When all you read is gloom, turn here for a much different perspective.

Thursday, February 26, 2009

101 Reasons Plus 9 Optimists

Yesterday you saw the list of 101 positives on the current economy. Most of the data on that list came from economists, financial forecasters or other media outlets. Today let's turn our attention to "main street." The everyday optimists who are only willing to look on the bright side.

The stories and associated links come directly from the CNNMoney feature "We are doing just fine!"  Let's applaud them for printing such stories...

1. Dawn Skwirut: "Refocus on what's important, like spending time together."

2. Gwen Brandenburg: "Use the crisis to create a clean slate."

3. Brandi Shigley: "Do what you love, and love what you do."

4. Brandon and Heather Loveridge: "Start a Debt Snowball."

5. Sharon and Don Wilson: "Focus on how much you save, not how much you earn."

6. Michael Kirk: "Let change create opportunity."

7. Dan and Carol Catlin: "Invest in lowering your energy dependency."

8. Robert Crumpler: "Live small and keep investing."

9. Robert Stadnik: "Train in a stable profession."

These 9 examples show us that the optimistic American spirit is alive and well. As you know it is a choice we get to make each and every day. And many times even the most stubborn of pessimists finally change their minds.

Wednesday, February 25, 2009

101 Economic Positives

Back in early Feb you read that good news was now on a roll...

Well, don't just take it from me. I can't keep up now with all the positives being posted out there...

In fact in just 30 minutes tonight, I'm up to 101...

Check out ten on the The Calafia Beach Pundit's List:

1. Commodity Prices Stabilizing

2. TED spread decline

3. Rise in T-bill yields

4. The dollar is not collapsing

5. Swap spreads have declined significantly

6. Shipping rates have bounced

7. Agency spreads are down

8. Consumer Loans are Up

9. Total Bank Lending is Up

10. Treasury bond yields are up

Nice Job Scott.

Or check this out from Irwin Kellner, chief economist for MarketWatch. He provides 21 reasons that the worst of the recession may be behind us.

Nice Job Irwin.

Or have a look at these seven indicators.

Nice Job Mark.

In a super surprise today, CNNMoney actually headlined the one positive piece of news in their story. Even though the story didn't point to all good news, they pulled the positive piece to headline!

Nice Job CNN.

And there are ten more positive economic headlines here.

Nice Job Barry.

You'll find 29 recent positive economic stories here.

Nice Job Fisher.

You'll find three more interesting ones here.

Nice Job Geri.

And several more on the housing market recovery, here, here and here.

Nice Job Dr. Perry.

And five recent reasons for economic optimism posted here.

Nice Job Mark.

And of course let's not leave out the dozen or so bounces that we've already tallied... and our count today stands at 101.

Perhaps some of the stories report duplicate data, but the fact remains that there is a tremendous uptick in good news reporting. You may just observe that some type of tipping point is upon us.

Who knows what tomorrow might bring.

Tuesday, February 24, 2009

Bernake Gets It Just Right

As you've read here there is no credit crunch at most banks.

What did occur is that our loosely regulated top "elite banks" -- in an attempt to garner greater and greater returns on their capital -- took on investments that turned out to be simply junk. [toxic assets] In the months since those banks either failed, were bailed out or otherwise exposed to their misguided ways, the government has continued to demonstrate (across both administrations) that it will do everything necessary to remove that junk from those bank balance sheets. It will then return those banks to credibility and further regulate those banks so that they never have the opportunity to swindle us again (in that way at least). Remember for the most part those toxic asset exposures are with the top US banks, not the majority of them.

If the Fed continues its actions as the Chairman indicates it will, that is excellent news for the US economy.

Chairman Ben Bernanke's testimony on Tuesday to the Senate Banking committee further outlines the governments plan to do just that.

