Thursday, 11/14, Market WrapUp (US Bond Market Flashing)

Financial Sense Online ^ | 11/14/2002 | Scott Middleton

[rohry]

 
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Sinclair & Schultz Editorial Gold's Future Tech Review 11/12 & VIP 11/11	Discuss WrapUp

Thursday Market Scoreboard  November 14, 2002
Dow Industrials		143.64	8542.13
Dow Utilities		3.38	196.43
Dow Transports		48.24	2339.12
S & P 500		21.74	904.27
NASDAQ		50.18	1411.52
US Dollar to Yen			120.45
Euro to US Dollar			1.0043
Gold		0.80	318.10
Silver		--	4.562
Oil		0.10	25.29
CRB Index		0.76	224.89
Natural Gas		0.01	3.869
All market indexes	11/14	11/13	Change
HUI (Amex Gold Bugs Index)
Close  YTD	118.54	116.84	1.70 81.80%
52week High	147.82	06/03/02
52week Low	59.86	11/26/01
XAU (Philadelphia Gold & Silver)
Close  YTD	66.20	65.19	1.01 21.62%
52week High	88.65	05/28/02
52week Low	49.23	11/19/01
Nyquist Column 11/12 No Wiggle Room

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 Market WrapUp for the Week 
Monday  l  Tuesday  l  Wednesday  l  Thursday  l  Friday

Week in Graphs Storm Watch Geopolitical News Energy Precious Metals Raw Materials

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^{Thursday, November 14, 2002}

Much Ado About Nothing
U.S. Stocks rose today as HSBC Holdings agreed to purchase struggling Household International Inc. to spark a rally in financial shares, Intel Corp. boosted computer related shares after saying it will buy back almost $9 billion in stock, and stocks were also helped by a report indicating that overall October retail sales were flat, which exceeded an expected 0.2% decline.

While each on its own has the appearance of some good, they do not, as one or as a group, have any substance to indicate that we have reached any sort of a bottom. As far as the retail sales figures go, the only thing it indicated was that consumers, while going out and buying warmer sweaters and wool pants because the weather suddenly got cold, are not going out and buying the big ticket items such as cars, plasma televisions, or DVD players, even with no payments and no interest. Needs are ruling one’s wallet over “wants.” Intel’s announcement has no effect on the bottom or top line growth of the company. Until we see companies such as Intel, along with other bellwethers, increase the bottom line sequentially, there is no reason for me to believe there is a change in the outlook.

With HSBC Holding’s announcement today to purchase Household International, HSBC gets a consumer loan/finance company with 50 million customers, many of whom have delinquent payment records, through home equity and other loans. Household International’s shares have dropped 53% this year, and in making this purchase, HSBC appears to have made a $14.2 billion bet on an economic recovery. Unfortunately, if there is no recovery anytime soon those delinquent accounts will soon turn to bad debts.

Expected to Beat Estimates
After the market closed today, Dell Computers released their 3^rd quarter earnings to the tune of $0.21 per share, in line with Wall Street estimates and its own forecast, which the company raised on Oct 1. Unfortunately for the stock price, meeting the estimate was not good enough as the price weakened in after market trading, post announcement. It seems that as the day progressed the odds increased that Dell would beat expectations as they were set to announce further gains in market share. There was no disappointment in the latter, as they continued to gain market share in PC sales and grew both the top line and bottom line on increased sales in the enterprise division, servers and storage systems. It is still a surprise to me that hype is still guiding this market, as it did today with respect to Dell’s price action. One would think that after 2 1/2 years of this, it would be enough to say ‘uncle.’

Financial Markets
The Dow Jones Industrial Average rose 143.64, or 1.7% to 8542.13, led by financial companies. The Nasdaq Composite Index also had its biggest gain since October 15. It climbed 50.18, or 3.7% to 1411.52. The S&P 500 Index climbed 21.74, or 2.5% to 904.27, with financial and computer shares contributing more than half the gain. More than two stocks rose for every one that fell on the New York Stock Exchange and Nasdaq Stock Market. Some 1.50 billions shares traded on the Big Board, 2.9% more than the three month daily average.

