Media Negativity Moderates in March

The mainstream media has indeed moderated in its pursuit of only gloom and doom this month. Earlier in March the mainstream outlets finally started covering positive stories. In fact radio and TV started soliciting for positive stories.

The media does play a significant role in sentiment changes in a recessionary cycle. It is now interesting to see how consumer and investor sentiment has changed -- perhaps in part to additional airtime on positive economic stories.

From the Rasmussen reports on Tuesday morning:

The Rasmussen Consumer Index, which measures consumer confidence on a daily basis, rose three points on Monday to 73.0. That’s up six points from a week ago, up seventeen points from a month ago and up thirteen points from the beginning of the year.

The Rasmussen Investor Index rose for the fourth straight day today. At 81.6, investor confidence is up fourteen points from last week, up twenty-five points from last month and up eighteen points from its first reading of the year.

There’s also a glimmer of good news in this month’s release of the Rasmussen Employment Index. After declining for five straight months, prospects for the labor market stabilized as the Employment Index inched up slightly.

And across the country the media outlets are indeed continuing to step up their reporting of good news. It looks like they will continue into April...

For example NewsRadio 1310 KLIX in Twin Falls, ID will set aside the normal news of the day in order to celebrate the good news happening in their communities, their state, and the country. For 24 hours starting April 2, the top rated news-talk station will update their listeners with only positive stories, interviews, and news.

“With so much ‘bad news’ dominating the headlines these days, it’s easy to let the ‘good news’ slip through the cracks,” says NewsRadio 1310 KLIX general manager, Janice Degner. “By dedicating a 24-hour news cycle to this type of news, we are hoping to offer a little sunshine and maybe help put things in perspective.”

Past the Inflection Point

One of my favorite bloggers is the Calafia Beach Pundit. Scott Grannis was Chief Economist from 1979-2007 at Western Asset Management (Wamco) and now blogs on economics, markets, and politics from his condo overlooking Calafia Beach on the Southern California coast.

In a recent post Scott suggests, "news continues to be bad, but on the margin, the news is less bad with each passing day. We've most likely passed the inflection point, where the rate of decline starts becoming less and less. Sooner or later we could see the news actually become positive. The market is already beginning to figure this out."

Here are five recent positive posts from the CBP (along with his supporting charts)...
(click on the title for the full story with graphs)

1. Home builders' stocks bouncing
This index of the stocks of 18 leading home builders is up over 40% from its late November '08 low.

2. Industrial metals prices bouncing
The global economy is not going down a black hole.

3. End of the recession
I see lots of signs showing up that could well mark the end of the recession.

4. No shortage of money
Credit is being extended to consumers at an above-average rate, and keeps posting all-time highs.

5. Copper update
Copper prices are up over 40% from their December lows.

Add those to our list of over 101 economic positives. Thanks Scott.

5 Vital Signs of Life

Let's start the week with a recap of last week's good news...

1. NEW-HOME SALES

Although there are still foreclosures flooding many markets, sales of new homes were up 4.7 percent in February from January. (And January's figures were revised higher.) The sales represent the first monthly gain since July.

2. DURABLE GOODS

Also for the first time since July, orders for manufactured goods expected to last at least three years, spiked up in Feb. You may remember that most experts were expecting them to fall instead. And orders for non- defense capital goods, a key indicator of business investment plans, surged 6.6 percent.

3. HOME RESALES

Sales of previously occupied homes went up 5.1 percent in February from Jan. Buyers took advantage of a market that pushed the median price down 16 percent from a year earlier. Mortgage rates are historically low, and a new $8,000 tax credit for first-time homebuyers also could further lift sales.

4. RETAIL SALES

Shoppers bought a few more necessities in February, offering some hope for stores. Retail sales dipped only 0.1 percent, and they actually rose in January. J.C. Penney and Target said their same-store sales were down but not as sharply as expected.
Consumer confidence is also up significantly.

5. WALL STREET

The stock market has finally caught a break. Major banks such as Citigroup and Bank of America have said they were profitable in January and February, and many on Wall Street have embraced the details of the Obama administration's plan to relieve banks of toxic assets.

5 more vital signs to look for this week:

Monday we get a look at Farm prices. Farm prices are monitored by analysts to give early warnings of inflation or deflationary pressures in the economy.

Tuesday we'll see the S&P/Case-Shiller® home price index which tracks monthly changes in the value of residential real estate.

Wednesday the pending home sales index is a leading indicator of housing activity.

Thursday we get a factory orders report. It represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the durable goods report release earlier.

And Friday we get the ISM non-manufacturing survey. In recent years it has gained more attention and is almost as widely followed as the manufacturing index which will follow a week after. This report also carriers a correlation with GDP growth rate giving us another data point into what that calculation may be this quarter.

Weekly Good News Wrapup

• Consumers Still Giving the Buy Sign

  We are continuing to watch retail sales and consumer confidence closely.  Both continue to indicate that consumers are spending again.