Bernanke Describes the Fed Action to Cleanse Top Bank [Elite Bank] Reserves...
The [elite] banks are nervous about lending given their concerns about their own capital positions [more junk?] and about risk aversion and credit issues in the market place. In a way, what the Fed is doing is borrowing by paying interest on reserves to the [elite] banks. That's where we get the money and we're standing in between the [elite] banks and the market place using that money, recycling it into commercial paper, asset-backed securities and other forms of credit. In a way we are becoming the counterparty between the markets and the [elite] banks. When the [elite] banks feel they have opportunities to invest [the junk's all gone], they will. That will begin to create expansion in credit and money supply. That will be the signal for the Fed to begin to pull back. Right now, it's clear [that elite] banks are more willing to hold reserves than they are to make loans.
Bernanke on the Attractiveness of Holding U.S. Treasures...
It seems to be, at least for now, that the dollar and U.S. debt are still very attractive around the world. There is a lot of demand for holding our Treasuries. That being said, we can't go running trillion dollar deficits indefinitely and it's going to be very important as we emerge from the crisis, as we begin to go into recovery stage that we get control of the fiscal situation and begin to bring down the deficit to a sustainable level. For the moment, foreign demand for U.S. securities is strong, but if we don't get control eventually they are going to lose confidence.
The Chairman's Opinion on Inflation/Deflation and Fed Actions Down the Road...
Our view is that over the next couple of years, inflation, if anything is going to be lower than normal, given how much commodity prices have come down, given how much slack there is in the economy. When the economy begins to recover, it's important to raise interest rates and do what is necessary to prevent an overheating that would lead to inflation down the road. We are confident we can do that. Every time we use our balance sheet to try and support the economy, we are thinking about how can we unwind that in a way that would be timely and allow us to take the actions we need to take.
Going Forward Oversight...
I'd like to address the perception that we are putting capital into banks and we are letting them do whatever they want. That it absolutely not the case ... First of all we have regulators (who) are now very actively engaged, particularly with the more troubled [elite] institutions, working with them to restructure, to sell assets, to take whatever steps they need to take to get viable again [junk off their books] and profitable again.

We are not going to let them do what they want. We are going to be very very vigilant to make sure that they are taking the tough decisions that they need to get back to viability.

The major banks all meet current regulatory standards, and well-capitalized is a well-defined regulatory term. The purpose of these assessments that we're going to do going forward is to make sure that banks have enough capital, not only to be well-capitalized in what we expect to be the weak conditions that we will see in the next year, but even under conditions that are weaker than expected. And, moreover, we want to make sure that they have good quality capital and that a sufficient portion of their capital is in common stock and not in other forms of capital. The purpose of these tests is try to assess how much additional capital and what kind of capital they need so they will be able to lend and support the economy even in a situation worse than we currently expect.

We need to be more aggressive in figuring out what the risks are and make sure that we are stress-testing, make sure that we are being conservative in terms of assigning capital to individual kinds of assets. There certainly were some assets that were under-weighted in terms of their risk characteristics when the capital was assigned. We need to look at a variety of other things like off-balance sheet exposures and other things that were not adequately represented
These ongoing actions by the Fed add nothing but great news to our growing list of positives in the short term. The actions are more importantly great news for a sustainable, viable US banking system down the road. And the stock market bounce indicates it believes Bernake is leading those bank revitalization efforts in just the right way.

Monday, February 23, 2009

"Slasher" Headlines Moderate

You may recall reading the "slasher" headlines last week.

The good news is that the mainstream media in just a few short days may be tempering the "slasher" montra. In fact on Monday, CNNmoney covered a similar story about forecasts of GDP growth later this year.

But instead of a slasher mentality, the article clearly points to recovery starting in summer and solid GDP growth in 2010.

Further the CNN Money report quotes forecasters pointing to a bounce in stocks: "The economists are forecasting a healthy recovery in stocks from current levels, estimating the Standard & Poor's 500 will end the year at 975, which would be 26% above current levels and a gain of 8% from where it started the year."

The report is far from a totally "good news" story. However, it is a significant mainstream media shift from the completely overblown dire commentary of the past few months.

Saturday, February 21, 2009

All Thawed Out - Debt Sales Now at Record Levels

Are any of you hearing arguments that credit markets are still frozen? If indeed they are, it is currently very difficult to find any real evidence to support that claim. That is great news for the economy.

In fact there are some reports now that commercial debt sales are ongoing at record levels. In a recent report at Bloomberg the assertion is that "companies are selling debt at an unprecedented pace this year as they take advantage of a rally in credit to raise cash."

Ashish Shah, of Barclays Capital agrees, "This year’s record bond issuance shows that government steps to stabilize the financial system are boosting highly rated debt markets."

Stuart Hosansky, at Vanguard Group, also observes that currently, "If a single-A rated company or above comes to market, there is significant demand."

"You’ll see continued strength in investment-grade bonds, Shah continued. "The demand is there. Liquidity continues to improve across the credit markets."

In fact according to the Bloomberg data, daily debt issuance is smashing records week after week this year. On Jan 29th, companies issued paper to raise a record $17.5B in cash for their books breaking the early January record. As you can see from the Bloomberg chart, on Feb 19th that number was beat handily.

Add to this the details that you have read here: that there is no credit crunch at most banks. And that several additional sources recently have revisited that assertion and verified the growing consumer loan data here and here.

