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Home Prices Continue to Rise – Analyst Blog

Dirk Van Dijk — Tue, 24 Nov 2009 18:44:14 +0000

This morning the S&P Case-Schiller index was released. The Composite 20 index (C-20), which covers 20 of the largest metropolitan areas in the country rose by 0.27% on a seasonally adjusted basis (home prices are seasonal, so the adjusted data is what you should be looking at -- most of the press makes a mistake by focusing on the unadjusted data, thus these figures might vary from what you read elsewhere). That was the fourth straight increase. The Composite 10 (C-10) index, which is a subset of the Composite 20, but which has a longer history, posted a 0.36% increase for the month.

On a year over year basis, the C-20 is down by 9.39% while the C-10 is down 8.53%. While it was an increase, it was a smaller one than was expected. The consensus of economists was looking for a C-20 year-over-year decline of just 9.10%. The data is for September, not October like most of the data that has come out recently.

The country was roughly split between areas where home prices increased during the month and areas where housing values continue to decline. Eleven metropolitan areas posted increases and nine suffered declines. Some of the areas with the biggest increases in home prices were a bit of a surprise.

In California, San Francisco saw the largest monthly increase of any city, enjoying a 1.71% rise. It was one of the areas that was considered "bubble central," but has started to stage a comeback. Over the last year, prices in the City by the Bay are down 7.85%. Similarly, San Diego posted a 1.05% increase for the month, and it is now down just 5.72% year over year. Long-depressed Detroit saw prices increase by 1.25% for the month, although on a year-over-year basis, home prices are still down by 19.26%. The other areas that saw monthly increases of over 1.0% were the Twin Cities, up 1.31%, and Chicago, up 1.11%.

On the negative side, the worst-hit city was Cleveland, which was down 1.20% for the month, although it is actually among the healthiest cities on a year-over-year basis with home prices down just 3.880%. Then again, the housing bubble was not centered on the beaches of Lake Erie, it was centered on the beaches of Southern California and Florida.

Las Vegas, which is the city that has been hit the hardest by falling home prices overall, continued to see prices fall, down another 1.19% for the month, and off 28.63% from a year ago. From the peak, home prices are down 55.4%. The only other city that comes close, to that cumulative decline is Phoenix, down 52.0%.

Also keep in mind that the home price declines had lasted for far more than just a year. The graph below (from http://www.calculatedriskblog.com/) shows the cumulative decline from the peak pricing, which was hit in April of 2006 for both of the composite indexes, but is shown in the graph from each individual city peak. It breaks down the cumulative decline by time period, with the blue bar showing how much home prices fell through the end of 2007, yellow showing where things stood at the end of 2008, and blue indicating how far the city is now off its peak. Thus if the orange bar is shorter than the yellow bar, it means that city has actually seen home prices rise so far this year.

It is encouraging to see home prices rise. If this continues, some of the people in underwater houses (meaning with a mortgage more than the value of the house) might just see the flood recede and regain some positive equity in the house. This would greatly reduce the number of foreclosures in the future. It would make it an economically rational thing for people to pay their mortgages again. As it stands today in big areas of the country, it isn’t.

As a result, mortgage delinquencies have been skyrocketing, and eventually those delinquencies will lead to foreclosures. That could reignite a vicious circle, where the foreclosed houses flood the market, once again depressing prices, which causes more people to think there are better places to put their money than paying their mortgages.

Rising home prices have the potential to turn that into a virtuous cycle. To the extent that happens, it has very positive implications for the entire mortgage complex, from the big banks like Bank of America (BAC) to the mortgage insurance firms like MGIC (MTG) to the wards of the state, Fannie (FNM) and Freddie (FRE).

However, I fear that the increase in home prices is only temporary. That it is the product of extraordinary government efforts to prop up home prices, and that those efforts can not be sustained forever. These include the tax credit (recently expanded to include move up buyers), which is scheduled to end at the end of April, and the Fed’s program of buying up $1.25 Trillion in mortgage-backed paper to manipulate mortgage rates lower. They should finish up their purchases by the end of March.

The FHA has also played a huge role in propping up the market, making far more loans than it ever has before, and only requiring down-payments of 3.5%. People can even use the tax credit for their down-payment. The FHA’s reserves are already dangerously low, and the delinquencies on the loans they insure are skyrocketing, particularly for mortgages it issued in 2007 and 2008. This year’s loans have not really had time to go bad yet. The FHA may end up going the way of Fannie and Freddie and require a massive federal bailout.

All in all, the increase in home prices is good news, but it is coming with a big price from the Federal Treasury and may end up being ephemeral. The risk of a renewed downturn in the second quarter of 2010 is very big. If that were to occur, it would mean more pain for the mortgage complex.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.
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Prieur’s readings (November 13, 2009)

Prieur du Plessis — Fri, 13 Nov 2009 07:33:38 +0000

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy. Please also add the links to any other worthwhile articles you would like to share to the comments section.

Oct 27: Consumer Confidence Down – Economic Highlights

Zacks Market Commentaries — Tue, 27 Oct 2009 15:15:47 +0000

The S&P/Case-Shiller 10-City Home Price Index increased by 1.3% in August following an increase of 1.7% in July, and up 1.4% in June. Over the year, the index has fallen by 10.6%, less than the 12.8% 12 month decline observed in July. The S&P/Case-Shiller 20-City Home Price Index increased by 1.2% over the month after increasing by 1.6% in July, up 1.4% in June, and a 0.5% increase in May. The index is down by 11.3% over the year compared to a 13.3% decline last year. This is the 7th consecutive month the indices have improved. 19 of all 20 indices showed improvements in the annual decline, with Cleveland as the exception.

The Consumer Confidence Index dropped to 47.4(1985=100) in October after dropping to 53.4% in September from 54.1% in August. The index was expected to increase with the consensus at 53.6%. The Present Situation Index decreased to 20.7 from 23.0 last month. The Expectations Index declined to 65.7 from 73.7 in September. Consumers outlook of current conditions and the short-term outlook grew more pessimistic along with a more negative outlook of the labor market.

Upcoming Releases
Durable Orders (10/28 at 8:30 AM EST)
New Home Sales (10/28 at 10:00 AM EST)
Initial Claims (10/29 at 8:30 AM EST)
GDP-Q3 Adv (10/29 at 8:30 AM EST)

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Velocity Energy Inc. (VCYE) Closes On Purchase of Appalachian Assets

QualityStocks — Mon, 12 Oct 2009 19:52:19 +0000

Velocity Energy Inc. announced the purchase of producing natural gas wells and partially developed acreage in the Appalachian region in the Northeastern United States. Velocity Energy Inc. purchased the assets from a private company and did not disclose the purchase price. Velocity Energy Inc. said that the sale included 13,500 net acres of oil and [...]

Anpath Group, Inc. (ANPG.OB) Announces New Distribution Agreement with ZayMat Distributors

QualityStocks — Mon, 12 Oct 2009 13:24:25 +0000

Anpath Group, Inc., a producer of cleaning and disinfecting products that help prevent the spread of infectious microorganisms while minimizing the harmful effects on people, equipment and the environment, recently announced that the company has expanded its distribution capabilities with the signing of an agreement with ZayMat Distributors of Cleveland, Ohio. ZayMat Distributors is owned and [...]

Ruinous Debt to Create Futureless Suburbia

Contrarian Profits — Fri, 25 Sep 2009 23:33:54 +0000

pIn our history, the American nation committed obvious sins against select groups of people, and we’ve paid bitterly for some of that. But now it’s our sins against the land itself that threaten to sink the USA as a viable enterprise./p pIt’s odd, that in his otherwise excellent blow-by-blow account (”Eight Days,” in the Sept 21 emNew Yorker Magazine/em) of the September 2008 Wall Street meltdown that left Lehman dead, and a href="http://www.google.com/finance?q=AIG"AIG/a croaking in a ditch, and the banking system in general functionally crippled, reporter James B. Stewart never got around to really describing the cause of it all — namely, the on-the-ground material catastrophe of American suburbia./p pIt was the worthlessness of the tradable securitized debt associated with all those overpriced (and#8230;/p

Energy Quest, Inc. (EQST.OB) Announces Innovative PyStR™ Process

QualityStocks — Tue, 22 Sep 2009 21:05:49 +0000

With increasing public interest in “green” initiatives, companies that invest in environmentally-friendly products gain public notoriety and success. Adhering to this creed, emerging alternative-energy leader Energy Quest, Inc. announced a new application for its Pyrolysis Steam Reforming process. The company’s hydrogen process, known as PyStR™ or “pie star,” is a system that converts biomass and [...]

Something we should all read at least once a week!

Prieur du Plessis — Mon, 21 Sep 2009 06:53:43 +0000

"To celebrate growing older," Regina Brett, a columnist at The Plain Dealer, Cleveland, Ohio, in 2006 wrote the 45 lessons life taught her. She subsequently, upon turning 50, added another five. This is something we should all read at least once a week.

A Brighter Shade of Beige – Analyst Blog

Dirk Van Dijk — Wed, 09 Sep 2009 21:01:31 +0000

The Federal Reserve just released its "Beige Book," which is largely a collection of anecdotal information about the state of the economy in the various Federal Reserve districts. Below are some of the key passages and my reactions to them. In the interest of space and to highlight the key trends, I have edited out most of the individual district information. However, if you want to read the full report, go to: http://www.federalreserve.gov/fomc/beigebook/2009/20090909/default.htm

"Reports from the 12 Federal Reserve Districts indicate that economic activity continued to stabilize in July and August. Most Districts noted that the outlook for economic activity among their business contacts remained cautiously positive."

This is a much better tone than in recent months, with talk of actual stabilization. Up to this point, the best that could be said that things were generally getting worse at a slow rate. Now, overall, it looks like the deterioration has stopped but the improvement has not yet begun.

"The majority of Districts reported flat retail sales. Richmond, Philadelphia, Chicago, Atlanta and Boston remarked that retailers continued to carefully manage inventories, keeping them in line with low sales levels. A majority of Districts confirmed that the "Cash for Clunkers" program boosted traffic and sales...Most regions reported some improvement in residential real estate markets...Downward pressure on home prices continued in most Districts...Reports on commercial real estate suggest that the demand for space remained weak and that nonresidential construction-related activity continued to decline...Loan demand was described as weak and many Districts reported that credit standards remained tight. Most Districts reported improvements in manufacturing production...Labor market conditions remained weak across all Districts...Wage pressures remained minimal across all Districts. Consumer prices were described as being steady in most Districts..."

Flat retail sales would be a major improvement over the declines that most retailers have been experiencing. However, the tight control of inventories does help explain how most of the retailers managed to post better-than-expected earnings in the second quarter. With just a little bit of a pick up, they might be well positioned to exceed expectations in the third quarter.

The housing market does appear to have turned, at least with respect to activity, if not pricing. The focus in now turning to problems in the commercial real estate market since the residential market has at least stabilized.

The labor market is still ugly. Those that are employed are not going to be seeing raises for awhile. There will be no wage price spiral, so the outlook for inflation is pretty good...for now.

"Consumer spending remained soft in most Districts...shoppers remained focused on essentials and continued to refrain from purchasing discretionary and big-ticket items...the cash-for-clunkers program helped boost traffic and sales, although Cleveland and Kansas City also remarked that used car sales were adversely affected by the program. The sustainability of the higher recent pace of new vehicle sales was questioned."

Discounters like Family Dollar (FDO) and Walmart (WMT) are much better positioned than traditional mall-based retailers. Cash for Clunkers helped out overall demand, and was obviously good for firms like AutoNation (AN), however the program is now over. The big question going forward is if the C4C program helped tap pent-up demand, or simply pulled forward demand from the future. In other words, were the cars being sold cars that would have been bought anyway in October or November, or was it incremental demand?

"Residential real estate markets remained weak, but signs of improvement continued to be noted...Most Districts noted that demand remained stronger at the low-end of the housing market...the first-time home buyer tax incentive was spurring sales...Reports on house prices generally indicated ongoing downward pressures...Construction remained at low levels...Reports on commercial real estate markets indicated that demand for space remained weak and that construction continued to decline in all Districts...vacancy rates increased...demand for space remained weak...Construction remained at very low levels, with modest improvements noted in public construction."

The low end of the housing market is where most of the bank owned ex-foreclosures are, at least for now. I am expecting foreclosures to go upscale in a big way over the next year or so. The tax credit is going to expire at the end of November, so no more "cash for castles" unless Congress extends it. The same questions about pulling forward demand exist for housing as for cars.

However, realtors have more clout in D.C. than do autoworkers, so there is a good chance that the program will be extended. Commercial real estate is just starting its decline and is going to be ugly for a few more years. The only thing keeping any activity going is public construction, which is largely due to the stimulus package. Most of that part of the stimulus bill was back-end loaded, so that cushion will continue into 2010, but private commercial construction is dead for the time being.

"Reports on the demand for nonfinancial services were mixed...the demand for service sector business remained soft, although the pace of decline was described as having slowed...Demand for transportation services were mixed, with some Districts noting stabilization at weak levels. Reports indicated that freight volume declines were moderating..."

Note that they did not say that freight volumes were picking up, just declining at a slower rate or stabilizing. Freight volumes are a great indicator of the overall current pace of activity.

"Most Districts reported that loan demand was weak and that credit standards remained tight...further weakening in loan demand across most categories...an increase in demand for auto loans..."

Weak loan demand is certainly in line with the record drop in consumer credit in July. Cash for Clunkers stimulated auto loan demand. The program is over now, so auto loan demand is likely to slip back next month, along with auto sales.

"Most Districts reported modest improvements in the manufacturing sector...slight-to-moderate increases in new orders...increases or planned increases in automobile and automobile-related production...The near-term outlook among manufacturers varied, but the majority of reports indicated that manufacturers were cautiously optimistic."

