The glitter continues to come off the equity market as stocks lost ground for the fourth consecutive week with the blue chip DJIA losing 1.75% and the broader S&P 500 shedding 1.9%. The massive spring-time rally has lost heat in the summer. The key phrase a couple of weeks ago was "green shoots", i.e. signs of glimmer in a tough overall environment. That green shoots theory took a big hit right before the July 4th weekend when the employment #s for June came in worse than expected. The disappointment from that report dragged on stocks for most of last week as equities traded in a fairly narrow range except for Tuesday which saw the DJIA lose 161.27 points. Traders now believe that the market has gotten ahead of itself and that economic recovery is still a fair way off. There was also a lot of programmatic trading last week as the major indices broke key technical levels on the downside. This triggered further selling and saw traders seek shelter in the safety of staples. Google (GOOG: Charts, News, Offers) announced that it is working on a lightweight operating system, CIT Group (CIT: Charts, News, Offers) is on the verge of collapse as it has been unable to get the government to back its planned debt offerings and Alcoa (AA: Charts, News, Offers) kicked off the earnings season on Wednesday with a smaller than expected loss. Oil was on the decline last week falling below $60 per barrel which hurt major energy stocks such as Exxon Mobil (XOM: Charts, News, Offers) and Chevron (CVX: Charts, News, Offers). The latter also issued a profit warning. The idea of a second stimulus package seemed to gain ground last week as policymakers start to feel the political pressure from the continuing recession.
Looking ahead, the main focus will be on earnings. A 36% drop in overall earnings from the S&P 500 is expected, though there should a few surprises to the upside given the reduced expectations. Goldman Sachs (GS: Charts, News, Offers) (which got a big vote of confidence from Meredith Whitney this morning), Johnson & Johnson (JNJ: Charts, News, Offers), Google and JP Morgan JPM are some of the big names that will report earnings this week. An updated reading on housing starts is due Friday. More Market News
The Silver Lining within Rising Jobless Numbers Last Thursday's news of yet another increase in the national rate of unemployment was predictably met with quite a few downcast headlines. The Wall Street Journal led with "Rising Job Losses Damp Hopes of Recovery", while top Pimco investment strategist Mohamed El-Erian penned a piece for the Financial Times titled "American jobs data are worse than we think." In times like these it's hard to minimize the pain felt by many Americans. For those who are jobless, every day they're out of work likely combines humiliation with fear that nothing will materialize. And for those lucky enough to be working, each day likely begins with perilous thoughts of an axe that is soon to fall. Still, as with everything in life, there are positive tradeoffs to our present economic difficulties. (Source: Real Clear Markets) Click here to read the full article
Will Obama rein in oil speculators? A year ago oil peaked at $147 a barrel, when most oil trading volume came from speculators. Certainly then, as now, the economics 101 explanation for oil prices -- that prices should rise if demand exceeds supply -- made no sense. And now, with oil having nearly doubled since the beginning of 2009 from $33 a barrel to $62, supply and demand offers no explanation for the rise in oil prices.
How so? Daily U.S. supply in 2009 is expected to exceed demand by 0.92 million barrels per day. (Source: The Daily Finance) Click here to read the full article
Do We Need a Second Stimulus? In "Brewster's Millions," a comedy starring Richard Pryor, a man is told he can keep $300 million if he manages to spend $30 million in one month. The movie documents -- with a great deal of humor -- his difficulties getting the money spent. The Obama administration is currently facing a similar problem with its "stimulus" spending, only without the humor. With the economy weak and the labor market continuing to decline, there is now talk of a second stimulus (which is actually the third, counting President Bush's 2008 tax rebates). This would be a mistake. The truth is there hasn't been any stimulus to speak of so far this year. Moreover, what's being called stimulus is just a smoke screen for a permanent expansion of government. Let's start with some facts. (Source: Wall Street Journal) Click here to read the full article
GM emerges from bankruptcy General Motors (GM: Charts, News, Offers) emerged from bankruptcy yesterday morning, with chief executive Fritz Henderson promising that the fallen corporate giant will be rebuilt and that "business as usual is over."
The announcement signals the substantial completion of one of the largest bankruptcies in U.S. history and the next step in what has become a landmark government bailout.
The new GM will have fewer brands, fewer plants, and fewer workers. The number of U.S. executives will be cut by 35 percent. But as important as this shrinking, Henderson said, is the need to revive the automaker's culture, long criticized as insular and slow-moving. Once the world's largest automaker, General Motors has been losing market share for decades. (Source: Philadelphia Inquirer) Click here to read the full article
CIT Group Says Its Failure Risks Demise of Customers CIT Group Inc. (CIT: Charts, News, Offers), the century-old lender that hasn't been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and "precipitate a crisis" for as many as 300,000 retailers.
