Thursday, August 27, 2009

President Obama's Lack of Fiscal Intellect cannot be Solved by Chairman Bernanke; Concerns Regarding a Bottom Mount...

The trailing weekly unemployment number of 570K confirms POTC's feelings; a free-market economy cannot recover without job growth. The stubborn spike in unemployment remains a major concern in the short and medium term (1 - 5 years): .
With so many complicated moving parts at work (micro and macro), we do not think this is an unemployment bubble that will suddenly burst, as job growth is 1,000X more complicated to solve than last year's oil spike.
Unemployment could continue to trend higher over President Obama's term, unless he tweaks his monarch like fiscal policies. We are upset that Chairman Bernanke did not decline a second term, as no monetary policy can be a panacea for a hemorrhaging fiscal policy. The imbalance between fiscal and monetary policy today favors a larger government and smaller private sector. What do President Obama's advisors not understand about our circle of concern?
Taxes on businesses, individuals, and investments should be cut in half for a 6 - 12 month period. POTC believes that would meaningfully spark job growth, innovation, and a strong greenback. Yet this administration is considering allowing President Bush's tax cuts to expire next year.
We find it unprofessional that most cable talking heads have stopped using the word 'bottom' lately, as we think this is exactly when the word should begin being debated. Bottoms are never marked by smooth "V's" or "U's" without running into any unfortunate left field debris, i.e. global currency issues, unfriendly legislation, terrorism. POTC strongly urges readers to consider raising your cash allocation percentage IF the S&P breaks below the 990 level.
We believe the changes President Obama has initiated have and will continue to bear no fruit due to his flawed fiscal policies. Whether "cash for clunkers" or the burgeoning budget deficit, we are unimpressed and give President Obama a D+. We do not see any safe fundamental foundational floor below us short term, only a growing number of unforeseen events that'll fill in the circle of concern before any true free-market bottom is in...

Tuesday, August 25, 2009

The Greenback Index Holds the Key to Equity Prices and the Chinese Manufacturing Cost Conundrum...

The rise in the S&P 500 index has been impressive from its March 6th lows of 666, yet it may represent nothing more than a bear market chop if the index cannot eventually muster, penetrate, and close above 1,098.
More and more individuals are beginning to feel this administration's policies are anti-free market, as double digit budget deficits remain unproven funancial experiments. Yet as we stressed in our June 25th piece, the potential collapse of the greenback may hold the key to the United States remaining King. Long-term that is: short-term suffering will be severe, but especially for the Chinese. Either Obama is for switching the economic model from free-market to a more centralized western European experience, or he is working toward a greater goal of shifting the manufacturing cost paradigm through fiscal liberal policies that'll devastate the Chinese renminbi, especially as deficit pressures on the greenback weigh. POTC believes slave wages in China have created a cushy U.S. WalMart consumer at the expense of a decimated U.S. manufacturing base, yet we are not convinced of Obama's aggressive policy motivations, especially on the fiscal side, you? Most agree the current fiscal and monetary path will fissure the greenback's floor, yet most disagree on exactly when. We expect a range bound equity market, S&P 803 - 1,098, unless the greenback falls or rises unexpectedly: 1) IF the greenback penetrates above 92.08, that will be a positive for equities short and long-term. 2) IF the greenback breaks below 71.63, that will be a negative for equities short-term, but positive long-term. Notice both outcomes end up being positive, yet the pain associated with a greenback below 71.63 will be historic and -we think- lead to a Chinese Solidarity-type labor revolution. The massive export driven economy of China would stumble badly, caution.
Here's to a strong U.S. dollar index, as scenario #2 looks too painful in the short-run, but especially for the Chinese people. We thank you for your trendy Tuesday attention. The Psychology of the Call team wishes you great success as the week evolves~

Obama Gives Bernanke Nod for a Second Term; POTC believes the Issue is whether Bernanke Accepts; and IF he Declines, will Summers Pounce the Position?