This confirms what the ISM report said last week. Generally, manufacturing is starting to recover before the service sector of the economy.

In general, this was a weak report, but not nearly as dismal as what we were seeing in the spring or early summer. However, we already knew that from most of the other reports out there. The picture that is painted is that the recession is over but the recovery has not yet begun. Inflation is not the problem for now -- getting the economy going again is.

Several government programs have helped to stabilize the situation -- Cash for Clunkers in autos, the first-time-buy credit in housing and the stimulus bill in non-residential construction. While not mentioned in the report, the Fed’s buying of just about every residential mortgage being produced and then some has helped to keep mortgage rates down and contributed to the stabilization of the housing market. Those measures are temporary, and many are about to run out.

The acid test will be if the economy can continue to function without the artificial supports. In my opinion, it is far too early to take the training wheels off, though eventually we are going to have to do so.
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Duke Energy Issues Bonds – Analyst Blog

Zacks Market Commentaries — Fri, 28 Aug 2009 21:45:19 +0000

Duke Energy Corp. (DUK) recently raised the size of its senior notes offering to $1 billion from the originally planned $800 million. Investors lapped up the notes due to their higher yield over US Treasury bonds. The company will use proceeds from the sale to retire commercial paper and for financing its capital expenditure.

Duke Energy issued senior notes totaling $500 million due in 2014 with a 3.95% coupon rate semi-annually and another $500 million due in 2019 with 5.05% coupon rate annually.

The company needs funds for its ongoing capital expenditures. Duke Energy is currently expanding its Cliffside Steam Plant on the border of Cleveland and Rutherford counties and a new plant at Edwardsport gasified-coal facility in Indiana.

The company is also investing to control carbon dioxide emissions from its coal-based plants. This is vital in the light of recent progress in the American Clean Energy and Security Act that stipulates stringent caps against such emissions.

Based in Charlotte, North Carolina, Duke Energy is a diversified energy company. It supplies electricity to nearly 4 million US customers. It has approximately 36,000MW of electricity generating capacity in the Midwest and the Carolinas. We have a Neutral recommendation on the shares of Duke Energy.

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Aug 25: Consumer Confidence – Economic Highlights

Zacks Market Commentaries — Tue, 25 Aug 2009 15:08:00 +0000

The S&P/Case-Shiller 10-City Home Price Index increased by 1.4% in June, following a 0.5% increase in May (revised from an originally reported 0.4% increase, a 0.7% decrease in April, and a 2.1% decline in March. Over the year, the index has fallen by 15.1%. The S&P/Case-Shiller 20-City Home Price Index also had increased by 1.4% in June, following a 0.5% increase in May, and a 0.6% decrease in April. The index is down by 15.4% over the year. The indices now stand at early-2003 levels. Over the past month, 18 of the 20 MSAs showed improvement in returns, the highest being in Cleveland, up 4.2%. Las Vegas posted negative returns of -2.0% and Detroit of -0.8%. Over the year, all metropolitan areas show negative returns.

The Consumer Confidence Index bounced back to 54.1% in August, from 47.4% in July, better than the expected 47.8% level. The Present Situation Index increased to 24.9 from 23.3 last month. The Expectations Index improved to 73.5 from 63.4 in July. Consumers outlook on business conditions and the employment situation improved over the month.

Upcoming Releases
Durable Orders (08/26 at 8:30 AM EST)
GDP Preliminary (08/27 at 8:30 AM EST)
Initial Claims (08/27 at 8:30 AM EST)
Personal Consumption Expenditures (08/28 at 8:30 AM EST)

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PennyOmega.com Stock Report! 8/24/09, DCBR, NEXS, CAL, AET, BKS, MGI

PennyOmega.com — Mon, 24 Aug 2009 17:22:45 +0000

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DrStockPick.com Stock Report! 8/24/09, DCBR, NEXS, CAL, AET, BKS, MGI

Dr. Stock Pick — Mon, 24 Aug 2009 17:17:56 +0000

DrStockPick.com Stock Report! Monday August 24, 2009 ************************************************************** Today, DC Brands International, a publicly traded company under the ticker symbol (PINKSHEETS: DCBR), is extremely proud to announce that they have reached an agreement with one of the nation’s leading retailers in sports equipment and apparel, The Sports Authority. The roll-out will begin with [...]

Lung Cancer Medical Breakthrough (OTC:BMOD)

Michael Vlaicu — Sun, 23 Aug 2009 01:58:32 +0000

Biomoda, Inc. (Public, OTC:BMOD) StocksHaven Investments profiles one of the most promising up and coming small cap biotech companies, Biomoda Inc, which has established a medical breakthrough for early lung cancer detection. It is a development-stage company. The Company is an invitro diagnostics company that develops assays, or tests, to detect cancer. These assays are performed in [...]

Beige Book: Bad, Not Worse – Analyst Blog

Dirk Van Dijk — Wed, 29 Jul 2009 21:13:58 +0000

Below are some of the key sections of the Summary of the Fed Beige Book and my reaction to it interspersed. I have also bolded what I consider to be remarks worthy of emphasis in the report.

"Reports from the 12 Federal Reserve Districts suggest that economic activity continued to be weak going into the summer, but most Districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilize, albeit at a low level..."

In other words, the economy is no longer falling off a cliff, but it has not started to climb back either. This is consistent with most of the other economic data we have been getting recently.

"Most Districts reported sluggish retail activity...Manufacturing activity showed some improvement in the Richmond, Chicago and Kansas City Districts; while St. Louis and Dallas reported some moderation of declines, Philadelphia and Minneapolis saw activity decrease and most other Districts indicated that manufacturing activity continued at low levels.

"Boston, Richmond, St. Louis, Minneapolis and San Francisco reported contractions in services industries. Banking sectors in the New York, Cleveland, Richmond, St. Louis, Kansas City and San Francisco Districts experienced weaker demand for some categories of loans. Residential real estate markets stayed soft in most Districts, although many noted some signs of improvement. By contrast, commercial real estate markets weakened further in recent months in two-thirds of the Districts and remained slow in the others."

A very mixed picture, but that mixed picture represents a substantial improvement over the extremely dire presentation in previous months. Again, sort of what you would expect when we are bumping along the bottom.

"Districts reported varied -- but generally modest -- price changes across sectors and products, with competitive pressures damping increases; however, Boston, Cleveland, Chicago, Minneapolis and Dallas noted that some metals prices have increased in recent months. Most Districts indicated that labor markets were extremely soft, with minimal wage pressures, and cited the use of various methods of reducing compensation in addition to, or instead of, freezing or cutting wages."

Inflation is not a problem at this time (but could become a more serious one in the future). The increase in metals prices is interesting, but most metals are easily traded goods, and the pick up in prices could be due to stronger demand abroad, particularly in China.

This is good news for the big mining firms like Freeport McMoran (FCX) and BHP Billiton (BHP). It will be hard to get an old fashioned wage-price spiral going with the wage side having no traction whatsoever.

To the extent inflation does show up, it will be on the food and energy side, not core inflation. The end result will be a reduction in the real standard of living of the average American, not a runway inflationary cycle like in the 1970’s.

"Consumer Spending and Tourism

"Consumer spending in the early summer remained below previous-year levels in most Districts, as households continued to be price conscious. Boston, Kansas City and San Francisco experienced either modest sales increases or less negative sales results than in recent reporting periods. Philadelphia, Atlanta, St. Louis, New York and Dallas cited flat or mixed sales, while sales in the remaining Districts remained soft.

"Several Districts noted that consumers focused on purchasing less expensive necessities, while sales of big-ticket items languished. Retailers in Boston, Philadelphia and Dallas characterized their outlook as 'cautious.'

"Auto sales were mixed across the country. Chicago, Minneapolis and Kansas City saw modest increases in car sales, while New York, Philadelphia, Cleveland and Atlanta continued to experience subdued sales. The exception was sales of used vehicles, which continued to be strong or were strengthening, according to Philadelphia, Cleveland, Atlanta, Kansas City and San Francisco.

"Travel and tourism declined in the majority of Districts. The San Francisco District observed a sharp drop in luxury and business travel, while tourism activity in New York City was weak but stable since the last Beige Book report. Tourism contacts along the Atlantic coast reported that with the exception of July 4th holiday bookings, business was generally weaker than a year ago. Hotel room rates have declined in several Districts."

People are reacting to substantially reduced wealth from both housing and the stock market, as well as slowing incomes due to layoffs and reduced hours or wages. They need to rebuild their balance sheets by increasing savings or paying down debts. As a result, they are keeping their wallets shut as much as they can.

Discretionary spending is, well, discretionary -- at least in the short term. As such it is the hardest hit. Tourism is sort of the ultimate in discretionary spending, so it is among the hardest hit areas. I would expect the major hotel companies like Starwood (HOT) and Marriott (MAR) face a tough intermediate-term future.

Auto sales got down to an unsustainably low level, well below the normal rate at which cars go to the scrap heap. Thus it not surprising to see some rebound, but it is doubtful we will see the over 15 million a year rate that was the norm earlier this decade and in the 1990’s for quite awhile.

"Nonfinancial Services

"District reports regarding nonfinancial services industries were largely negative, although they included a few bright spots. The Minneapolis, St. Louis, and Dallas Districts indicated that demand for professional services such as business support, architecture and legal services continued to decline or remained soft. By contrast, reports from the health care sector were largely positive, with the San Francisco, Minneapolis and Richmond Districts citing steady-to-increased demand for medical services, and the Atlanta, Cleveland, Chicago and Dallas Districts reporting hiring activity in health care.

"Technology-related firms in the Kansas City District also reported heightened activity, especially in the clean technology and defense-driven aerospace markets. Richmond and Minneapolis noted increased demand for information technology workers, and Atlanta saw hiring activity in the defense and aerospace industry.

"Staffing industry contacts in numerous Districts suggested a higher demand for temporary or part-time workers over permanent hires, and Atlanta noted that employers were taking advantage of a higher supply of skilled labor to improve the quality of their workforces.

"Nearly all Districts reporting on transportation services observed continued weakness. Freight transport respondents from the Atlanta, Dallas and Cleveland Districts noted that cargo volumes remain below year-earlier levels. While Cleveland contacts reported that competitive shipping rates are being maintained, trucking contacts from the Atlanta District noted that an oversupply of trucks relative to demand has exerted downward pressure on rates. A few Districts also reported reduced airline traffic, especially amongst business travelers."

Well there is a surprise -- health care is still growing while the rest of the economy is shrinking. This has been a pretty consistent pattern for...oh, the last 30 years or so...as health care becomes an ever larger part of the economy.

It would be nice if there were some evidence that such spending were making us healthier, but there isn’t that much, especially relative to other countries that spend far less on health care and where the spending is growing more slowly. The weakness in freight traffic is a pretty key metric of how the overall economy is doing, and it is worthwhile to note that while they say it is below year-ago levels, they do not mention further deterioration in volumes, just that the oversupply of trucks is putting downward pressure on prices.

One more factor on the side of deflation currently -- the pick up in temp hires might be a positive straw in the wind. It shows some more demand, but businesses are not sure if it is permanent yet.

"Manufacturing

"Reports on the manufacturing sector remained subdued but were slightly more positive than in the previous Beige Book. Many Districts characterized manufacturing activity as remaining depressed but with selected signs of modest improvement...albeit chiefly in nondurables industries. Districts attributed some of the recent increases in production to replenishment of finished-goods or customer inventories.

"Chicago indicated that the quick resolutions of the Chrysler and GM bankruptcies have boosted business confidence, and that automakers were scheduling a pickup in production for July...Steel production remained depressed but has leveled off or increased somewhat...Refineries increased their capacity utilization slightly over the past six weeks, but overall industry conditions remain weak because of low demand for fuels.

"Various District reports noted cancellations of orders for commercial aircraft and continued weak demand for most types of equipment and machinery. Among the positive developments in manufacturing, several Districts mentioned pickups in technology sectors, or cited strong or rising sales of military products or pharmaceuticals.

"Comments on the near-term outlook varied across Districts, but on the whole they appear consistent with a forecast of modest and uneven recovery in manufacturing output beginning during roughly the coming six to twelve months. New York, Philadelphia and Atlanta indicated that manufacturers have a generally positive or improved near-term outlook. Dallas reported that high-tech manufacturers 'are seeing some upside potential in their forecasts instead of just down-side risks,' but that construction-related manufacturers 'expect no improvement in the near term.'

"Boston indicated that many respondents expect continued sub-par revenue numbers for the remainder of the year, but 'look forward to slowly improving business in 2010,' while Cleveland and Kansas City reported that manufacturing contacts expect little or no change in demand through the end of 2009."

It looks like we might be on the cusp of an improvement in manufacturing, but just to replenish inventories that have gotten down to very low levels. That would be welcome, but is not sustainable unless final demand also picks up, and with incomes under pressure and a desire to save a bigger proportion of that income, demand is likely to remain soft for the foreseeable future. The improvement in Tech is consistent with what we have been seeing in the estimate revisions data, where analysts have been generally raising their sights lately for Tech firms earnings.

"Real Estate and Construction

"Commercial real estate leasing markets were described as either 'weak' or 'slow' in all 12 Districts, although the severity of the downturn varied somewhat across Districts...resulting in sizable leasing concessions and/or declines in asking rents. Significant weakness in the retail leasing sector was reported for the Boston, Minneapolis and New York Districts, and industrial vacancy increased in the Atlanta, Dallas, Minneapolis and St. Louis Districts.

