Filed under: Consumer confidence, Inflation, Norhill Wealth Strategies Report, Safe Investments | Tags: Annualized Inflation, Dow Jones Industrial Average, Homebuying market, housing market, Inflation, Norhill Wealth Strategies, rebounding Stock market, Warren Elkin
ACTIONS in GREECE & ITALY CALM MARKETS
Global investors seemed reassured at the end of last week by developments in the European Union. By Friday, Greek prime minister George Papandreou had stepped down; Italian prime minister Silvio Berlusconi’s resignation was at hand. Greek prime minister designate Lucas Papademos and a new coalition government will now be charged with implementing austerity cuts as Greece accepts the EU’s latest €130 billion aid package. Italy’s senate passed new economic reforms at the end of the week aimed at reducing its sovereign debt. Italy’s treasury was also able to sell €5 billion of one-year notes , albeit at 6.09% interest.1,2
A BIG REBOUND IN CONSUMER CONFIDENCE
The preliminary November consumer sentiment index from the University of Michigan was a nice surprise. It came in at 64.2; far better than the final mark of 60.9 for October and the 61.3 consensus forecast of economists polled by Briefing.com. The reading hasn’t been this high since June. The future expectations sub-index improved to 56.2 from the previous 51.8.3
OIL PUSHES TOWARD $100 AGAIN
On Veterans Day, oil futures settled at $98.99 on the NYMEX after a +5.02% week that saw prices rise $3.25 across Thursday and Friday. Gold prices posted a weekly gain as well: the precious metal gained 1.83% on the COMEX for the week, and that brought its 3-week advance to 9.32%.4
STRONG FRIDAY PUTS DOW BACK IN THE BLACK
The DJIA climbed 260 points on Friday after rising 113 points on Thursday, almost offsetting Wednesday’s 389-point descent. That left it at +4.98% YTD. Last week’s performances: DJIA, +1.42% to 12,153.68; S&P 500, +0.85% to 1,263.85; NASDAQ, -0.28% to 2,678.75.5,6,7
THIS WEEK: Key economic releases will be complemented by earnings from the big boxes. Monday, Lowe’s, Urban Outfitters and JCPenney issue 3Q results. On Tuesday, Wal-Mart, Home Depot, Staples, Dell and Beazer Homes come out with earnings, and the October PPI arrives along with October’s retail sales report from the Census Bureau. Wednesday, the October CPI appears along with data on October industrial output; 3Q results roll in from Target and Abercrombie & Fitch. Thursday brings earnings from Ross Stores, Sears, Dollar Tree, GameStop and GAP, the latest initial claims figures and October’s housing starts report. Friday, Heinz announces 3Q results, EU finance ministers meet and the Conference Board offers its October leading indicator index.
| % CHANGE | Y-T-D | 1-YR CHG | 5-YR AVG | 10-YR AVG |
| DJIA | +4.98 | +7.72 | +0.00075 | +2.72 |
| NASDAQ | +0.98 | +4.82 | +2.42 | +4.56 |
| S&P 500 | +0.49 | +4.15 | -1.70 | +1.30 |
| REAL YIELD | 11/11 RATE | 1 YR AGO | 5 YRS AGO | 10 YRS AGO |
| 10 YR TIPS | -0.04% | 0.71% | 2.25% | 3.50% |
Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 11/11/117,8,9,10
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
Filed under: Consumer confidence, Economic Outlook, Inflation, Norhill Wealth Strategies Report, Secure Investments | Tags: Annualized Inflation, Dow Jones Industrial Average, Homebuying market, housing market, Inflation, Norhill Wealth Strategies, rebounding Stock market, Warren Elkin
JOBLESS RATE DECREASES TO 9.0%
Economists surveyed by Bloomberg News had expected unemployment to stay at 9.1% in October, so this was a nice development. Still, this latest jobs report had something in common with its predecessors: underwhelming job growth. Non-farm payrolls expanded by 80,000 positions last month, but that fell short of the 95,000 new jobs envisioned in the consensus Bloomberg forecast. On the bright side, the percentage of underemployed Americans fell from 16.5% to 16.2% and the long-term unemployed (those out of work for at least 27 weeks) shrank to 42.4% of the jobless population, the lowest percentage since November 2010.1
BOTH ISM INDICES MOVE LOWER
The Institute for Supply Management’s purchasing manager indexes were both above 50 in October, but not quite where they were at a month before. The ISM manufacturing index slipped from 51.6 to 50.8; its service sector index ticked down to 52.9 from the preceding 53.0. The service sector employment gauge improved by 4.6% and moved from 48.7 in September (contraction) to 53.3 (expansion).2
