Here it is folks, the link to our new website, new name, new identity!
http://www.trutinafinancial.com/
Blog comments will start next week. In the meantime, meet my partners, check out our philosophy. Oh yeah, and there are a few recent clips of me appearing on CNBC up there too.
Wednesday, September 8, 2010
Monday, September 6, 2010
Ch-ch-ch-changes
Effective tomorrow Storehouse Partners will have a new name and a new website. AND, starting next week, we'll have a new blog on that new website that is actually updated on a regular basis.
Stay tuned until tomorrow... and I'll be back with links to the new digs!
Stay tuned until tomorrow... and I'll be back with links to the new digs!
Tuesday, January 5, 2010
Monday, December 21, 2009
Opps, the weather did it again
I'm not a fan of excuses. I screw up, I own it. You screw up, you own it. Retailers seem to constantly play the weather card - it was too cold, too warm, too dry, too wet, too snowy, etc. And that frankly pisses me off. But this weekend, I kind of have to give them the benefit of the doubt, at least those with a concentration of stores on the East Coast.
I had the opportunity to chat with NBC Nightly News today about this weekend's fun, although only about 3.5 of the best seconds from my 15 minutes of tape made it to air. (Not complaining, that's just how TV works. I just find it ironic.) Anyway, a couple of take aways:
* Yes, Christmas will still come on Friday. And yes, kids will still expect to have presents under the tree on Christmas morning, regardless of the weather. Santa, after all, has Rudolph and shouldn't be hindered by inclement weather.
* I don't care how much people shop this week, they'll be under more pressure because they have less time. And given that, expect fewer impulse buys, fewer instances of self-gifting. Put another way, sales might be okay, but not as good as they might have been had the weather been better.
* Companies with smaller presence on the east coast will have done better (all things being equal)than those based heavier in the south or west. That being said, the southern most portion of the country (ala Florida... JT Smith territory) wasn't as affected.
* If you're holding out for 70% discounts... you're either going to end up empty handed or with lime green jumpsuits in size 2. Face the facts, reailers have generally speaking managed their inventories very well this season. Panic was last year. Stupid merchandising, however, is omnipresent if you look hard enough. You can buy it though, I don't want it.
I had the opportunity to chat with NBC Nightly News today about this weekend's fun, although only about 3.5 of the best seconds from my 15 minutes of tape made it to air. (Not complaining, that's just how TV works. I just find it ironic.) Anyway, a couple of take aways:
* Yes, Christmas will still come on Friday. And yes, kids will still expect to have presents under the tree on Christmas morning, regardless of the weather. Santa, after all, has Rudolph and shouldn't be hindered by inclement weather.
* I don't care how much people shop this week, they'll be under more pressure because they have less time. And given that, expect fewer impulse buys, fewer instances of self-gifting. Put another way, sales might be okay, but not as good as they might have been had the weather been better.
* Companies with smaller presence on the east coast will have done better (all things being equal)than those based heavier in the south or west. That being said, the southern most portion of the country (ala Florida... JT Smith territory) wasn't as affected.
* If you're holding out for 70% discounts... you're either going to end up empty handed or with lime green jumpsuits in size 2. Face the facts, reailers have generally speaking managed their inventories very well this season. Panic was last year. Stupid merchandising, however, is omnipresent if you look hard enough. You can buy it though, I don't want it.
Monday, December 14, 2009
Pardon me if this is obvious...
Those of you who already got this, tune back in tomorrow. For the rest of you:
It was announced today that both Wells Fargo and Citicorp were going to pay back TARP, joining Goldman Sachs and Bank of America. Think that it's great that these banks are so healthy that they can pay back the money? Uh huh. If that's what you think it is, I've got some land in Florida for sale(right by JT Smith, who wanted to be mentioned in this post).
So now these banks don't have to listen to the government on pay. That's the real reason they've forked over the cash. It's not that I blame them, mind you. The government has no business setting pay for the private sector. Yeah, I understand that the banks got government bailout money, and for that they need to be accountable to the government. But 'the government' didn't (doesn't) have a clue about what people should be paid for ANY job, let alone top positions in banking. Remember, these are the folks who pay clerks 20% above the going rate in the private sector and yet make sure that folks in the military are still able to qualify for food stamps.
The big problem with all this is that if the banking sector were truly healthy, they'd be starting to loan on their own. And yet their fists are closed tight, hanging on to almost all the capital that wasn't needed to get the government to butt out. Obama's meeting today with bankers at the White House where he sternly scolded them about their 'responsibility' to the American public to lend since the public had bailed the banks out? BOGUS.
See, this is how it works if you're a bank: you loan your excess capital to the creditworthy and turn down those who don't qualify. That means that 1) you have to have excess capital, and 2) you have to find someone creditworthy to loan said capital. I don't care how cranky the government folks get, it's a bunch of blowhard posturing that messes with capitalism as we know it. And guess what - if you give people money who can't pay it back, you just create bigger problems... but hopefully not until after the next election.
Color me cynical.
It was announced today that both Wells Fargo and Citicorp were going to pay back TARP, joining Goldman Sachs and Bank of America. Think that it's great that these banks are so healthy that they can pay back the money? Uh huh. If that's what you think it is, I've got some land in Florida for sale(right by JT Smith, who wanted to be mentioned in this post).
So now these banks don't have to listen to the government on pay. That's the real reason they've forked over the cash. It's not that I blame them, mind you. The government has no business setting pay for the private sector. Yeah, I understand that the banks got government bailout money, and for that they need to be accountable to the government. But 'the government' didn't (doesn't) have a clue about what people should be paid for ANY job, let alone top positions in banking. Remember, these are the folks who pay clerks 20% above the going rate in the private sector and yet make sure that folks in the military are still able to qualify for food stamps.
The big problem with all this is that if the banking sector were truly healthy, they'd be starting to loan on their own. And yet their fists are closed tight, hanging on to almost all the capital that wasn't needed to get the government to butt out. Obama's meeting today with bankers at the White House where he sternly scolded them about their 'responsibility' to the American public to lend since the public had bailed the banks out? BOGUS.
