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

Monday, December 27, 2010

Putting the Bow on a Positive 2010

U.S. retailers put a bow on a positive 2010 and registered their best performance in five years according to preliminary reports released on Monday.

Holiday sales jumped 5.5 percent as consumers returned to retailers across the board including high-end Macy’s Inc., Tiffany's. and Bloomingdale's.

Consumers were out in full forces at most every chain and also increased their spending on the Web. Their spending, which accounts for about 70 percent of the U.S. economy, is a further positive sign for a sustained recovery heading into 2011.

"Increasing confidence has freed up more money from savings," said Michael McNamara, a vice president at New York-based SpendingPulse. "We are seeing this momentum building and being sustained."

Apparel sales grew the fastest in the 50 days before Christmas, with an 11 percent gain, more than 10 times the pace of last year.

Reports just before Christmas showed that consumer confidence climbed in December to the highest level in six months and that U.S. jobless claims continue to fall with job openings on the rise.

Wednesday, December 15, 2010

TARP Payback Outlook Brightens Even Further

On Wednesday, taxpayers received additional paybacks from their investments in the Troubled Asset Relief Program (TARP).

General Motors Corp., which went public last month, repurchased it's preferred shares in the program to the tune of $2.1B.

Additionally, common shares held by the Treasury are now valued at nearly $17B based on GM's closing price of $33.61 on Wednesday. The Treasury continues to hold a stake of 500,065,254 shares of common stock in GM via the TARP program investment.

Monday's transaction is further evidence of the success of the $700B program that has now not only helped stabilize the U.S. Banking system, but also the U.S. auto industry.

The government investment -- which initially was viewed as a cost burden to U.S. taxpayers -- has now stabilized two large U.S. industries and has some analysts wondering if the investments might even turn a profit. Cost estimates over the last several months have the break-even gap narrowing nearly every month, with the last estimate closing to within $25 billion.

Sunday, December 12, 2010

Holiday Retail Season Running At Strong Pace

Retail revenues probably rose in November for a fifth consecutive month as American shoppers began their holiday purchases. Reports later this week will show consumers are returning to the stores in greater numbers and spending more than in recent holiday shopping seasons.

The consensus among economists surveyed is for a 0.7 percent gain in November. That would follow a 1.2 percent October increase.

"The holiday season is running at a pretty strong pace," said Guy LeBas, of Janney Montgomery Scott LLC in Philadelphia. "There’s a broad-based uptick in sales helped by aggressive discounts."

The National Retail Federation has forecast November- December holiday sales will rise by 2.3 percent from a year ago, the most since 2006. A Bloomberg survey taken Dec. 2 to Dec. 8 showed economists raised projections for consumer purchases, the biggest part of the economy, to 2.6 percent for next year, up from their 2.3 percent estimate the prior month.

Retailers will also benefit from consumer confidence, which rose in December to the highest level in six months -- that according to the Reuters/University of Michigan report released last week.

"As we look at November into December, we see strength across the store," says Chief Financial Officer Carol Tome of Home Depot.

A strong holiday showing by retailers will be additional evidence that the U.S. economic recovery is starting to fire on multiple cylinders.

Thursday, December 9, 2010

Average Household Net Worth Increased by over $10,000 in Q3

The average U.S. household net wealth worth rose by over $10,000 in the third quarter according to Federal Reserve data released on Thursday and an estimate on the number of total households in the U.S. Collectively that resulted in a net worth increased of $1.2 trillion dollars for all households.

The increase is largely due to financial investments such as stocks and mutual fund holdings and represents even more evidence that the U.S. economy is beginning to fire on multiple cylinders.

Wednesday, December 8, 2010

Job Openings On The Rise; Up 44% Since July 2009

Businesses and government advertised nearly 3.4 million jobs at the end of October, up about 12 percent from the previous month, the Labor Department said Tuesday in its Job Openings and Labor Turnover survey.

That reverses two months of declines and is the highest total since August 2008, just before the financial crisis intensified.

Overall, the number of advertised jobs has increased by about 1 million, or 44 percent, since the low point of July 2009, a month after the recession ended.

And the new job postings continue at a rapid rate. According to Job Search on CNN Money.com, 151,950 new jobs were added to the site on Wednesday alone.

And there are more positive signs for jobs... according to the Manpower Employment Outlook Survey for Q1 2011:
When seasonal variations are removed from the data, the Outlook is +9%, the most promising hiring expectations reported since Quarter 4 2008... U.S. employers have now expressed
a positive Outlook for five straight quarters.

Source (Manpower.com)

Tuesday, December 7, 2010

Income Tax Cuts, Unemployment Benefits, and Social Security Relief

A deal appears near with President Barack Obama and congressional leaders. The pending bill will essentially give U.S. taxpayers a pay raise which will in turn pump money into the recovering economy almost immediately. The deal will also boost the creation of hundreds of thousands of jobs over the next two years.

The big surprise in the legislation: a one-year 2% tax cut in Social Security withholdings. That cut alone will result in significant take-home upside for most wage earners.

Other income-tax cuts, that were set to expire at the end of 2010, will now remain for at least another year. Those cuts will continue to encourage small businesses to continue to hire as they have been in recent months.