A collapse would ripple across the "small and medium-sized businesses who rely on CIT to operate -- to pay their vendors, ship goods to their customers and make their payroll," the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the U.S. economy. CIT spokesman Curt Ritter declined to comment on the documents. (Source: Bloomberg) Click here to read the full article
Earnings prospects for 2009's second half will be scrutinized With corporate earnings season set to hit full stride this week, the stock market will be paying far more attention to what companies say about the quarters ahead than to the one that just ended.
Investors have long known that second-quarter financial reports will be dreary. Overall profits for the biggest U.S. companies are expected to be down more than one-third from a year earlier -- the eighth consecutive quarterly drop. In hard-hit sectors, including financial services and raw materials, earnings could be off by more than half. But Wall Street is more interested in what companies divulge about their prospects for the rest of 2009 -- whether executives forecast their businesses improving and the recession lifting.
"This earnings season is of such crucial importance," said Dan Greenhaus, market analyst at Miller Tabak & Co. in New York. "So much attention, more so than even usual, is being paid to it." (Source: LA Times) Click here to read the full article
Google's War on the PC As the GoogleApps suite of programs finally graduated from its "beta" status this week, Google (GOOG: Charts, News, Offers) also announced its plans to release an operating system on which to run them. Google Chrome, based on the company's new browser, will invite us all to spend a lot less time, energy, and money on our computers--and in the process, it may force the technology industry to consider how to make money after people no longer require expensive machines and software to do their work.
In a sense, Google is just bringing computing back to the way it was supposed to be.
When Steve Jobs toured Xerox PARC and saw computers running the first operating system that used Windows and a mouse, he assumed he was looking at a new way to work a personal computer. (Source: The Daily Beast) Click here to read the full article
How Facebook is killing MySpace For the past year, News Corp.'s (NWS: Charts, News, Offers) flagship Internet property has watched its fortunes steadily fade. Not long ago, MySpace was the dominant player in the online social-media space, but rivals have been stealing away users. Just two months ago the site lost its title as the world's largest social-networking Web site to rival Facebook.
MySpace also experienced a painful loss of revenue in the most recent quarter, and analysts expect more bad news. At this rate, the "place for friends" could soon find itself virtually friendless and barren.
"They are in a really deep hole right now," said Debra Aho Williamson, a senior analyst at eMarketer, an online advertising research firm. "It wasn't a good quarter for MySpace, and what you have seen since then is a snowball effect." (Source: MSN Money) Click here to read the full article
Bing, the Imitator, Often Goes Google One Better For the last 15 years, Microsoft’s master business plan seems to have been, "Wait until somebody else has a hit. Then copy it." I know that sounds mean, but come on -- the list of commercial hits/Microsoft knockoffs is as long as your arm. PalmPilot/PocketPC. Netscape Navigator/Internet Explorer. Mac OS X/Windows Vista. Apple iPod/Microsoft Zune.
You'd think Microsoft would feel a little sheepish after a while.
And now we have yet another me-too effort. It's something called Bing, and it's the latest iteration of Microsoft's multiyear attempt to imitate Google.
The name, presumably, is supposed to evoke the sound of a winning game-show bell. The cynics online, however, joke that Bing is an acronym for "But It's Not Google." Here’s the shocker, though: in many ways, Bing is better. (Source: New York Times) Click here to read the full article
For many, a simpler life is better Shrinking paychecks and rising environmental concerns are prompting Americans to pare back their lifestyles.
"Perhaps the silver lining (of the recession) is that people are coming to realize they can live with less and their lives are richer for it," says Michael Maniates, professor of political and environmental science at Allegheny College in Meadville, Pa.
A third, 32%, say they have been spending less and intend to make that their "new, normal" pattern; 27% say they are saving more and plan to continue, according to a Gallup Poll in April.
Nearly half of consumers, 47%, say they already have what they need, up from 34% in November 2006, according to the 2009 MetLife Study of the American Dream. (Source: USA Today) Click here to read the full article
It ain't easy, but you can still retire well The expensive approach to retirement is to pile up so much money that you'll be safe no matter how long you live or what goes wrong with your health or the markets. But for many families, the amount required seems ridiculously out of reach, especially after the twin crashes of Wall Street and Main Street. "There's a big sense of futility and hopelessness," says Liz Davidson, founder and chief executive of Financial Finesse, a Manhattan Beach (Calif.) educational firm.
Take courage. There are more efficient and affordable approaches. You can have a secure retirement even if you don't have the biggest nest egg since the extinction of the Great Elephant Bird of Madagascar. (Source: MSNBC) Click here to read the full article
We encourage you to forward this FREE newsletter to your friends! Did someone forward this to you? Subscribe by clicking here or sending an email to investor.12@add.ms00.net ! If you have any comments/feedback about this newsletter, click here.