"Commercial real estate sales volume remained low, even 'non-existent' in some Districts, reportedly due to a combination of tight credit and weak demand. Construction activity was limited and/or declining in most Districts, although exceptions were noted for health and institutional construction in the St. Louis District, public sector construction in the Chicago District, and the reconstruction of the World Trade Center in Manhattan. Tight credit was cited as an ongoing factor in the dearth of new construction activity.

"The commercial real estate outlook was mixed, both within and across Districts. Some contacts expect commercial real estate markets to improve within two quarters, and others predict further market deterioration for the remainder of 2009 and possibly through late 2010."

Commercial Real Estate is proving to be to late 2009 and 2010 what residential real estate was to 2008 and early 2009. It is going to be the major source of new headaches for the banks. With rents falling and vacancies rising, declining construction activity is a good thing, although I am sure that construction workers do not agree with me on that.

Most of the non-residential construction activity that is going on appears to be tied to the stimulus package or related to health care. Given the weakness for architects services noted above, commercial construction activity is likely to remain depressed for awhile.

"Residential real estate markets in most Districts remained weak, but many reported signs of improvement. The Minneapolis and San Francisco Districts cited large increases in home sales compared with 2008 levels, and other Districts reported rising sales in some submarkets.

"Of the areas that continued to experience year-over-year sales declines, all except St Louis -- where sales were down steeply -- also reported that the pace of decline was moderating. In general, the low end of the market, especially entry-level homes, continued to perform relatively well; contacts in the New York, Kansas City and Dallas Districts attributed this relative strength, at least in part, to the first--time homebuyer tax credit. Condo sales were still far below year-before levels according to the Boston and New York reports.

"In general, home prices continued to decline in most markets, although a number of Districts saw possible signs of stabilization. The Boston, Atlanta and Chicago Districts mentioned that the increasing number of foreclosure sales was exerting downward pressure on home prices. Residential construction reportedly remains quite slow, with the Chicago, Cleveland and Kansas City Districts noting that financing is difficult."

The housing market is awful, but has stopped getting worse. Sales are starting to pick up, but it is going to be awhile before prices start to recover. Foreclosures will continue to weigh on the market for at least the next few quarters. The first-time homebuyer tax credit program appears to be a success, and inventories are coming down to more manageable levels.

"Banking and Financial Services

"In most reporting Districts, overall lending activity was stable or weakened further for most loan categories. In contrast, Philadelphia reported a slight increase in business, consumer and residential real estate lending. As businesses remained pessimistic and reluctant to borrow, demand for commercial and industrial loans continued to fall or stay weak in the New York, Richmond, St. Louis, Kansas City, Dallas and San Francisco Districts. Consumer loan demand decreased in New York, St. Louis, Kansas City and San Francisco, stabilized at a low level in Chicago and Dallas, and was steady to up in Cleveland.

"Residential real estate lending decreased in New York, Richmond, and St. Louis. Dallas reported steady but low outstanding mortgage volumes, while Kansas City noted that the rise in mortgage loans slowed. Refinancing activity fell dramatically in Richmond, decreased in New York and Cleveland, and maintained its pace in Dallas. Bankers in the New York District indicated no change in delinquency rates in all loan categories except residential mortgages, while Cleveland, Atlanta and San Francisco reported rising delinquencies on loans linked to real estate.

"Banks continued to tighten credit standards in the New York, Philadelphia, Richmond, Chicago, Kansas City, Dallas and San Francisco Districts, and some have stepped up the requirements for the commercial real estate category, in particular, due to concern over declining loan quality. Meanwhile, Cleveland and Atlanta reported that higher credit standards remained in place, with no change expected in the near term. Credit quality deteriorated in Philadelphia, Cleveland, Kansas City and San Francisco, while loan quality exceeded expectations in Chicago and remained steady in Richmond."

In an overleveraged country, I am not sure that the decline in lending activity is such a bad thing from a long-term point of view, however it does slow down economic growth. Given how fast public debt is growing, if loan demand were also strong in the private sector it is likely that interest rates would rise, perhaps rather sharply.

We saw the same pattern in terms of lending activity with residential mortgages that is now happening on the commercial side. As prices fall, the bankers are not as sure about the value of the collateral and become more reluctant to lend. Then again, those falling prices are evidence of a glut of available resources, so adding to the inventory of unused offices and strip malls is probably not a good thing to do in any case.

The decline in residential mortgage activity is probably a reflection of the recent rise in mortgage rates (relative to April and May). It does call into question the sustainability of the recent pick-up we saw in home sales (both new and used).

"Employment, Wages and Prices

"All Districts indicated that labor markets remain slack, with most sectors either reducing jobs or holding steady, and aggregate employment continuing to decline, on net. However, Boston, Cleveland, Richmond, Atlanta, Chicago, St. Louis and Minneapolis noted selective hiring, including attempts by some firms to take advantage of layoffs elsewhere to pick up experienced talent.

"Richmond, Chicago, St. Louis and Dallas cited moderation in the pace of manufacturing employment decline since the last report, and New York noted some signs of labor market stabilization. But Atlanta reported further deterioration in labor market conditions and additional job cuts already planned for coming months.

"The weakness of labor markets has virtually eliminated upward wage pressure, and wages and compensation are steady or falling in most Districts; however, Boston cited some manufacturing and business services firms raising pay selectively, and Minneapolis said wage increases were moderate. Boston, Cleveland, Richmond, Chicago, Dallas and San Francisco cited a range of methods firms are using to limit compensation, including cutting or freezing wages or benefit contributions, deferral of future salary increases, trimming bonuses and travel allowances, reducing hours, temporary shutdowns, periodic furloughs and unpaid vacations.

"Most Districts reported that upward price pressures were minimal. Manufacturers in the Boston, Philadelphia, Atlanta, Minneapolis, Kansas City and Dallas Districts indicated that most materials costs were flat or down; however, several Districts mentioned price increases for some metals, petrochemicals and building materials.

"While the Boston, New York and Kansas City reports say a few firms are making modest price increases stick, selling prices of most manufacturers and retailers were reportedly held down by competitive pressures. Services firms have increased discounting and/or cut fees, according to contacts in Boston, Philadelphia, Atlanta, Dallas and San Francisco, while Richmond indicated price increases for services were mild."

The current economic environment is by its nature deflationary, which tends to raise real interest rates and further slow economic activity. The private sector is attempting to deleverage and repair balance sheets. The policy responses to this have been explicitly inflationary to counteract the natural deflation.

For the time being, it looks like the forces of deflation continue to have the upper hand. I don’t see where the increasing prices for building materials are coming from given the weak construction markets, unless they are being exported. I suspect the strength in metals prices is also mostly coming from China.

Core inflation is likely to remain subdued, and businesses will have trouble making any attempted price increase stick. If inflation shows up, it is likely to first show up on the food and energy side, and will cause headline inflation to outpace the rate of compensation growth. Given the cutting or freezing of wages, etc. it will not take much in the way of headline inflation to reduce the real standard of living of most people.

Overall, this was a downbeat report, but not as downbeat as we have seen in recent months. The picture is one of an economy stuck in the mud, not one falling off a cliff. For now, deflation remains a more significant threat than inflation, but given the increase in the size of the Fed balance sheet, it is not time to forget about potential inflation down the road.

Unemployment is going to be a very big problem for quite awhile. That slack in the economy will make it hard for inflation to gain traction. People are not going to be seeing their incomes go up, and will want to save more of what they do earn.

This will be a double-whammy on consumption. Over the long term, this is not a bad thing, since at over 70% consumption is a far bigger share of our economy than it is for most of our competitors. But at 70% of the economy, if consumption is weak, there is no way for the economy as a whole to avoid being weak.
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Zacks Investment Research

Bank Stock Outlook: Will First-Half Gains Give Way to Second-Half Pain?

Money Morning — Wed, 29 Jul 2009 20:05:53 +0000

[Editor's Note: After more than a year of chaos and controversy, some of the leading U.S. banks saw their stock prices soar during the second quarter. As part of its mid-year forecast series, Money Morning examines the outlook for U.S. banks for the rest of this year. To see earlier stories from our mid-year forecast [...]

Lincoln Electric Still Under Pressure – Analyst Blog

Zacks Market Commentaries — Wed, 29 Jul 2009 15:14:12 +0000

Lincoln Electric Holdings Inc. (LECO) recently posted second-quarter EPS of $0.34, well above market expectations of $0.24. However, quarterly earnings were down 79.0% year over year primarily due to significant decline in sales volumes.

Lincoln Electric posted net sales of $413.3 million for the quarter, which is 40.9% below prior-year sales of $699.8 million. The weakness in industrial activity and strength of the U.S. dollar had an adverse impact on the company’s quarterly sales. It also faced weak demand for its welding products across markets. While North American sales were down 40.2%, sales from Lincoln subsidiaries outside North America declined 42.0%. U.S. export sales were down 41.4% during the quarter.

Gross margin declined 360 basis points year over year to 25.7%, while operating margin was down 670 basis points at 6.4%. Quarterly margins were hit by the impact of liquidating high cost inventory combined with declining volumes and a strong U.S. dollar.

Lincoln Electric has implemented various measures in an attempt to align its business costs with declining global demand. These actions include reductions in management compensation, a voluntary separation program for the company’s Cleveland-based workforce, reduced work hours, hiring and merit increase freezes, rationalization of factory operations in Europe and other discretionary cost reductions. These initiatives are expected to generate annualized cost savings of over $100 million.

However, we believe these measures are unlikely to fully offset the impact of declining volumes on the company’s margins in the next couple of quarters. We maintain a Hold recommendation on the stock.

Read the full analyst report on "LECO"
Zacks Investment Research

Housing Price Declines Slow – Analyst Blog

Dirk Van Dijk — Tue, 28 Jul 2009 16:50:29 +0000

The Case Schiller home price data looks to be much better than I expected. The data is for May, and relative to April the composite 10 index rose by 0.41%, while the composite 20 index was up 0.45% -- on a not-seasonally adjusted basis!

There is some seasonality to the data, however, and when the seasonal adjustments come into play the C-10 fell by 0.21% and the C-20 was down by 0.16%. Still, this is a substantial decline in the pace of deterioration, with the C-10 down at an annualized rate of just 2.5% for the month and the C-20 falling at just a 1.7% rate. Compare this to the year-over-year rate of decline (including the May data) showing a 16.8% decline for the C-10 and a 17.1% decline for the C-20.

Some of the individual city data was interesting, and since the season affects all cities at the same time, the relative numbers are not likely to be affected. The graph below (from http://www.calculatedriskblog.com/) shows each of the 20 cities ranked by the declines from their individual peak levels based on the non seasonally adjusted data. By color it shows when the declines took place.

Not-seasonally adjusted, for the month, 14 cities were up and only six were down. However, on a year over year basis all 20 cities are showing lower prices. Seasonally adjusted, the numbers were 12 cities down and eight cities up.

The two cities (all city data discussed is seasonally adjusted) that have held up best since the top did pretty well in May -- prices in Dallas rose by 1.13% while Denver was up 0.3% for the month. On a year over year basis they are down just 4.1% and 4.6%, respectively. Given that both cities are heavily influenced by the energy industry, this is somewhat surprising with the price of oil and natural gas off as much as it is over the last year. On a year to date basis, Dallas is effectively unchanged and Denver is down just 1.8%.

However, the real winner for the month was Cleveland, where prices leapt by 2.78% for the month, leaving its year-over-year decline at just 6.2%. Cleveland was never much affected by the bubble on the way up, but was an early poster child for the declining rustbelt form of housing decline.

The resilience of Cleveland is very good news for the banks with big exposures to Ohio, like KeyCorp (KEY) and PNC Financial (PNC), which recently bought National City, as well as Fifth Third (FITB).

The cities that were most "bubbly" on the way up have been the hardest hit on the way down. The desert cities of Phoenix and Las Vegas have both seen prices more than cut in half and continue to have trouble, with Phoenix down 1.73% and Las Vegas down 3.08% on the month. This is bad news for the regional banks like Zions (ZION) that are focused on the desert Southwest. On a year over year basis they are down 34.2% and 32.0%, respectively.

Thus it does not seem like there is a leveling of the housing price declines, with cities that held up well early catching up with the early decliners. Rather, the pattern seems to be more of the poor getting poorer. There are some exceptions to this. The decline so far in 2009 for San Diego is relatively small (-4.7%), even though since the peak, it is a member of the -40% club.

Yes, the overall direction of housing prices is still down, especially if you account for the seasonality. However, the rate of decline is slowing pretty dramatically. This will in turn slow the number of people becoming underwater on their mortgages and will limit the depth for those that do slip below the waves. This is significant since most people will not walk away from the house (or simply stop paying and live there for a year or more until the sheriff shows up) if they are just a few thousand bucks underwater.

There is still some residual stigma to doing this in society, and it does hurt your credit rating. Plus, it often means pulling the kids out of school, etc. However, when it gets to the point when it looks like the value of the home will never again get to the level of the mortgage -- or if the homeowner runs into cash flow problems while the house is under water (i.e. gets laid off or his hours cut) -- that is the point the mortgage checks stop being written.

The slowing pace of decline brings the housing prices well within the “more adverse" scenario in the banks stress tests. Earlier this year, it looked as if they were tracking right along it while the unemployment rate was well above, calling into question if the "more adverse" was adverse enough. With the current data it looks as if it was tough enough (the bases case was WAY to optimistic) and is turning into a reasonably accurate forecast.

While far from ready to break into a chorus of “Happy Days Are Here Again," I have to put this report into the plus column, along with the new and existing home sales reports.

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Zacks Investment Research

Food Inflation Returns, Watching the Fed, Dollar Bulls Rampage, Bestselling “Car” and More!

