TOR Minerals (Nasdaq: TORM), Trex Co. (Nasdaq: TREX), TriMas (Nasdaq: TRS), True Religion (Nasdaq: TRLG), Twin Disc (Nasdaq: TWIN), Unisource Energy (NYSE: UNS), Unit (NYSE: UNT), Universal (NYSE: UVV), Universal Technical Institute (NYSE: UTI), Unim Group (NYSE: UNM), USEC (NYSE: USU), Venoco (NYSE: VQ), Vical (Nasdaq: VICL), Vishay Intertechnology (NYSE: VSH), W&T Offshore (NYSE: WTI), Wabash National (NYSE: WNC), Watts Water (NYSE: WTS), Web.com (Nasdaq: WWWW), WebMD (Nasdaq: WBMD), West Pharmaceuticals (NYSE: WST), Westlake Chemical (NYSE: WLK), Weyco Group (Nasdaq: WEYS), Whole Foods (Nasdaq: WFMI), WMS Industries (NYSE: WMS), World Fuel Services (NYSE: INT), XL Group (NYSE: XL), YRC Worldwide (Nasdaq: YRCW), ZipRealty (Nasdaq: ZIPR) and ZymoGenetics (Nasdaq: ZGEN).

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