Hey everyone,
Just wanted to wish all of you a safe and happy Thanksgiving! I am about to hit the road to meet up with family and friends and excited to do so.
Some important economic figures came out today:
- First, personal income increased 0.3% in October, slightly ahead of the 0.1% consensus estimate gain. Income growth has been surprisingly resilient in the face of mounting job losses throughout the economy.
- Second, if anyone was looking for some early holiday cheer in today’s initial jobless claims data then think again. The numbers continue to be dour each week as losses in the manufacturing and construction industries intensify from the already lean levels. Additionally, a further level of doom and gloom may be recorded in the first quarter of 2009 as companies grappling with the reality of a poor holiday selling season shed workers. For the week-ended November 22, initial jobless claims tallied 529,000, slightly better than the 535,000 consensus estimate, but is definitely not a cause for celebration by any means. In the November report, I wouldn’t be surprised to see the unemployment rate spike to 7.5% from the current 6.5%.
- Third, orders for durable goods decreased by 6.2% last month to a seasonally adjusted $193.02 billion, which was the third straight month of declines. Durables, which are goods designed to last at least three years, fell 0.2% in September, revised way down from a previously estimated 0.9% increase. A key barometer of overall business equipment spending, orders for non-defense capital goods excluding aircraft, plunged by 4.0%, after decreasing 3.3% in September.
All of this tells me that the economy has yet to begin the recovery process. The financial system needs to the revamped, the auto manufacturers need a bailout tied to key performance indicators, and the middle class Joe and Jane need access to credit. The government announced yesterday that they are bypassing the banks to directly free up the credit crunch so those with solid credit and at least 20% equity in their homes can refinance. I like the fact that the government is rewarding the fiscally responsible individuals rather than those on a $30,000 salary who took out negative amortizing loans on $500,000 homes. However, just providing refinancing opportunities isn’t enough. These individuals with solid credit scores need to be able to access loans for new home purchases. Hopefully, this is what the government initiative will evolve into.
Today, at the start of the market, I nibbled on a few shares of Exxon, Alcoa, Wal-Mart, GE, and Intel regarding the blue chips. I also added shares to gold positions, specifically GDX. My thought process here is, from a technical standpoint, the market is poised to spike up over the next few months (or days if we get violent 300+ point rallies) before looking to retest the previous lows or possibly establishing new lows as we are starting to see some bullish tendencies and the financials holding up. Also, with the euphoria around President-Elect Obama establishing his economic A-team, this should create some calm in the markets. Additionally, gold is starting to break out which is about time. So, I will continue buying blue chip shares in market weakness.
Well, I am signing off and going to hit the road Jack. All of you have a wonderful Thanksgiving, and I will speak to you soon. As always, if you have any questions, don’t hesitate to contact me at moolahtimeletter@gmail.com.
Gobble Gobble,
Moolah