The president and congressional leaders also agreed to extend benefits for the long-term unemployed for 13 more months. That aid had expired Nov. 30 and up to 2 million unemployed people would have run out of benefits by the end of the year.

One year examples for the extent of the cut in Social Security taxes
For worker earning $40,000 a year the Social Security tax cut will result in an additional $800 in take home pay next year. A employee earning $100,000 will take home $2,000 more.

And on the jobs front, the Center for American Progress predicts that extending the unemployment benefits through next year will generate an additional 520,000 jobs -- further undergirding an labor market that is steadfastly improving.

Sunday, December 5, 2010

Democrats and Republicans Appear Likely to Extend Unemployment Benefits

Politicians went on Sunday talk shows and made it clear that both sides are ready to extend benefits to the unemployed -- no matter their party affiliation.

President Obama is pressuring both parties to extend unemployment insurance and it appears a Congressional deal could be reached this week.

"I think most folks believe the recipe would include at least an extension of unemployment benefits for those who are unemployed and an extension of all of the tax rates for all Americans for some period of time," said Republican Senator Jon Kyl of Arizona.

"Without unemployment benefits being extended, personally, this is a nonstarter," said Democratic Senator Dick Durbin of Illinois.

Durbin and Kyl were speaking on the CBS Sunday show "Face the Nation."

On CNN's "State of the Union" Republican Senator Orrin Hatch, R-Utah, said, "Let's take care of the unemployment compensation... We've got to do it. So let's do it."

The movement toward a possible compromise came after Republicans blocked Democratic efforts in the Senate on Saturday to extend the current tax rates on all but the highest income levels. Republicans prefer extending all the tax rates permanently, a prospect that also can't win legislative approval and that Obama would be sure to veto.

The debate comes amidst an 18-month recovery that is beginning to add jobs more quickly than any other recovery from recession in recent memory. But because of the depth of the recession just past, many in the U.S. continue to rely on government benefits as they seek to find permanent work as the recovery begins to fire on multiple cylinders.

Thursday, December 2, 2010

Strong Retail, Healthy Housing Report Net Rising Stock Averages

Two new reports on Thursday added additional good news to that already reported Wednesday.

Strong retail sales and a healthy reading on the housing market further boosted investor confidence in a recovery that is finding its footing and starting to fire on many cylinders.

Monthly sales volumes from individual department, chain, discount, and apparel stores are usually reported on the first Thursday of each month. This month, that report registered a surge in retail sales for November. Gains appear across the spectrum of stores: big to small, high-end to low-end, general merchandise to apparel.

Year over year sales gains for these stores have now shifted from the low to mid single digit percentage gain to the mid to high single digit percentage gain. Today's results combined with yesterday's strong report for vehicle sales points to a U.S. consumer is solidly participating in the recovery.

And on the housing front, the pending home sales index jumped 10.4 percent in October to indicate gains ahead for existing home sales. The index at 89.3 is up 18 percent from its post-stimulus low in June. Low home prices and low rates appear to be stimulating demand. The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes.

In response to these additional pieces of good news, the Dow Jones industrial average rose 106 points. Combined with the 249-point gain Wednesday, the index has now had its best two-day run since July 7-8.

Where the market will go from here and the stock market trend in 2011, is of course anyone's guess.

Wednesday, December 1, 2010

U.S. Recovery Now Firing on Multiple Cylinders

Many reports out on Wednesday point to a U.S. recovery that is exhibiting healthy signs on many different fronts.

Motor vehicle sales are now enjoying a strong run. U.S.-made vehicle sales held unchanged in November at a 9.1 million unit annual rate. The results surprised many recovery skeptics who were calling for a fizzle in November. Anecdotal reports on used car sales point to strength as do indications on sales at auto-parts retail chains. Motor vehicle sales make up 18 percent of total retail sales.

Private-sector employment increased by +93,000 from October to November on a seasonally adjusted basis, according to the latest ADP National Employment Report released today. The best news in the report shows that small businesses (the heart of job producers) actually accounted for more than half of the net additions. (+54,000) The report bodes well for the government's report released later this week which will also include government job additions. Some analysts now believe net additions in November may have reached close to +200,000 jobs for the month.

Manufacturing continues to grow at a healthy pace, according to the ISM report for November. The growth has now been persistent for 16 straight months with the sector now adding jobs for 12 straight months.

Construction spending surprisingly jumped in October, rising 0.7 percent, following a 0.7 percent rebound the month before. The market expectation was for a 0.4 percent decrease. Strength was in multifamily housing. (Also a surprise to many)

The Beige Book prepared for the December 14 Fed meeting gave the economy a modest upgrade.
Quotes included:
- Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries. Reports also showed steady to increasing activity for professional and nonfinancial services.

- Retail spending showed improvement across most Districts.

- Lending activity is picking up somewhat for businesses in most Districts.

- Hiring activity showed some improvement across most Districts.

- Inflation remains subdued.

The Economic Cycle Research Institute, ECRI, a New York-based independent forecasting group, upgraded their projection for future economic growth. Earlier in the week, ECRI's managing director and cofounder, Lakshman Achuthan, was on CNBC Monday to discuss the enhancement of their Oct 28, 2010 prediction. Last month the Institute declared that "The much-feared double-dip recession is not going to happen". This month they go several steps further to say:

- There will be a revival of US Economic growth in the near future.