Addison Wiggin — Tue, 16 Jun 2009 13:54:33 +0000

pRice rationing redux? a href="http://www.contrarianprofits.com/articles/author/chris-mayer/" class="alinks_links"Chris Mayer/a on the return of rising food prices#8230; Dan Amoss on what the Fed says versus what the Fed does#8230; Russia sings dollar#8217;s praises, dollar bulls stampede#8230; Chuck Butler looks past the rhetoric#8230; China#8217;s latest resource grab#8230; Iraqi oil#8230; America#8217;s best-selling car#8230; with an MSRP of $60#8230;/p p strongWe begin a new week pondering the question that bedevils the conscientious market observer every day./strongInflation? Deflation? Or as Agora founder a href="http://dailyreckoning.com/author/bbonner/"Bill Bonner/a is wont to suggest, both?/p p strong“Inflation – rising prices, or a drop in the purchasing power of the dollar – will soon rise to the very top of economic concerns,” writes Chris Mayer./strong “I can’t understand why there are pundits who insist we can’t have inflation while the economy is weak. There are plenty of examples#8230;/p

Beige Book Blues – Analyst Blog

Dirk Van Dijk — Wed, 10 Jun 2009 23:08:00 +0000

OK, the financial press spin in favor of "green shoots" is getting absurd. The AP headline on the story about the Fed Beige Book reads: "Fed survey sees signs recession is easing." Did the reporter even bother to read the report, or did he write the headline first to show what he wanted the report to show, not what it actually said?

Here is the link to the whole beige book, and a few key sections (with my comments in between paragraphs):

"Reports from the twelve Federal Reserve District Banks indicate that economic conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the Districts noted that the downward trend is showing signs of moderating. Further, contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year."

In other words, seven of the twelve districts did not see signs of moderating.

"Manufacturing activity declined or remained at a low level across most Districts. However, several Districts also reported that the outlook by manufacturers has improved somewhat. Demand for nonfinancial services contracted across Districts reporting on this segment.

"Retail spending remained soft as consumers focused on purchasing less expensive necessities and shied away from buying luxury goods. New car purchases remained depressed, with several Districts indicating that tight credit conditions were hampering auto sales. Travel and tourism activity also declined.

"A number of Districts reported an uptick in home sales, and many said that new home construction appeared to have stabilized at very low levels. Vacancy rates for commercial properties were rising in many parts of the country, while developers are finding financing for new commercial projects increasingly difficult to obtain. Most Districts reported that overall lending activity was stable or weak, but with mixed results across loan categories.

"Credit conditions remained stringent or tightened further. Energy activity continued to weaken across most Districts, and demand for natural resources remained depressed. Planting and growing conditions varied across Districts as did agricultural input costs."

Check out the verbs and adjectives used: "declined," "contracted," "remained soft," "declined," "stabilized at very low levels," "weaken." Positive verbs were only used for things that you don't want to go up, like commercial vacancy rates.

"Labor market conditions continued to be weak across the country, with wages generally remaining flat or falling. Two Districts also mentioned employers' plans to scale back employee benefit programs. The Atlanta, Chicago and St. Louis Districts reported that some state and local governments faced hiring freezes or outright job cuts.

"While manufacturing employment levels remained low, some Districts saw signs that job losses may be moderating. With few exceptions, Districts reported that prices at all stages of production were generally flat or falling. The notable exception to the downward pressure on prices was the widely-reported increase in oil prices."

Expect labor market conditions to stay weak for some time now. Flat or falling wages will keep retail sales soft and consumer focused on less expensive necessities. The good news is that for now, core inflation is not going to be a problem.

Rising oil prices will make headline inflation a bit more problematic. Dollars going to Exxon (XOM) at the pump can not be spent at J.C. Penney (JCP) for more discretionary goods.

Manufacturing

"Manufacturing declined or remained weak in most Districts. Boston, Philadelphia, Cleveland, Chicago, St. Louis and Minneapolis reported declines in activity, while production remained at very low levels in the San Francisco District. Atlanta and Kansas City indicated that the pace of the decline in manufacturing had moderated or slowed. New York characterized the sector as having stabilized, while Dallas mentioned signs of stabilization. In contrast, Richmond reported a rise in both new orders and shipments."

OK, only one district, Richmond, was clearly positive on the manufacturing side of things. The New York district might be called neutral, and perhaps the same could be said of San Francisco.

"Philadelphia reported that the primary metals, machinery and electrical equipment industries remain especially weak, and Cleveland noted that steel shipments continue at depressed levels. Chicago commented that, apart from Asia, export demand was weak. Dallas reported that construction-related manufacturing and the petrochemicals markets remained weak, while San Francisco stated that activity in the wood products industry was depressed and that demand in the metal fabrication industry was extremely weak.

"Cleveland, Chicago, St. Louis and Dallas all noted weakness in automotive-related industries. In contrast, Boston, Dallas, and San Francisco indicated that high technology industries experienced some increase in activity, and Richmond noted strengthening across a number of industries. Several Districts also reported that the outlook of manufacturers has improved somewhat, though Boston, Cleveland and Kansas City mentioned that capital spending was weak."

"Remain weak," "remain weak," "remain especially weak," "was extremely weak." How the heck do you get "signs the recession is easing" from this report? Look I would love to be able to say that things are getting better, but I am not going to be doing anybody any favors by holding out false hope, or spinning a headline so that black is white.

This was not a strong report. Look at the data yourself -- don't just rely on those in the financial media who want to say everything is coming up roses. A slowing rate of decline is still a decline, and stabilizing is not the same thing as going up. Orwell's classic 1984 was published 60 years ago on Monday, and it seems as relevant as ever.
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Zacks Investment Research

Zacks Earnings Preview: National Semiconductor and The Talbots Inc. – Press Releases

Charles Rotblut — Mon, 08 Jun 2009 12:03:40 +0000

For Immediate Release

Chicago, IL - June 8, 2009 - Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes National Semiconductor (NSM) and The Talbots Inc. (TLB). To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Every day, Zacks.com makes 4 stock picks available, free of charge. To see them, go to http://at.zacks.com/?id=3567.

The Week's Events

S&P 500 members Brown Forman (BF.B), National Semiconductor (NSM) and Pall Corporation (PLL) headline what will be a very light earnings calendar. Only 37 companies are confirmed to report.

On the economic front, the Fed will release its periodic Beige Book on Wednesday afternoon. The next morning we will get May retail sales numbers from the Commerce Department.

Tuesday: April wholesale inventories
Wednesday: Fed Beige Book, April trade deficit, May treasury budget, weekly crude inventories
Thursday: May retail sales, weekly initial jobless claims
Friday: Initial June University of Michigan consumer confidence, May import and export prices

Three Fed officials are scheduled to speak. Governor Daniel Tarullo will talk about financial regulation at the Peterson Institute for International Economics in Washington, D.C. on Tuesday. On Wednesday, Governor Elizabeth Duke will deliver a lunchtime speech about consumer protection in Cleveland. Finally, Atlanta Fed Reserve President Dennis Lockhart will talk about the economy at a conference in Atlanta on Thursday.

The smartphone market will be in focus.

Palm's (PALM) next generation phone, the Pre, goes on sale tomorrow (Jun 6). Expect to hear some discussion about sales and initial reaction by customers.

Competitor Apple (AAPL) is expected to release details about a new iPhone. A software developers conference starts on Monday and there is speculation that Steve Jobs will be the one introducing the new mobile device.

The markets are stuck in a trading range. Given the light amount of data, there doesn't seem be a reason to think that things will change this week.

This said, keep an eye on Wednesday and Thursday, however. The combination of the Beige Book, speeches from Fed officials, oil inventories and a 10-year treasury auction (Wednesday at 1 p.m.) could get some traders to be more active.

Companies That Could Issue Positive Earnings Surprises

Fiscal-fourth quarter estimates for National Semiconductor (NSM) have been gradually improving. The current consensus estimate, which calls for a loss of 44 cents per share, is 3 cents better than the average forecast of a month ago. The most accurate estimate is slightly more bullish and calls for a loss of 42 cents per share. Though NSM has topped expectations twice in the past 4 quarters, it has also missed twice, so this is a risky call. National Semiconductor is scheduled to report on Thursday, Jun 11, after the close of trading.

Companies That Could Issue Negative Earnings Surprises

The Talbots Inc. (TLB) has not only disappointed investors for 2 consecutive quarters, but it missed estimates by wide margins. Brokerage analysts are bracing for a first-quarter loss of 49 cents per share, but the most accurate estimate suggests the retailer could post a wider loss of 52 cents per share. Talbots is scheduled to report on Tuesday, Jun 9, before the start of trading.

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

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About the Zacks Rank

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank Stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 82% annually (+2% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

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Zacks Investment Research

Earnings Preview for June 8 – 12 – Earnings Preview

Charles Rotblut — Fri, 05 Jun 2009 05:00:00 +0000

On the economic front, the Fed will release its periodic Beige Book on Wednesday afternoon. The next morning we will get May retail sales numbers from the Commerce Department.

Tuesday: April wholesale inventories
Wednesday: Fed Beige Book, April trade deficit, May treasury budget, weekly crude inventories
Thursday: May retail sales, weekly initial jobless claims
Friday: Initial June University of Michigan consumer confidence, May import and export prices

The smartphone market will be in focus.

Palm's (PALM) next generation phone, the Pre, goes on sale tomorrow (Jun 6). Expect to hear some discussion about sales and initial reaction by customers.

The markets are stuck in a trading range. Given the light amount of data, there doesn't seem be a reason to think that things will change this week.

Companies That Could Issue Positive Earnings Surprises

Companies That Could Issue Negative Earnings Surprises

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

Surprise Trader can help you turn earnings surprises into quick profits. Learn how.

Earnings Calendar

Here is a list of companies that we have confirmed will report during the week of June 8 - 12¹. Prices are as of Thursday's, June 4, market close.

Company	Stock	Zacks Estimate	Year Ago EPS	Last Qtr Surprise	Date	Time	Price
Ferrellgas -Lp	FGP	$0.65	$0.55	(7.6%)	6/8	N/A	$16.80
Fuelcell Energy	FCEL	($0.30)	($0.38)	(9.4%)	6/8	AMC	$3.74
Pall Corp	PLL	$0.42	$0.54	(13.6%)	6/8	AMC	$26.67
Quiksilver Inc	ZQK	$0.04	$0.30	22.2%	6/8	AMC	$3.28
99 Cents Only	NDN	$0.04	($0.06)	(5.3%)	6/9	AMC	$10.04
Cra Intl Inc	CRAI	$0.30	$0.48	(48.7%)	6/9	BTO	$28.63
Gigamedia Ltd	GIGM	$0.11	$0.20	(6.7%)	6/9	BTO	$6.31
Korn/Ferry Intl	KFY	($0.06)	$0.36	(20.0%)	6/9	BTO	$11.82
Movado Grp Inc	MOV	($0.48)	$0.05	(975.0%)	6/9	BTO	$8.15
Nci Bldg System	NCS	($0.14)	$0.85	8.9%	6/9	AMC	$3.99
Oxford Inds Inc	OXM	$0.25	$0.59	100.0%	6/9	AMC	$10.85
Pep Boys M M &J	PBY	$0.06	$0.00	11.5%	6/9	BTO	$7.81
Piedmont Nat Ga	PNY	$0.66	$0.66	(1.8%)	6/9	BTO	$23.11
Rentrak Corp	RENT	$0.05	$0.10	0.0%	6/9	AMC	$10.50
Shuffle Master	SHFL	$0.04	$0.09	(75.0%)	6/9	AMC	$4.25
Streamline Hlth	STRM	($0.02)	($0.09)	N/A	6/9	AMC	$3.48
Talbots Inc	TLB	($0.49)	$0.21	(258.2%)	6/9	BTO	$4.88
Titan Machinery	TITN	$0.13	$0.24	-14.29%	6/9	BTO	$16.06
Brown Forman B	BF.B	$0.49	$0.65	5.2%	6/10	BTO	$45.99
Hooker Furnitur	HOFT	$0.16	$0.23	5.0%	6/10	BTO	$12.00
Linktone Ltd	LTON	($0.02)	($0.18)	220.0%	6/10	AMC	$2.50
Measuremnt Spcl	MEAS	$0.00	$0.31	200.0%	6/10	AMC	$6.39
Mens Wearhouse	MW	$0.00	$0.20	62.5%	6/10	AMC	$18.43
North Amer Egy	NOA	$0.16	$0.66	44.1%	6/10	AMC	$7.75
Stewart Entrp A	STEI	$0.08	$0.15	(12.5%)	6/10	BTO	$4.90
Access Integr-A	CIDM	($0.21)	($0.43)	0.0%	6/11	N/A	$1.11
Arcsight Inc	ARST	$0.07	($0.03)	300.0%	6/11	AMC	$17.75
China Med Tech	CMED	$0.45	$0.53	268.8%	6/11	BTO	$25.01
Chindex Intl	CHDX	$0.10	($0.20)	(21.4%)	6/11	BTO	$8.69
Del Monte Foods	DLM	$0.26	$0.29	36.4%	6/11	BTO	$8.40
Herley Inds Inc	HRLY	$0.16	$0.15	220.0%	6/11	AMC	$11.02
Hoku Scientific	HOKU	($0.08)	($0.12)	(300.0%)	6/11	BTO	$3.12
Lululemon Athlt	LULU	$0.08	$0.12	33.3%	6/11	BTO	$14.08
Mds Inc	MDZ	$0.06	$0.06	(14.3%)	6/11	BTO	$5.44
Natl Semicon	NSM	($0.44)	$0.35	180.0%	6/11	AMC	$13.99
Repligen	RGEN	($0.06)	($0.10)	100.0%	6/11	N/A	$4.55
School Specialt	SCHS	($0.66)	($0.66)	(13.9%)	6/11	BTO	$19.69

BTO = Before The Market Open, AMC = After The Market Close

¹Some of the companies listed in the earnings calendar may not be in the Zacks Rank universe.