See, this is how it works if you're a bank: you loan your excess capital to the creditworthy and turn down those who don't qualify. That means that 1) you have to have excess capital, and 2) you have to find someone creditworthy to loan said capital. I don't care how cranky the government folks get, it's a bunch of blowhard posturing that messes with capitalism as we know it. And guess what - if you give people money who can't pay it back, you just create bigger problems... but hopefully not until after the next election.
Color me cynical.
Sunday, December 13, 2009
They're not all equal
I have two boys whom I love equally, but differently. They each have strengths and weaknesses. It would be wrong to treat them exactly the same since they aren't exactly the same.
Walking the mall today, it became so apparent that this holiday season is going to have it's share of winners AND losers, even though so many would like to paint all retail with the same brush.
There were a number of teen retailers full of merchandise that was marked down offering an additional savings of 25-33% with purchases of $75-100. It amused me that a couple of these retailers belong to a company that swore they weren't going to discount because it would damage the brand. I could report that these discounts drove scores of customers and purchases into their stores, but my parents taught me early that lying was the wrong thing to do. The mall I was at didn't have an Aeropostale, but I'm pretty sure that they had to be doing better business than what I saw at their competition.
On the other side of the equation, J Crew was running with a moderate amount of inventory at most, had some sales going which projected value, and all of it made me want to buy.
Certain large national department stores with more than 850 stores had a lot of merchandise, few clerks, and not a lot of purchasers among the folks wandering through the store. Those cash registers are more profitable if people line up to buy things at them.
Oh yeah, and if you're at the mall with your significant other and just can't take the hustle and bustle anymore... fear not. There's plenty of peace and quiet in just about any jewelry store in the mall.
There's a lot more detail rattling inside my head about this, but my bottom line is simple: don't believe all the hype that "The Consumer" is back. "The Consumer" doesn't exist, just like "The Retailer" doesn't. Unlike the Borg (yeah, I've been known to watch some sci-fi, so what?), there are differing levels of consumer rebounds and retailers' success isn't homogeneous. If you're not going to do your own homework, or pay to peek at someone else's... stay out of the game.
Be careful out there.
Walking the mall today, it became so apparent that this holiday season is going to have it's share of winners AND losers, even though so many would like to paint all retail with the same brush.
There were a number of teen retailers full of merchandise that was marked down offering an additional savings of 25-33% with purchases of $75-100. It amused me that a couple of these retailers belong to a company that swore they weren't going to discount because it would damage the brand. I could report that these discounts drove scores of customers and purchases into their stores, but my parents taught me early that lying was the wrong thing to do. The mall I was at didn't have an Aeropostale, but I'm pretty sure that they had to be doing better business than what I saw at their competition.
On the other side of the equation, J Crew was running with a moderate amount of inventory at most, had some sales going which projected value, and all of it made me want to buy.
Certain large national department stores with more than 850 stores had a lot of merchandise, few clerks, and not a lot of purchasers among the folks wandering through the store. Those cash registers are more profitable if people line up to buy things at them.
Oh yeah, and if you're at the mall with your significant other and just can't take the hustle and bustle anymore... fear not. There's plenty of peace and quiet in just about any jewelry store in the mall.
There's a lot more detail rattling inside my head about this, but my bottom line is simple: don't believe all the hype that "The Consumer" is back. "The Consumer" doesn't exist, just like "The Retailer" doesn't. Unlike the Borg (yeah, I've been known to watch some sci-fi, so what?), there are differing levels of consumer rebounds and retailers' success isn't homogeneous. If you're not going to do your own homework, or pay to peek at someone else's... stay out of the game.
Be careful out there.
Sunday, November 29, 2009
With apologies to Clement Clarke Moore
Twas the eve'n after Turkey Day and all through the mall,
There were creatures a-stirring, but not buying all.
The discounts were posted in the stores with care,
In hopes that the shoppers soon would be there.
The security teams were nestled all snug at their posts,
While visions of safety were bigger than most.
Shoppers in PJs, some with hot plates,
Had just settled in for a cold morning's wait.
When out in the parking lot there arose such a clatter,
Security sprang to attention to see what was the matter.
Away to stores I flew like a flash,
Held on to my credit cards, I'd only pay cash.
The fluorescent lights gleamed on the newly arrived stuff,
Gave a glimmer of hope to the retailers who'd had it so tough.
When what to my wondering eyes should appear,
But a whole slew of shoppers, with Christmas lists for those dear.
They clutched at the flyers, all glossy and slick,
And I knew in an instant that it was bargains that would stick.
More rapid than hordes, the shoppers they came,
Crowding home and electronics, gotta get that new game.
Now toasters, now iPods, now board games and toys,
Grab discounts, grab bargains, can't afford to be coy.
To Kohls and to Target, To Walmart and the mall,
Shop away, shop away, shop away all.
As dry leaves that before the wild hurricane fly,
Grew the lines at the checkouts with items to buy.
So up to the next floor, the hordes they plain flew,
They wanted those bargains, apparently more than did you.
And then in a twinkling, I heard from the clerks,
'Next in line please,' they were glad to have work.
As I talked with consumers, the people in line,
It was really apparent they weren't feeling too fine.
They were clutching their wallets, a glaze in their eyes,
'No credit left for me this year,' was often their cry.
Their choices were careful, each item a find,
Yet the retailers had obviously kept margins in mind.
Their steps they were quick, but eyes were quite bleery,
Still yawns they were stifled, due to caffeine with dairy.
Their bags didn't bulge, despite purchases paid,
A few less per family than they'd previously made.
Still some shopped for sport and had good fun,
Twas quite the excitement to watch where they'd run.
A quick look through stores when I should be in bed,
Soon gave me to know retailers might have a tough time ahead.
The customers they shopped where stuff was on sale,
But no discount equaled no purchase despite their avail.
And leaving the mall to hit the next store,
The consumers weren't confined to stores they adore.
The shoppers want value, not just cheap price.
And retailers win who know naughty from nice.
We're still not done with the shopping this season,
But retailers will win who use their good reason.