One must come to the conclusions that:

1) Commercial debt sales are now ongoing at increasingly record levels.
2) Consumer loans continue at a healthy rate.

With perhaps the exception of some larger elite banks with continued junk on their books, the majority of US banks have been immune to this toxicity and the credit markets are now for the most part all thawed out.

These conclusions are significant pieces of further evidence and positive bounce that point to increased economic health later this year.

(Thanks to reader john c for the pointer to the bloomberg story and data. Please keep those good news stories coming to good.news.econ@gmail.com)

Thursday, February 19, 2009

The Bull Market Move: Swift And Steep

Several of you have recently ask where the stock market is heading and when will it rebound. You probably know however that I am not an investment adviser. There are several investment firms however that are worth a close look if you are seeking investment counsel:

1. Fidelity Investments
Here is an overview of their four and five star funds.

2. T Rowe Price
Here is a list of their funds with historical performance,

3. Fisher Investments
Here is their investing philosophy.

Although I do not have an account with Fisher, I find some of their materials quite in line with my personal investment philosophies. For instance, here are some excerpts and tables from a recent Fisher newsletter:

"In our view, markets are highly likely to rebound sharply in the period ahead. Bounces off market bottoms historically have been fast and huge -- and we think the recovery can't be too far ahead whether or not the very short-term markets are up or down."

If you visit their site, you can download and read their full newsletter. However what follows below are two charts from that newsletter republished here with their permission:

Just like you read here every day, Fisher says "at every turn people seem to be ignoring the positives to focus strictly on the negatives... in times like these optimists are seen as crazy, just like in bubbles markets pessimists are seen as fools."

But there is no doubt that eventually sentiment will change. And according to Fisher, "when it does the initial bull market should be swift and steep, leaving many in the dust."

That statement might just remind you of why Warren Buffett was doing what he was doing back in 1974. (and in 2008 as well)

Wednesday, February 18, 2009

Hardly a "Slash"

It was another "slasher" headline... I am not sure who first "broke" the story, but it was almost humorous to watch all the mainstream media outlets follow each other using that worn out verb.

"The Fed slashes 2009 forecast"

This is hardly a "slash" of projections and certainly not surprising...

You may remember the details on fed projections from 43 of their professional forecasters last week. If not, have a look here.

You will note from the raw data there that real GDP growth is due to resume in Q3 of this year. The overall declining growth in Q1 and Q2 is old news. For a nice chart of the data, have a look here.

Even in this "slasher story" the projections are for 4 quarters of solid growth in 2010 following the two quarters of GDP growth later this year.

Tuesday, February 17, 2009

More Evidence of Retail Growth From Walmart

Last week the government released retail sales numbers and they showed a 1% jump in retail sales.

Although it surprised many, it came as no surprise to Walmart management. The week prior, they had already reported that their January sales jumped 1% month over month. (That's a 12% annualized clip.)

You may know that Walmart accounts for about a quarter of the total $1.75 trillion annual top 100 retail market. So it is not insignificant to the whole sector when they post their results and forecasts... which they did early Tuesday morning.

For the three-month period that ended Jan. 31, Walmart reported net income of $3.79 billion, beating analysts' expectations. Their quarterly sales increased to $108 billion. Their annual sales year over year increased 7.2% to $401.2 billion.

So will Walmart be surprised about continued growth in their 23% take of the retail segment?

"Our performance relative to competitors was exceptionally strong in the fourth quarter," said Wal-Mart's new CEO, Mike Duke. "We expect this momentum to continue."

Given Duke's remarks, I doubt the management team will be surprised by their continued growth. Why? Because not only do they see continued growth in their business, but like 43 Fed economists it is highly likely that Walmart top brass sees an overall return to US economic growth by summer.

Disclosures: No positions.

Sunday, February 15, 2009

A Dozen Positive Bounces

It has been an amazing two weeks of positive bounces. Here are the top dozen:

1. First you read about the bounce in the Baltic Dry Index jumping up 210%.

2. Then January Retail Sales bounced by a surprising 1% month over month. (12% annualized) With Walmart, Walgreens and Amazon leading the way.

3. Next the Institute for Supply Management Indexes both headed north in January.

4. And the Intel's announcement to invest $7B soon followed.

5. There was even a international glimmer of hope for GM, when their January car sales in Brazil surged by 30%.

6. And when it comes to automobiles, US used car sales have just bounced up in January.

But what you may have not yet seen or read about in the main stream media are significant updrafts in real estate sales numbers. (Thanks to Mark J. Perry of Carpe Diem)

7. For instance, in Sacramento California, existing home sales doubled in 2008 over 2007.

8. In fact, for all of California since 2007, existing home sales are up 85%.

9. And in Flint, MI, one of the most depressed economies in the country, home sales have increase by 21%. Yes you read that right. With that 2008 bounce, Flint-area realtors recorded their best sales year in more than a decade.

