Epiphany Investing

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Mid-Day Market Report - July 10, 2009

Posted on | July 10, 2009 Time: 9:57 am |

Today’s overall market continues to look weak, as the S&P 500 struggles to maintain a key medium-term range of 860-880. The heat map below shows that most sectors are weak with the exception of some selected tech names:(extreme hat tip to FINVIZ.com for their great software)

Chevron issued a profit warning today, while GM is apparently “reorganized” and ready to “compete” again.

Hey, a 35-day bankruptcy is impressive, no matter how you slice it.But I wonder how long it will take for this investment by the taxpayer to get returned? As shocking as this may sound, I see us getting our money back from the banks much, much faster, and also earning a greater long-term return from equity stakes.

(for some light reading on my auto dreams, check out this November post…I think the U.S. govt did an admirable job in the re-orgs of GM and Chrysler, somewhat close to what I outlined at the time…will it be enough though?)

Friday’s Economic Data Bends Both Ways

The University of Michigan consumer confidence report showed a big drop today, falling to 64.6 from 70.8 in June and representing the lowest reading since March.

I’m not as big a fan of the UM report as the Conference Board’s indicator that was released about 10 days ago (see that release here). The latter is a big more inclusive, while the UM report out today is a bit more spotty in its tracking ability and really more of a populist, Middle America voting machine. (as a note to curious readers, I wrote a consumer confidence tutorial that may help you to understand the context we should be taking these figures in…)

Avoid the Consumer - Check, and Check…

I’ve been expecting a snapback in the confidence readings for several months, all part of my broad strategy to avoid the domestic consumer as much as possible via the Secular Trends Model.

As unemployment gets closer to the ultimate in negative headline numbers (Extra! Extra! Read all about it! 10% ), I wouldn’t be surprised to see the confidence polls stay below 70 until early Fall - especially the UM poll.

On the positive side, we learned today that the trade deficit fell to its lowest levels since 1999. Granted, there’s some one-off’s causing the drop to $26B in May, such as lower imports of oil and auto parts (no surprises). But exports also rose a modest 1.6%, the largest increase since last July. The added bonus of the lower deficit is some immediate boosting to 2nd quarter GDP figures. And while just as meaningless on the surface, a positive GDP figure for Q2 would pull confidence forward as unemployment rates push it down. Will they net out? No, but it’s at least an ameliorating force.

The trade gap fell to the EU (poor Europe, they’re going to have a really difficult time the next few years), and also to Mexico, Canada, and Japan. But we continue to love Chinese goods, as the trade deficit rose to $17.5B from $16.8B in May. Don’t let the China figures scare you out there, however. Appeasing the desperate need for China to have global consumers is a net-net positive for us all, including their all-important appetite for USD-denominated assets. Unless we want 10% inflation in 2 years folks, we should be happy to see the trade gap widen with our far-Eastern “mates”.

EpiphanyOne

More on this topic (What's this?)
General Motors (GM) bankruptcy trade (Dividend Growth Investor, 6/1/09)
Taking Bets on Hummer’s Buyer (Investment U, 6/2/09)
Hitch A Ride With Ford On The Path To Profits (Investment U, 3/10/10)
Read more on General Motors at Wikinvest
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