The Treasury Markets, driven by the retail sales figures, was the biggest loser as investors rotated out of the bond market to higher yielding corporate paper and stocks. Treasury prices fell considerably as the day wore on with the 10-year Treasury note shaving 1 22/32 to yield 4.045%, and the 30-year government bond shedding nearly 2 1/2 to yield 4.945%.

Overseas Markets
European stocks rose after Credit Suisse Group and Allianz, this year's worst performers in the Dow Jones Stoxx 50 Index, said they'll return to profit in 2003 after lowering expenses. The Stoxx 50 added 2% to 2568.13, climbing for a second day in three. All eight majore European markets were up during today’s trading.

Japan's Nikkei 225 Stock Average fell today. Banks such as Mizuho Holdings Inc. dropped on concern the government may nationalize some lenders as it considers tougher rules for assessing their bad loans. The Nikkei fell 1.6% to 8303.39, the first time it slid below the Dow Jones Industrial Average since February.

Copyright © Scott Middleton
November 14, 2002

[rohry]

Scott's back...

[rohry]

Market WrapUp is delivered...

[ReyDM]

The Wall Street spin machine was really going good today ... the headline on Bloomberg this AM said something like "Retail sales excluding Autos rise 0.7 %". Isn't that kind of like saying "Buffalo Bills win SuperBowl, excluding missed field goal"? Nevermind that as Scott points out, overall they were flat.

Just curious, how do other Freepers see the economy's real state? From my anectdotal view, it's looking grim ... not to get too specific but I know of more layoffs on the way in November and December in the Atlanta area ..

[Lunatic Fringe]

My take on the current state of the economy is this......

The Fed is setting up the consumers for a huge financial fall, by allocating more money through lower interest rates, they are encouraging debt that we cant afford. They are cheering for consumers to keep spending even though they cannot afford it. Continued intervention by the government is delaying the inevitable depression that is coming.

[Milwaukee_Guy]

I would worry about a deflationary cycle looming this Spring if things don't pick up.

Where is the spending going to come from? Consumers are tapped out IMHO. Despite 0% financing on big ticket items, sales are flat or falling. I bought a new car last year. Won't buy one for another ten years. 0% on a $4,000.00 plasma TV? I don't think so.

Just look at consumer costs right now. Our 401K's lost 30-40% the last couple of years. What are baby boomers going to do for retirement? Keep pouring money into losing investments? Limp along on 3-4% bond investments that are eaten up by inflation and tax increases?

Health insurance copayments are costing consumers -thousands- more per year and no end is in sight. One major nedical event in your family and your savings are wiped out.

Gasoline has crept steadily upward this year and may spike with any Mid-East developments. Home heating costs are projected to increase 20-25% more than last year.

My property tax assesment went up 16% in one year. How about a looming real estate bubble as people can hardly afford to live in the houses they spent years trying to afford?

How about historic consumer credit debt? Families have thousands of dollars on their statements now. Tens of thousands of debt in their home equity loans.

No a pretty picture....

[Orion]

Just curious, how do other Freepers see the economy's real state? From my anectdotal view, it's looking grim ... not to get too specific but I know of more layoffs on the way in November and December in the Atlanta area ..

Well...

If one were to opine about the sorry state of the economy prior to 11/5, then about 99.9999999999999999999999999% of the FReepers would have been accusing that person of being an pro-RAT shill, and helping Daschle.

Now that we are all safe in our Pubbie Paradise, I will state again that this economy sucks whale ass. Debt, debt, debt, and even some debt are in the process of disemboweling any chance for a meaningful recovery. The government wrote a half-tril worth of debt this year, every local government is coming down from their late-90s estimates on tax revenues, and going into debt. Real estate has been outstripping wages by better than 15% nationwide for some time, and that is going to be fugly when that bubble goes kablooie. 2002 is going to be the year where cash-out refis for a single year beat the entire last decade for such things. That's more debt. Manufacturers of big ticket items (autos, electronic gizmos) are offering 0% down for the forseeable future. Mortgages are going for the inflation rate, and that bald guy that CNBS worships keeps printing more dough.

