Reading Barron's online did not give me a good feel about the direction of the market. It was neither positive or negative. It was a real wait and see attitude.
Alan Ableson did his usual banter that did not provide much in the way of economic or investment foresight. He finally mentioned that the number of new claims for unemployment was at a six month high. He also pointed out that theConference Board's Leading Economic Indicators inched up a bit but reminded us that the indicator is sometimes not an indicator. The most important thing he said in his column was the fact that China continues to be a source of disturbing news. He even used factual information for a change explaining that Sino manufacturing was down .3 points which scared the Shanghai index last week and sent shockwaves into all markets.
Tiernan Ray wrote a great piece about Microsoft's entrance into the hardware market. I highly suggest the read. He thinks it is a long term good move, but I have my doubts as the margins in hardware are teeny tiny compared to software. Ray suggests that MSFT must do this to stay in the game.
Gene Epstein put a story together that as usual was well researched and informative about whether the indicators we are seeing say Recession on the horizon. Odds say 24% over the next two year, but his homework is quite well done. He cites (actually an article from Applied Global) five areas the recession in Europe and the slowdown in China will cause a recession here at home. They are exports, banking, weaker equity markets, falling commodity prices (yes oil and gold), and declining long bond yields. Great article for you economic hounds.
Vito Racanelli wraps up last week nicely with his piece Investors Can't Get Enough Fed Stimulus.
He reminds us the week turned out better than it felt after the whack we took on Thursday. In orund numbers we were only down about 1% on the week. He cites the fed lack of action on the decline (rightly so), and joins the growing number of people who actually are smart and says Operation Twist is probably not working. He also puts out the bad news out of China and Europe as a factor for the Yellow Flag flying.
In the commodities corner Tatyana Shumsky points out a possible opportunity in Lithium. Good article and well vetted.
The Busy week Ahead
Monday
Quite a few folk will be watching the number which we think will surprise to the upside a bit. Bets are on a 350K number but we think it will be closer to 360, we are calling it 358,000. It is in line with 350 so won't move the needle. If there is aa miss, hold on to your hats.
Though not as important, the Fed will be watching the Dallas Fed Survey for more signs to enact QE III. Last mont we took a hit on the number to negative territory (-5.1) The guess is 0. We are thinking more disappointment.
Tuesday
The case-Shiller Home price Index kicks off the day and the consensus figures are scattered at best. Our guess is the Month on Month figure will be up and in line with most of the estimates (.4%), and the year on year will be better than expected (The guess is -2/3%. We are thinking flat.) Unfortunately only a miss will move the market and it won't be to the upside.
Look for a slight drop in consumer confidence. (our guess is below the 63.5 estimate to 62.)
Again we have another regional Fed Survey, this time Richmond and it could be the nail in the coffic for the fed to do a QE III.
Wednesday
MBA Purchase Applications are out bright and early (4:00 AM PST) and look for the number to impress to the upside, but Refis will be the driver.
Durable Good order are expected to be up a little. (New orders .4% and ex trans .8%) We are thinking we are in for a big bad surprise. I noted how many "light" trucks I saw on the freeway coming up here. If there is a big miss, we will see another bad day.
That is followed by pending home sales which are expected to be up about 6% to 1.2%. we don't see it and thin this will be one more disappointment.
Keep an eye on the petroleum status report, a huge build up of inventories will continue to know West Texas in the dirt.
Thursday
This could a zinger of a day. We have a cornucopia of news coming out of Europe such as the Eurozone Consumer and Confidence Survey, Germany's unemployment number, Italy's Producer Price Index, and the UKs GDP number. Any guesses on how those will go? We also have a retial number out of Japan which might be the only piece of positive news.
At home we start off with our own GDP. We will continue to see GDP stay below 2%. If the numbers come in below 1.7% look out Mr. Bill. We will probably see more bad news in the Jobless claims number.
Friday
More news out of Europe as a money supply report is announced by The ECB. This will be a good tell about possible inflation. There is also a CPI number out of the Eurozone. France reports their GDP as well as a consumption of goods number and a producer's price index.
We have a personal income and outlay report and with fuel being cheaper, we think the numbers will disappoint.
The Chicago Purchasing managers index reports and it is expected to improve just a teeny tiny bit. We think not, another disappointment. And we close the week with the Consumer sentiment report which is expected to be flat. Come on how can it be flat with all the fear mongering going on. Look for a small drop and big response by the market.
That was about 3 hours worth of homework. My guess is one of the worst weeks this year. Look for a 4% or more drop. There will be a red flag by the end of the week, we think.
Salve Lucrum
Since 6/21/2012