Zacks Investment Research

Revisiting Some Previous Picks

Bullish Bankers — Mon, 04 May 2009 11:00:07 +0000

The volatility in the markets over the past year has been staggering to say the least. Even during these turbulent times, I was always of the belief that utilities were relatively safe. As a result, I wrote about a few stocks in the past seven months or so that I thought were pretty good plays [...]

Each Real Estate Market’s Different – Analyst Blog

Dirk Van Dijk — Tue, 28 Apr 2009 21:32:06 +0000

Highlights include Citigroup, Inc. (C) and JPMorgan Chase & Co., Inc. (JPM), Bank of America Corp. (BAC) and Hudson City Bancorp (HCBK).

Realtors will tell you that every real estate market is different. While there is some truth to that, the decline we are seeing in housing prices is very broad-based.

The graph below (larger version available at http://www.calculatedriskblog.com/) shows the decline from peak levels in each of the 20 markets followed by the Case Schiller index. Every market is off by at least 10%, but it is clear that Dallas, Charlotte and Denver have been holding up the best so far. On the other hand, seven areas -- more than one third of the markets -- are down more than 40% from peak levels.

Phoenix is in ashes with a decline of more than 50%; time will tell if it can live up to its name and rise again. What is striking is that the three cities where Finance is the most prominent industry -- New York, Boston and Charlotte -- are all towards the least damaged end of the spectrum.

So is there anything we can tell from the pattern of price declines across these different markets? Was it a question of how big the bubble was in the first place? Perhaps -- Dallas was the second-least-bubbly market based on its peak CS index level of 126.47, and Charlotte was number four at 135.88 (all the indexes equaled 100 1/2000). Cleveland (123.24) Detroit (127.05) and Atlanta (136.47) round out the remainder of the non bubbly quartile, and only Detroit is down more than 40% from its peak.

A strong case can be made that given the troubles of the Auto industry that it is a special case. Cleveland and Atlanta have fared somewhat better than most cities, but not by a huge margin. On the other hand, the most bubbly markets are well represented in the biggest declines from peak group. Miami was the most bubbly with a peak index value of 280.87, followed by L.A. (273.94), Washington D.C. (251.07), San Diego (250.34) and Tampa (238.09). Three of those cities are in the down over 40% club and Tampa seems to be applying for membership.

In addition to the top five, four other cities had peak index values of over 200, and three of them are in the down 40% club (Phoenix, Las Vegas and San Francisco). New York is the one anomaly there. It is the one true bubble market that has not popped hard.

In general, the hardest-hit markets also hit their peaks earlier than the ones that have held up better. Four cities peaked out in late 2005, of which only Boston is holding up better than most. San Diego, San Francisco and Detroit were the other early peakers.

Five cities, on the other hand, did not hit their peak until the summer of 2007 -- Charlotte, Portland, Seattle, Dallas and Atlanta -- all of which are clustered towards the least affected end of the graph. Are they just behind the curve? I suspect that may be the case.

I suspect that the New York market is the most vulnerable at this point. The Pacific Time Zone cities have already seen most of the damage done. Dallas, Charlotte, Atlanta and Denver never got too out of hand on the upside. New York, and to a lesser extent Boston, did experience full-scale bubble pricing, but have yet to really feel the pain.

This would be very bad news to banks with big exposures to those two markets. Citibank (C) and J.P. Morgan (JPM) have very large presences in New York, and Bank of America (BAC) has a big share in Boston. However, perhaps the most vulnerable would be a smaller bank like Hudson City Bancorp (HCBK).

Read the full analyst report on "HCBK"
Zacks Investment Research

Home Price Indexes Show Signs Of Improvement

IndexUniverse Staff — Tue, 28 Apr 2009 17:02:47 +0000

While not sterling, the latest readings of indexes tracking U.S. home prices showed signs of improvement in February.

Although the S&P/Case-Shiller Home Price indexes kept dropping in February, some good signs did appear.

For the first time in 16 months, the benchmarks' fall didn't set new records, according to the latest monthly results released on Tuesday. That was seen as at least some sign of progress for the heavily depleted housing market.

Nearly all of the major metro areas followed by the index, which benchmarks existing single-family home prices across the country, showed improvement from January.

"We will certainly need a few more months of data before we can determine if home prices are finally turning around," said David Blitzer, chairman of S&P's index committee, in a statement.

All 20 metro areas covered by the indexing series produced a monthly decline in February. However, some 16 of the 20 metro areas saw an improvement in their monthly returns compared with January. "Furthermore, this is the first month since October 2007 where the 10- and 20-City composites [benchmarks] did not post a record annual decline," added Blitzer.

Still, average U.S. home prices are at similar levels to where they were in the third quarter of 2003. From the peak in mid-2006, the 10-City Composite Index was down 31.6% and the 20-City Composite was down 30.7% through February 2009.

From the U.S. housing market's peak through February 2009, Dallas has suffered the least. Average home prices in that metropolitan market were down 11.1% from peak levels in June 2007. Meanwhile, Phoenix was down 50.8% from its peak in June 2006.

Cleveland was the only metro area having a record monthly decline, returning -5.0%. Besides that metro area, home prices in Charlotte, New York and Washington were the only areas showing larger declines in February than the previous month.

But all 20 major metro areas remained steeped in double-digit declines from their peaks. In fact, 10 of those posted February declines of greater than 30% and seven of those—Detroit, Las Vegas, Los Angeles, Miami, Phoenix, San Francisco and San Diego—in excess of 40%.

On an annualized basis, three metro areas fared the best:

Dallas dropped 4.5% and turned in the best performance, returning -0.3%

Denver fell some 5.7%

Boston lost 7.2%

The three worst-performing cities continue to be from the Sunbelt, all reporting negative returns in excess of 30%:

Phoenix was down 35.2%

Las Vegas declined 31.7%

San Francisco fell 31%

Home Prices Indexes Show Signs Of Improvement

IndexUniverse Staff — Tue, 28 Apr 2009 17:02:47 +0000

While not sterling, the latest readings of indexes tracking U.S. home prices showed signs of improvement in February.

Although the S&P/Case-Shiller Home Prices indexes kept dropping in February, some good signs did appear.

Nearly all of the major metro areas followed by the index, which benchmarks existing single-family home prices across the country, showed improvement from January.

"We will certainly need a few more months of data before we can determine if home prices are finally turning around," said David Blitzer, chairman of S&P's index committee, in a statement.

All 20 metro areas covered by the indexing series produced a monthly decline in February. However, some 16 of the 20 metro areas saw an improvement in their monthly returns compared to January. "Furthermore, this is the first month since October 2007 where the 10- and 20-City composites (benchmarks) did not post a record annual decline," added Blitzer.

Still, average U.S. home prices are at similar levels to where they were in the third quarter of 2003. From the peak in mid-2006, the 10-city composite index was down 31.6% and the 20-city composite was down 30.7% through February 2009.

But all 20 major metro areas remained steeped in double-digit declines from their peaks. In fact, 10 of those posted February declines of greater than 30% and seven of those -- Detroit, Las Vegas, Los Angeles, Miami, Phoenix, San Francisco and San Diego -- in excess of 40%.

On an annualized basis, three metro areas fared the best on an annualized basis:

Dallas dropped 4.5% and turned in the best performance, returning -0.3%

Denver fell some 5.7%

Boston lost 7.2%

The three worst performing cities continue to be from the Sunbelt, all reporting negative returns in excess of 30%:

Phoenix was down 35.2%

Las Vegas declined 31.7%

San Francisco fell 31%

Housing Prices Continue to Tumble – Analyst Blog

Dirk Van Dijk — Tue, 28 Apr 2009 16:32:39 +0000

Highlights include Citigroup, Inc. (C) and Bank of America Corp. (BAC).

The S&P Case Schiller index, the best measure of housing prices, showed prices were still declining in February. The 10-city composite was down by 2.1% for the month, 18.8% year over year and is 31.6% off its peak (May 2006). The 20-city composite has a shorter history but tells much the same story -- it was down 2.2% for the month, 18.6% for the year and is off 30.7% from its peak (also May 2006).

As the chart below (larger version available at http://www.calculatedriskblog.com/) shows, the most positive thing that can be said is that the year-over-year rate of decline has started to slow a bit, particularly for the 10-city composite. This was the first time in over two years (20-city composite, 16 months for the 10-city composite) that the year-over-year decline did not set a record. For the month, housing price indexes were down for every one of the 20 metropolitan areas followed. For eight of the 20 cities, the monthly declines were at least 3.0%.

The worst-hit cities for the month included many of the usual suspects, which means that the hardest hit places continue to get hammered. For the month, Cleveland registered a 5.0% decline, followed by Phoenix with a 4.5% drop and Detroit with a 3.8% decline. The other hard-hit cities include (in order of monthly declines) Las Vegas, Chicago, San Francisco, Minneapolis and Miami. The only city to have less than a 1.0% decline for the month was San Diego.

However only two cities have housing prices below January 2000 levels (when the indexes were all at 100) -- Detroit and Cleveland. The three cities with the highest current index levels are New York (178), Washington D.C. (168) and Los Angeles (163). Only time will tell if they are simply behind the curve, or are more resilient than other areas. I suspect the former.

The level of house price decline is one of the key metrics for the so-called "stress tests." As the second graph shows, the "more adverse" scenario under the stress tests is the one that most closely matches the economic reality.

The baseline scenario is not even worth considering, for it involves no stress at all. Any bank that cannot pass the baseline scenario should be avoided by investors at all costs (depositors are fine up to $250,000, for at least as long until the FDIC runs out of money, but even then the Treasury or the Fed will bail it out). Such a bank is insolent, not just illiquid, insolvent. They will need to raise very large amounts of capital that will severely dilute the existing shareholders.

Passing the "more adverse" scenario means that the bank should be able to make it, provided there are no major exogamous shocks to the system -- like, say, a worldwide flu pandemic.

The decline in housing values is really at the core of the current economic troubles. To be more precise, it was the unwarranted rise in those housing values (which are now returning to earth) that was the core problem -- it is just that the pain is felt on the downside of the bubble.

The continuing decline in housing prices will lead to more people being underwater on their homes. That will lead to more foreclosures (and rising unemployment will speed that process along). Those foreclosures will cause more pressure on bank balance sheets.

Since the administration seems intent on being extremely nice to the bankers, it means that there will be more taxpayer money flowing to the coffers of the banks to shore them up. It certainly does not come as a surprise that Citigroup (C) and Bank of America (BAC) are likely to need to raise more capital. However, if recent history is any guide (under both the Obama and Bush administrations), they will probably get it from the government on extremely preferential terms, with the government going out of its way to asset any ownership rights that might protect the taxpayers.

The decline in housing values also means that those still with positive equity in their houses will have less of it, further diminishing retirement nest eggs for millions. This will keep the pressure on for people to try to save out of current income. That is a good thing over the long run, but the savings will come at the expense of consumption, and the lower consumption will further depress the economy.

On the bright side, young people (and renters) may actually be able to afford a house in the near future. They will need a low monthly mortgage payment given the amount of taxes they will have to pay in the future given the debt the country is taking on to make sure that bankers can live in the style that they have become accustomed to.

Zacks Investment Research

Apr 28: Consumer Confidence Surges – Economic Highlights

Zacks Market Commentaries — Tue, 28 Apr 2009 15:16:38 +0000

The S&P/Case-Shiller 10-City Home Price Index decreased by 2.1% in February, following a 2.6% drop in January, a 2.3% decline in December and a 2.2% drop in November, and fell 18.8% over the year, less than the 19.4% record annual decline observed in January, which is the first time in 16 months the annual decline did not set an annual record for the 10-city composite and the 20-city composite, which fell by 18.6% over the year. In March, the S&P/Case-Shiller 20-City Home Price Index declined by 2.2%, following a 2.8% reduction in January, 2.5% in December. This is the 31st consecutive month residential real estate has fallen, starting from August 2006, with home price reductions ubiquitous geographically where all 20 MSAs observed monthly and annual residential value declines. Cleveland was the only metro area having a record monthly decline, returning -5.0%. In terms of annual declines, the three worst performing cities continue to be from the Sunbelt fared worse with Phoenix down 35.2%, Las Vegas declined 31.7% and San Francisco fell 31.0%. Dallas, Denver and Boston faired the best in terms of annual declines down 4.5%, 5.7% and 7.2%, respectively. Dallas also had the least severe monthly decline, by -0.3%.

The Consumer Confidence Index showed optimism, which now stands at 39.2 in April, following 26.9 in March, and its record low of 25 in February. Consumers short term outlook improved and the employment situation became less pessimistic. The Present Situation Index increased to 23.7 from 21.9 in March, and the Expectations Index rose to 49.5 from 30.2 in March.

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Zacks Investment Research

Reovest Growth Research’s Recent Speculative Buy Rating on Sector 10, Inc. (SECT.OB)

QualityStocks — Mon, 13 Apr 2009 17:12:32 +0000

It’s one thing for a start-up company to send out a press release encouraging investors to purchase stock and another for an independent research company to release findings saying the same exact thing. Reovest Growth Research recently took a closer look at Sector 10, Inc. (SECT.OB) and published its findings in a 10-page report detailing [...]

PepsiCo: “Refresh Everything” – Analyst Blog

Zacks Market Commentaries — Tue, 24 Mar 2009 17:49:48 +0000

As part of the company's "Refresh Everything" campaign, PepsiCo. (PEP) is introducing three new products: Pepsi Natural, Pepsi Throwback, and Mountain Dew Throwback. All are sweetened with natural sugar.