- When you are at this stage of the [recovery] cycle, a shock won't derail us and put us into a new recession.

- In October they said "no second recession." Now they are saying economic growth is likely to accelerate to a 3-4% annualized rate.

Achuthan went on to indicate that although we are a long way off from recovering the 8.5M jobs lost in the recession, the economy has now added back 1M and we are on track for to begin to see significant job gains again.

Tuesday, November 30, 2010

Chicago PMI Up, Consumer Confidence Jumps, Retail Spikes

On Tuesday, Chicago manufacturing reports and Consumer Confidence led the good news of the day.

Chicagoland continues to report accelerating month-to-month growth in their manufacturing sector. New orders rose in November vs October to extend what is now extremely strong order growth trending. Production is now cranking and like other regions is raising the demand for manufacturing employment which was reported strong in November as well as October. The healthy production is also holding down and unfilled orders, which now reflect a contracting rate.

The Chicago report covers both non-manufacturing and manufacturing and indicates that we will continue to see strength in the nationwide purchasing reports for November also to be released this week.

Consumer confidence improved in November at a rate better than any economist had projected this month. The Conference Board's reading jumped more than four points to 54.1 fueled by gains in their "expectations component." That measurement points to overall improvement in future months.

Retail sales also moved higher in the November 27 week according to ICSC-Goldman's index released on Tuesday. The improvement now registers a year-on-year rate of plus 3.5 percent. For November as a whole, ICSC-Goldman has measured a three to four percent year-year gain.

Redbook reported a spike higher in same-store retail sales during the week just past. Its reading at a plus 4.9 percent on-year rate is now the strongest retail growth rate of the whole recovery.

All of these reports underscore a solid recovery that is on track and jobs growth (particularly in manufacturing) that continues to increase.

Monday, November 29, 2010

A Small Price to Pay: $25B And Falling

The Troubled Asset Relief Program will cost taxpayers far less than initially feared, with the new price tag estimate now just in at $25 billion. That according to the Congressional Budget Office report released on Monday.

The nonpartisan group underscored that, "it was not apparent when the TARP was created two years ago that the costs would be this low. Because the financial system stabilized and then improved, the amount of funds used by the TARP was well below the $700 billion initially authorized and the outcomes of most transactions made through the TARP were favorable for the federal government."

The once much debated program, now has fewer and fewer skeptics. And it seems each month brings better news from the CBO. In August, the CBO report predicted a cost of $66B. Just last month the the Treasury Department estimated that TARP cost could end up being as little as $29 billion. Monday's report bested even that. At the $25B estimate, the program will cost less than half of what it took to clean up the massive savings and loan crisis of the 1980s.

The program which provided the equivalent of U.S. taxpayer loans to automakers, big banks, and bad loan brokers has ended up costing far less than expected because of a number of reasons. Most banks that received bailout funds repaid their TARP money sooner than even the most optimistic forecasters had projected 18 months ago. In addition, participation in a program designed to aid struggling homeowners with their mortgages has turned out to be much lower than forecast.

Indeed we now are seeing objective measures that point to 2008 gloom and doom claims that were massively overblown and our report that "TARP is Working" in early 2009, was right on.

Sunday, November 28, 2010

Markets Likely to Applaud Irish Bailout Terms

On Monday, markets will likely applaud the 85 billion euro bail-out of the Irish economy from the International Monetary Fund and European Union financing.

Over the weekend, the rescue package was approved at a meeting of European Union finance ministers in Brussels.

The overall financing includes up to 35 billion euro to support the Irish banking system - 10 billion euro of which will likely be needed immediately.

The Irish government applied for the loan last Sunday when it conceded the bank crisis was too big for the country to handle on its own.

IMF managers and directors say the Irish authorities propose "a clear and realistic package of policies to restore Ireland's banking system to health." The program and funding will put its public finances on a sound footing, "and bring Ireland's economy back on track."

Saturday, November 20, 2010

The Real Stock Market Chart for 2009, 2010 (and 2011?)

You may remember our famous chart that predicted the bottom for the bear market of 2007, 2008 and 2009 and then predicted the ensuing bull market to follow.

The methodology was simple. Compare a stock chart from the bear market of 1973 and 1974 with that of recent bear trends of 2008 and 2009.

The downward similarities were so striking that one would be led to believe that what happened next in the market in 1975 and 1976 would be a good prediction for what would happen in 2009 and 2010...

And what a prediction it has turned out to be. We published the chart three (3) days prior to bottom of the bear. We joked that we had no idea what would happen next and then showed the chart for the bull run of 1975 and 1976.

Since that chart was published, the graph has turned out to be the most visited page every day on The Good News Economist blog from that day back in March of 2009 until the present day!

So what did actually happen? Here you go... Look familiar?