10. Florida - not to be outdone - reported from West Palm Beach that a total of 638 homes sold in December 2008 compared to 467 homes in December 2007 - that's a 37% bounce.

11. Last week produced an interesting consumer survey. Even though consumers continue to *feel* gloomy about the future, the trending of their economic "current conditions" over the last 5 months continues to trend positive. (See chart)

12. And tomorrow the huge bounce begins. One of the biggest US government investment initiatives ever gets underway.

With all these upticks it is no wonder that 43 Fed economists now point to a return to US economic growth in Q3 2009. You may recall reading about a similar level-headed prediction way back in November.

Saturday, February 14, 2009

The Stimulus: As Good As It Gets

"The American Recovery and Reinvestment Act of 2009" will be signed into law on Tuesday by President Obama. It looks like he plans to get out of Washington and travel to Denver... an area that indeed has been hit hard economically in recent times. The Denver area will see job growth from this Act almost immediately.

While many still question whether or not this government initiative is the right thing to do long term, let's highlight the positives of what will happen with this massive funding effort.

1. Upgrades to our Transportation Systems
‐ $27.5B for highway investments.
‐ $8.4B for public transportation.
‐ $1.5B for additional state and local governments for transportation.
‐ $1.3B for air transportation systems.
‐ $9.3B for rail transportation.

In the suburbs of Denver plans have long been in place to build out rail in all directions. Lack of funding has always hindered those efforts. Perhaps one of these days we'll understand why those in Europe prefer the rail to our single occupant cars and no doubt the public in suburban Denver will also.

2. Massive Energy Investments
- $4.5B to repair fed buildings and increase energy efficiency.
- $3.4B for Clean Fossil Fuel R&D.
- $11B for smart-electric grid and modernization related activities.
- $2B to advance vehicle battery systems.
- $6 billion in new loans for renewable energy projects such as wind or solar.

You may recall reading about the City of LA's shovel ready project, "Solar LA," the largest solar project undertaken by any single city in the world. Tuesday will mark good news for LA's mayor whose office has long been championing this massive energy project.

3. Unprecedented Funding for State and Local Government Budgets
-$53.6B for the State Fiscal Stabilization Fund
-$39.5B to local school districts using existing state funding formulas to:
+prevent school cutbacks,
+prevent teacher layoffs,
+modernize buildings
-$8.8 billion to states for highest priority needs such as public safety system upgrades.

This funding is great news for state legislatures grappling with severe budget gaps in fiscal 2009 and public safety officials struggling to meet the public's demand for better disaster continengcy plans and systems.

4. Broadband Internet Expansion
$7.2B will be spent to increase broadband access and usage in unserved and under-served areas of our country. Not only will this better position us for economic growth and innovation, but broadband service provider firms (who already have geographic coverage strategies ready to implement), will begin hiring on those expansion blueprints this week.

5. Tax breaks
- Most individuals will get a $400 tax credit, and most couples an $800 credit.
- Many students will get a $2,500 tuition tax credit.
- First-time home buyers may qualify for a tax credit of up to $8,000.
- People who receive Social Security will get a one-time payment of $250.
- In total, $212B will get passed onto individuals and small businesses.

6. And of course Jobs Creation (Directly and Indirectly)
The Congressional Budget Office predicts that the plan all told will create between 1 million and 3 million jobs. Any opposition to that if it works out?

So, the stimulus plan has now passed. On Tuesday the spending begins. And although economists will argue about its long term benefits to the US economy, it is highly likely that the vast majority of those pundits will be wrong.

Friday, February 13, 2009

Fannie Loosens Credit Restrictions on Investors

Yesterday you read about consumer spending rising in January and foreclosures plummeting. That's good news for home owners looking to stay in their houses or needing to sell in this housing market.

But there is more warmth for seasoned investors looking to buy real estate in this market.

Last week Fannie Mae announced that it would loosen several of its loan restrictions for real estate investors and second homebuyers. It enumerated a set of new guidelines designed to attract landlords and other low-risk speculators into the current market.

“Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors,” said Fannie in a press release. “Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with its mission to provide stability, liquidity and affordability to the nation's housing system.”

The new Fannie Mae guidelines allow investor and second home borrowers to qualify for Fannie-backed financing on up to 10 properties by following strict underwriting requirements. Prior to the new rule, Fannie had a “four property limitation” for those investors.