Pepsi Natural is a premium, all-natural beverage made with natural sugar, natural caramel, kola nut extract and natural apple extract. One of its unique attributes is the amount of foam that rises to the top of beverage when it's poured. Offered in a 12-ounce glass bottle, initially it will be available in 10 regional markets -- Chicago, Cleveland, Pittsburgh, Los Angeles, San Diego, San Francisco, Seattle, Portland, Las Vegas and New York -- beginning late March or April.

Pepsi Throwback and Mountain Dew Throwback are retro versions of two of PepsiCo's popular brands, sweetened with natural sugar in a retro-look package. Pepsi Throwback and Mountain Dew Throwback will be available nationally for only the limited time of 8 weeks beginning April 20th.

Product innovation is a key to revenue growth and margin improvement for consumer companies. New and improved brands, along with innovative value-added products, enable consumer companies to command premium pricing. When supported by extensive and aggressive marketing campaigns, new products not only stimulate sales growth but also enhance margins. In addition, these innovative and highly competitive products usually have unique attributes that enable consumer companies to gain market share.
Read the full analyst report on "PEP"
Zacks Investment Research

U.S. Home Prices Index Falls To 21-Year Low

IndexUniverse Staff — Tue, 24 Feb 2009 19:17:30 +0000

Home price indexes don't show many bright spots as 2008 ends up as the second-straight year of annual declines.

More ugly real estate news came out Tuesday as the S&P/Case-Shiller U.S. National Home Price Index in December showed its largest quarterly fall in the 21-year history of the indexing series.

The drop-off in the final quarter of 2008 by the benchmark – which covers all nine U.S. census divisions – represented an 18.2% decline from the same period a year ago. S&P reported that the 10-City and 20-City composite indexes also set new records, with annual declines of 19.2% and 18.5%, respectively.

With completed December data, S&P is now saying that domestic home prices have been falling nationwide for two straight years, covering 2007 and 2008.

"The broad downturn in the residential real estate market continues,” said David Blitzer, chairman of the index committee at Standard & Poor’s, in a statement. “There are very few, if any, pockets of turnaround that one can see in the data."

The picture remained bleak in December as all of the 20 metro areas covered by the indexes were reporting annual declines. In fact, eight of those areas had negative rates exceeding 20%. And looking at annualized data, some 13 of the 20 metro areas have been reporting consecutive record declines since December 2007.

Breaking down the data on a monthly basis shows a similar trend. All of the metro areas had at least four consecutive months of negative returns in the past two years. As of December, the average U.S. home price was at a similar level as in the third quarter of 2003. From the housing market's peak in the second quarter of 2006, average home prices are down 26.7%.

Still, some bright spots did show up, although few and far between. Five metro areas -- Boston, Denver, Los Angeles, San Diego and Washington, D.C. -- saw some improvement. Those areas' rates of decline were less in December 2008 than in the previous December. Also, Detroit showed a slight improvement in monthly returns, but fell harder in 2008 on an annualized basis.

The most recent index data through December also reported that:

The seven worst-performing cities in terms of year-over-year declines continue to be from the sunbelt, reporting negative returns in excess of 20%. Phoenix was down 34.0%, Las Vegas reported -33.0% and San Francisco fell 31.2%.
Denver, Dallas, Cleveland and Boston faired the best in terms of annual declines down 4.0%, 4.3%, 6.1% and 7.0%, respectively.
Dallas was down just 8.6% from its peak in June 2007, while Phoenix is down 45.5% from its peak in June of 2006. Eighteen of the 20 metro areas were in double-digit declines from their peaks, with half of the metro areas posting declines of greater than 20% and four of those (Las Vegas, Miami, Phoenix and San Francisco) in excess of 40%.

Home Prices Drop 26.7% From Peak In December

IndexUniverse Staff — Tue, 24 Feb 2009 19:17:30 +0000

Home price indexes don't show many bright spots as 2008 ends up as the second straight year of annual declines.

More ugly real estate news came out Tuesday as the S&P/Case-Shiller U.S. National Home Price Index in December showed its largest quarterly fall in the 21-year history of the indexing series.

The drop-off in the final quarter of 2008 by the benchmark—which covers all nine U.S. census divisions—represented an 18.2% decline from the same period a year ago. S&P reported that the 10-City and 20-City composite indexes also set new records, with annual declines of 19.2% and 18.5%, respectively.

With completed December data, S&P is now saying that domestic home prices have been falling nationwide for two straight years, covering 2007 and 2008.

Still, some bright spots did show up, although few and far between. Five metro areas—Boston, Denver, Los Angeles, San Diego and Washington, D.C.—saw some improvement. Those areas' rates of decline were less in December 2008 than in the previous December. Also, Detroit showed a slight improvement in monthly returns, but fell harder in 2008 on an annualized basis.

The most recent index data through December also reported that:

The seven worst-performing cities in terms of year-over-year declines continue to be from the sunbelt, reporting negative returns in excess of 20%. Phoenix was down 34.0%, Las Vegas reported -33.0% and San Francisco fell 31.2%.
Denver, Dallas, Cleveland and Boston fared the best in terms of annual declines, down 4.0%, 4.3%, 6.1% and 7.0%, respectively.
Dallas was down just 8.6% from its peak in June 2007, while Phoenix is down 45.5% from its peak in June of 2006. Eighteen of the 20 metro areas were in double-digit declines from their peaks, with half of the metro areas posting declines of greater than 20%, and four of those (Las Vegas, Miami, Phoenix and San Francisco) in excess of 40%.

Home Prices Continue To Post Declines

Daniel Shepard — Tue, 24 Feb 2009 15:00:43 +0000

Tuesday February 24, 2009 Navivest Standard #38; Poor’s today released its Standard #38; Poor#8217;s/Case-Shiller Home Price Index for December and as expected, the numbers were not good. The index, which tracks home prices in twenty metropolitan areas, showed that prices for single-family homes fell 18.5% for the month on a year over year basis. On a month [...]

Eight Houses for Sale Across the US for $100 Each

Fred Fuld — Sat, 14 Feb 2009 05:11:00 +0000

It may be hard to believe, but Zillow is listing eight houses for sale at a reasonable price of only $100. And yes, there is even one in California and two in Florida.br /br /Here are some of the cheapest houses in the country according to Zillow.br /br /a href="http://www.zillow.com/homedetails/440-Osmun-St-Pontiac-MI-48342/24415551_zpid/" target="_blank"Michigan/abr /br /a href="http://www.zillow.com/homedetails/125-S-Catherine-Ave-La-Grange-IL-60525/3888878_zpid/" target="_blank"Colorado/a (5 bedroom, 4.5 bath, 3400 sq ft)br /br /a href="http://www.zillow.com/homedetails/10827-Barker-View-Dr-Cypress-TX-77433/2140767443_zpid/" target="_blank"Texas/a ( 5 bed, 3.5 bath)br /br /a href="http://www.zillow.com/homedetails/Crosby-Big-Bear-Lake-CA-92315/2144617390_zpid/" target="_blank"California/abr /br /a href="http://www.zillow.com/homedetails/Slsby-10-Cleveland-OH-44118/2141387437_zpid/" target="_blank"Ohio/abr /br /a href="http://www.zillow.com/homedetails/1475-Freeland-Ave-Calumet-City-IL-60409/4287892_zpid/" target="_blank"Illinois/abr /br /a href="http://www.zillow.com/homedetails/9225-N-Rainelle-Ave-Crystal-River-FL-34428/43630523_zpid/" target="_blank"Florida/abr /br /a href="http://www.zillow.com/homedetails/1550-Phillip-Pl-Englewood-FL-34223/43572854_zpid/" target="_blank"Florida/adiv class="blogger-post-footer"div class='adsense' style='text-align:center; padding: 0px 3px 0.5em 3px;' script type="text/javascript"!-- google_ad_client="ca-pub-2427831169011625"; google_ad_width=300; google_ad_height=250; google_ad_format="300x250_as"; google_ad_type="text"; google_ad_channel ="8681602088"; google_color_border="FFF3DB"; google_color_bg="FFF3DB"; google_color_link="1B0431"; google_color_url="1B0431"; google_color_text="29303B"; //--/script script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js" /script /div

Valentines Day Stocks

Fred Fuld — Tue, 10 Feb 2009 05:05:00 +0000

a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://1.bp.blogspot.com/_T9VXVyuEITg/SZERIA0Vn5I/AAAAAAAAAoU/wsvpFNnYyNA/s1600-h/valentine.jpg"img style="float:right; margin:0 0 10px 10px;cursor:pointer; cursor:hand;width: 130px; height: 200px;" src="http://1.bp.blogspot.com/_T9VXVyuEITg/SZERIA0Vn5I/AAAAAAAAAoU/wsvpFNnYyNA/s200/valentine.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5301037065747931026" //abr /February 14 is Valentine's Day, so if you haven't done the shopping for your sweetheart, then you better get started. How about a gift of some shares in companies that may participate in sales of Valentines Day related products. Here are some stocks that can benefit from from this popular day, including chocolate, flowers, jewelry, greeting cards, and gift wrap.br /br /Hershey (HSY), founded in 1894, is the largest manufacturer of chocolate in North America and one of the largest chocolate and candy companies in the world. Hershey's Kisses were invented in 1901. Hershey chocolate chips were introduced in 1928. The stock has a P/E of 27, with a favorable yield of 3.2%.br /br /Rocky Mountain Chocolate Factory Inc. (RMCF) is a very low cap stock [and should therefore be considered very speculative], based in Durango, Colorado, which makes and markets caramels, creams, mints, and truffles. The company, which was founded in 1981, has over 300 franchise locations in 40 states, along with Canada and the United Arab Emirates. The P/E is 11, and their yield is 5.2%. This is a very low cap stock and should be considered very speculative.br /br /1-800-Flowers.com Inc. (FLWS), the largest publicly traded flower seller, also sells plants, gourmet foods, cookies, cakes, candies, wine, gift baskets, and other gifts. They recently generated negative earnings. This is a low cap stock and should be considered very speculative.br /br /Tiffany Co. (TIF), founded in 1837, is one of the top jewelry companies in the world, with over 60 U.S. stores and over 100 international locations. The metric carat as a weight standard for gems was developed by a Tiffany gemologist. The New York City flagship store is home to the 128-carat Fancy Yellow Tiffany Diamond. The stock has a PE of 10, and a yield of 3%.br /br /Blue Nile Inc. (NILE), founded in 1999, is a leading web based retailer of diamonds and fine jewelry, and the largest online retailer of certified diamonds. The stock has a PE of 24.br /br /A couple other jewelry companies are Signet Group plc (SIG), with a PEG of 1, and Zale Corporation (ZLC) which recently generated negative earnings. These are very low cap stocks and should be considered very speculative.br /br /American Greetings Corp. (AM), founded in 1906 and based in Cleveland, Ohio, is the largest publicly-traded greeting card company in the world. The stock has recently generated negative earnings and a yield of 8.5%.br /br /CSS Industries Inc. (CSS) markets gift wrap, gift bags, boxed greeting cards, gift tags, tissue paper, decorations, and decorative ribbons and bows. The stock has a PE of 10, and a yield of 3.6%.br /br /Don't forget to check out a href="http://stockerblog.blogspot.com/2008/05/diamond-and-jewelry-stocks.html"diamond and jewelry stocks/a and a href="http://stockerblog.blogspot.com/2008/02/chocolate-stocks.html"chocolate stocks/a.br /br /span style="font-style:italic;"Author does not own any of the above./spanbr /br /By a href="http://Stockerblog.com"Stockerblog.com/adiv class="blogger-post-footer"div class='adsense' style='text-align:center; padding: 0px 3px 0.5em 3px;' script type="text/javascript"!-- google_ad_client="ca-pub-2427831169011625"; google_ad_width=300; google_ad_height=250; google_ad_format="300x250_as"; google_ad_type="text"; google_ad_channel ="8681602088"; google_color_border="FFF3DB"; google_color_bg="FFF3DB"; google_color_link="1B0431"; google_color_url="1B0431"; google_color_text="29303B"; //--/script script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js" /script /div

Facing Foreclosure ? Don’t Leave. Squat

Alex Stanczyk — Thu, 05 Feb 2009 16:41:06 +0000

Alex’s Notes: Very interesting to note that banks are having a hard time finding the actual mortgage documents. *** Facing Foreclosure ? Don’t Leave. Squat Amy Goodman February 4, 2009 The San Francisco Chronicle Marcy Kaptur of Ohio is the longest-serving Democratic congresswoman in U.S. history. Her district, stretching along the shore of Lake Erie from west of Cleveland to Toledo, [...]

Bank of America Drops as Merrill May Need U.S. Aid

Alex Stanczyk — Thu, 15 Jan 2009 18:53:34 +0000

Alex’s Notes: And the massive derivative mess continues to unwind. The US has pushed so much paper into the markets, and the Fed has used up pretty much all its credit, so the next shoe to drop will be the bond markets. More bailouts = direct bond issuances by the Federal Reserve. Scary territory. When that bubble pops, [...]

US Stocks, Wall St Falls on Dow Chemical (DOW) News

Contrarian Profits — Mon, 29 Dec 2008 18:50:49 +0000

pDow Chemical, Kuwait deal collapses#8230; Nasdaq dragged by large-cap tech companies#8230; Oil rises above $38 per barrel on Middle East tensions#8230; Dow off 1.6 pct, S#38;P off 1.6 pct, Nasdaq off 2.3 pct/p pWall Street stumbled on Monday after a joint venture between Kuwait and Dow Chemical fell through, threatening one of the larger merger deals of the year and adding to fears about a faltering global economy. /p p a href="http://finance.google.com/finance?q=NYSE%3ADOW"Dow /ashares tumbled to their lowest since 1991 after Kuwait decided to end a $17.4 billion petrochemical joint venture amid slumping petrochemical sales and the global financial crisis. /p p The news ignited worries that the largest U.S. chemical company would not be able to buy rival Rohm #38; Haas , which Dow agreed to#8230;/p

Fed Cuts to Near-Zero – Analyst Blog

Dirk Van Dijk — Tue, 16 Dec 2008 15:27:39 +0000

The Federal Reserve used up almost all of its remaining conventional ammo today as it desperately tries to prevent the second Great Depression. The statement is below, along with the previous statement, and with my commentary interspersed.

