Archive for February, 2008
Friday, February 29th, 2008
Income, Outlays
The US Bureau of Economic analysis released numbers on personal consumption expenditures (PCE) and income today before the stock market open. Even when adjusted for inflation, personal income rose 0.4% boosted by bonus payouts and gains on the exercising of stock options. However, personal expenditures remained relatively flat when adjusted for inflation (unadjusted figures rose 0.4%).
Bottom line: flat spending points to a slower economy.
Inflation Up
Inflation continues to remain a threat, with the PCE price index increasing 0.4% when food and energy are included, and 0.3% when excluding food and energy. I always look at the former - food and energy are volatile, but bottom line is that they are an expense that impacts consumers.
Bottom line: not good, inflation is never good for the market.
Related Links:
Bureau of Economic Analysis - Personal Income & Outlays
Posted in Economic Indicators | No Comments »
Wednesday, February 27th, 2008
The US Commerce Department announced today that durable goods (items which last 3 or more years) fell about 5.3% in January. These products (which include items such as appliances, expensive electronics, and home furnishings) are typically the first to feel the pinch in a recession.
Not good news for the stock market- especially given the gathering storm cloud of price inflation and credit liquidity problems which continue to plague the economy.
Posted in Economic Indicators, Investing | No Comments »
Monday, February 25th, 2008
I bet you wouldn’t have guessed the Walt Disney Corporation (NYSE: DIS). If you’re like me, the name Disney immediately brings to mind an amalgam of animated cartoons, theme park rides, and lovable rodents. However, while having the market cornered in the rugrat space, Disney is actually a well diversified media giant that derives over half of operating earnings from its media networks and assets. Surprisingly, these networks include ABC, ESPN, SOAPnet, as well as equity stakes in Lifetime Television, and A&E.
Durable Competitive Advantage at a Discount
According to Barron’s Michael Santoli, the stock has fallen to unjustifiable lows as of late and is literally “the cheapest it’s been in 20 years”. Indeed, it certainly seems fairly cheap given a trailing P/E of 15.7 vs. the broadcasting / cable TV average at 19.2 and the S&P 500 at 18.3. While I can understand why investors may have unloaded the stock as fears of a consumer led recession continue to mount - I still see this as a possible long term opportunity to invest in a company with a significant durable competitive advantage.
Disney is Deeply Entrenched
Really, there is no denying that Disney permeates every aspect of our lives. In fact, several months ago I made the decision to buy a Blu-Ray player over an HD DVD player. Why? I read that Disney was on board exclusively with Sony’s Blu-ray format. The thought of parents having to explain to their kids why they couldn’t buy the 47th sequel to The Little Mermaid seemed like a nightmare waiting to happen. And, lo and behold, HD DVD is (ironically) going the way of Sony’s Betamax.
Related Links:
Barron’s: The Magic’s Back (subscription required)
Posted in Large Cap Stocks | No Comments »
Friday, February 22nd, 2008
Since it’s Friday, I thought I’d take a break from the normal stock market news and talk about investing in a different market: Real Estate. So, not much has changed: the economy looks like we’re headed for a recession, credit markets remain tight, and inflation is gradually emerging as a dark cloud on the horizon. However, sometimes opportunity may exist in even the bleakest of markets - even real estate.
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Posted in Investing | 2 Comments »
Wednesday, February 20th, 2008
Inflation as measured by the Consumer Price Index (CPI) came in at 0.4% growth, above market expectations for a 0.3% rise in prices.
I’m only reporting the overall CPI number here, as this includes both energy and food prices. The “core” CPI number excludes these items, but I believe this distorts the impact to consumers (hey, we all have to eat and most of us have to drive to get to work).
Housing Starts
Furthermore, housing starts came in slightly under expectations at 1,012 K for January vs. consensus estimates of 1,015 K. A thousand more, a thousand less - it doesn’t matter. The bottom line is that we are continuing to see a weak market for housing due to the collapse of the credit markets. Unfortunately, this will probably continue for some time.
Posted in Economic Indicators, Stock Market News, The Stock Market | No Comments »