• Recession-Proof Jobs

  Despite the news of job losses and unemployment numbers, there is indeed strong employment opportunity in selected parts of this economy. 
  

• Market Good News Upstages Bernanke, Geithner, and Obama

  Durable goods orders in February shocked economists (and the markets) by showing sharply better numbers than anyone had expected.
  

• Monster Employment Index Up

  The Monster index bounced up in Feb for the first time since last October.
  

• Expert Reactions to Geithner Plan: Net Positive

  You may have heard that not all economists agree on the efficacy of the plan. But there were surprisingly many positive comments on the the government's new roadmap.
  

• How Toxic Assets Turn To Gold

  Today's "toxic assets" are tomorrow's "hot buys." 
  

Consumers Still Giving the Buy Sign

We are continuing to watch retail sales and consumer confidence closely.

The Rasmussen Consumer Index, which measures consumer confidence on a daily basis, stabilized at 68.4 on Saturday. Consumer confidence is up four points from a week ago, up twelve points from a month ago and up nine points from the beginning of the year.

You'll remember that index has rebounded sharply in the past two weeks.

Also the latest data from the census bureau shows many segments of strength for the last two months and retail growth back on its historical growth trajectory. (1992-2009)

(click on charts to enlarge)




Several reports out this week stress that so far March retail activity is in line with January and February and that retail growth is indeed leading to US economic recovery.

Recession-Proof Jobs

Despite the news of job losses and unemployment numbers, there is indeed strong employment opportunity in selected parts of this economy. In fact several industry segments have actually continued to add jobs throughout this whole recession. Indeed the jobs data shows bright spots — expanding industries that promise new, stable career opportunities.

•Health care. Hiring has continued non-stop at hospital, medical clinics and doctors' offices. Jobs in demand: nurses, lab technicians, physician assistants.

•Government. Cities, counties and school districts continue to add a great number of jobs -- seven times as many as the federal government. Jobs in demand: educators, police, firefighters and workers connected to infrastructure such as roads.

• Energy. Oil, gas, coal and electricity production have kept adding jobs, although the pace has slowed since energy prices declined last year. City utility jobs have also continued to increase.

According to BLS data, about 4.4 million people got hired into new jobs in January, and 3 million more openings were available. Granted, those numbers are down sharply from the start of the recession, but don't let anyone tell you there are "no jobs."

More broadly these charts show the last several year's actual job growth and Moody's Economy.com's forecasted job growth for 2009-12.

With corporations scaling back their layoffs significantly, you can see from the charts when those companies actually begin to contribute to renewed job growth again.

Market Good News Upstages Bernanke, Geithner, and Obama

Wednesday was all about "surprising" good news. Most thought that the spotlight would be on rehashing congressional testimony by Fed Chair Ben Bernanke and Treasury Secretary Timothy Geithner -- or on digesting the President's prime-time news conference the night before.

Instead durable goods orders in February shocked economists (and the markets) by showing sharply better numbers than anyone had expected. The consensus estimate from the experts called for a 2 percent decrease. The strong 3.4 jump surprised even the most optimistic prognostications that had only forecast a paltry 1.0% rise.

Several industry segments reported significant gains. Machinery orders shot up 13.5%. Orders for computers spiked up 10.1%, with defense aircraft and parts surging by 32.4%. The closely watched special category of nondefense capital goods orders pushed higher by 7.4%.

The readings were no doubt a pleasant shock to many. There is clearly more resilience in the manufacturing sector than most believed and this report confirmed that more indicators are starting to fall in the improved or no longer falling categories.

Then thanks to the Fed's aggressive work to free up mortgage lending, new home sales, like existing home sales earlier in the week, also came in higher than expected. With good news on a roll, the mortgage application data from the Mortgage Bankers Association was also reported to register striking improvement.

By the end of the day, treasury testimony and presidential press answers were forgotten. The ongoing rally in the stock market took center stage, advancing strongly late in the day to post its best monthly gain since 1991.

Monster Employment Index Up

I missed this report earlier in the month. The Monster Employment Index gave us some encouraging news on US employment activity.... another positive bounce.

The Index is a broad monthly analysis of US online job demand conducted
by Monster - the online job bulletin board. The index is based on a real-time view of millions of employer job opportunities from a large, representative selection of online career outlets nationwide. (Remember our calculations of over 700,000 Fortune-1000 jobs available at the end of Jan?)

The Monster index bounced up in Feb for the first time since last October.
(click chart to enlarge)

Source: Monster Worldwide, Inc. (NYSE: MWW)

Other highlights from the report:

• Occupations in Business and Financial Operations witnessed gains.

• All geographic regions exhibited increased recruitment activity in February,
except the Pacific region which remained flat

• Online demand for workers grew in 25 of the 28 major metro markets, led by
Pittsburgh and Houston

This report is consistent with what we are also seeing in the government data. Initial claims for the March 14 week did fall back 12,000. Total claims remained high, but a leading indicator of recovery is when these initial claims totals continue to fall consistently.

