Durable Goods Orders Lays a Goose-Egg

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

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

Durable Goods Orders

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

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

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

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

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

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

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

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

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

Seeing a Busy Black Friday

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

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

Black Friday

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

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

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

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

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

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

Congressional Leaders Offer Reassuring Fiscal Statements

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

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

Go Long Over the Short Short-Term

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

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

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

A Perfect Storm Threatens Stocks

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

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

Perfect Storm

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

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

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

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

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

Is the Jobless Claims Surge on Sandy or Something More?

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

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

Jobless Claims

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

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

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

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

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

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

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

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

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

Ticking Fiscal Cliff Clock Costing Economy Today

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

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

Fiscal Cliff

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

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

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

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

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

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

Mortgage Application Relief Post Sandy

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

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

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

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

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

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

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

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

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

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

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

Disaster for Some Stocks is Blessing for Others

The disaster now understood as Superstorm Sandy is wreaking havoc upon the economy and upon most industries, but one industry that keeps finding blessings where others are finding curse, wins again today. The construction industry and building supply companies should find support from what was perhaps the most destabilizing storm in the history of the Northeast.

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

The shares of the SPDR S&P Homebuilders (NYSE: XHB) are up another couple percentage points Thursday, after gaining on Wednesday as well. Some $10 billion in property damage is approximated by experts as the result of Hurricane Sandy Frankenstorm. For an industry where new home supply is already scarce due to a long period of inactivity, this means business. Whether the large builders participate or not though, the building supply companies like Builders FirstSource (Nasdaq: BLDR), Home Depot (NYSE: HD), Lowe’s (NYSE: LOW), Beacon Roofing (Nasdaq: BECN), USG (NYSE: USG) and Masco (NYSE: MAS) should make out big. Certainly, investors are betting on it, with some of these shares up sharply today.

Company & Ticker	Thursday Midday Change
Builders FirstSource (BLDR)	+8%
Home Depot (HD)	+1.2%
Lowe’s (LOW)	+1.6%
Beacon Roofing (BECN)	+0.7%
USG (USG)	+2.1%
Masco (MAS)	+6.2%

Whether a new home is built or not, roofs need repairing, siding needs replacement, water damaged drywall must be removed and replaced, and portions of some homes must be renewed. So the building supply companies are finding capital on the free market today. The low lying fruit has been taken in many of these names, but there are still untapped gains to be found within the sector.

The homebuilders should find a smaller benefit from the disaster, as the complete replacement of homes are going to be limited in number. In actuality, the storm may have caused damage at construction sites, costing some of the companies operating in the Northeast. Also, the work stoppage will cost these companies some capital, and some potential buyers will have been economically impaired. My view is that the impact is less important in this space than in the building supply space. That has not stopped the stocks from rocketing higher today though.

Builder & Ticker	Thursday Midday Change
Toll Brothers (NYSE: TOL)	+2.1%
PulteGroup (NYSE: PHM)	+2.9%
D.R. Horton (NYSE: DHI)	+3.5%
Hovnanian (NYSE: HOV)	+2.3%
Lennar (NYSE: LEN)	+2.4%
Beazer (NYSE: BZH)	+2.6%

Rental space providers should also benefit from the storm, as displaced and economically hampered Americans must move somewhere. The easiest option for the displaced, after friends and relatives, are the apartment rentals. This is probably why the shares of many apartment rental REITs are higher today. The shares of Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR) and Avalonbay Communities (NYSE: AVB) are higher by 0.7% each. Take note that all the players are not rising, as regional plays gather capital allocation from capital previously allocated to names in other regions.

So, even as airlines, retailers and many other discretionary capital destinations suffer today and over the next quarter, some are finding a blessing for their shares. It just goes to show you that even in disaster, opportunity can be found.

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.