(Click chart to enlarge)

Any guesses on what the 2011 chart might look like?  (Hint:  Take a peek at 1977)

(Click chart to enlarge)

Charts Source:  Google Finance

Thursday, November 18, 2010

More Positive Signs for Jobs

On Thursday the government's report of jobless claims held onto the big improvement of the prior week and only rose 2,000 to a lower-than-expected level of 439,000. The four-week average of 443,000 is now down more than 15,000 from a month ago and signals solid improvement for November payrolls.

Also reported on Thursday by the Conference Board were leading economic indications that continue to strengthen. Gains now reflect two strong back-to-back 0.5 percent gains for the Board's index of leading economic indicators. A big central positive is the factory work week, strength that is likely to continue given persistent uplift underway in the manufacturing sector.

Philly Fed data has been lagging national data recently -- but not in November. Thursday's report of the November index registers general business conditions jumping from a zero-flat trend to a ballooning 22.5. This indicates very sharp month-to-month growth. New orders also rose more than 15 points to 10.4. Shipments were also up more than 15 points, to 16.8.

And all this is translating into jobs. The region's factory jobs index rose more than 10 points to 13.3.

Other readings confirm strength: unfilled orders rose while delivery times and inventory contraction slowed. Input prices show steep month-to-month pressure at an accelerating rate yet output prices, that is prices manufacturers receive for their finished goods, continue to contract though now only slightly.

This report points to accelerating strength for what is already solid growth for the national manufacturing sector. Interestingly, these results contrast with Monday's weak Empire State report from the New York Fed, a report that had been significantly stronger than Philly's recently. Month-to-month swings in regional data shouldn't cloud what is generally a positive outlook and continued leadership for the nation's manufacturing sector.

Tuesday, November 16, 2010

Industrial Production Index Shows Factory Output Jumped

Manufacturing rose quite handily in October. That is according to the Industrial Product report released on Tuesday.

By major components, manufacturing increased a healthy 0.5 percent, following an upwardly revised 0.1 percent rise in September (previously a 0.2 percent dip). Excluding motor vehicles, manufacturing rose 0.5 percent, following a 0.1 percent increase the month before.

The output of durable goods increased 0.9 percent, with increases in most major categories. The production of nondurable goods moved up 0.2 percent in October after having risen 0.4 percent in September.

It really is the manufacturing component that matters in this report since the utilities component can swing sharply on adverse weather. The manufacturing component is quite healthy and should lead us to discount any weakness in the Empire State report yesterday.

Saturday, November 13, 2010

Manufacturing Continues to Lead Recovery; Jobs Growth

On Monday we will continue to watch for signs of significant hiring strength in the manufacturing sector.

Last month the Empire State manufacturing index jumped to 15.73 from 4.14 in September.

You may have noticed in the raw data, two series that suggest continued improvement ahead. First, the new manufacturing orders index rose to 12.90 from 4.33 in September. That type of strength in new orders almost always translates into healthier production. But of perhaps more interest was the employment index which jumped to a very strong 21.67 from 14.93 and 14.29 in the two prior months which were already strong. Manufacturers would not be hiring if they were not expecting to continue to expand production.

On Monday we will likely see a report that indicates a sector that continues it's year-long streak of growth and jobs expansion.

Sunday, October 3, 2010

Obama -- More Tax Cuts for Small Businesses

Late last month, President Barack Obama signed legislation that will cut taxes and provide credit help for small businesses. It is yet another step that the government is taking to continue programs that spur job growth in the U.S. economy.

The Small Business Jobs Act is now the fourth jobs measure that Congress has enacted this year -- it is likely to be the last before the Nov. 2 midterm congressional elections.

The bill provides billions of dollars worth of tax cuts over the next 12 months, with the bulk coming through “bonus depreciation.” The measure allows companies to more quickly write off the cost of business-related purchases. The bill also revives stimulus provisions that cut fees and increase limits on loan guarantees offered by the government's Small Business Administration.

Sunday, September 19, 2010

More Bullish Signs for Housing

As the U.S. recovery churns into its second year, more bullish arguments for housing are beginning to emerge.

Talk and writings about real estate has finally shifted lately. It looks as if our contrarian view of the housing market is finally beginning to gain traction.

For instance, Credit Suisse analysts say the worst is behind us and that fear of another hit on the housing market is just an overreaction. The bank experts point to U.S. government support of 70% of home mortgages that will likely keep prices from the drops seen in 2007 and 2008. Last week Brett Arends of the Wall Street Journal listed 10 reasons to buy a home. He strongly counters the recent Time Magazine cover story that questions the pros of homeownership. But perhaps the strongest voice comes from Bill Wheaton of Massachusetts Institute of Technology's Center for Real Estate. Wheaton believes the housing market is poised to make a strong comeback. His research points to "a sleeping giant that is about to wake up."

Wheaton modelling shows that much of the excess home inventory will either be sold, occupied or otherwise absorbed by 2013. Furthermore from 2011 onward, buying demand will return to pre-recession levels. Even more encouraging is that he shows that the recovery of home construction could boost overall GDP to levels unseen during recoveries after other previous recessions -- the the exception being that of the massive building that happened right after World War II.

His paper illustrates that, "housing construction will not only rise, but it will stay high for a while, which didn't happen in previous recoveries." Wheaton continues, "It won't just be a one or two year blip."