The change will go in effect on March 1, 2009.

For those of you following the Buffett model, "now is the time to invest and get rich."

Thursday, February 12, 2009

Friday Sunshine: Foreclosures Plummet, Retail Sales Up

On Friday two weeks ago, you read that the propensity to report good news was on the rise. This week, and this Friday in particular, are no exception.

To review:
1. A closer look at jobs data revealed that companies are indeed hiring again and that the dismal unemployment reports are largely a result of November/December actions.

2. Three major retailers demonstrated by their January sales announcements that its not all dismal in the retail segment.

3. The ISM's reports for January show deceleration of business activity declines, with some industry segments now reporting growth.

4. Some emerging international markets are rebounding sharply to start the new year.

But perhaps the most dramatic piece of good news this week were two reports out yesterday:

1. The government reported that indeed the US retail segment as a whole rebounded by 1%! (a "surprise" to those gloomsters who had forecast a decline.)

2. In the housing market in January foreclosures have slowed dramatically. The total foreclosure numbers were down 25% in January with "pre-foreclosure" filings down 12%. Further, California foreclosures are at their lowest level in over a year.

Happy Friday.

Wednesday, February 11, 2009

In Brazil, Automobile Production Up 92% in January

GM Brazilian sales jump 30% in January

You many have seen a glimmer of hope for GM in an otherwise gloomy "Q4 2008 Global Sales Call Transcript."

GM reported there that they are finding some growth success in 26 targeted "emerging markets." In these global markets, GM has a 12% market share, but in 16 of 26 of them they either held share or gained in 2008.

Particularly noteworthy in 2008 over 2007: Brazilian GM sales was up 10%. Russian sales up 30%. And sales in India up 9%. On sales of 1,090,000 vehicles, Chinese sales were up 30%.

And suddenly this week the report from Brazil is that the car market there seemed to rocket out of the gates for 2009. Production (although jumping 92%) could not keep pace with sales of 197,000 vehicles in January.

The already firm GM sales numbers there surged by 30% from the end of December through the end of January.

As my friend Stephen C Kanitz who operates the blog, "Betting on Brazil" points out, "Don't start out your phone call with your Brazilian partner on a negative note. Optimism is building here."

Some additional global evidence that a return to economic growth by summer is not out of the question.

Tuesday, February 10, 2009

Contraction Also Slowing in Non-Manufacturing Segment

Many of you enjoyed yesterday’s positive summary of the Institute for Supply Management's report on January manufacturing.

You ask for a look at some of the positives found in their non-manufacturing report for January also released last week.

That report is similar in its findings to the manufacturing report. The ISM indexes still indicate contraction in the non-manufacturing sector, but at a slower rate. Even more encouraging is that the rate of decline has now slowed for two months in a row.

In fact, two industries are actually now reporting growth in January. Those segments are Health Care & Social Assistance; and Finance & Insurance.

The industry reps surveyed in each were quoted as saying:

* "Business in general remains strong, and revenues are ahead of budget projections." (Health Care & Social Assistance)
* "Markets are still depressed, but show signs of stabilizing. We may have hit bottom in the U.S..." (Finance & Insurance)

The non-manufacturing index graph is plotted in the graphic. A value less than 50% generally correlates to contraction. Just like the Manufacturing Index, the uptick in the slope of the index indicates decelerating contraction. I’ve included a graph of the manufacturing index for your comparison and to enhance yesterday's summary.

These two additional visuals are my contribution to support the theory that a return to growth by summer is quite feasible.

Monday, February 9, 2009

Good News for Manufacturing

As many of you know the Institute for Supply Management (ISM) releases two significant reports each month. The reports measure, index, and correlate manufacturing and non-manufacturing activities with other measurement readings from the government and elsewhere.

Let’s have a look at some of the positives found in their manufacturing report released last week:

Although the manufacturing sector report still indicated recessionary trends, “the decline was slower than experienced in December.” Additionally, the overall “PMI index” used by the ISM points to a much slower annualized GDP decline than the 3.6% reported for Q4. The ISM measurements now shows that annualized declining rate to be at 1.7% (That’s 0.425% on a quarterly basis compared to the 0.9% quarterly, reported for Q4 2008)

Further positives points to declines in the costs that manufactures need to pay for their inputs with no commodities reported in short supply. Ultimately these decreases in costs and ease of access to materials can be passed on as lower prices to the end consumers.

Several manufacturing sub-segments are now reporting economic growth. They include the Textile Mills; and Petroleum & Coal Products. Quite surprisingly the Machinery segment reported, "Sales are settling in; Q4 was better than expected."

