Russian Finance Minister: People Should Smoke and Drink More
Posted by Eddy Elfenbein on September 7th, 2010 at 9:40 am

Can anyone imagine Tim Geithner saying this?

Speaking as the Russian government announces plan to raise duty on alcohol and cigarettes, Alexei Kudrin said that by smoking a pack, “you are giving more to help solve social problems such as boosting demographics, developing other social services and upholding birth rates”.
“People should understand: Those who drink, those who smoke are doing more to help the state,” he told the Interfax news agency.
Alcohol and cigarette consumption are already extremely high in Russia, where 65 per cent of men smoke and the average Russian consumes 18 litres of alcoholic beverages per year, mainly vodka, according to official statistics.

If I were cynical, I would say that in America, such a policy would greatly aid our entitlements financing.
Also, I’m not so sure that telling people that something will help the state will urge them to do it. I’ll give the Russian government credit for finally trying to kill its citizens by second-hand means. That’s actually an improvement.

Good Morning!
Posted by Eddy Elfenbein on September 7th, 2010 at 9:30 am

I hope everyone had a great long three-day weekend. The weather was perfect here in DC, lots of sun and not too hot.
On Saturday, I was walking through DuPont Circle and I came across one of the most bizarre protests I’ve ever seen. Living in DC, you get used to seeing people protest some off-beat cause or another, but this one was strange even by DC standards.
I’ll try to present their gripe as best as I can, and I’m using the groups leaflet as my guide. My apologies if I get this wrong, but the document isn’t a great example of clarity. Apparently, a group called Huntington Life Sciences allegedly does horrible things with animal testing. So the group is protesting them? No.
Huntington allegedly got a loan from Fortress Investment Group. So they’re protesting Fortress? No, that’s not it either.
Goldman Sachs allegedly owns a large stake in Fortress. So they’re protest Goldman? Yes…well, sort of.
They’re not protesting at Goldman’s HQ. Nor are they protesting at Goldman’s Government Affairs office in DC, which I’m assuming is their lobbying arm. Instead, they were protesting at the private home of the director of the Government Affairs office.
How this man, or his neighbors, is supposed to stop Huntington’s animal testing isn’t clear. This is the most degrees of separation I’ve ever heard of. I’m now curious if Kevin Bacon ever worked for Goldman Sachs’ Government Affairs unit.
I guess some people will protest anything.

McDonald’s Hits New All-Time High
Posted by Eddy Elfenbein on September 3rd, 2010 at 11:25 am

Congratulations to McDonald’s (MCD). The stock just made a new all-time high today of $75.35. That’s not just a 52-week high, or a post-crash high; that’s an all-time high.
Forty years ago you could have picked up the shares for just 29 cents a piece. That’s adjusted for nine stock splits; four 2-for-1s and five 3-for-2s which equals 121.5-for-1. That’s a gain of close to 26,000% or nearly 15% a year, and it doesn’t include dividends.

McDonald’s has done a great job in turning itself around. In 2003, the shares fell to less than $13. Who would have been brave enough to buy MCD then? I sure didn’t!
Check out this numbers: Yearly EPS has jumped from $2.04 in 2005, to $2.45 in 2006 to $2.89 in 2007 to $3.67 in 2008 to $3.97 last year. EPS will probably hit $4.50 this year and the Street is looking for $4.87 next year.

The CWS Buy List YTD
Posted by Eddy Elfenbein on September 3rd, 2010 at 10:44 am

Thanks to this morning’s push, the Crossing Wall Street Buy List has crept back into the black for the year.
Through yesterday’s close, we were down -0.79% for the year compared with -2.24% for the S&P 500. That doesn’t include dividends.
Here’s a look at the chart:

By early April, we ran to a big lead of more than 600 basis points. Since then, our lead has steadily eroded but we’re still ahead of the market.