The heart of the Wheaton argument lies in the rate of residential construction today. It's been historically low – so low that demand is now actually significantly overtaking the level of building going on. This demand-side factor alone sets the stage for a relatively large comeback in residential rebound.

As we've noted here on several occasions, housing drew us into the large slump and it is likely that housing will provide significant bounce to lead us out on the positive side.

Housing construction could hugely drive America's economic growth over the next few years, Wheaton says. Residential investment as a share of GDP is relatively small, averaging about 3% to 4%. But given that there's so little building going on today, it's plausible housing construction could add an average of 0.7% to GDP growth per year over five years – a level far greater than what has been seen during recoveries of previous downturns.

Of course many see Wheaton (and others listed above) as way too bullish given what the majority of "experts" are saying about the housing rut.

But remember when it comes to economics, the majority is always wrong.

Tuesday, September 7, 2010

September Ushers In Welcome News; Manufacturing Growth Accelerates and Adds Jobs for Ninth Straight Month

The beginning of September saw good news flowing in many corners of the economy.

The consumer made a comeback in July-in both income and spending. Personal income in July posted a 0.2 percent gain, following no change in June. The July figure was a little lower than the consensus expectation for a 0.3 percent rise. More importantly, the wages & salaries component rebounded 0.3 percent after slipping 0.1 percent in June. This component would have been even stronger had it not been for a dip in government payrolls from laying off temporary Census workers. Private industry wages and salaries gained 0.5 percent in July, following a 0.1 percent dip in June. The consumer sector bounce-back should help support overall economic growth.

And retail sales followed the consumer. Chain-store sales improved in the August 28 week, according to Redbook's tally which shows a plus 3.0 percent year-on-year pace vs. a plus 2.6 percent pace in the prior week. The positive trend is very steady, showing a four-week average of 2.8 percent over the past two weeks and 2.9 percent over the five prior weeks.

ISM's manufacturing report on business reported a PMI that came in at a stronger-than-expected 56.3 for a sizable eight tenths gain from July. The reading is well over 50 to signal month-to-month growth and in the comparison with July, and points to growth at an accelerating rate. Further this growth is in business activity like production, employment, and inventories. These three factors all accelerated in August. The ISM report is solid and includes strength in both exports and imports and an increase in prices paid that reflects demand for inputs. Jobs in manufacturing have now grown for 9 straight months and last month reflects hiring that is accelerating.

Initial jobless claims are now edging down, as they have for the past couple of weeks. Initial claims for the August 28 week came in at 472,000 compared with a revised 478,000 in the prior week and the 2010 peak of 504,000 the week before that. The four-week average fell 2,500 to 485,500.

And the overall private sector is providing jobs again... that sector added 67,000 positions after a 70,000 boost in July. Leading the way was a 45,000 boost in education & health services, with health care up 40,000. Professional & business services returned to positive territory, rising 20,000 after dipping 3,000 in July.

Sunday, August 29, 2010

Q2 GDP Reading Surprises Most

On Friday, the Commerce Department confirmed that Q2 GDP growth was 1.6%. Many of the details pointed to good news for the U.S. Economy. With inflation almost non-existent the report also shows that year over year the economy is up 3.0% Reading surprised almost all analysts to on the upside.

Many stock traders focused on the U.S. final sales number of the report. Real final sales to domestic purchasers was revised up to 4.3% from the initial estimate of 4.1%

So even though overall economic growth slowed from the first quarter's 3.7% pace, domestic demand was actually stronger-4.3% compared to 1.3% in the first quarter.

In summary, the latest GDP revisions report is quite supportive of continued recovery for the U.S. economy for the foreseeable future.

Thursday, August 26, 2010

30 year fixed rates -- now below 4.4% -- Should you refi yet again?!

How low can they go?

Mortgage rates managed to reach yet another low this week, with the 30-year fixed rate now costing borrowers less than 4.4% for the first time in history.

Freddie Mac (FMCC) said on Thursday that the average rate for traditional 30-year fixed mortgages fell to an average of 4.36%, the ninth decline over the past 10 weeks.

Fixed mortgages with a 15-year duration also fell to a historic low of 3.86% and adjustable-rate mortgages, which have shorter terms of one or five years continue hovering near 3.5%.

Additionally those folks who need a payday loan are also likely to find the lowest rates in quite some time. Folks wishing to take a personal payday loan may be surprised at just how easy it is.

The sharp decline is a reflection of three factors: Ongoing stress in the housing market, regulatory policies aimed at spurring demand and an increasing belief on Wall Street that deflation (and inflation) is basically non-existent.

"...long-term bond yields fell to the lowest levels since January 2009, allowing fixed mortgage rates to ease to new record lows this week," said Amy Crew Cutts, Freddie's deputy chief economist.

In response to the low rate that Mortgage Bankers Association reported on Wednesday that in its Weekly Mortgage Applications Survey for the week ending August 20, 2010 the Market Composite Index, a measure of mortgage loan application volume, increased 4.9% on a seasonally adjusted basis from one week earlier.

"The volume of refi applications last week was up 26% over their level four weeks ago. Mortgage rates dropped to their lowest level in the survey, going back to 1990," said Michael Fratantoni, MBA’s Vice President of Research and Economics. "We are at a new 15 month high for the Refinance index. With rates this low, many borrowers who refinanced in the past two years may well have an incentive to refinance again, and this is likely increasing refi application activity."