Looking at specific indexes, ISM's New Orders Index was over 10 percentage points higher in January than the seasonally adjusted reading in December. Although the index still indicates contraction in total orders, the significant index move up in January is a leading indicator of slowing contraction. Further, in January two industries actually reported growth in new orders: Textile Mills; and Food, Beverage & Tobacco Products.

The Production Index also increased by 5.8 percentage points from December's reading. Again the index reading pointed to further overall contraction, but at a significantly slowed pace. And three industries now reported production growth: Textile Mills; Petroleum & Coal Products; and Food, Beverage & Tobacco Products.

As you might expect, those manufacturing segments that are now seeing new orders, and increases in production are the first to indicate growth in their payrolls in January. The top segment for employment growth was indeed the Petroleum & Coal Products segment.

Additionally, in a healthy change from the reported Q4 buildup in inventories, manufacturers' inventories contracted in January, with the only industry to report higher inventories being the Computer & Electronic Products industry. All others reported declines in inventories.

Backlog decline is also slowing. The ISM's Backlog of Orders Index was 6.5% higher in January, with 53 percent of survey respondents reporting improving or no change in their backlogs from December.

This is no doubt the healthiest manufacturing report that I’ve seen since this recessionary cycle began. These indexes provide a handful of leading manufacturing indicators, most of them now pointing to a marked decrease in the rate of contraction in the manufacturing industry.

Further evidence that a halt to economic contraction and return to growth by summer is quite possible.

Saturday, February 7, 2009

Employers Laid Off Workers Too Quickly Some Say

Two economists now claim that the credit crisis fear last fall may have been the primary reason for many of the layoffs that we are now seeing. Like you've read here in recent weeks, they agree that indications point to a moderation of the those job losses in the coming months. In fact, as you've read here, companies may be looking to get those workers right back.

The Lehman bankruptcy "scared the living daylights out of companies," said Ken Mayland, president of ClearView Economics LLC. "It may prove to be the case that companies cut too much."

Maryland, who in the past has won best forecaster awards in Bloomberg's Markets Magazine observed, "They were very fast to pull the trigger."

Antony Nieves, chairman of the Institute for Supply Management's non-manufacturing survey agrees.

When credit was tight back in Oct/Nov 2008, many companies were forced to focus on short-term survival rather than on long-term goals. Now that credit conditions are returning to normal, "some of those workers will be needed back, for sure." confirms Nieves.

(Thanks to an alert anonymous reader for the tip on the Maryland/Nieves pair. Keep those emails and comments coming.)

Friday, February 6, 2009

Retail Growth Already Skyrocketing in 2009

Do you remember how that gloomy GDP number was calculated last week?

In Q3 to Q4 the economy contracted by 0.9%. Take that times 4 and you get a 3.6% contraction for a full year.

Okay so do you want to have some fun? Look at just how ridiculous that is by applying similar logic to recent small "successes" in the retail segment... (The hype in the headlines is that consumers are not buying.) Really?

Many retailers (RLX) reporting earnings this past week actually beat their numbers. Not all the numbers were glowing, but two of the major players stand out.

You may have seen Walmart (WMT) for instance report that Jan. 2009 sales increased 1.8% from Dec. So annualized that 1.8 percent multiplied by 12 is a 21.6% growth in 2009.

Over at Walgreens (WAG) they are already five months into their fiscal 2009. They reported this week that for the first five months sales are up 7.3 percent. Applying the appropriate ratio and you get growth for their fiscal year of 17.5%

And Amazon recently estimated that its Q1 sales will be up 9 to 19%. So for the year sales will be up a whopping 36% to 76%! Right?

Okay so even I'll admit that it is not that rosy. But hey, it is not that gloomy either.

Thursday, February 5, 2009

Jobs Data: Take a Closer Look

Again the headlines were pre-printed. The employment numbers had to be grim right? So let's go ahead and print the story... even though the real underlying data is not there to support the gloom.

We already documented last week (with all your primary research) that firms indeed are hiring. And now the details of the Initial Claims report helps us further make the claim:

Firms announced the layoffs to satisfy shareholders, then turned right around and started hiring again.

Where's the data?

First let's remember this. Initial claims for unemployment are just that, initial claims. For those of you who have gone through the process, you know that frequently an initial claim is never converted to payment (or eligibility). The most common reason? Because you find a new job.

So here's the punch line (thanks to reader John C for catching this on Bloomberg), the unemployment rate among people eligible for benefits, which tends to most closely track the actual jobless rate, held at 3.6 percent in the week ended Jan. 24.