Given the fact that the Feb Monster data is more dynamic, look for initial claims to fall again when the claims data is released later this week. (Also remember that we saw corporate layoffs curbed significantly in February) . Although initial claims are likely to begin falling from here, unemployment may continue to rise for a time. It is however the initial claims falling that indicates that recovery is near.

Interestingly, the consensus among the majority of experts is that claims will rise. So look for a headline something like "initial claims for unemployment unexpectedly fall..." later this week.

(Thanks for all your emails and good news stories. Keep them coming to good.news.econ@gmail.com)

Expert Reactions to Geithner Plan: Net Positive

Yesterday you read one scenario for toxic asset appreciation over time. That would spell good news for big bank liquidity in the short term and good news for private investors and taxpayer equity gains in the long run.

You may have heard that not all economists agree on the efficacy of the plan. But there were surprisingly many positive comments on the the government's new roadmap:

From Mark Thoma in the Economist's View's article Which Bailout Plan is Best?, "I am willing to get behind this plan and to try to make it work. It wasn't my first choice... but like it or not this is the plan we are going with and the important thing now is to do the best that we can to try and make it work."

Scott Anderson, senior economist at Wells Fargo said, "My gut reaction is that this is an excellent plan. This plan will go a long way toward getting banks in better position to lend more aggressively and break the deleveraging feedback loop that is now in place."

From the Calculated Risk Blog (usually a quite negative read), "It is probably the best we can get in the current environment."

John Burns, real estate consultant, Irvine, "This plan is very smart. It will cause an economic rebound much sooner than would otherwise have occurred."

Jack Kyser, chief economist, Los Angeles County Economic Development Corp., "It should help get the [big] banks lending again, which is very important to our small-to-medium sized business community."

Mark Zandi of Moody's Economy.com, wrote in the Miami Herald that, "This plan has a good chance of success."

UC Berkeley's Brad DeLong wrote on his blog that the plan is a "positive step" that lets the government shoulder the risk. DeLong emphasizes that the US treasury is much more risk-tolerant than private firms.

John Gapper from The Financial Times offers, "Two cheers for Tim Geithner’s bad assets plan."

The plan to cleanse banks of toxic assets "has a good chance of succeeding," says A. Michael Spence, co-winner of the 2001 Nobel Prize in economics.

The plan obviously has its naysayers. And the mainstream media was parading them out yesterday. (You can read about them elsewhere). But it is quite interesting to note the overwhelming support to try to make this plan work -- even from many of the "perma gloomsters."

So with consumer confidence now spiking higher by the day, some additional good news on the housing market, and increased investor confidence in big bank future fundamentals, this first full week of spring just may be a positive precursor to a much warmer summer stock market.

How Toxic Assets Turn To Gold

All week you will probably hear about "toxic assets" and the government's plan to rid the banks of these "bad" assets on their balance sheets.

But several astute readers have already alerted us all:

Today's "toxic assets" are tomorrow's "hot buys." The next scandal is going to be stories on wealthy Wall Streeters making a fortune buying "toxic" assets financed by the government as the real estate market recovers.

That just might be the case. Here is one scenario that weaves a silver lining into all those assets the government just might be buying on our behalf...

Take the example of Mike. He bought a small condo in the burbs of DC for $200,000 several years ago. The market was hot; he could not go wrong his agent said. He put $20,000 down and took out a 7% note from Countrywide (now Bank of America) for $180,000.

Now conditions outside the beltway recently got bad for everyone. The housing market slumped. The condos in his complex are listed for $110,000 and not selling. To make matters worse, Mike lost his job in November and just missed the first loan payment ever in his life.

Is this mortgage a toxic asset for Bank of America? You bet.

Let's assume that under the new Treasury plan, a private investor fund and the government buy this asset at a discount. (And a whole bunch more just like them). Why? So Bank of America can show more cash and liquidity on it's books and restore confidence to it's depositors that it can cover any withdraw requests.

The story continues. Mike finds a job three months from now. He starts making his payments again. Further, because of the discount paid for the note, the investors and the government have lowered his monthly payments, principal, and will forgive his past back payments. He now is paying on a $120,000 note at 5%. His job looks quite stable.

Now let's look ahead 5 years. Mike has been current on his note ever since his new job. He has paid the investors and the government 5 years of interest at 5%. Condo values have recovered and several units in his building just sold for $230,000. Will anyone buy that note? You bet they will.

You will no doubt hear more details on the Treasury's plans. There may be more outrage at the government assisting big banks in their new quest to become liquid and trustworthy again. Remember that just because those assets might look toxic today on the US Government balance sheet, that doesn't mean they will be toxic forever. This just might be one of the better investments the Government has made on our behalf.

