Archive for the ‘Investing’ Category
After a two month delinquency in updates we’re back. And, wow - what a market to start writing about again. Since our last post in April, the S&P 500 lost 9% of its value while the Dow surrendered a hefty 11%. In fact, we are knee deep in recession as far as textbooks go - with the Dow crossing the 20% drop mark in early July. So, what now? To steal a line from the late great Douglas Adams - don’t panic. The slow market days of summer are the perfect time to step back and reassess the situation. (more…)
The US Bureau of Labor Statistics released March Consumer Price Index (CPI) data today, showing that inflation continues to be an issue for the US economy. Overall, prices increased 0.3% in March vs. February and 4% over the last twelve months.
Don’t be fooled by the so-called “core” inflation number which shows inflation of 0.2% and 2.4% respectively. The core number excludes food and energy items; two components which have seen the highest price growth and impact consumers the most. Inflation is a killer for economies, as higher prices weigh on corporate earnings and reduce the present value of future real cash flows.
More Housing Pain
Housing data out today also showed more of the same, as housing starts fell about 12% in March vs. February. March housing starts are also 37% lower than they were in March 2007. Good times.
Despite an initially positive reaction by the stock market to CPI data yesterday, the market headed into negative territory after a heavy dose of bad news from the Fed and Bear Stearns (NYSE: BSC).
Take One for the Team
The Federal Reserve announced it would work with JP Morgan Chase (NYSE: JPM) to float a cash-strapped Bear Stearns funds in order to keep the company in business. Their concern is that, given an already air-tight credit market, the entire economy would collapse if Bear were to suddenly go out of business. Why? Because nobody really knows how enmeshed Wall Street is when it comes to lending between firms. If one giant falls, several more may unexpectedly collapse as well. Even though it has been given a brief reprieve, most expect that the company will be sold to a larger bank or private-equity firm within a matter of weeks. After the news, BSC stock quickly lost about half of its value…ouch.
Enter the 2nd Bear
Or, I guess I should say the market has already entered the second bear market of the millennium (irrespective of how the Bear Stearns issue pans out) . Now the question is, will it be long or short? In my opinion, you have to hope for the best and expect the worst right now. Especially because I fear a larger problem with consumer credit (i.e., credit cards) could sneak up on the economy if we’re not careful.
The US Bureau of Labor Statistics announced this morning that nonfarm payrolls fell by 63,000 in February, leaving unemployment at approximately 4.8%. This comes on the heels of a loss of 22,000 jobs in January, making it two straight months of job decreases.
As Steve Liesman noted on CNBC this morning, we’ve never had two straight months of decreases in a row outside of a recession.
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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.
Tags: , Economic Indicators
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