There were creatures a-stirring, but not buying all.
The discounts were posted in the stores with care,
In hopes that the shoppers soon would be there.
The security teams were nestled all snug at their posts,
While visions of safety were bigger than most.
Shoppers in PJs, some with hot plates,
Had just settled in for a cold morning's wait.
When out in the parking lot there arose such a clatter,
Security sprang to attention to see what was the matter.
Away to stores I flew like a flash,
Held on to my credit cards, I'd only pay cash.
The fluorescent lights gleamed on the newly arrived stuff,
Gave a glimmer of hope to the retailers who'd had it so tough.
When what to my wondering eyes should appear,
But a whole slew of shoppers, with Christmas lists for those dear.
They clutched at the flyers, all glossy and slick,
And I knew in an instant that it was bargains that would stick.
More rapid than hordes, the shoppers they came,
Crowding home and electronics, gotta get that new game.
Now toasters, now iPods, now board games and toys,
Grab discounts, grab bargains, can't afford to be coy.
To Kohls and to Target, To Walmart and the mall,
Shop away, shop away, shop away all.
As dry leaves that before the wild hurricane fly,
Grew the lines at the checkouts with items to buy.
So up to the next floor, the hordes they plain flew,
They wanted those bargains, apparently more than did you.
And then in a twinkling, I heard from the clerks,
'Next in line please,' they were glad to have work.
As I talked with consumers, the people in line,
It was really apparent they weren't feeling too fine.
They were clutching their wallets, a glaze in their eyes,
'No credit left for me this year,' was often their cry.
Their choices were careful, each item a find,
Yet the retailers had obviously kept margins in mind.
Their steps they were quick, but eyes were quite bleery,
Still yawns they were stifled, due to caffeine with dairy.
Their bags didn't bulge, despite purchases paid,
A few less per family than they'd previously made.
Still some shopped for sport and had good fun,
Twas quite the excitement to watch where they'd run.
A quick look through stores when I should be in bed,
Soon gave me to know retailers might have a tough time ahead.
The customers they shopped where stuff was on sale,
But no discount equaled no purchase despite their avail.
And leaving the mall to hit the next store,
The consumers weren't confined to stores they adore.
The shoppers want value, not just cheap price.
And retailers win who know naughty from nice.
We're still not done with the shopping this season,
But retailers will win who use their good reason.
Saturday, November 28, 2009
NBC Nightly News
Did a little work for my friend Brian Williams on Black Friday. Okay, I don't know Brian, but I'm sure we'd be friends if I did. Anyway, watch the results of 4 hours with a camera crew starting at 3:15am:
Visit msnbc.com for Breaking News, World News, and News about the Economy
Tuesday, November 17, 2009
Sandbagging or realism?
Interesting debate going on today after more retailers reported earnings. Several folks insinuated that management teams are sandbagging earnings expectations for Q4 so they can knock it out of the park. Let's be clear...no sane retail management team is going to be pumping up expectations when headline unemployment is 10.2% and the more realistic U-6 number that includes discouraged workers and the under employed is 17.5%. If people can't get jobs, they can't spend.
Yes, last year things were so dire, folks were so scared, that the sales were totally abysmal. It almost seemed Apocalyptic. And we have absolutely come back from that brink. But this time last year unemployment was only 6.8%, most folks had credit cards that hadn't had limits reduced, retailers had way too much inventory that they sold to us at 60% off, and we were still in the mindset that retail therapy worked.
But this year, we don't have the same level of inventories so there won't be the same sales. Oh sure, expect retailers to have promotions. Just don't expect that there will be the smell of fear when you walk in the stores. Retailers know you expect a discount, and they've procured items at costs that will allow them to put them "On Sale" while they still make decent margins. And if you buy it when it isn't "On Sale", they'll make even more.
The major retailers are saying November is starting weak. Smaller retailers are saying November is starting weak. JC Penney, Kohl's and Walmart have all started Black Friday discounting earlly. If I was managing a retailer, I wouldn't be enthusiastic about what's happening out there.
Caveat - one semi bright spot came from the CEO of American Express this morning when he said on CNBC that his cardholders spent 3% more in October. Maybe it will continue to holiday... maybe it won't. Most major outlets are expecting a fall in sales.
The trick right now is to find the best operators in retail and cling to them if you feel you must own a retailer. Discounters will do better than mainline departmetn stores. Higher end stores seem to be stronger than mainline too. Whatever you do, don't be tempted to lower your standards.
Bottom line: If you want to own these stocks do your research. Watch monthly retail sales. Walk the stores and watch trends. Talk to people about what they're doing for the holidays this year. Or just keep following me here, on CNBC and on Twitter and see what I'm seeing. Be careful out there.
Yes, last year things were so dire, folks were so scared, that the sales were totally abysmal. It almost seemed Apocalyptic. And we have absolutely come back from that brink. But this time last year unemployment was only 6.8%, most folks had credit cards that hadn't had limits reduced, retailers had way too much inventory that they sold to us at 60% off, and we were still in the mindset that retail therapy worked.
But this year, we don't have the same level of inventories so there won't be the same sales. Oh sure, expect retailers to have promotions. Just don't expect that there will be the smell of fear when you walk in the stores. Retailers know you expect a discount, and they've procured items at costs that will allow them to put them "On Sale" while they still make decent margins. And if you buy it when it isn't "On Sale", they'll make even more.
The major retailers are saying November is starting weak. Smaller retailers are saying November is starting weak. JC Penney, Kohl's and Walmart have all started Black Friday discounting earlly. If I was managing a retailer, I wouldn't be enthusiastic about what's happening out there.
Caveat - one semi bright spot came from the CEO of American Express this morning when he said on CNBC that his cardholders spent 3% more in October. Maybe it will continue to holiday... maybe it won't. Most major outlets are expecting a fall in sales.
The trick right now is to find the best operators in retail and cling to them if you feel you must own a retailer. Discounters will do better than mainline departmetn stores. Higher end stores seem to be stronger than mainline too. Whatever you do, don't be tempted to lower your standards.