"The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent."

"The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 1 percent."

Hard to believe that just six weeks ago the fed funds rate was at 1.50%. Now we are near zero. The use of a range is unusual and perhaps unprecedented. Then again, the fed funds rate has never been this low before, and at the low end of the range I can safely say that it is a record that will never be broken.

That's it folks -- the Fed is officially out of its normal ammunition, although by using a range perhaps it has retained a BB. On the other hand, the effective fed funds rate has been in this area for several weeks, so the Fed is really just catching up to the market, not leading it.

"Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further."

"The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures. Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."

No disagreement here. The economy is a mess and getting messier by the day. Pick your indicator and it is either at a record or a multi-decade low or high, depending on which indicates a soft economy.

"Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters."

"In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate in coming quarters to levels consistent with price stability."

In the short run, the problem is deflation, not inflation. The CPI [Consumer Price Index] came out today down 1.7% for the month, with the core unchanged. On the headline numbers, that is far from price stability. If this continues, it will slow spending much more, since people will not want to buy today if they think they will be able to get a much better price next week.

Deflation also raises real interest rates, and the Fed is powerless to help out. However, the Fed is turning on the printing presses and is going to run them day and night. Eventually they will cure the deflation problem. There is a huge danger that they will overshoot and we will have very high inflation (more than Ford/Carter, less than Zimbabwe) as a result, in a year or two.

"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

"The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.

"The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity."

"Recent policy actions, including today's rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability."

Extraordinary times, indeed. The Fed is promising to keep fed funds low for a long time. This should help bring long-term rates down. I'm not sure that really is the problem though, since the 30-year bond is flirting with 3.0% -- levels not seen since the Great Depression.

The talk of buying the longer-term Treasuries and mortgage securities, that is Fed speak for "Turn on the printing presses and run them full speed night and day." The use of the Fed balance sheet to support credit to households and small businesses could be helpful, but moves the Fed in the direction of being a commercial bank, not a central bank.

We have to give the Fed high marks for creativity and trying hard. Generally, though, creativity is not a highly cherished trait in either accountants or central bankers. The potential unintended consequences are huge. The most likely of these is potential hyperinflation in 2010 or 2011. The dollar could also end up losing its status as the world's reserve currency.

"Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh."

"Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh."

Everyone on board with the plan. Geithner has removed himself from the committee pending his move over to Treasury.

"In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco. The Board also established interest rates on required and excess reserve balances of 1/4 percent."

"In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, and San Francisco."

The discount window is not a window anymore, it is a gaping hole in the side of the building. Come and get it, bank boys -- free cash! Use of the discount window is supposed to be at a penalty rate, but somehow even in this environment 0.25% does not seem like a very tough penalty.

While these actions are friendly to the banks, I would still avoid names like Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C). There are still way too many bad debt shoes left to fall before it is safe to get back into the banks.

Read the full analyst report on WFC

"C" Free Stock Analysis: Buy? Sell? Hold?
"BAC" Free Stock Analysis: Buy? Sell? Hold?
"WFC" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

ETN Cuts Forecast – Zacks Tale of the Tape

Zacks Market Commentaries — Tue, 16 Dec 2008 14:19:34 +0000

Eaton Corp. (ETN) cut its fourth-quarter earnings estimate as the Cleveland-based industrial manufacturer battles deteriorating economic conditions.

For the fourth quarter, Eaton is looking for a profit in the range of $1.00 and $1.10, excluding certain costs. In October, the company had expected earnings between $1.70 and $1.80.

Analysts expect Eaton to earn a profit of 1.71 in the current quarter.

The company now projects earnings of $6.75 to $6.85 a share for the full year, while analysts see profit of $7.46.

Eaton is currently a Zacks #3 Rank ("Hold") company.

"ETN" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Pinnacle Energy Corp. (PENC.OB) Finds History to Be Financially Rewarding

QualityStocks — Fri, 07 Nov 2008 16:15:45 +0000

In many respects, being a small fish in a big pond can have benefits when market conditions are difficult. This often used analogy suggests a certain amount of flexibility and latitude as larger concerns work to manage more problematic issues associated with smaller margins on a larger scale. This doesn’t diminish the issues associated with [...]

More Bad News For Housing Market

Daniel Shepard — Tue, 28 Oct 2008 13:28:28 +0000

Tuesday October 28, 2008 Navivest The S&P/Case-Shiller Home Price Index, which measures home prices in 20 U.S. cities, registered a drop of 16.6%, for the month of August 2008. In July, we saw a 16.3% drop. The index has shown a decline in home prices every month for the past nineteen months. The good news is that the number [...]

Sunday Morning Coffee

Roger Nusbaum — Sun, 19 Oct 2008 12:14:00 +0000

Obviously too many things going on to cover them all so I thought I would try to hone in on a couple reader comments.

One reader noted that I looked more tired in last week's video (buy signal) and less tired this week (sell signal?). If I were to be an indicator I would be incapable of recognizing it's value but have at it if you think there is something to it.

I actually felt more wiped out this week due to being pulled in progressively more directions in terms of emails from work, media inquiries but not trading. If you've been reading this site for a while you know most of the work was done ages ago.

The small portfolio tweaks are not usually time consuming. As the phone has been ringing for me a little more often it has been ringing for Joellyn a lot more often as apparently dog rescue issues have gone up as the stock market has gone down.

Another reader asked a question about entering and exiting the market during what he calls a complex market. He believes in thinking of the current cycle as a complex bottom and although he tends to be shorter term in nature wonders if points of entry and exit take on additional importance right here.

Well there's all sorts of things there I don't know. The first thing I think is buy and hold and whether that notion is dead. I've never thought it was dead dead but the tweak I have written about is buy and hope to hold. When I first bought Bank of America (BAC) a few years ago I figured I'd never need to sell it. Then the merger with Merrill came along and I sold it. Had there been no MER merger I'm pretty sure I'd still own it.

I'd love to be able to assemble a portfolio that never needed any changes but that is not realistic but that is my starting point in trying to answer the question. I do take a longer time frame than the reader and as a top down person I am more concerned the the exposure of the entire portfolio and reducing that exposure or increasing it depending on what I think the market is doing consistent with other more objective concepts I rely on.

I've outlined the couple of across board trades I've done of late (a few long sales a while back, selling the double short, buying a little Statoil) but I would say I probably have the next three offensive and defensive moves planned, which I do or the order they might get done depends on what the market gives and to tie in with some comments yesterday, I could add a few names and still have a cash position most folks would consider defensive.

There are a couple of things that are foremost on my mind these days. The most important ties in with down a lot. I'd been writing about trying to avoid big chunks of down a lot. We've now had down a lot (you can look at the quarterly recap videos to determine whether you think I was successful in trying to miss down a lot), many people are very afraid and there is a lot of questioning of the future of our financial system. Quite simply that describes a time to gear more toward entry than exit at the portfolio level.

At the index level continued volatility, although maybe soon we only move in 4 and 5% increments, should be expected. Apparently David Rosenberg from Merrill thinks SPX 750 is in the cards. That is 190 points from here. In the context of a 1565 starting point, 190 points would be another 12% after already falling 40%. If you do not think this is the great depression revisited then you probably need to realize the vast majority of the decline is in.

That does not mean that if we go up to 1050 this week that we don't go down to 850 the next week and scare the bejeezes out of everyone. And then that type of action repeats a few more times.

At the stock level we should expect more wipeouts. If you have a 2% weight to a stock that goes to zero you don't really have a problem but most people put more than 2% in one name. I do think there needs to be a willingness to come out of any stock you own in this type of environment, BAC as a case in point for me.

Market history shows us that buying some stock after a huge selloff that scares people has worked far more often than it hasn't.

Exactly a year ago I mentioned JD Drew's grand slam against Cleveland. He gad been having a dreadful time at the plate but all the while I kept telling Joellyn he would do something good. Last night was the exact same thing with Jason Varitek. He may not be a major league hitter anymore but when they flashed that 0-for the series stat, I knew the Rays were in trouble.

Game 7 tonight which obviously the Sox have a shot at which is good but that means we have one more night of Chip Carey and Buck Martinez announcing (Ron Darling is nowhere near as bad as the other two, in fact Darling doesn't bug me in the least). In addition to not being able to judge flies balls as homers or not Carey also has trouble with fair and foul. I swear to you I could do a better job than him.

The picture hearkens to a simpler time, 2006, in the Icelandic countryside.

Economist Mundell says China should buy all IMF gold

Alex Stanczyk — Sat, 18 Oct 2008 18:48:59 +0000

From our friend Chris Powell: 10:54a ET Saturday, October 18, 2008 Dear Friend of GATA and Gold: Your secretary-treasurer was given a fair amount of time Thursday night to explain the gold price suppression scheme to the annual fall dinner meeting of the Committee for Monetary Research and Education (www.CMRE.org) at the Union League Coub in New York [...]

Dow Zooms to Record Gain on Reports Government Will Reveal Bailout Details Early Today

Contrarian Profits — Tue, 14 Oct 2008 14:02:00 +0000

U.S. stocks yesterday (Monday) staged their biggest rally since the Great Depression – with the Dow Jones Industrial Average soaring an all-time record 936 points – on a Federal Reserve-led push to flood the ailing global financial system with dollars and on a U.S. government plan to buy stakes in banks.

The rally was sparked by commitments from the major financial nations to cooperate in getting the credit markets functioning again, and by news that U.S. officials were putting the finishing touches on Washington’s version of a rescue plan under which the U.S. Treasury Department will invest an estimated $125 billion in nine major U.S. banks, and another $125 billion in smaller financial institutions, Bloomberg News reported early this morning (Tuesday).

The White House announced that U.S. President George W. Bush would meet at 7:30 a.m. EDT today with members of his financial markets working group. He’ll make a statement about the plan at 8:05 a.m. U.S. Treasury Secretary Henry M. “Hank” Paulson Jr., U.S. Federal Reserve Chief Ben S. Bernanke and Federal Deposit Insurance Corp. Chair Sheila C. Bair will discuss the plan during an 8:30 a.m. news conference, MarketWatch.com and Bloomberg both reported.

“These are tough times for our economies, yet we can be confident that we can work our way through these challenges and America will continue to work closely with the other nations to coordinate our response to this global financial crisis,” President Bush told reporters yesterday following a meeting with Italy Prime Minister Silvio Berlusconi at the White House.

After an eight-day losing streak – the worst for the Standard & Poor’s 500 Index since 1996 – those dramatic worldwide developments were enough to spawn a rally of historic proportions in U.S. shares. The S&P 500 rebounded from its worst week in 75 years with an 11.6% advance, jumping 104.13 points to close at 1,003.35. The Dow zoomed 936.42 points, or 11%, to close at 9,387.61 – eviscerating the previous record of 499 points, set in March 2000, and posting its best percentage gain since 1933.

The Nasdaq Composite Index climbed 194.74, or 12%, to 1,844.25. Sixteen stocks gained for each that fell on the New York Stock Exchange.

Last week’s 18% declines pushed both the S&P 500 and Dow down more than 40% from their peaks last October.

The S&P 500 ended the trading day Friday at 17 times reported earnings of its companies, the cheapest valuation in more than a year. Yesterday’s really boosted the Price/Earnings ratio to 19.2. The S&P 500 is still down 32% this year, positioning it for its worst yearly loss since 1937.

“The worst of the immediate danger is past,” Bruce McCain, chief investment strategist at Key Private Bank (KEY) in Cleveland, which manages $30 billion, told Bloomberg, the well-known financial news service.“It’s always easier when you’ve got markets going up and you’re not having to talk clients back in off the ledge.”

Kevin Divney, chief investment officer at Putnam Investments in Boston, told Bloomberg Television that “the real catalyst is the levels of valuation.”

But not everyone was quite so sanguine. Money Morning Investment Director Keith Fitz-Gerald cautioned that one strong day in the markets – even a record one – doesn’t necessarily mean there’s a full-fledged rebound in store.

“The real economic growth rates in the financial sector are unclear,” Fitz-Gerald said in an interview. “To say that it’s an accounting nightmare is an insult to the Hollywood honchos who actually make their living transforming nightmares into movies. Fiction writers could not concocted a better horror story than the one that’s rocked world financial markets since last November. Despite all the mergers and acquisitions, and the emergency bailouts, that we’ve seen to date, Wall Street hasn’t even begun to address the underlying business prospects – on anything more than a superficial level – of the lion’s share of the companies that are being bailed out.” [For Fitz-Gerald’s full take on yesterday’s market action – including some insights on how he believes investors should navigate the uncertainty – check out his special market commentary that appears elsewhere in today’s issue.]

All 10 industries in the S&P 500 added more than 7%. Monday’s worldwide rally – which ranged from Tokyo to New York – sent the MSCI World Index up 9.5 %, the biggest gain since the gauge was created in 1970, MarketWatch reported.

The bond market was closed for the Columbus Day holiday. The dollar fell the most in three weeks against the euro.