So, what happens when inflation ticks up? Interest rates rise, and all that is going well will slam into reverse. All that is not going well will really hit their stride.

When you have to give away your cars, major employers are announcing double digit employee cuts, your currency is being sold, and you governments are drowning in red ink, that seems to be trouble.

Then again, the Pubbies are running everything, and most of my reading on the subject (on FR) states that we are about to enter full employment, free money, no crime, life expectancy to 175, gold paved streets, an SUV in every house, every house a mansion, racial harmony, everlasting peace (once we whack Iraq), the end of drought, the cure for cancer, and the final death of telemarketers.

How do you see the economy?

[razorback-bert]

Intel Corp. boosted computer related shares after saying it will buy back almost $9 billion in stock

Dividends, who ever of paying dividends, that was something done in the old economy.

Got to get that share price up to make options good.

[sourcery]

How do you see the economy?

Winter comes

[razorback-bert]

In RE today, we have marginal to poor quality buyers chasing higher priced houses.

This is good news, so I am told.

[lds23]

Not to be alarmist, but there are terror alerts all over the place. If they impact the holiday shopping season, the economy might take a swoon dive, having been propped up by borrowing and consumer spending.

[dalereed]

The 1930s was a cakewalk compared to what we are facing in the near future. Glad I don't owe anyone anything.

[arete]

This is good news, so I am told.

Did you ever watch a drunk fumbling with his car keys? That is where our economy is now. Too delusional to admit the obvious.

Richard W.

[Ken H]

Does anyone still follow the TED spread? You used to hear a lot about this indicator back in the 70's and 80's, but I don't hear it mentioned anymore.

The Dec T-Bill closed at 98.79 and the Eurodollar closed at 98.59, for a TED spread of 0.2.

I have no idea how to interpret that figure.

[jwh_Denver]

*Scott's back...

After being out of the loop on the SM for a month it looks like Scott has taken some big steps towards writing a decent review. Or did he take a smart pill today?

[Tauzero]

"Just curious, how do other Freepers see the economy's real state?"

The deflationary vise is putting the squeeze on most.

My own employer is o.k. for the time being. Despite the enormous price pressure we've seen, we're doing much better than last year, when we came within literally minutes of being closed for good by our creditors. We are now a lean, mean, profitable machine. Deflation is a great and ruthless efficiency expert.

BUT -- there's basically no place left to cut. So if our efficiency expert pays us another visit like last year's, we could be gone. We're doing much better, true -- in fact having one of our best years ever profit-wise -- but gross sales have a slight negative trend. No one is feeling secure, and we're all basically grateful to have jobs.

[ReyDM]

I really enjoy these wrap-ups because Puplava and Rohry are a refreshing antidote to the spin and blather coming out of the mainstream financial press ... my take on the economy is that there are serious problems. We are still in denial about some things. The government economic numbers are being manipulated in a manner similar to corporate earnings, IMHO. A good example is the unemployment rate. They don't count anyone as unemployed who has either stopped looking for work or is working part-time at a fraction of their former salary. Then of course the weekly new unemployment claims are "seasonally adjusted", whatever that means. The bottom line is that these numbers should be viewed with extreme skepticism, as they can be manipulated just as earnings can.

Last week a survey of CEO's came out that said most expect to fire staff next year ... not a good thing. And once interest rates start to go up again, and they will, you can stick a fork in the re-fi boom (and probably the housing market as well). My guess is that we are likely to face another recession, beginning either 1st quarter 03 or early spring. And I am no Democrat shill, just calling it like I see it.

[Semaphore Heathcliffe]

excellent interview. thanks for the link.

[CPT Clay]

We need the end to the double taxation of Dividends to get companies to pay them. Also there is nothing "pro-forma" about dividends, they are the real deal. Problem witha stock buy back, you have to sell your shares to realize the gain.

Anybody see what the unemployment ins claims were this week?