Weekly Good News Wrap

The Big Bank Fix
There is no credit crisis at most banks, but the lack of trust in the largest US banks still needs mending. Is there a good plan to do that yet? (Full Story)

Consumer Confidence Makes Up Huge Ground
Last week you noted that consumer and investor confidence were up significantly. But taking a closer look at the data reveals just how significant the confidence bounce was. (Full Story)

San Francisco Housing Market Instantly Hot
In another sign that the US economy is turning the corner, the San Francisco housing market has almost instantly become hot. (Full Story)

Obama: $15B for Small Businesses
On Monday, President Obama announced that the U.S. Treasury would buy as much as $15 billion Small Business Administration (SBA) securities in order to further boost the secondary markets for small business loans. (Full Story)

Fed Chair: Growth Probably to Resume in 2009
Fed Chair Ben Bernanke was on 60 minutes Sunday evening and confirmed what you've been reading here for some time. The recession will probably end in 2009. (Full Story)

The Big Bank Fix

There is no credit crisis at most banks, but the lack of trust in the largest US banks still needs mending. Is there a good plan to do that yet?

Fed Chair Bernanke described the plan last month to Congress. But did folks understand?

David Wessel wrote an excellent article in yesterday's Wall Street Journal about the fundamentals of what the government is doing to fix those top 19 banks:

The Treasury has thrown pieces of the jigsaw puzzle on the table, but few outsiders can see the whole of its plan. Here's a modest attempt to show the cover of the jigsaw-puzzle box.

The problem: No one has confidence in the financial strength of the nation's big banks. Even banks don't trust other banks. No one is sure what the loans and securities on their books are worth. No one knows which banks are strong enough to survive the recession.

So what is the fix?

The Treasury's bank strategy is twofold. One, get enough capital into the 19 biggest banks so everyone believes each can withstand a really bad recession. Two, get toxic assets off their books so banks will pick up the pace of new lending, and savvy big-money investors will put money into the banks and help achieve the first objective.

The last piece of the Geithner plan comes soon: Buying toxic loans and securities, mostly linked to real estate, from the banks and others. One challenge is putting a fair price on them. The Paulson Treasury spent months trying to fashion auctions in which the government would buy these assets. It never bought any. The Geithner Treasury decided that approach wouldn't work. What's more, it hasn't nearly enough taxpayer money to buy enough of the assets to make a difference.

So the plan is to form joint ventures between the Fed and money managers like Pimco or BlackRock. The Treasury kicks in, say, $1 for every $1 the private guys put in. The private investors, not the government, decide what securities to buy from the $1 trillion or so in securities linked to real estate or consumer loans. The private guys decide what price to pay. That's their business. Taxpayers and the investors would share the profits, if any. If the Fed lends to these ventures, they'll be able to buy more securities and pay more for them.

The good news is that the plan exists. As the plan is implemented and trust restored in these mega elite banks, that will build confidence again in the US banking system as a whole. And as US consumers move with confidence into spring, a budding recovery will restore hope in an economy that drives and leads world commerce.

Consumer Confidence Makes Up Huge Ground

Last week you noted that consumer and investor confidence were up significantly. But taking a closer look at the data reveals just how significant the confidence bounce was.

In fact according to the archive of Rasmussen Confidence Index data, it only took five days last week for the daily index to make up almost all of the ground it had slowly lost over the past five months. (Click to enlarge chart)


You've seen how consumer spending drives recovery. Here's just one more data point leading us out of the winter doldrums into a much cheerier spring and summer.

San Francisco Housing Market Instantly Hot

In another sign that the US economy is turning the corner, the San Francisco housing market has almost instantly become hot.

Bay Area CBS News 5 reports "there are now signs of a serious real estate rebound in San Francisco." Their news story headline? "Mini-Boom."

"This is not some kind of spin from the real estate brokers. We absolutely have hard numbers to back this up," claims reporter Hank Plante of News 5. "In the last 2 weeks in San Francisco there have been more homes sold than in the previous 6 months."

One 40-year veteran agent claims he has never seen activity like he saw last week. On one home alone he received 42 offers. That house sold for $100,000 over the listing price.

Another house in the same neighborhood had 10 offers on it. It was listed for $525,000 and just sold for $608,000. And Plante reports several more examples of almost instant sales in this resurgent market with none of the examples being foreclosures.

Real estate expert Brendon DeSimone claims that evidently, "buyers have been waiting, they've been saving their money and waiting. The foreclosures have come and driven the prices down. With affordable monthly payments now, buyers are coming back in."

With those low prices, "pent up demand has now been unleashed, even at the high-end," continued Plante. For instance, waterfront real estate developer Alan Mark describes their "amazing run since the beginning of the year. We've had 50 [high-end waterfront condo] sales in 2009 and 30 in the last 30 days."

We'll add this incredible observation to our growing list of strong recovery signs.