Tuesday, August 24, 2010

Stimulus May Have Added 3.3M Jobs

The economic stimulus package may have added as many as 3.3 million jobs to the economy during the second quarter of this year and according to the independent Congressional Budget Office (CBO) may have prevented the nation from lapsing back into recession. The report was released by the CBO on Tuesday.

The details of the CBO report said that the stimulus lowered the unemployment rate by between 0.7 and 1.8% in the second quarter and increased the number of people employed by between 1.4 million and 3.3 million.

The budget office said the act also increased the nation's GDP by between 1.7% and 4.5% in the second quarter of the year.

Saturday, August 14, 2010

Leveraged Buyouts Reach $42B Year to Date

The big banks are now openly seeking out deals to back once again. And in response, some savvy private equity firms have sought to accelerate what they do best -- acquiring firms and then reselling those companies at a premium.

Following retrenchment in activity in 2009, this year buyout firms have been seeking to put their billions of dollars in untapped investor capital to use by taking on additional risk.

For instance on Friday, the Blackstone Group, one of the largest private equity holding companies, agreed to buy Dynegy, the Houston power company. The price tag -- $4.7B -- the largest of the year.

According to Thomson Reuters that brings the total for leveraged buyouts to just over $42B in calendar year 2010.

Friday's transaction continues to remind us that big money is betting on a world economy that grows steadily well into next year.

Thursday, August 12, 2010

General Motors: "Extraordinary Turnaround"

On Thursday, General Motors Corp. posted its best quarterly profit in six years in one of the clearest signs yet the ailing automaker (and its beleaguered industry) is on a road to recovery.

The record profits were posted slightly more than 12 months after a steep drop-off in sales caused by the financial crisis of 2008/2009.

GM says that the strong profits will pave the way for the company file for an IPO and begin to rid itself of a more than US$50-billion taxpayer liability -- company equity that is majority owned by the U.S. government.

Total second-quarter earnings came in at US$1.3-billion, a huge reversal from the US$12.9-billion it lost in the same period a year ago. Revenue jumped 44% to US$33.2-billion during the quarter.

Last year the government had estimated that it would take perhaps 8 years for the GM to pay taxpayers back. The quick GM rebound however has surprised even the most optimistic of forecasts.

“Given the extraordinary turnaround — frankly, faster and better than what we had imagined — I think the IPO could be very successful if the overall markets co-operate,” Steven Rattner, the Obama administration’s former Car Czar, said in an interview on Bloomberg Television.

Tuesday, August 10, 2010

Retail Sales Continue at a Steady, Healthy Year over Year Rate

Retail sales continued at a steady pace in the Aug. 7 week according to Redbook's tally on Tuesday. The Redbook report shows a plus 3.0% year-on-year pace, unchanged from the prior week.

According to a similar measure from ICSC-Goldman on Tuesday the year-on-year pace currently is at 3.7%. The Goldman report sees the full-month pace coming in at a year-on-year rate of plus 3.0%.

Retail sales under-girds much of U.S. GDP growth. In July (and now into August), the growth rate has been quite steady in the moderate 3% range.

Saturday, August 7, 2010

Fears Continue to Subside As Positive Data Kick-starts August

Market fear continues to subside drastically following a peak six weeks ago. Fear about the insolvency of European banks -- which was a basic staple of bear analysts has now proven itself to be grossly overblown. And as the fear about Europe has subsided so has the VIX S&P Volality Index

(chart source: yahoo finance)

The index -- which appeared to be on its way to 50 at the height of the European Crisis -- now appears to be headed for the teens again.

And there were plenty of signs this week that August news will continue to calm the markets.

1.  The Institute for Supply Management released 2 reports this past week.  Pointed to continued growth in both the manufacturing and non-manufacturing service sectors.

2.  Construction spending -- which was forecast to decrease -- actually increased during the June reporting period.

3.  Domestic motor vehicle sales for July came in stronger than most economists had predicted.

4.  According to the most reliable retail indices, the retail sector (which accounts for nearly three quarters of the US GDP) continues to growth at a healthy rate between three and four percent year over year.

5.  The mortgage purchase index for the purchase of new homes has now been up for three weeks in a row.  Refinancing and purchase interest rates continue to fall.

6.  Although jobs creation is always the last sign of a healthy recovery, the private sector is now clearly beginning to add jobs -- ADP reports + 42,000 private sector additions and the U.S. government calculated 71,000 additions in July.  The return to jobs growth can be argued as the quickest return to growth from a recession than at any point in modern U.S. history.

7.  It is now clear -- as evidenced by earnings calls and transcripts -- that the majority of U.S. businesses have returned to profitability.  Not only have the majority report Q2 results better than expected, but the majority now forecast continued growth and profitability into the end of the year.

And investors are finally starting to agree with the positive business assessment.  Not only is the VIX index on a steady decline, but stock markets finished the first week of August up nearly 2 percent for the week and over 6 percentage points year to date.