Friday, August 21, 2009

Existing Home Sales Prices Continue to Hemorrhage as Inventories Build, Yet Headline Inks a Rosy Picture; POTC Sees S&P 1,098 as Huge Technical Hurdle

DJ US July Existing Home Sales Up 7.2% To 5.24 Mln Rate Jul Existing Home Sales Jul Jun Consensus: Total Sales: 5.24M 4.89M 5M
% Change: +7.2% +3.6% Actual: Months Supply: 9.4 9.4 5.24M. .=========================================================== By Meena Thiruvengadam Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)-- Existing-home sales rose to their highest level in nearly two years from June to July as cheaper prices and the availability of tax credits continued to entice buyers. Home resales rose more than expected, bouncing 7.2% - the highest month-over-month percentage increase in more than a decade - to a seasonally adjusted 5.24 million annual rate, the National Association of Realtors said Friday. Analysts surveyed by Dow Jones Newswires had expected an annual sales rate of 5 million. "The housing market has decisively turned for the better," said Lawrence Yun, the NAR's chief economist. The NAR last month estimated June sales rose 3.6% to 4.89 million. That figure was not revised. Foreclosures and short sales reflect 31% of sales in July. Distressed property sales have pushed prices lower, year over year, attracting buyers not sidelined by unemployment or tight credit conditions. The median price for an existing home last month was $178,400, a 15.1% decrease from July 2008. Previously owned home sales, year-over-year, were up 5.0% from the pace in July 2008, the NAR report said. Weak demand has kept inventories of unsold homes high, driving down prices. Inventories of previously owned homes climbed 7.3% at the end of July to 4.09 million available for sale. "The additional inventory likely is a result of some held back inventory coming back to the market," Yun said. That inventory level represents a 9.4-month supply at the current sales pace, compared to 9.4 months in June. Regionally, July sales rose 13.4% in the Northeast, 7.1% in the South and 10.9% in the Midwest. July sales slid 1.7% in the West. The average 30-year mortgage rate fell to 5.22% in June from 5.42% in June, Freddie Mac data show. -By Meena Thiruvengadam, Dow Jones Newswires; 202-862-9255; Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires August 21, 2009 10:00 ET (14:00 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 10 00 AM EDT 08-21-09

Friday, August 14, 2009

The Ebbs and Flows of the Retail Sector; Here's some Color on the Deleveraging Effects Abercrombie & Fitch is Enduring

NEW YORK (Dow Jones)--Abercrombie & Fitch Co. (ANF) will use lower prices as part of an arsenal that includes incorporating in-step fashions and more international expansion to battle out of the recession. "Consumer spending patterns domestically continue to be dictated by cost and value propositions and this is clearly a headwind for our premium brands," Chief Executive Michael Jeffries said during a conference call to discuss the retailer's second quarter results, which came in a bit better than expected. The pressure is forcing Abercrombie & Fitch to do something it is loathe to: step up efforts to offer lower prices after having spent much of the recession clinging to a more premium-cost approach. "We are planning to deliver greater reductions in [average unit retail prices] for the fall season, but we will continue to review pricing on an ongoing basis," Jeffries said. Abercrombie & Fitch has also stumbled when it comes to offering compelling merchandise. "We have admittedly missed some other fashion opportunities that drove the business in the spring," Jeffries said. "We feel like we have corrected these fashion misses," by adding in-demand clothing in time for back-to-school and holiday buying. Jefferies reiterated that Abercrombie & Fitch feels its future is tied to international expansion. The retailer plans to open three international flagship stores this fiscal year as it cut its fiscal-year capital spending target by $15 million to $185 million. As Abercrombie & Fitch continues heading overseas, it has to rebuild cache with consumers, said Brian Sozzi, retail analyst at Wall Street Strategies. "Brand perception has taken a hit as consumers cry afoul regarding inflated prices at all divisions," Sozzi said. "Value in discretionary apparel purchases will be predominant for back to school and the holidays, and consequently, Abercrombie & Fitch's sales will continue to suffer." Abercrombie & Fitch swung to a fiscal second-quarter loss on continued drops in sales and margins. Its 2 cent a share loss, excluding charges, was better than the 3 cents analysts expected, while sales came in at $648.5 million, above projections for $647.8 million. Shares were recently up $1.28, or 3.7%, to $34.10. The teen-apparel retailer has been increasingly shedding its no-markdown approach after seeing same-store sales drop sharply month after month as it looks to clear inventory. Abercrombie & Fitch has consistently been among the poorest performers when it comes to comparable-store-sales declines, with July, the last month of the second quarter, showing a 28% drop. In June, the company said it would close its 29 Ruehl stores and related operations by the end of the year. The high-end Ruehl business had been posting slumping results. Gross margin during the second quarter fell to 66.5% from 70.1% on a higher markdown rate. Inventories declined 13% from Jan. 31. The company had come under fire for keeping inventories at levels similar to those before the economic slump. -By Karen Talley, Dow Jones Newswires; 212-416-2196; (Kerry Grace Benn contributed to this article.) Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires August 14, 2009 12:04 ET (16:04 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 12 04 PM EDT 08-14-09