(Thanks to an Anonymous reader for pointing us to this good news story)

Obama: $15B for Small Businesses

On Monday, President Obama announced that the U.S. Treasury would buy as much as $15 billion Small Business Administration (SBA) loans in order to further boost the secondary markets for small business loans.

The fiscal move by the Treasury should increase the SBA's lending ability to banks and then ultimately to small businesses by further enabling those bank lenders to free up capital in order to make new small business loans.

Small businesses are "not only job generators, but the heart of the American dream," the President said. "Too many entrepreneurs can’t access the business capital they need to start or grow their businesses." The new policy aims to change that quickly.

Cynthia Blankenship of the Bank of the West in Grapevine, Texas said, "This is an incredible tool for community banks nationwide to help jump start the economy."

Congressional leaders also hailed the move.

Obama's "efforts send a clear message to entrepreneurs around the country: You are central to our economic recovery strategy. The ability to secure a loan at affordable terms often makes the difference between whether a small firm stays afloat, grows and create jobs, or shuts it doors," said Rep. Nydia Velazquez, who is the chair of the House Small Business Committee.

The SBA's "Certified Lenders Program (CLP)" is designed to provide quick service on loan applications received from participating lenders who have a successful SBA lending record and a thorough understanding of SBA policies and procedures. Participating lenders will be enabled immediately via the new Obama funding initiative.

For small businesses across the country this is outstanding news. For those experiencing a downturn in their business, this could be just the boost required to grow into the recovery that is likely later in the year.

Many very successful entrepreneurs know that strong firms retool their businesses during lulls in business cycles. Barry Cox, Owner of SkyRun Vacation Rentals in Keystone Colorado observes, "Several well known firms were born during recessionary times. We see it as an opportunity to borrow, invest, and grow the SkyRun business model. What better time for SkyRun to add properties and new franchised vacation locations? When the market for vacation travel returns, as it will eventually, we will be much better equipped to take advantage of the demand."

Fed Chair: Growth Probably to Resume in 2009

Fed Chair Ben Bernanke was on 60 minutes Sunday evening and confirmed what you've been reading here for some time. The recession will probably end in 2009.

Many seemed surprised that he would express such optimism that this indeed could be accomplished.

But much like Bernanke's remarks to congress last month, he continued to highlight the programs the Fed is using to instill confidence in our largest (elite) banks, and compel them to lend freely again. As you recall most smaller and regional banks never stopped lending.

Said Bernanke, "We do have a plan. We're working on it. And, I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year."

Just like last week, I'd expect the markets to respond positively to such forward looking optimism.

Weekly Weekend Roundup

Consumer Pessimism Receding; Investors' Confidence Up
Consumer and investor optimism is rising again. The majority of economists were wrong as most were expecting the consumer sentiment index to fall during the month. (Full Story)

More Strong Recovery Signs
Our list of positives is growing and Thursday saw some extremely positive recovery signs. (Full Story)

Remember 1979: Is This Time Different?
In 1974 and 1975 the majority was wrong about any positive prospects for the US economy. How about 1979? (Full Story)

The Tipping Point and Good News Matches
The rally in stocks on Tuesday was significant. Have we reached a tipping point? Perhaps. And here is why. (Full Story)

Positive News on the Radio -- Tuesday 1:20p CDT
Listen to one of our very own positive economic news bloggers, Barry Lauterwasser of Positive Economic News is doing a radio spot. (Full Story)

Mainstream Media: Finally Some Positives
The mainstream media does have a role in how quickly we recover from this recession. Up until last week they continued with all the overblown extremes of gloom pouring gasoline on the negativity firestorm. But this week was finally different. (Full Story)

Consumer Pessimism Receding; Investors' Confidence Up

Econoday reported yesterday that there are "more positives than negatives in the mid-March consumer sentiment report. The headline index edged 3 tenths higher to a still severely low level of 56.6. But expectations, the report's leading component, did rise 2-1/2 points to 53.0 -- indicating that pessimism isn't getting worse and perhaps hinting that pessimism may now be receding." The majority of economists were wrong as most were expecting the consumer sentiment index to fall during the month.

Rasmussen reported on Friday that "consumer and investor confidence continued to gain ground and is now at the highest levels since late January."

The Rasmussen Consumer Index, measures consumer confidence on a daily basis and it moved up for the third straight day. The index of 61.8 moved up four points from a week ago and is now over 60 for the first time since early February. Further Rasmussen says "confidence is the highest it’s been since January 23."

Investor confidence is also now at its highest level since late Jan.

"Fifteen percent (15%) of investors now say the economy is getting better, doubling the 7% who held that view just a few days ago (Tuesday)." This week saw "the number of investors who say the economy is getting worse fell from 75% on Tuesday to 64% today."

Consumer and Investment confidence is key as the economy reaches a tipping point, begins to exhibit more signs of recovery, and eventually returns to growth this summer.

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More strong recovery signs

Our list of positives is growing and Thursday saw some extremely positive recovery signs.