Bottom line: If you want to own these stocks do your research. Watch monthly retail sales. Walk the stores and watch trends. Talk to people about what they're doing for the holidays this year. Or just keep following me here, on CNBC and on Twitter and see what I'm seeing. Be careful out there.
Wednesday, September 30, 2009
What is a successful career anyway?
Some interesting moves today after the close... moves that made me think about the difference between being famous or infamous.
First, Ken Lewis announced his retirement from Bank of America as of the end of this year. The stock immediately rose in after hours trading, even though Cuomo says he's still coming after BoA. How humilitating it must be to know that investors think your company will be better off without you. Ken Lewis had a huge part in building up the financial supermarket concept... and yet all he'll be remembered for is his flame out at the end.
At least that's better than John Thain's fate - he'll always be the guy with a penchant for decorating... and an exquisite commode. Oh yeah, and didn't he do something in the investment business too?
Michael Vick, on the other hand, was given yet another shot at redemption today. Nike has decided to take what I hope is an educated gamble on Vick... again. This could either be very very good for them... or end in a greater-than-Thainsian blaze of glory.
At least this business is never boring.
First, Ken Lewis announced his retirement from Bank of America as of the end of this year. The stock immediately rose in after hours trading, even though Cuomo says he's still coming after BoA. How humilitating it must be to know that investors think your company will be better off without you. Ken Lewis had a huge part in building up the financial supermarket concept... and yet all he'll be remembered for is his flame out at the end.
At least that's better than John Thain's fate - he'll always be the guy with a penchant for decorating... and an exquisite commode. Oh yeah, and didn't he do something in the investment business too?
Michael Vick, on the other hand, was given yet another shot at redemption today. Nike has decided to take what I hope is an educated gamble on Vick... again. This could either be very very good for them... or end in a greater-than-Thainsian blaze of glory.
At least this business is never boring.
Thursday, September 17, 2009
What's driving this thing?
I've been doing a lot of research with my friend JT Smith (CIO of Aristar Funding), trying to figure out exactly what was driving this market.
The 'this market is cheap' argument hasn't made any sense to me for some time. Cheap does NOT refer to stock prices relative to where they've been, contrary to what is implied by a lot of folks. Historically, bear markets have bottomed at roughly 7-8x earnings. We only got to 10.2x forward earnings at the bottom in March - not low enough for my liking. Now we're trading at... sit down... 17.8x FORWARD earnings. Put another way, the S&P is more expensive than it has been in the past FIVE YEARS or more.
I might be 'of a certain age,' but my memory isn't so weak that I can't remember that the economy at least appeared to be much more robust at almost any time in 2004, 2005 or 2006 than it does now. And yet we're paying significantly more for a dollar of next year's S&P earnings now? Makes no sense. Unless...
What if this market isn't discounting future earnings right now? It's my belief that a lot of times the animal spirits of the market discount things without really knowing what it is they're discounting. So, what if... just what if... this market is actually discounting the inflation that almost certain to come? Gold over $1000 an ounce is telling us that either everyone is scared to death of this market (not confirmed by the VIX), or that inflation might be rearing it's ugly head. And yesterday's rumors that two Fed officials were ready to vote to tighten! Even today's Philly Fed numbers pointed out that the Prices Paid component is ticking up. Inflation.
Yeah, I know we've been seeing deflation in food and consumables. But that can turn quickly. And more importantly... how else are we going to dig ourselves out of this debt pit unless we pay it off with cheaper dollars?
If we're heading into inflation, folks, the game plan changes.
The 'this market is cheap' argument hasn't made any sense to me for some time. Cheap does NOT refer to stock prices relative to where they've been, contrary to what is implied by a lot of folks. Historically, bear markets have bottomed at roughly 7-8x earnings. We only got to 10.2x forward earnings at the bottom in March - not low enough for my liking. Now we're trading at... sit down... 17.8x FORWARD earnings. Put another way, the S&P is more expensive than it has been in the past FIVE YEARS or more.
I might be 'of a certain age,' but my memory isn't so weak that I can't remember that the economy at least appeared to be much more robust at almost any time in 2004, 2005 or 2006 than it does now. And yet we're paying significantly more for a dollar of next year's S&P earnings now? Makes no sense. Unless...
What if this market isn't discounting future earnings right now? It's my belief that a lot of times the animal spirits of the market discount things without really knowing what it is they're discounting. So, what if... just what if... this market is actually discounting the inflation that almost certain to come? Gold over $1000 an ounce is telling us that either everyone is scared to death of this market (not confirmed by the VIX), or that inflation might be rearing it's ugly head. And yesterday's rumors that two Fed officials were ready to vote to tighten! Even today's Philly Fed numbers pointed out that the Prices Paid component is ticking up. Inflation.
Yeah, I know we've been seeing deflation in food and consumables. But that can turn quickly. And more importantly... how else are we going to dig ourselves out of this debt pit unless we pay it off with cheaper dollars?
If we're heading into inflation, folks, the game plan changes.
Tuesday, September 8, 2009
Bet you dollars to donuts
Actually, if the dollar keeps sliding, donuts might be the better investment soon. Yeah, the DXY Index was lower when Lehman collapsed last year, but beyond that, we're at pretty much the lowest levels we've seen in a long time.
What's it mean? Well, first of all it means that those commodities valued in dollars become more expensive for the American consumer. If you're a Middle Eastern country selling oil, you need the same buying power when you jaunt off to Paris regardless of what the dollar is doing vs the Euro... so the price of oil and gold go up. For that reason alone, I'm a little skeptical of the folks who are saying that the rise in the oil price is a reflection of stronger economic activity. But I'm a skeptic.
And let's look at the poor consumer again. So now energy prices are going up. And home prices still stink. And they have no credit available. And their retirement accounts are worth 40% less than at the top of the market. But those retail stocks are going to have earnings rebounds just like a coiled spring because of cost cutting. Whatever.
One more thought on the whole dollar/hard commodities thing - could people be piling into those commodities because of a fear of inflation? Yep. Does it make sense? In my mind, yes. How else are we going to pay off this amazing amount of federal debt that we have but to create inflation and pay it with cheaper dollars? And what holds value in inflationary times? Hard commodities.
