Weekly Recap & Outlook – 10.12.12

Tower Private Advisors

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  •  Fabulous contest
  • Q3 earnings reporting season starts

Capital Markets

 

Contest Time

Here’s a chance for you to win some dough. We’re just 80 days away from closing the books on another year. How about taking a guess at what the Dow Jones Industrial Average and Gold will be then. You’ll win some serious bread for guessing right on one or both of them. Click here to submit your guesses.

Top Stories

On earnings

  • JPMorgan Chase  beats earnings estimate by 21.7%. Shares fall by -$0.48
  • Q3 earnings season off to a decent start

 

  • Price action has little to do with earnings surprises; as many stocks fall on positive surprises as rise

 

  • Revenue is even worse at explaining performance…and analysts spend so much time forecasting these things, why?

Other stuff…

  • Unemployment in Greece rises to record 25.1%
  • Vice President Biden–if he meant to say it–suggested that maybe taxes should just increase on those making more than $1 million instead of $250,000
  • Natural gas rose to a new 1-year high. It appears to breaking a multi-year downtrend, is above its 200-day moving average, and, generally, seems headed higher.

 

 

 

 

 

  • S&P downgrades Spain from BBB+ to BBB-, leaving it barely clinging to investment grade status
  • Residential foreclosures fell to a five-year low
  • The IMF released a report that said that China could increase individual incomes by 10 times if it would eliminate its state-run enterprises. 10 times!
  • Uh-oh…”financial advisers backing way from stocks and bonds, poll finds.” Instead, they’re investing in “cash, mutual funds and hard assets such as real estate and [guess what?] gold.” Watch out, gold buyers

On the fiscal cliff

  • According to a New York Times story, the fiscal cliff is really a fiscal slope. It will be “powerful but gradual.”
  • According to The Economist magazine, the fiscal cliff is already hurting the U.S. economy as businesses wait to see its impact before acting. This was brought out in our economic panel discussion yesterday, when Sri Bradesam, from Autoline Industries, said he can see five to six years of growth if we can get past the fiscal cliff in okay shape.
  • The topic is starting to get some traction, as can be seen in this chart of Google searches on “fiscal cliff.”

 

 

 

 

  • The IMF said the risk of a global recession is “alarmingly high,” due, in part, to–you guessed it–the U.S. fiscal cliff.
  • The Economist said that its politicians’ “dithering” that is increasing the odds of a global recession.

Here’s a look, in Wordle form, at the transcripts from the Presidential debate

…and from the Veep debate

All I can say is, at least they care about us.

The Federal Reserve released its Beige Book, which is, not surprisingly, named for the color of its cover. Here’s the word cloud version of it.

This Week

Kicking off the week was September Small Business Optimism from the National Federation of Independent Business. It was unchanged from August’s reading. One would think that, with increasing mention of “Fiscal Cliff” in the press that optimism would be dropping like a rock, but it hasn’t been, and it (and hiring plans in the bottom panel, below) remains in an uptrend.

Did you know there are 3.5 million job openings in the U.S? That’s what the monthly Job Openings Labor Turnover Survey (JOLTS) said this week. While that sounds like a lot, it’s well below the 5.1 million at the beginning of the century and the 4.7 million before the housing bubble went “pop.” Job openings are created not only by the economic growth that requires more employees but by workers increasingly confident they can better their position and increasingly willing to resign. In our economic panel discussion yesterday, two panelists mentioned that unemployment benefits–and emergency benefits–were to blame for some of the difficulty they had in filling positions. An AFL-CIO representative, who we had neglected to invite, opined in the Journal Gazette, that, “the fact is, a lot of these jobs are lousy.”

The weekly report of Initial Jobless Claims took a sharp drop this week (-30,000), and the usual kneejerk folks were crowing about how this means the economy is turning around. There are a couple of things about the report that should be noted, though. First, the data reported is seasonally adjusted. This is done so that the natural ebb and flow of jobs over the course of the year (college students reporting to school, seasonal Christmas help, etc.) doesn’t distort the data. Well, the non-seasonally adjusted figure did increase by 25,990 (the reported decline was -30,000). That’s an 8% increase, but the seasonal adjustment was calling for an 18% increase. In other words, unadjusted jobless claims would have had to rise by 55,000 before an increase in the seasonally adjusted claims figure–which is the headline, or announced, figure–would have been reported. This is the sort of thing that gives to the consolation of conspiracy theorist: not every conspiracy is a theory. Second, this data is reported to the Bureau of Labor Statistics by each state, and apparently one state, which was expected to report a big increase, instead reported a decline. Some of the usual suspects on the everything’s-a-conspiracy-when-I-don’t-agree-with-it folks suggested that since the state was unnamed, it had to be California, and that fits with the Administration trying to manipulate stuff. In fact, the state-by-state reporting is always one week in arrears. Apparently, this isadministrative data and was never intended for the current use. According to the folks at the Department of Labor, they do expect the seasonal increase to happen; it just wasn’t this week.

Lastly, University of Michigan Consumer Confidence was announced today, and these folks are clearly feeling better about things than are the folks surveyed by the Conference Board and ABC News. While the U of M data is making new cycle highs, the ABC News survey remains mired at the same levels of the last 3+ years. Conference Board folks are at the top of the 3+ year range, but the Michigan folks are feeling as enthusiastic as they have since early 2008.

Next Week

Key indicators to watch

  • Industrial Production
  • Capacity Utilization
  • Initial Jobless Claims
  • Leading Economic Indicators

Regional indicators

  • Empire State Manufacturing index
  • Philadelphia Federal Reserve

Housing related indicators

  • NAHB Housing Market Index
  • Housing Starts
  • Building Permits
  • Existing Home Sales 

Graig P. Stettner, CFA, CMT

Chief Investment Officer

Tower Private Advisors

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2 Responses to “Weekly Recap & Outlook – 10.12.12”

  1. Larry Dent says:

    The conference was pretty good. I was surprised at how positive all the participants seemed to be about the economy. They also seemed to be fairly unconcerned about which way the election goes. I wonder if that was because they were advised to stay away from politics??? In any case it was a good, upbeat meeting, and you did a good job of moderating.

    Thanks, Larry Dent

  2. Lloyd Ehmcke says:

    I predict 13,722. for the Dow and $ 1,685. for Gold. Now, Graig, don’t go manipulating the market to make me appear erroneous. Ha!

    Sorry I was not able to attend the conference last week. I really needed one of those good pens we always get.

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