Monday, August 2, 2010

U.S. Manufacturing Grows 12m Straight; Jobs Up in Sector 8m in a Row

The ISM released its manufacturing report on business on Monday. Their index continued to show healthy growth in the sector. Perhaps even more encouraging is the employment growth measured in the report. It now registers an increase in jobs for 8 straight months and now at an accelerated pace.

Manufacturing continued to grow in July as their PMI registered 55.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

According to their report on business: "The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (58 percent) corresponds to a 5.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for July (55.5 percent) is annualized, it corresponds to a 4.5 percent increase in real GDP annually."

Tuesday, July 27, 2010

Flu down; Profit Up at Aetna

On Tuesday Aetna Inc. lifted its 2010 earnings forecast a second time after the firm reported milder-than-expected flu season. The good news about flu this year tacked one more positive in an earnings season that has been dominated by profit results and increasingly positive projections.

The firm now projects that their operating earnings may reach $3.05 to $3.15 a share in the upcoming quarter. That’s significantly up from their earlier forecast of $2.75 to $2.85 in April.

In further positive economic stimulus, Aetna's Chief Financial Officer Joseph Zubretsky said that in addition to healthy profit for the firm in the second half of 2010, the company will also increase their spending to upgrade computer systems.

For the 2Q 2010, net income rose 42 percent to $491 million easily topping most medical market analyst expectations.

Source:  Aetna

Sunday, July 25, 2010

Investors Continue Focus On Earnings

U.S. stocks surged last week following yet another strong batch of earnings.

Earnings results from heavy weights such as Caterpillar (CAT), 3M (MMM), UPS (UPS) and AT&T (T) all topped earnings estimates and raised their outlooks.

Some economists pointed to data that seemed to show some weakness. Weekly jobless claims jumped, but it may have been due to seasonal factors.

The markets have been trying to sort out all the data and it seems that for now investors have decided that the positive corporate earnings from so many sectors do not indicate a slowdown in the economic recovery. And even if there is some weak elements, those are not affecting companies' profits in general.

For the week the S&P 500 index was up nearly 3%.

Wednesday, July 21, 2010

Rates Continue Down; Loan Applications Up

For those folks looking to refinance or purchase, the news on Wednesday continues to be nothing but positive.

The Mortgage Bankers Association (MBA) reported that their refinancing index jumped 8.6% in the July 16 week, making for a nearly 30% gain over the past four weeks. The average 30-year mortgage fell 10 basis points in the week to 4.59%, the lowest ever in the survey.

Low rates continue to be a consistant positive for home sales. The MBAs purchase index also rose -- up 3.4%. Much of the demand was driven by government loans which have low down-payments.

Wednesday's report, along with Tuesday's rise in applications for housing permits, are indisputable good news for the housing sector.

Friday, July 16, 2010

James Altucher versus Dr. Doom (Winner: James)

Many of you will remember last year when we ask Dr. Doom, Nouriel Roubini to take a seat already!  As most of you know Dr. Doom is just that -- a Doomster -- a perma-pessimist.  Sadly (and mistakenly), because he is always calling for the worst, he is credited with correctly calling the credit crisis and the ensuing recession.  (and will likely be given credit for any other downward trends in the future!)

Fortunately we do currently have more level heads among us. One of those level heads is James Altucher. Forget Dr. Doom and do your homework on James and his columns and interviews.

In this interview with Dow Jones, James gives 7 reasons why the S&P index is headed for 1500.

And in this one, James takes on Dr. Doom and scores knock-out, after knock-out punches.


Thursday, July 15, 2010

Historic Financial Overhaul Begins Now

On Thursday, the U.S. Congress gave final approval to one of the most massive overhauls of country's financial regulation ever. The legislative action ended more than a year of political disagreements over the scope of the new regulations.

The new law establishes an independent consumer bureau within the Federal Reserve to monitor against abuses in mortgage, credit card and several other types of lending.

President Obama is scheduled to sign the legislation next week. On Thursday after Senate passage of the bill, he said that the bill will "protect consumers and lay the foundation for a stronger and safer financial system, one that is innovative, creative, competitive, and far less prone to panic and collapse."

Sen. Christopher J. Dodd (D-Conn.), who was one of the Senate's driving forces behind the bill, said that "more than anything else, my goal was, from the very beginning, to create a structure and an architecture reflective of the 21st century in which we live, but also one that would rebuild that trust and confidence."

In addition to the Presidential and Senate praise Thursday, Treasury Secretary Timothy F. Geithner held a rare news conference lauding the bill.

Monday, July 5, 2010

Earnings For S&P 500 Firms Still Increasing

Earnings for members of the Standard & Poor's 500 are expected to increase another 27% from a year earlier and their associated revenues are seen to also rise -- perhaps another 9%, said Thomson Reuters last week. Actual earnings season for Q2, begins shortly...

In the first quarter of 2010, S&P 500 firms' earnings increased 57%. It was the second quarter in a row that the S&P 500 recorded earnings growth. If the predictions are correct, it will represent three quarters in a row of year over year increases. Those increases follow a record nine straight quarters of year-over-year declines prior to that.

Industry sectors like materials, energy, information technology and consumer discretionary segments are all predicted to have very healthy earnings growth rates.