Yeah, you can guess where I've got client money right now. Go ahead. If you get it right, I'll buy you a donut.
What's it mean? Well, first of all it means that those commodities valued in dollars become more expensive for the American consumer. If you're a Middle Eastern country selling oil, you need the same buying power when you jaunt off to Paris regardless of what the dollar is doing vs the Euro... so the price of oil and gold go up. For that reason alone, I'm a little skeptical of the folks who are saying that the rise in the oil price is a reflection of stronger economic activity. But I'm a skeptic.
And let's look at the poor consumer again. So now energy prices are going up. And home prices still stink. And they have no credit available. And their retirement accounts are worth 40% less than at the top of the market. But those retail stocks are going to have earnings rebounds just like a coiled spring because of cost cutting. Whatever.
One more thought on the whole dollar/hard commodities thing - could people be piling into those commodities because of a fear of inflation? Yep. Does it make sense? In my mind, yes. How else are we going to pay off this amazing amount of federal debt that we have but to create inflation and pay it with cheaper dollars? And what holds value in inflationary times? Hard commodities.
Yeah, you can guess where I've got client money right now. Go ahead. If you get it right, I'll buy you a donut.
Tuesday, September 1, 2009
View from the Top
For those of you who haven't been to the Seattle area, that's Mount Rainier up there, taken from the SE side of the mountain. I took the picture a couple of weeks ago. Mountain tops are beautiful, aren't they? Problem is you can't stay at the top forever, you eventually have to go back down the other side.
In my opinion, today's sell off has been a long time coming. Of course, if you've read this blog at all, seen me on TV, heard me on radio, or seen me quoted in print... you already knew that.
What really killed me this morning was listening to some folks trying to hype the economic releases as positive. Look, we're in a pretty down time right now. If you don't think that the folks who put out those releases are trying to highlight the happiest stuff they can, you're naive. Let's take them one by one.
ISM Manfacturing: Headline number was better than expected, coming in at 52.9 vs expectations for 50.5. HOWEVER, you have to look behind the headline number. Looks like Cash for Clunkers is part of the pop – drew down inventories and there’s some restocking going on there. Is it sustainable? No, but the lower level wasn’t sustainable either. Employment is still declining – manufacturers aren’t confident about this or they’d be hiring. Prices paid is going up, which could mean that inflation is coming down the road, perhaps at a faster pace than most expect.
Yes, right now we're dealing more with deflation than inflation. But what if we can't sell bonds and need to increase interest rates? Yes, the dollar has been getting stronger. For me, that's a head scratcher. I certainly don't think the US is the safety currency or economy at this point. In fact, for our clients, I'm deliberately betting that the dollar gets weaker, strengthening commodities.
Pending Home Sales: Those are sales contracts... NOT completed sales. People still have to get loans, which are darn hard to get these days. Which leads to my next topic...
Construction Spending: This is the one that kills me... Year over year residential spending is down 26.4% (not-seasonally adjusted). But everything's okay folks. Really.
If you need a reason that the market tanked today, part of it was the stuff above. Part of it was what's coming down the pike at us. If you want more insight into what joy may be coming, follow jtsmith24 on Twitter - smart guy, good insights into the economy. You can follow me there too (PattyEdwards) for more timely, intraday, updates.
Take some profits folks. There's no reason to be a hero.
Thursday, August 27, 2009
Adult beverage recommended before reading
Someone asked me the other day via Twitter if I'd seen Dick Hoey's comments on the Kudlow show where he asserted that bulls follow forward-looking indicators while (and I'm paraphrasing here) bears are looking in the rear-view mirror. PUHLEASE.
At this point, I'd say that it's the bears who have some sembelance of reality in their view points, and not just because I am one. But let's walk through some points one by one.
Home Prices
Yes, I'm worried about home prices. I'm a little concerned that they're 33% below the peak. But not so much because of the lost wealth (which is a tragedy) but because of how that will affect consumers, banks, builders, and a host of others. Let's see, consumers can't take money off their home equity loans to buy stuff in the future because many of them are underwater. Consumers also can't sell those homes because they won't come out whole, ruining the whole set of industries that really thrived on the idea that homes were meant as an investment instead of shelter.
Let's not forget that banks are stuck with ever-increasing amounts of Real Estate Owned on balance sheets because they can't sell them without tanking the housing market even further.
Builders, well there's a bit of insanity going on there, just because they still exist in the size they do. Prices start to stabilize (a false tell in my eyes because of the REO from the banks, not to mention the homes that were on the market, got pulled because they didn't sell for months on end and are now back on the market) and the builders start to build again. An article on Bloomberg this week said they're buying land again. The only analogy that I can come up that fits this lunacy is that it's like cooking Thanksgiving dinner 7 nights in a row, even though the refrigerator is so full that you don't know how you'll EVER get through all those leftovers.
Retirement Savings
Even after the 'Rally of the Century' that we've had since March, the S&P is down 40% from the October 2007 high. My client base is mostly individuals... individuals who came to my firm after seeing their retirement savings cut in half, in many cases within 10 years of when they had at least hoped to retire. Guess what kids - those folks aren't going to be spending the way they were in the past. They can't! They're saving every last penny they can at this point, hoping to build that nest egg back up so that they can at least retire within a few years of when they had originally hoped. And you know what... their money that we currently have in places other than the stock market? They're not so excited to put it back in. These folks have been burned a lot in the past few years. The stock market just doesn't have the allure it used to for them.
Consumer Debt Levels
Not only are consumers trying to save everything they can right now, but many of them are in debt up to their eyeballs. I know I've shown this chart before, but it's such a lovely picture, let's put it up again (Parental Warning: not suitable for small children):
Yeah. Pretty, eh? Household debt at the level of GDP. Think it's changed much in the past few months? Nah. Me neither. If it took years to get it to a sustainable/decent level back in the 30's why would we expect anything different now? Because it's different this time? Right. Tell it to someone else.