1. We have now had strong retail reports for both Jan and Feb this year. The Feb growth number was actually flat, but much stronger than many had feared. Feb retail sales are typically the most weak month of the year. Further the Jan number was revised upward, meaning the Jan growth was actually stronger than originally reported.

2. Late on Thursday,deputy central bank governor Su Ning said: "We expect China's
economy can see a substantial recovery in the second half of this year." That is no doubt great news for the world economy.

3. Struggling automaker GM, told Washington that it will no longer require a planned $2B loan from the government. Instead it told reporters that its restructuring plans are working to reduce it's burn rate significantly.

4. Bank of America CEO's said he did not expect BOA to need additional financial help from the government. Further he said that banks are not in "nearly as dire shape as some would have us believe." They follow positive comments from two other large banks: Citigroup and JP Morgan Chase.

And you will enjoy these quotes from several Thursday financial news stories:

"How all this turned around in a week, I don't know," said Scott Bleier, president of CreateCapital Advisors. "But it's certainly a better outlook than how it looked two weeks ago."

"We might find that the banks are not as bad, or not bad at all, if these assets are marked differently," said Doreen Mogavero, president of the New York's Mogavero, Lee & Co.

"There's a lot of money on the sidelines, and a lot of people who've been waiting for the turn to come," Mogavero said. "I think that probably, people will want to get some of their money in the market."

Remember 1979: Is this time different?

In 1974 and 1975 the majority was wrong about any positive prospects for the US economy. How about 1979?

On the cover of Business Week magazine on Aug 13, 1979, the headlines announced "The Death of Equities" and the byline: "How inflation is destroying the stock market." But last year Money magazine said, "That, of course, turned out to be one of the great buy signals of all time."

By getting into stocks right then, savvy investors beat inflation easily for the following 5 to 10 years.

But this time is different right? Yes and No. Of course 2009 is a different time in history. But a fascinating paper by the economics department at Harvard, reveals that a significant number of factors are the same now as compared to other financial crises that have occurred for 800 years!

They find that these gloomy financial episodes "are typically spaced some years (or decades) apart, creating an illusion that 'this time is different' among policymakers and investors." Further they conclude that, "the recent US sub-prime financial crisis is hardly unique."

So are stocks dead this time? Or just resting?

Following the Business week article in 1979, buying stocks would have yielded, after inflation, an average annual return of 7.3%. The 10-year performance yield: 9.52% annually. Further, history shows that for 20- and 30- year periods, inflation-adjusted gains on stocks have never been negative.

So are we at the tipping point in the bear stock market of 2008-2009? What about 2010? Have another look at our recent charts and graphs. You be the judge. Because remember most economists make astrologists look respectable.

The Tipping Point and Good News Matches

The rally in stocks on Tuesday was significant. Have we reached a tipping point? Perhaps. And here is why.

The book "The Tipping Point", by Malcom Gladwell should be on your reading list. It frames the world around you as events that sometimes converge without many people giving notice until that confluence of small changes sets the stage for drastic change or actions.

The picture on the front cover is a match. The implication? How one small match can start a huge forest fire. If the conditions are just right. Those conditions may be building for days. Maybe even years. And then for 2 months straight, there is no rain. And the wind kicks up... and it's the small match that ultimately ignites the blaze.

Using another example, Gladwell says that the tipping point "is the name given to that moment in an epidemic when a virus reaches critical mass. It's the boiling point. It's the moment on the graph when the line starts to shoot straight upwards. The Tipping Point is an examination of the social epidemics that surround us."

What we will likely see in the stock market for the foreseeable future are just such events. The economic positives have been pouring in since early February. Not many folks have taken note. But you have.

What was the match yesterday? It was quite simple really. Three statements:

1. Citigroup's CEO gave traders hope that much of the crisis with top banks is behind us. Citi may actually post a profit this quarter, after a string of massive losses.

2. The Federal Reserve Chairman made a very strong statement that "the US will recover from this recession."

3. And House Financial Services Chairman Barney Frank said he believes the SEC may reinstate the uptick rule as early as next month. The rule is designed to help prevent traders from adding to the momentum of falling stocks.

Gladwell continues, "Epidemics behave in a very unusual and counterintuitive way. Things can happen all at once, and little changes can make a huge difference. The Tipping Point is a way of making sense of the world, because I'm not sure that the world always makes as much sense to us as we would hope."

You've consistently read now that the economic contraction is slowing; that retail sales are firming, commercial credit is no longer frozen, and that many other positives are building and actually hitting the mainstream media. There is no doubt that recovery is somewhere on the horizon and as further "good news matches" are used on Wall Street, those catalysts will likely just ignite more waiting fuel for the fire.

Positive News on the Radio -- Tuesday 1:20p CDT

The good economic news really got rolling back in February.

You may remember it was then that we discovered the same companies that were announcing layoffs, were actually rehiring.