The Good News Is that the Bad News Wasn’t as Bad as Expected!
Posted by Eddy Elfenbein on September 3rd, 2010 at 9:46 am

Today’s jobs report is being celebrated as “better-than-expected” which probably comes as a surprise to most non-Wall Streeters. After all, the unemployment rate ticked up from 9.5% in July to 9.6% for August, and there are now close to 15 million unemployed people in the country. That also doesn’t count the people who have left the job market entirely.
The “good” part of the news is that the private sector added 107,000 jobs in August while Wall Street was expecting just 40,000. Overall employment fell by 54,000 which was the same amount lost during July.

Employment at service-providers decreased 54,000. Construction companies added 19,000 workers, the first gain in four months, and retailers cut 4,900 workers.
Average hourly earnings rose 0.3 percent to $22.66 from $22.60 in the prior month, today’s report showed.
Government payrolls decreased by 121,000. State and local governments reduced employment by 10,000, while the federal government lost 111,000 jobs.
The average work week for all workers held at 34.2 hours.

As I mentioned, the overall unemployment rate rose from 9.5% to 9.6%, if we break down the decimals, it really rose from 9.51% to 9.64%. Only 12,000 more job losses and the number would round up to 9.7%.
One of the bright spots is that the civilian labor force increased by 550,000. This means that more people are looking for work. All I can say is that it could have been worse.

$4 Trillion a Day
Posted by Eddy Elfenbein on September 2nd, 2010 at 2:28 pm

Guess what market has daily volume of $4 trillion?
Give up? I’ll give you a hint: The currency markets.
Look at the table on the link. What’s interesting is how much the U.S. dollar dominates the currency markets. In fact, if you were to place a non-dollar trade — say, British pounds to Mexican peso — it would probably go pounds to dollars and then dollars to pesos.

ISM Chart
Posted by Eddy Elfenbein on September 2nd, 2010 at 9:56 am

Here’s the latest chart on the Institute for Supply Management index:

As I’ve discussed before, this is one of the best metrics for telling us if we’re in a recession or not. Notice how often the recession bars on the chart coincide with low ISMs.
A reading above 50 means the economy is expanding, below 50 means we’re contracting. Yesterday’s reading was 56.3.
Until now, I’ve been a doubter on the Double-Dip hypothesis, but now I think I need to take that scenario a lot more seriously. I still don’t think a second recession is probable, but the odds of one have increased markedly.
Fortunately, the ISM takes some of the worry off. The jobs outlook, however, does not. Despite all the concerns of a Double Dip, the quarterly GDP growth number has dropped from 5% in Q4 to 3.7% in Q1 to 1.6% in Q2.
That’s not good, but it’s (for now) not a recession. I should add that we have been fooled before by a false Double Dip. Let’s take a look at what happened 19 years ago:

GDP growth was negative for three straights quarters (you can’t see Q3’90 of -0.006% but it’s there).Then the economy grew by 2.7% in the third quarter of 1991, followed by 1.7% in Q4 and 1.6% in Q1 of 1992. That’s successively lower growth just like we’re seeing now. Yet, it didn’t lead us to another recession. In fact, it led to four straight quarters of 4% of more growth.
Here’s an AP article from December 1991 titled “National economy stalled on brink of double-dip recession.” This came right as the time the double-dip threat was passing.
I’m not saying that history will repeat itself. I’m merely pointing that a double-dip is certainly possible, we still have a ways to go to get to one.

A Look at the Mid-Term Rally
Posted by Eddy Elfenbein on September 1st, 2010 at 2:10 pm

The stock market has historically done very well from its low point during a mid-term election year to the high point during a presidential election year. Check out the numbers:

(Data via Gary Alexander)
The Dow’s lowest close (so far) this year came on July 2 at 9,686.48. A 57% rally would bring the Dow to over 15,200.

ISM 56.3
Posted by Eddy Elfenbein on September 1st, 2010 at 9:58 am

Whew! The ISM number came in at 56.3 which was well above expectations of 53.
I feel like we dodged a bullet here. The market should continue to rally.

ISM Due at 10 am
Posted by Eddy Elfenbein on September 1st, 2010 at 9:29 am

Stocks are rocking this morning, but the ISM comes out at 10 am. The Street expects 53. A negative surprise could be very nasty. I’m now hiding under my snuggie.