This debt is going to be a ball and chain around the ankle of the consumer for a long time to come. A LONG TIME. Those "coiled springs" that so many analysts keep talking about in reference to the retailers who have cut costs and just need the consumer back before earnings take off like rockets... BUNK. By the way, can I remind everyone that at least until recently the consumer drove 70% or so of the economy. Guess what is also probably going to change? Yeah. That.
Coming Mortgage Resets
I've shown this graph before too... but just in case anyone missed it...
Please notice all the resets of Alt-A and Option ARMS that are coming in the next 18 months or so. Any (honest) mortgage broker will tell you that both of those categories have the capability of being even worse than the Subprime mortgages. I've heard that up to 50% of the folks with those loans that haven't even reset yet can't make their payments. Guess what happens when they DO reset? Yep. Ugly. Really ugly.
But there's no housing problem.
And I haven't even gotten to the accounting changes coming for the banks that put all the toxic waste back on the balance sheets. But that's another post.
Cheers!
At this point, I'd say that it's the bears who have some sembelance of reality in their view points, and not just because I am one. But let's walk through some points one by one.
Home Prices
Yes, I'm worried about home prices. I'm a little concerned that they're 33% below the peak. But not so much because of the lost wealth (which is a tragedy) but because of how that will affect consumers, banks, builders, and a host of others. Let's see, consumers can't take money off their home equity loans to buy stuff in the future because many of them are underwater. Consumers also can't sell those homes because they won't come out whole, ruining the whole set of industries that really thrived on the idea that homes were meant as an investment instead of shelter.
Let's not forget that banks are stuck with ever-increasing amounts of Real Estate Owned on balance sheets because they can't sell them without tanking the housing market even further.
Builders, well there's a bit of insanity going on there, just because they still exist in the size they do. Prices start to stabilize (a false tell in my eyes because of the REO from the banks, not to mention the homes that were on the market, got pulled because they didn't sell for months on end and are now back on the market) and the builders start to build again. An article on Bloomberg this week said they're buying land again. The only analogy that I can come up that fits this lunacy is that it's like cooking Thanksgiving dinner 7 nights in a row, even though the refrigerator is so full that you don't know how you'll EVER get through all those leftovers.
Retirement Savings
Even after the 'Rally of the Century' that we've had since March, the S&P is down 40% from the October 2007 high. My client base is mostly individuals... individuals who came to my firm after seeing their retirement savings cut in half, in many cases within 10 years of when they had at least hoped to retire. Guess what kids - those folks aren't going to be spending the way they were in the past. They can't! They're saving every last penny they can at this point, hoping to build that nest egg back up so that they can at least retire within a few years of when they had originally hoped. And you know what... their money that we currently have in places other than the stock market? They're not so excited to put it back in. These folks have been burned a lot in the past few years. The stock market just doesn't have the allure it used to for them.
Consumer Debt Levels
Not only are consumers trying to save everything they can right now, but many of them are in debt up to their eyeballs. I know I've shown this chart before, but it's such a lovely picture, let's put it up again (Parental Warning: not suitable for small children):
Yeah. Pretty, eh? Household debt at the level of GDP. Think it's changed much in the past few months? Nah. Me neither. If it took years to get it to a sustainable/decent level back in the 30's why would we expect anything different now? Because it's different this time? Right. Tell it to someone else.
This debt is going to be a ball and chain around the ankle of the consumer for a long time to come. A LONG TIME. Those "coiled springs" that so many analysts keep talking about in reference to the retailers who have cut costs and just need the consumer back before earnings take off like rockets... BUNK. By the way, can I remind everyone that at least until recently the consumer drove 70% or so of the economy. Guess what is also probably going to change? Yeah. That.
Coming Mortgage Resets
I've shown this graph before too... but just in case anyone missed it...
Please notice all the resets of Alt-A and Option ARMS that are coming in the next 18 months or so. Any (honest) mortgage broker will tell you that both of those categories have the capability of being even worse than the Subprime mortgages. I've heard that up to 50% of the folks with those loans that haven't even reset yet can't make their payments. Guess what happens when they DO reset? Yep. Ugly. Really ugly.
But there's no housing problem.
And I haven't even gotten to the accounting changes coming for the banks that put all the toxic waste back on the balance sheets. But that's another post.
Cheers!
Sunday, August 23, 2009
Happy Happy, Joy Joy
Tonight Jack Welch (yes, that Jack Welch) said that it's a 50/50 chance that we go down again. Watching Twitter is important folks, 'cause that's where he said it... right after a diatribe about the Red Sox. Glad to know that even someone who might know a little about the financial world doesn't think I'm totally out in left field. (All puns intended... all the time.)
What is most interesting to me is that both Meredith Whitney and Dick Bove, two of the top bank analysts out there, believe that there are somewhere around another 200+ banks to go under before this whole whatever-we're-calling-it is over. As of Friday night, we're over 80 failures this year. And the thing that I don't think Wall Street gets is that each of these 'too little to care if they fail' banks affects a lot of folks on Main Street. Want everyone else back in the market, Wall Street? Start to care if other peoples' pools are polluted.
The biggest announcement of the past week, though, and one that got virtually no press, was the announcement that the FDIC is looking to relax the rules for Private Equity getting involved in the banking sector. Gee, color me cynical, but why would they do that? Ummmm, maybe because they already know that based on the losses they already know about they need to raise fees to banks. And ummm... maybe because they know there are lot of other failures to come?
But everything is just fabulous out there. Go long in the market folks. Go ahead, I dare you. I'll even sell you the stock you want to buy. Color me generous.
What is most interesting to me is that both Meredith Whitney and Dick Bove, two of the top bank analysts out there, believe that there are somewhere around another 200+ banks to go under before this whole whatever-we're-calling-it is over. As of Friday night, we're over 80 failures this year. And the thing that I don't think Wall Street gets is that each of these 'too little to care if they fail' banks affects a lot of folks on Main Street. Want everyone else back in the market, Wall Street? Start to care if other peoples' pools are polluted.