Details of a Bailout/“Rescue” Plan

On Sunday, the major European Union nations committed more than $2.3 trillion to safeguard their banks and financial system, according to The Associated Press. Global efforts to rescue the international banking system gathered force yesterday, with Europe leading the way to provide money to shore up its financial sector and calm traders, and the U.S. hinting it’s on board with its own rescue plan, MarketWatch reported. [For details of the sweeping European rescue plan, check out this related report elsewhere in today’s issue of Money Morning.]

U.S. bankers were summoned to the Treasury Department yesterday, as the U.S. government prepared additional measures to stabilize markets, reported the U.S. shortwave broadcasting service, The Voice of America.

Over the weekend, Treasury Secretary Paulson had called the heads of the five biggest U.S. banks to come to Washington for face-to-face talks about the rescue plan, according to people briefed on the matter. Goldman Sachs Group Inc. (GS) Chief Executive Officer Lloyd C. Blankfein, Morgan Stanley (MS) CEO John J. Mack, Citigroup Inc. (C) CEO Vikram Pandit, JPMorgan Chase & Co. (JPM) CEO Jamie Dimon and Bank of America Corp. (BAC) CEO Kenneth D. Lewis were all asked to attend, according to The AP.

The CEOs had been in Washington this past weekend to meet with international finance officials at the annual meetings of the International Monetary Fund (IMF) and World Bank. This group of U.S. banking sector leaders met with Paulson and Fed Chairman Bernanke for about three hours yesterday, several news sources have said.

When asked for precise details about the plan that’s to be unveiled early today, U.S. Treasury officials remained mum. Indeed, sources would only say that it would include a “series of comprehensive actions to strengthen public confidence in our financial institutions and restore functioning of our credit markets.”

However, after the CEO meetings, some details began to leak out. Industry insiders speculated late yesterday that the Federal Reserve and Treasury Department had outlined a plan to inject as much as $250 billion of the $700 billion rescue plan into top U.S. banks.

In addition, to jumpstart “Interbank” lending, the FDIC would actually insure new senior preferred debt for three years.

The Treasury Department would take the equity stakes in banks using authority it was granted under the $700 billion bank rescue plan enacted two weeks ago.

“We’re talking about making investments in these banks in a way that doesn’t necessarily punish existing shareholders,” Charles Bobrinskoy, vice chairman of Ariel Investments LLC, which manages $13 billion, said on Bloomberg TV. “Most of the bank actions to date in the U.S. have been good for bondholders but terrible for common stockholders.”

Government actions this year to prevent bankruptcies at investment bank Bear Stearns Cos., mortgage lenders Fannie Mae (FNM) and Freddie Mac (FRE) and insurer American International Group Inc. (AIG) resulted in near-total losses for the firms’ shareholders.

The collapse of New York-based Lehman Brothers Holdings Inc. (LEHMQ) on Sept. 15 precipitated the latest chapter of the 14-month-old credit crisis, causing banks to stop lending to each other out of concern they may not get their money back.

Direct investments of this magnitude represent a new approach for Treasury Secretary Paulson, who initially advocated a bailout targeted at illiquid mortgage-related assets. When the markets didn’t respond positively to earlier plans, the Treasury Department shifted gears – in a big way.

“They’ve decided they need to do something drastic and this is drastic,” Gerard S. Cassidy, a bank analyst at RBC Capital Markets (RY) in Portland, Maine, told Bloomberg.

The proposed cash injections in exchange for preferred shares are said to be destined for Citigroup, Goldman Sachs, Wells Fargo & Co. (WFC), JP Morgan Chase & Co., Bank of America Corp., Merrill Lynch & Co. Inc. (MER), Morgan Stanley, State Street Corp. (STT), and Bank of New York Mellon Corp. (BK).

“The government has gone to ‘Plan B’ and it packs a big wallop,” Frederic Dickson who helps oversee $25 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, told the financial news service.

The Treasury plans to spend $25 billion each for stakes in Citigroup and JPMorgan, people said. Another $25 billion will be divided between Bank of America and Merrill, which agreed last month to be acquired by Bank of America. Wells Fargo is to get at least $20 billion, Goldman and Morgan Stanley will each get $10 billion, and State Street and Bank of New York will get about $3 billion each, people said.

The government will obtain its stakes with a type of security designed not to dilute the value of common shares.

None of the nine banks getting government money was given a choice about it, said people familiar with the plans. All of the banks involved will have to submit to compensation restrictions as mandated by Congress, people said.

The remaining $125 billion will be used to recapitalize other financial institutions around the country, the people said. Neel Kashkari, the U.S. Treasury official overseeing the rescue of the financial system, yesterday said the equity purchases would be aimed at “healthy” firms.

Source: Dow Zooms to Record Gain Yesterday on Reports The Government Will Reveal Banking Bailout Plan Details Early Today

Dow Zooms to Record Gain Yesterday on Reports The Government Will Reveal Banking Bailout Plan Details Early Today

William Patalon lll — Tue, 14 Oct 2008 09:25:01 +0000

By William Patalon III Executive Editor Money Morning/The Money Map Report U.S. stocks yesterday (Monday) staged their biggest rally since the Great Depression – with the Dow Jones... Money Morning is here to help investors profit handsomel...

Home Prices Indexes Hit Record Declines In July

IndexUniverse Staff — Tue, 30 Sep 2008 18:56:27 +0000

Index isn't all negative, as rate of slowdown in home prices declines over the past three months.

The S&P/Case-Shiller Home Price Indexes' 10-City Composite and 20-City Composite reached new record annual declines of 17.5% and 16.3%, respectively, through the end of July, the most recent period tracked by S&P.

The 10-City Composite Index declined at a record level for the 10^th consecutive month. Taken together, these declines far surpass the record decline of 6.3% in a similar market trough between 1990-1992.

The news is not all bad, however. Overall declines have actually slowed in home prices in the most recent three-month period.

Cumulative home prices fell 2.2% for the three months ended July, whereas for the previous two consecutive three-month periods, the cumulative home price fall was more than triple that level, between 6-6.5%.

While the slowdown in home price declines is notable across metro areas, it does not necessarily mean a bottom has been reached in the market, and some metro markets continue to post outsized declines, S&P indicated.

All 20 major metro markets are still in negative territory year-over-year, and Las Vegas (-29.9%) and Phoenix (-29.3) had annual declines nearing 30%. The Sun Belt as a whole continued to be in the dark, with its seven major metro markets all posting declines of at least 20%. Don't make a bet on Vegas' home market, either: It continues to be the big loser at the table in terms of home price declines, followed by Phoenix and Miami (-28.2%).

Other major metro markets seem on the verge of a rebound, but S&P remains cautious on outlook.

Atlanta, Dallas, Minneapolis and Tampa all showed improvements in home pricing with the new monthly and annual data, but S&P indicated the markets remained too near recent lows to be demonstrating clear evidence of a turning tide. Atlanta, Boston, Dallas, Denver and Minneapolis all had positive returns for the past three months through the end of July. The smallest dips for the annual period through July were Charlotte (-1.8); Dallas (-2.5%); and Denver (-4.7%)

U.S. Housing Prices Through July 2008
City	1-Year Change	July/June Change
Las Vegas	-29.9%	-2.8%
Phoenix	-29.3%	-2.7%
Miami	-28.2%	-1.6%
Los Angeles	-26.2%	-1.6%
San Diego	-25.0%	-1.8%
San Francisco	-24.8%	-1.8%
Tampa	-19.4%	0.0%
10-City Composite	-17.5%	-1.1%
Detroit	-16.7%	0.6%
20-City Composite	-16.3%	-0.9%
Washington	-15.8%	-1.1%
Minneapolis	-13.1%	1.3%
Chicago	-10.0%	-0.4%
Atlanta	-8.2%	0.4%
Seattle	-8.2%	-1.0%
Cleveland	-7.8%	-0.3%
New York	-7.4%	-0.8%
Portland	-6.6%	-0.5%
Boston	-5.4%	0.2%
Denver	-4.7%	0.8%
Dallas	-2.5%	0.6%
Charlotte	-1.8%	-0.2%

In the same 2007 annual period, the S&P/Case-Shiller Home Price Indexes fell 4.5% and 3.9%, respectively. The only five metropolitan areas last July to show positive one-year returns were Atlanta, Charlotte, Dallas, Portland and Seattle (see story here).

Lincoln Electric Holdings, Inc. – Value – Zacks Rank Buy

Tracey Ryniec — Tue, 16 Sep 2008 00:00:00 +0000

Lincoln is seeing its overseas business beef up profits as the weakened dollar boosted exports by 28.6%. The company has surprised on estimates 3 out of the last 4 quarters by an average of 5.21%. Lincoln has a forward P/E of 11.98.

Company Description

Lincoln Electric Holdings, Inc. (LECO) manufactures arc welding products, robotic welding systems, plasma and oxyfuel cutting equipment.

The company, founded in 1895, is headquartered in Cleveland and has manufacturing facilities and alliances in 20 countries. LECO also has distributors and sales offices in more than 160 countries.

Research and development is an important part of Lincoln's tradition. The company supports a state of the art technology center that seeks to pioneer arc welding technological advancements.

Arc welding is used in many industries including metal working for transportation, construction and petrochemicals. Arc welding applications are used to manufacture heavy machinery and structural steel. Arc welding is also the dominant joining method for building oil and natural gas pipelines and refineries.

Lincoln Posts Record Second Quarter Income

Lincoln is operating on all cylinders. On July 23, the company reported second quarter earnings that beat Wall Street estimates by 18.25%. Net income rose 26.9% to $70.1 million, or $1.62 per share, from $55.2 million, or $1.27, in 2007.

Sales jumped 19.3% to $699.8 million from $586.6 million a year ago. North American sales rose 10.1% year over year. With the weakened dollar, the company also saw export sales surge 28.6% to $64.5 million from $50.1 million in 2007.

Sales outside of North America were also strong, jumping 34.2%. Excluding changes in foreign currency exchange rates and acquisitions, sales outside of North America rose 12.3% in the second quarter.

The company is optimistic despite a challenging North American industrial economic cycle and volatile metals markets.

"Our broad market position in key global growth segments allowed us to take advantage of expansion opportunities, and minimize the impact of softening in traditional markets," said John M. Stropki, Chairman and Chief Executive Officer.

"We continue to be focused in executing our global strategy, capitalizing on key infrastructure development opportunities, and leveraging our value-driven welding product and service offering," he said.

Consensus Estimates Rise for the Full Year

Covering analysts are bullish on Lincoln in fiscal 2008. Estimates for the third quarter are up a penny in the last 30 days to $1.37 from $1.36. For the full year, consensus estimates rose 7 cents to $5.58 from $5.51 per share. 60 days ago, estimates were at $5.16.

Value Fundamentals

Lincoln Electric has a forward P/E of 11.98. Its price-to-book is 2.46. The company has an excellent five year return on equity (ROE) of 18.12%.

"LIEL" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Hawk Corporation – Aggressive Growth – Zacks Rank Buy

Zacks Market Commentaries — Tue, 09 Sep 2008 00:00:00 +0000

Hawk Corporation (HWK) recently set a new 52-week high after an excellent second-quarter earnings report. The company has increased guidance and remains attractively priced with a PEG ratio of only .39.

Company Description

Hawk Corporation designs, manufactures, and sells friction materials for brakes, transmissions, and clutches. The company operates through its subsidiaries and supplies its products to the aerospace, automotive, and agricultural industries. The company is headquarters in Cleveland, Ohio, has approximately 1,200 employees, and carries a market cap of $220 million.

Second-Quarter Earnings Smash Estimates

Hawk reported second-quarter results on August 7th, which included earnings per share of 66 cents, well above the consensus of 28 cents. Net income for the quarter was $6.2 million, a 226% year-over-year increase, up from $1.9 million.

The excellent results were driven by record net sales, $71.8 million up from $55.3 million in the same quarter last year. The 29.8% increase is attributed to strong economic conditions for its end users and beneficial foreign exchange rate changes as well as several other factors.

A Positive Outlook

Hawk has also increased its full-year estimates for operating income and net sales. Operating income is now expected to be between $28 and $30 million, a 44% to 54% increase from 2007.

The full-year estimate for net sales is now between $255 and $260 million compared to 2007 net sales of $216 million.

Favorable Industry Comparison

The projected earnings growth for the next five years is 40.0%, well above the industry average of 12.8%. Despite the high growth rate, Hawk remains reasonably priced with a PEG ratio of .39, compared to the industry average of 1.1.

The Chart

Shares of HWK have increased over 20% since the August 7th announcement. The stock is currently trading just under the 52-week high of $25.14, which was set in late August. Take a look at the chart below.

"HAWK" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Tasty Baking Company (TSTY) Wants to Let Them Eat Cake

QualityStocks — Wed, 03 Sep 2008 13:45:57 +0000

If one chicken laid all of the eggs used for one day of production at Tastykake, it would take that chicken 572 years to lay enough eggs. That’s how much production goes on daily at Tasty Baking Company’s Philadelphia and Oxford, Pennsylvania manufacturing facilities. Founded in 1914, and headquartered in Philadelphia, Tasty Baking Company is [...]

Ferro Corporation’s (FOE) Materials Facilitate Performance

QualityStocks — Fri, 29 Aug 2008 15:34:21 +0000

You know when your sales for 2007 are $2.2 billion that you’re doing something right. That’s the case for Cleveland, Ohio based Ferro Corporation who garnered those kinds of numbers last year. Trading on the New York Stock Exchange (NYSE), Ferro is a worldwide supplier of technology-based performance materials for manufacturers. They are part of [...]

Earnings Preview

Trader Mark — Mon, 05 May 2008 22:00:00 +0000

We have 2 late filers tonight in Brazilian homebuilder Gafisa (GFA) and American iron ore producer Cleveland Cliffs (CLF). It looks like they will be reporting later in the evening, but I expect positive things from both - but wish to hear something ne...