Then you started noticing positive bounces: Foreclosures slowing, layoffs plummeting and housing markets stabilizing.

Pretty soon you had over 101 economic positives to talk about at the water cooler or in the lunch room.

And then facebook fans and groups kicked in.

Then yesterday the mainstream media started cluing into the fact that hundreds and hundreds of positive stories do exist about the economy and that their audience is just plain sick and tired of hearing the gloom and doom over and over.

But here's the most exciting part today: One of our very own positive economic news bloggers, Barry Lauterwasser of Positive Economic News is doing a radio spot on Tuesday at 1:20p CDT on WCCO News Radio Minneapolis, MN. You can tune in over the internet at:
http://www.wccoradio.com/ Click on the big "Listen Live" button.

Barry says he is "absolutely thrilled that mainstream is starting to 'get it'. I was very excited to see [positive economic news] start to get some play [in the mainstream press]", says Barry in a recent post on his blog.

Let's take an early or late lunch and all tune in to cheer Barry on. Let's focus good energy on some Keynesian "economic animal spirits" and help to assure an economic turnaround by summer.


(Be sure to check out the comments sections of several of the most recent posts. In addition to links that are provided in the main story, additional economic good news pointers are provided by readers. Thanks all for your contributions!)

Mainstream Media: Finally Some Positives

The mainstream media does have a role in how quickly we recover from this recession. Up until last week they continued with all the overblown extremes of gloom pouring gasoline on the negativity firestorm.

But we have now reached the point in this cycle that the public has had enough. How can you tell? Because the grassroots outcry in the last week has finally been heard. Where? Check out these recent headlines...

From NPR:
Optimism Boosts Florida Housing Market
"Sales are picking up and the inventory is going down." (Full Story)

From MSNBC:
NBC anchor says request for positive stories has hit ‘incredible nerve’
NBC's Brian Williams was "shocked at the thousands of responses he has received in less than two days after asking viewers to suggest some good news to report." (Full Story)

Company shares $9 million with employees
One Boulder Colorado worker: 'We're fortunate to have great bosses' (Full Story)

From CNBC:
They're Hiring: Where The Jobs Are
"Many employers across the country are actually hiring." (Fully Story)

Consumers Start Spending Again
"Some economists say the worst may be over for consumer spending." (Full Story)

From Fortune:
Jobs data speaks of a bottom
"The loss rate has stopped accelerating, indicating a possible turnaround."
(Full Story)

From CBS News:
Ben Stein to Charles Osgood
"Economic health is determined by Supply of Money and the Velocity with which it is moved."
(Full Story)

And in another interesting twist last week, a new Facebook group formed and is adding members at an unheard of clip. The new group is "10,000 to Tell the Media to Stop Inciting More Fear and Panic!" and is open to any Facebook member wishing to join.

Did you stop counting at 101 positives? Anyone else keeping score?
Looks like Good News continues on a roll...

(Thanks to the following faithful readers who submitted several of these stories: Esther Jane, John C, and Ralphm37 of Tuesday Ramblings)

Weekly Weekend Roundup

• Leading Economic Indicators Rise Two Months In A Row
  
• Why was this story under-reported? Because the data actually surprised analysts when it came in with a key positive number for the month of January. The Index Of Leading Economic Indicators for the second month in a row showed an increase in economic activity. (full story)
  
• 
  
• Manufacturing Data Now Trending Toward Recovery
  
• The Institute for Supply Management (ISM) released its manufacturing report on business Monday and there are now bright spots for two months in a row. You'll remember that the report measures, indexes, and correlates manufacturing activities with other measurement readings from the government and elsewhere. (full story)
  
• 
  
• Obama and Cramer Now Bullish on Stocks
• It was tit for tat between the White House and Jim Cramer the host of CNBC's Mad Money (full story)
  
• 
  
• Corporate Layoffs Subsiding Substantially
  
• The good news for jobs this week is that a major study now shows that corporations have either finished their layoffs for now or have significantly curbed those actions. (full story)
  
• 
  
• Retail Growth is Indeed Leading Us to Recovery
  
• It came as a huge surprise on just how well Walmart fared in February.
  Total sales rose from $27.7B in Jan to $30.0B in Feb. That's an unheard of 98% annualized clip! (full story)
  
• 
  
• The Stock Market Chart for 2009 - 2010
  
• Here you are: the stock market chart for 2009 to 2010... (full story)
  
• 
  

The Stock Market Chart for 2009 - 2010

Here you go, the stock market chart for 2009 to 2010...

Click chart to enlarge:

(Source: Google Finance)

You have heard us reminisce about 1974 in articles and comments.
And you've read many, many "scary charts" in the last several months.
And you have no doubt been asked, "Are you scared?"
For me, I remember 1974. When you've been scared once and lived to see a much brighter day, it makes it much easier to endure and face fear the next time around.