The biggest announcement of the past week, though, and one that got virtually no press, was the announcement that the FDIC is looking to relax the rules for Private Equity getting involved in the banking sector. Gee, color me cynical, but why would they do that? Ummmm, maybe because they already know that based on the losses they already know about they need to raise fees to banks. And ummm... maybe because they know there are lot of other failures to come?
But everything is just fabulous out there. Go long in the market folks. Go ahead, I dare you. I'll even sell you the stock you want to buy. Color me generous.
Tuesday, August 18, 2009
What goes up... must come down...
All of the sudden, I find myself with increasing company in the bear camp. I don't know whether to dance the bear dance with my new found friends, or defect to the bull camp. But I'm pretty sure that I heard some dancing music warming up.
So the market is trading at 16.8x 2010 earnings. That seem extreme to anyone else? And not only does no one in the bull camp seem to expect any revenue growth this year, it seems like maybe not much is expected next year. So we're cost cutting our way to properity then? Right. Pardon my skepticism, but I just can't help myself - probably the fault of my parents that taught me that thinking for myself might not be such a bad idea.
I run a number of different valuation models that I've developed over the last ::bleep:: (substitute 'many', it will do just as well) years in the industry. Last night my earnings momentum model that usually gives me 100 or more stocks on which I can do more fundamental work rendered a list of ... wait for it... nineteen (19) stocks. NINETEEN. On another growth model that I developed over the past 3 years or so, a multifactor model that requires revenue growth to support the earnings growth, I usually get a list of 300+ names. This week? Right around 100.
So what can I take from this? As of right now, given today's valuations and earnings/revenue prospects for stocks, revenue growth is an almost extinct animal.
If you're good with cost cutting as the only way of getting out of this lovely little economic scenario, good for you. But don't use my money to invest, 'k?
So the market is trading at 16.8x 2010 earnings. That seem extreme to anyone else? And not only does no one in the bull camp seem to expect any revenue growth this year, it seems like maybe not much is expected next year. So we're cost cutting our way to properity then? Right. Pardon my skepticism, but I just can't help myself - probably the fault of my parents that taught me that thinking for myself might not be such a bad idea.
I run a number of different valuation models that I've developed over the last ::bleep:: (substitute 'many', it will do just as well) years in the industry. Last night my earnings momentum model that usually gives me 100 or more stocks on which I can do more fundamental work rendered a list of ... wait for it... nineteen (19) stocks. NINETEEN. On another growth model that I developed over the past 3 years or so, a multifactor model that requires revenue growth to support the earnings growth, I usually get a list of 300+ names. This week? Right around 100.
So what can I take from this? As of right now, given today's valuations and earnings/revenue prospects for stocks, revenue growth is an almost extinct animal.
If you're good with cost cutting as the only way of getting out of this lovely little economic scenario, good for you. But don't use my money to invest, 'k?
Sunday, August 16, 2009
Wall Street vs Main Street
I guess Alan Abelson of Barron's and I are thinking a bit alike lately. I don't know whether to be comforted or scared about that.
I mentioned last week on CNBC that I thought this was coming down to a struggle between Wall Street and Main Street. Aparently Alan (you don't mind if I call you Alan, do you Alan?) agrees with me.
Go ahead, tell me the story about how good things are again. My opinion, for whatever it's worth, is that the market just isn't worth 16.8x next year's earnings. I know all the bulls think that we're going to have company after company guiding earnings upward and that earnings will be like a huge coiled spring that launches us into the next realm of the market. I also know that the market is a discounting mechanism, and that you really want to buy in some cases as much as 6-9 months before we expect to be out of the recession. But someone forgot to tell 70% of the economy that things were better.
Let's look at life for Joe and Jane Consumer for a moment. Not only is unemployment off the charts, but we're seeing people use all their benefits and drop off the backside of the statistic. The backside, you know, the part where there isn't any more money? Yeah. Comfy place. Doesn't tend to inspire a rebound in spending.
Despite there being a slight pick up in the number of homes being sold, Joe & Jane's home isn't worth anymore today than it was a month or two ago. And statistically it's probably worth somewhere around 33% less than it was a couple of years ago. Since Joe & Jane put 20% down (at most), that means it's worth less than they paid for it in many cases. And all those foreclosures going on down the block, not helpful. Luckily, though, their Alt-A mortgage doesn't reset for another few months. Oh, and that checkbook that wrote against the home equity line of credit? Might as well use it for fire starter this winter (especially if you can't afford the traditional heating bill), 'cause it's quite literally not worth the paper it is printed on.
If it comes down to choosing one payment over another, the credit cards aren't getting paid just so the mortgage can be made for one more month. That's not good for the banks or retailers. If they are making card payments still, chances are their interest rates have risen and their credit limits have fallen - can't use the revolving card for spending anymore because the only revolving it's doing is spinning in the grave of consumer spending.
Luckily, in order tohelp the car companies yet again stimulate the economy and help consumers drive more fuel efficient cars, the government launched Cash for Clunkers. Fabulous idea. Sold lots of cars. Also gave something like 300,000 people who had a paid off clunker of a car a gift that goes on giving - A CAR PAYMENT! So there goes another $400 a month out of discretionary income.
Yes, there's a lot of the stimulus bill that hasn't been issued yet. Why issue it when people really need it? Better to wait so that any positive effects come just a few months before the election... not that I'm saying the government planned it that way... Oh. Wait. I am saying that. I guess I have little skepticism as far as the benefits of this. Sure, our roads out here in the Seattle area are much better now that road construction projects are coming through. But I'm still waiting for the trickle up effect to show through. Geez, even beer isn't selling the way it was. What more of a sign do you need?
I guess the thing that tickles my oh-so-ironic funny bone the most is the belief from the Wall Street pundits (you know, those OTHER people who flap their lips on TV all the time) who think all the money on the sidelines is going to come pouring back in the market. A couple of thoughts on this:
First - if you're a baby boomer who just saw 40% of your savings evaporate before your eyes, you're panicked and not likely to want to jump back in the overheated market.