Digging a bit deeper into the report we find:

Forty-eight states and territories had a decrease in new claims for the week ended Jan. 24, while only five reported an increase.

Two more pieces of evidence pointing to this downturn's end by independence day.

(Did you catch a good news story on the economy today like John C.? Keep those emails, comments, and statistics coming this way.)

Wednesday, February 4, 2009

Evidence Points to Recession's End by July

There now seems to be enough evidence mounting. This recessionary cycle will likely be over by July.

You first heard that level-headed prediction from Mark Hirschey, Professor of Business at the University of Kansas back in November. He called all the dire commentary back then "overblown." Further he confidently stated, "If you look at history as a guide here, it would suggest that sometime between now and the Fourth of July in 2009, you’d expect business to once again turn up."

The evidence is now building that Hirschey may be right on the mark:

1. Macro uncertainty is subsiding quickly. In their excellent paper on economic uncertainty, Economists Bloom and Floetotto of Stanford University, propose uncertainty shocks as one of the primary impulses that drives business cycles. It is indeed these shocks in uncertainty that cause business to delay production cycles or trim staffing levels. But as uncertainty subsides, businesses re-deploy.

As you know many pundits are still warning that a dire recession is in the offing. Bloom and Floetotto would have been among them three months ago, but now, "based on the analysis of 16 previous economic shocks... and using the latest data on uncertainty measures, our model predicts that the worst has been avoided."

Further, they now claim that according to their model economic uncertainty is dropping so rapidly that "we believe growth will resume by mid-2009."

2. Credit is Flowing Again. In his excellent post on credit markets, Prieur du Plessis concludes that "the credit market tide seems to be turning." His in-depth look at worldwide credit indicators points to significant warming conditions since the "big chill" last October.

3. Global Commerce is On the Rise. The Baltic shipping indices are coming to life again. According , the Dry index "has just about doubled from its early December low." Grannis further explains, that this closely watched shipping index is a high level indicator of trends and associated strengths on a global scale. Dr Mark Perry shares details about the index here.

4. The Consumer is Ready for Spring. You've also recently read that consumer confidence is now "surprisingly" up. The US Consumer when re-awakened will discover that all the commentary in October and November was overblown. Their spending this spring, will re-ignite any remnants of winter slowness in the retail segments.

5. Firms are Hiring. Although many companies announced layoffs as part of their year-end earnings announcements, these actions were largely to placate their stockholders. A vast number of them are now quickly reversing course and hiring aggressively. Indeed, several high profile private firms who don't have to bow to short sighted stockholders, have taken the opportunity to declare "No Layoffs -- Ever!"

Clearly the evidence for the end of this recession is mounting. As we actually approach the turn-around point, the increase in good news will be followed by the inevitable up-turn. Probably between now and independence day.

Hirschey will be proud and continue his calm analysis of economic cycles from his classroom. And Warren Buffett, will be raking it in yet again.

Tuesday, February 3, 2009

Good News is Now on a Roll

Last week you saw a significant increase in coverage of good news. This week that trend continues.

In residential real estate, in macro models, in the halls of Washington, in earnings reports, and in labor news, there are significant new positive stories to highlight.

On Tuesday the National Association of Realtor's reported that pending home sales showed "Healthy Gains" in December.

In the macro market, Tuesday saw the "Fed's TED Spread" Model and chart reporting that yes the Recession will end in 2009.

Late Tuesday the reports inside the DC beltway, had lawmakers moving closer to a stimulus package that will likely pass with bipartisan support in both chambers.

Tuesday also brought Good News from Merck. The company announced surprisingly strong financial results. For Merck, net income for the fourth quarter of 2008 was $1.6B, compared with a net loss of $1.6B in the fourth quarter of 2007.

And the worlds largest telecommunications company AT&T, balanced layoffs vs aggressive hiring, by announcing that it has brought back in-house about 4,000 support center jobs, well on the way toward a goal of bringing back 5,000 jobs that had been outsourced overseas. Further evidence that despite the laundry list of layoffs in company press releases last week, vast numbers of job openings remain at Fortune 1000 firms including companies as diverse as Booz Allen Hamilton, Whole Foods Market, and the Mayo Clinic.

Stay tuned.

Monday, February 2, 2009

A Stimulus Package Will Pass

“Were it not for the Internet, Barack Obama would not be president." - Arianna Huffington, editor in chief of The Huffington Post.

The 2008 election is behind us, but the same techniques used by this historical Internet campaign, are still alive and well. The big difference? The communications are now coming to us from the White House in Washington DC. Not the Obama campaign office in Chicago.