Wednesday, June 30, 2010

European Cash Needs Overblown

Negative moods in Europe are finally being calmed by news on Wednesday that the European Central Bank will likely lend less money than expected for the next three months. The data suggests that region's banks' cash needs were wildly overblown again by the crisis fear-mongers.

"The result of the ECB's money market operations indicated that money markets have been less distorted than originally feared," BNP Paribas said in a note. BNP Paribas is considered the leading financial group of the eurozone.

Also providing a hopeful sign, Germany's unemployment rate declined to 7.5% in June thanks not only to the traditional springtime upturn, but also an improving economy, according to the country's labor agency report. They released data showing that the jobless rate was down from 7.7% in May.

The German data raised hopes on Wednesday that consumer spending in Europe's biggest economy will help the region, a zone where doomsters have suggested that severe spending cuts will darken the growth outlook.

The European reality now mirrors what most analysts now recognize in the U.S. economic prognostications. "The U.S. economy has stabilized in the near term," said Castor Pang, director of research at Cinda International. "Maybe the U.S. markets are overreacting a little."

Monday, June 28, 2010

Consumers Score Another 2010 Trifecta

Income, Spending, and Saving All Grow in May

According to the Bureau of Economic Analysis the month of May provided a triplet of economic good news -- personal income, spending, and savings all grew. Furthermore, income grew even greater than consumer expenditures and consequently, savings grew as well.

All three measures added similar gains in March of this year.

Personal income has remained fairly stable over the past three months, growing between 0.4% and 0.5%. Over the same period, disposable income has averaged about 0.5% growth. For consumers to be able to spend more on discretionary purchases, their disposable income must of course increase.

Spending has been less stable, recently. In February and March we finally saw spending growth increasing, after the recessionary downward trend of 2009.   The first uptick however post-recession had consumers increasing spend without as much additional income, which meant shoppers were relying more on credit to spend and saving less. In April, however, that changed. Spending was constant, while income continued to grow. And in May? We're now seeing an even better reading: more income growth, but with some additional spending as well.

Tuesday, June 22, 2010

Geithner: "Unpopular 2009 Actions Were The Right Thing To Do"

Treasury Secretary Timothy F. Geithner said credit availability is improving and companies are building up unprecedented cash reserves, signs that the U.S. economy continues on a path of increased growth.

Further the Secretary claimed on Tuesday that the government’s management of the $700 billion Troubled Asset Relief Program has yield the desire results while costing much less than originally estimated. The unpopular program he claims “played a critical role” in loosening access to credit and putting the economy back on a solid footing.

“Credit conditions overall, which dragged our economy into a deep recession in 2007, no longer pose an obstacle to growth,” Geithner said in his testimony to the Congressional Oversight Panel. Geithner pointed to U.S. firms that are now raising money in capital markets “and have built up record cash reserves, which will eventually be reinvested and fuel growth.”

The TARP program was criticized by both Democratic and Republican lawmakers as favoring Wall Street over small businesses. Many thought the government would likely lose all of the $700 billion lawmakers had allocated to rescue large banks as well as several U.S. automakers and housing loan backers.

Surprisingly, the cost to taxpayers has now plummeted to $105 billion at last estimate, down from an estimate of $341 billion in August. And it seems now that the benefits have thus far continued to outweigh the cost of the program.

Congress authorized TARP in October 2008 to prevent a collapse of the U.S. financial system. Against the predictions of many, companies like Goldman Sachs Group Inc. and Bank of America Corp. that borrowed funds have since repaid the government with interest. Additionally because of the return to more palatable market conditions, Geithner said the Treasury plans to sell the remainder of its stake in Citigroup Inc. in an “orderly fashion” by year end, further reducing the overall cost of the rescue program.

In additional good news, prospects for the government’s investments in the auto industry have improved, and the Treasury plans to begin to recover its stake in General Motors Co. after the company has an initial public offering later this year or in 2011.

Losses from government investments in GMAC Inc. “will be less than forecast last year,” the Secretary said.

Geithner said the Obama administration doesn’t plan to extend TARP past its Oct. 3 expiration and called Tuesday’s hearing “a eulogy” for the program.

The TARP loans “did what they were supposed to do,” Geithner continued. The economy wouldn’t have started to rebound “without the dramatic actions we took, however unpopular, to bring down the cost of credit and stabilize the system.”

Friday, June 18, 2010

U.S. Consumer Spending Power Increases

Over the last two months, consumer spending power has increased and not just because of income gains. The U.S. dollar actually goes farther these days as prices have dropped on average in the past two months.

Many argue that prices are down largely because of gasoline prices. However, in May overall inflation declined 0.2%, following the -0.1% measure in April. These latest cost of living adjustments are in line with what most economists were expecting and point to good news for consumers -- provided the labor picture continues to improve.

As has been the trend since May of last year, this past week saw several indications that labor indeed will continue to improve. On Thursday the conference board released the leading economic indicators. The most substantial gain in the May report was the factory work-week. The indicators underscored another release on Wednesday which illustrated that overall industrial production in May surged 1.2%, following a 0.7% boost the month before. The production numbers continue to beat forecast -- this month above the +1.0% consensus estimate.

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