Second - and I think this is the part that those on Wall Street who never walk around in the rest of the country will never get - when your friends, family, boss, neighbor has their job, savings or future hit by the closing of one of those little banks that is NOT 'too big to fail', confidence errodes really quickly. No, it's not about the deposits so much because the FDIC has those covered. I'm talking about the business and construction loans that are not being picked up by the acquiring banks, leaving projects halfway completed with no further funding. I'm talking about grown men in tears because their lives as they know it have just evaporated. Doesn't tend to make for a lot of trust for those folks that got the bailout money, know what I mean?
If you totally disagree with me, so be it. But remember this one piece of information if nothing else: in a bear market rally it doesn't take a selling climax to end the rally - it just takes a lack of further buyers.
Be careful out there.
I mentioned last week on CNBC that I thought this was coming down to a struggle between Wall Street and Main Street. Aparently Alan (you don't mind if I call you Alan, do you Alan?) agrees with me.
Go ahead, tell me the story about how good things are again. My opinion, for whatever it's worth, is that the market just isn't worth 16.8x next year's earnings. I know all the bulls think that we're going to have company after company guiding earnings upward and that earnings will be like a huge coiled spring that launches us into the next realm of the market. I also know that the market is a discounting mechanism, and that you really want to buy in some cases as much as 6-9 months before we expect to be out of the recession. But someone forgot to tell 70% of the economy that things were better.
Let's look at life for Joe and Jane Consumer for a moment. Not only is unemployment off the charts, but we're seeing people use all their benefits and drop off the backside of the statistic. The backside, you know, the part where there isn't any more money? Yeah. Comfy place. Doesn't tend to inspire a rebound in spending.
Despite there being a slight pick up in the number of homes being sold, Joe & Jane's home isn't worth anymore today than it was a month or two ago. And statistically it's probably worth somewhere around 33% less than it was a couple of years ago. Since Joe & Jane put 20% down (at most), that means it's worth less than they paid for it in many cases. And all those foreclosures going on down the block, not helpful. Luckily, though, their Alt-A mortgage doesn't reset for another few months. Oh, and that checkbook that wrote against the home equity line of credit? Might as well use it for fire starter this winter (especially if you can't afford the traditional heating bill), 'cause it's quite literally not worth the paper it is printed on.
If it comes down to choosing one payment over another, the credit cards aren't getting paid just so the mortgage can be made for one more month. That's not good for the banks or retailers. If they are making card payments still, chances are their interest rates have risen and their credit limits have fallen - can't use the revolving card for spending anymore because the only revolving it's doing is spinning in the grave of consumer spending.
Luckily, in order to
Yes, there's a lot of the stimulus bill that hasn't been issued yet. Why issue it when people really need it? Better to wait so that any positive effects come just a few months before the election... not that I'm saying the government planned it that way... Oh. Wait. I am saying that. I guess I have little skepticism as far as the benefits of this. Sure, our roads out here in the Seattle area are much better now that road construction projects are coming through. But I'm still waiting for the trickle up effect to show through. Geez, even beer isn't selling the way it was. What more of a sign do you need?
I guess the thing that tickles my oh-so-ironic funny bone the most is the belief from the Wall Street pundits (you know, those OTHER people who flap their lips on TV all the time) who think all the money on the sidelines is going to come pouring back in the market. A couple of thoughts on this:
First - if you're a baby boomer who just saw 40% of your savings evaporate before your eyes, you're panicked and not likely to want to jump back in the overheated market.
Second - and I think this is the part that those on Wall Street who never walk around in the rest of the country will never get - when your friends, family, boss, neighbor has their job, savings or future hit by the closing of one of those little banks that is NOT 'too big to fail', confidence errodes really quickly. No, it's not about the deposits so much because the FDIC has those covered. I'm talking about the business and construction loans that are not being picked up by the acquiring banks, leaving projects halfway completed with no further funding. I'm talking about grown men in tears because their lives as they know it have just evaporated. Doesn't tend to make for a lot of trust for those folks that got the bailout money, know what I mean?
If you totally disagree with me, so be it. But remember this one piece of information if nothing else: in a bear market rally it doesn't take a selling climax to end the rally - it just takes a lack of further buyers.
Be careful out there.
Wednesday, August 12, 2009
It's been a big month here at Lake Woebegon...
Let me start by apologizing for a month of silence. Some of you, no doubt, found it refreshing that I'd shut up for a bit.
We at Storehouse have been somewhat gratefully busy converting our firm from one platform to another. It's a goood move over all, but painful.
But enough of all that. I've been doing a lot of CNBC lately, and if you're following you probably know that I'm pretty much the Princess of Darkness right now. No, I don't believe the rally. No, I don't think it's supported by fundamentals. I certainly don't think the valuation of the market is warranted. At all. Revenue growth is beyond anemic. But most importantly...
FALLING LESS QUICKLY DOES NOT EQUAL GROWTH.
There are a myriad of reasons why we're happily playing the market using chicken methodologies. I intend to post those over the next few days. In the meantime, here are today's two appearances on CNBC, which should give you some insight into what I'm thinking. In the afternoon appearance (first one below), Scott Wapner had all the finese of a pit bull with rabies, in my humble opinion. Of course, I was on the receiving end of the questions. I'm just saying, from my perspective, he was out of line.
We at Storehouse have been somewhat gratefully busy converting our firm from one platform to another. It's a goood move over all, but painful.
But enough of all that. I've been doing a lot of CNBC lately, and if you're following you probably know that I'm pretty much the Princess of Darkness right now. No, I don't believe the rally. No, I don't think it's supported by fundamentals. I certainly don't think the valuation of the market is warranted. At all. Revenue growth is beyond anemic. But most importantly...
FALLING LESS QUICKLY DOES NOT EQUAL GROWTH.
There are a myriad of reasons why we're happily playing the market using chicken methodologies. I intend to post those over the next few days. In the meantime, here are today's two appearances on CNBC, which should give you some insight into what I'm thinking. In the afternoon appearance (first one below), Scott Wapner had all the finese of a pit bull with rabies, in my humble opinion. Of course, I was on the receiving end of the questions. I'm just saying, from my perspective, he was out of line.
Wednesday, July 8, 2009
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