The new President continues to change the communication rules inside the beltway. He organizes supporters, advertises to congressional constituents, briefs reporters, and defends himself against attacks on his policy... not on Larry King Live, not on The Fox News Channel, and not on MSNBC. Instead Obama continues to organize his campaigns "on the Internet." And the opposition has yet to figure out how to effectively combat the viral nature of his success.

Currently any major opposition to the stimulus plan up and down Pennsylvania Avenue is limited to old techniques to mobilize armies of volunteers and paid organizers on the ground and via mass media methods. Even Rush Limbaugh seems to be hoarse from screaming his descents.

But advocacy for a stimulus plan is not being fought using those antiquated, costly, non-targeted techniques. Instead, the "campaign is mobilizing" just as it did in the election. Not in the hallways of Washington, but right here online. (Organizing For America)

That's right more house parties in your and my living room. Again, Obama has taking the power right out of the hands of the middlemen PACs and polititians and placed the power into your hands in your living room... complete with "recovery plan talking points" and hosting tips.

At your event you will:

• Connect with your neighbors and discuss how the current economic crisis is affecting your community.
• Watch a short video that will outline the basics of President Obama's economic recovery plan focusing on how it will impact working families.
• Commit to taking the next steps in your community to help push forward President Obama's plan to jumpstart job creation and long-term economic growth.

It is up to each one of us to take the fate of our country into our hands.

The administration will likely not need to buy broadcast TV time. Why would they? Instead they continue to push emails and text messages and then measure their results as millions and millions of us watch their commentary directly on YouTube without the spin from the political commentators of CNN and FOX.

And their fact checking machine is incredible. They know by the power of the Net when and where a negative spin may be effecting "their game." Their response is swift and targeted, with crisp FAQs that document fact vs. any fictitious spin.

JFK's presidency was largely a success because he addressed people directly on TV from the oval office. In a similar manner, Obama will be the first networked, facebooked, YouTubed, Reddited, StumbleITed, and in every other Internet way directly connected commander in chief.

And even as I write this, I check my email box and what do you know...
(and I'm not making this up) Here's the bulk email message word for word... from the President of the US:

from President Barack Obama
reply-to info@barackobama.com
date Mon, Feb 2, 2009
subject What recovery means for you
mailed-by bounce.bluestatedigital.com

Eldon --

The economic crisis is growing more serious every day, and the time for action has come.

Last week, the House of Representatives passed the American Recovery and Reinvestment Act, which will jumpstart our economy and put more than 3 million people back to work.

I hope to sign the recovery plan into law in the next few weeks. But I need your help to spread the word and build support.

It's not enough for this bill to simply pass Congress. Americans need to know how it will affect their lives -- they need to know that help is on the way and that this administration is investing in economic growth and stability.

Governor Tim Kaine has agreed to record a video outlining the recovery plan and answering questions about what it means for your community. You can submit your questions online and then invite your friends, family, and neighbors to watch the video with you at an Economic Recovery House Meeting.

Join thousands of people across the country by hosting or attending an Economic Recovery House Meeting this weekend.

The stakes are too high to allow partisan politics to get in the way.

That's why I've consulted with Republicans as well as Democrats to put together a plan that will address the crisis we face.

I've also taken steps to ensure an unprecedented level of transparency and accountability. Once it's passed, you will be able to see how every penny in this plan is being spent.

You can help restore confidence in our economy by making sure your friends, family, and neighbors understand how the recovery plan will impact your community.

Sign up to host or attend an Economic Recovery House Meeting and submit your question for the video now:


Our ability to come together as a nation in difficult times has never been more important.

I know I can rely on your spirit and resolve as we lead our country to recovery.
Thank you,

President Barack Obama

P.S. -- If you can't host or attend an Economic Recovery House Meeting, you can still submit your questions for Governor Kaine and then share the video with your friends and family this weekend. Learn more here:


I also subscribe to many Republican mailing lists. I received a few emails during the campaign from Sarah, and McCain, and Joe the Plumber. But to date I have received none from any PAC or politician opposing the current stimulus plan bill. Have you?

So why will a stimulus bill pass? Because the Obama adminstration is appealing to our collective resolve by speaking directly to each one of us. More pointedly, Barack is placing the responsibility for restoring confidence with you, your friends, your family, and your neighbors.
He can lead. But the ultimate results are about you and up to you.

And when YOU truly understand the specifics of how the recovery plan will positively effect your community, no one will stand in your way.

And the propensity to report Good News about the economy will continue to increase.

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