I offer the chart above as a reminder that we have been through stock market times like this before and there is no doubt in my mind that better stock market times are just around the corner.

Retail Growth is Indeed Leading Us to Recovery

Just a reminder to everyone: Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed.

You may remember several weeks ago strong January results from several retailers. The brightest report coming from Walmart which alone accounts for close to one quarter of the overall retail number. The government followed shortly there after with a "surprising" 1% growth number in retail for January alone.

What came as a huge surprise today was just how well Walmart fared in February.
Sales in Feb can truly be categorized as skyrocketing... total sales rose from $27.7B in Jan to $30.0B in Feb. That's an unheard of 98% annualized clip! And in a short month no less. Walmart quickly responded to these results by raising it's dividend payout.

Apart from Walmart, yesterday's report on retail chain stores indicated major improvements in February. Rates of sales contraction slowed significantly in the month. Not surprisingly, Walmart's chain stores once again led the report and posted their strongest results since June. Many other chains, in stark comparison to prior months, were extremely positive in their description of business conditions with some actually describing their retail traffic as strong.

This is quite possibly the firmest leading indicator to date on our growing list of well over 101 economic positives, that along with 43 Fed economists points to an overall return to US economic growth by summer.

Corporate Layoffs Subsiding Substantially

The good news for jobs this week is that a major study now shows that corporations have either finished their layoffs for now or have significantly curbed those actions.

"The decline in job cuts last month offers some hope that January was the peak and we will now see layoffs begin to fall or at least stabilize," said John Challenger, chief executive officer of Challenger Gray & Christmas the authors of the study.

According to the report, major U.S. companies surveyed in the study announced only 186,350 job reductions in February, down significantly from January when the cuts totaled 241,749.

On Thursday all eyes will be on initial claims for unemployment. Following the Challenger, Gray & Christmas report it will likely also show those initial claims falling.

If so, we may just be reaching an important tipping point. You might just be observing one more catalyst to fuel another significant rally in the equities markets.

Obama and Cramer Now Bullish on Stocks

In recent days it's been tit for tat between the White House and Jim Cramer the host of CNBC's Mad Money

Cramer’s claims: "Obama has caused the greatest wealth destruction I have seen by a president.”

“I’m not sure what he’s pointing to, to make some of the statements,” responded the White House via the press secretary. The secretary even tried to marginalize Cramer -- pigeon-holing him to a niche audience, while Obama's audience "is the whole country."

Cramer pointed to stock averages down significantly and associated "main street" savings and 401K plans suffering. Jim further pointed to the government's spending plans as the cause of such stock market depths.

But then get this. Amidst all this jousting, both men actually agree. Stocks are oversold.

President Obama: "Right now is a good time to buy stocks."

And Cramer followed up by publishing a list of 10 reasons why!

1. Treasury Secretary Geithner addressed the "current crisis." Cramer claims that when Geithner speaks, "we all feel more confident", with stocks respondng positively on Tuesday to the Geithner address.

2. The Fed Chairman proposed a new "Term Asset-Backed Securities Loan Facility." Private investors may indeed be enticed into that asset-backed security market, further boosting credit. Beyond government backing, Cramer thinks that is just what the market needs. (Don't miss this good news: Cramer is actually supporting a goverment program proposed by the Fed!)

3. Two chip companies, Altera (ALTR) and Xilinx (XLNX) both announced "that business wasn’t as bad as people say." That gives some stock traders hope that indeed the dire commentary that the majority of the herd are claiming is overblown. Those semiconductor strength claims should help support stocks like Intel (INTC) , Microsofts (MSFT), and Cisco (CSCO).

4. Copper inventories in London are falling. That alone points to increased economic activity. Cramer claims that there is a major China infrastructure project that is spurring demand for those stockpiles.

5. And China’s markets are solid right now. The Chinese Shanghai Composite Index is up about 14% so far for 2009. The Baltic Freight Index is also up, this probably indicates that China is actually growing demand for natural resources.

6. Cramer claims that stocks U.S. Steel (X) and General Motors (GM) are oversold. Jim: "How much further could they possibly go?"

7. Cramer believes that oil markets are finally stabilizing and that alone strongly signals that indeed "we’re suffering through only a recession and not a depression."

8. Houses are more affordable now than at any other time on record. Have you heard that before? Cramer sees a housing bottom at least by June.

9. Many companies have now raised their dividends to yields between 4% and 5%. Company leadership would not raise those yields if they planned to cancel them quickly in upcoming quarters.

10. And finally Cramer has never seen people more negative than they are now. The market looks so oversold that "a sharp snap back is likely". When everyone is hopeless, Cramer said, that might just be the one time when "being optimistic pays off."

So now even Jim Cramer sees reasons to be positive. (Adding 10 more to our list of 101 others)

Cramer believes from here the market goes higher. And Obama of course agrees.



(Thanks to faithful reader John C. for alerting me to the Obama/Cramer mania. Keep those good news stories coming.)