GOLD & OIL POST WEEKLY GAINS
Oil futures advanced 1.01% last week to settle at $94.26 per barrel on the NYMEX Friday. Prices have jumped 19.02% over the past five weeks of trading. Gold logged a 0.52% gain last week, closing at $1,755.30 an ounce on the COMEX Friday.3
GREEK THEATRE PREOCCUPIES WALL STREET
The whims of Greek Prime Minister George Papandreou affected stocks more than anything last week: first he announced a public vote on the latest austerity cuts for the nation, reconsidered it, and then prepared to step down Friday amid concerns that he might change his mind. As these weekly performance numbers show, bears were roaming last week: DJIA, -2.03% to 11,983.24; S&P 500, -2.48% to 1,253.23; NASDAQ, -1.86% to 2,686.15.4,5,6
THIS WEEK: No major economic releases are slated for Monday; we do have results from Priceline and SYSCO. Eurozone finance ministers conclude their meeting in Brussels on Tuesday, and Toyota presents earnings. Wednesday, Ben Bernanke speaks at a Federal Reserve conference on small business; earnings come in from GM, Anheuser Busch, HSBC, Cisco, Green Mountain, Ralph Lauren, Macy’s and Wendy’s. Thursday we have earnings from Viacom, Kohl’s, Disney and Nordstrom; Ben Bernanke speaks at an El Paso town hall. Friday is Veterans Day: banks are closed, markets are open, and the initial October University of Michigan consumer sentiment survey arrives plus earnings from D.R. Horton.
| % CHANGE | Y-T-D | 1-YR CHG | 5-YR AVG | 10-YR AVG |
| DJIA | +3.50 | +4.80 | -0.000047 | +2.69 |
| NASDAQ | +1.25 | +4.22 | +3.05 | +4.98 |
| S&P 500 | -0.35 | +2.63 | -1.63 | +1.36 |
| REAL YIELD | 11/4 RATE | 1 YR AGO | 5 YRS AGO | 10 YRS AGO |
| 10 YR TIPS | -0.08% | 0.44% | 2.40% | 3.50% |
Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 11/4/116,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
Filed under: Consumer confidence, Economic Outlook, Inflation, Norhill Wealth Strategies Report, Secure Investments | Tags: Annualized Inflation, Dow Jones Industrial Average, Homebuying market, housing market, Inflation, Norhill Wealth Strategies, rebounding Stock market, Warren Elkin
ANNUALIZED INFLATION HITS 3.9%
So noted the Bureau of Labor Statistics last week. The Consumer Price Index rose 0.3% during the month of September, with core CPI rising 0.1%, the smallest such increase in six months. (Annualized core consumer inflation was at 2.0%.) The Producer Price Index climbed 0.8% for September after a flat August.1
HOMEBUYING TAPERS OFF IN SEPTEMBER
Existing home sales decreased by 3.0% last month, according to the National Association of Realtors. At this rate, about 4.91 million previously occupied homes will be sold in 2011, matching the total for 2010. In a normal year, about 6 million residential resales occur in the real estate sector.2
HOUSING STARTS UP 15%
Here’s a good sign for residential real estate: a sign of demand. Most of the 15.0% monthly increase in September came from apartment construction; the Commerce Department reported a 53% monthly jump in that category. Single-family construction improved by 1.7%. Overall, there were 658,000 housing starts last month, the best number in any month since April 2010.3
DOW EXTENDS WINNING STREAK
Wall Street rallied Friday on the eve of the crucial summit meeting to address the Eurozone debt crisis, helped by news that a new aid package for Greece had been approved by EU finance ministers. The DJIA gained ground for the fourth week in a row; the S&P 500 also advanced. The weekly numbers: S&P 500, +1.12% to 1,238.25; DJIA, +1.41% to 11,808.79; NASDAQ, -1.14% to 2,637.46.4,5
THIS WEEK: Earnings season is in full swing. Monday, earnings reports from Netflix, Amgen, Caterpillar and Texas Instruments hit the Street. On Tuesday, BP, Deutsche Bank, Amazon.com, Broadcom, DuPont, UBS and 3M issue 3Q results … and the August Case/Shiller Home Price Index comes out along with the Conference Board’s October gauge of consumer confidence. On Wednesday, quarterly results arrive from Boeing, VISA, GlaxoSmithKline, Sprint, ConocoPhillips and Ford and we have data on September new home sales and durable goods orders. Thursday brings the initial estimate of 3Q GDP and the data on September pending home sales, plus earnings from ExxonMobil, Occidental Petroleum, Baidu, P&G, Aetna, Bristol-Myers Squibb, Time Warner Cable, Hershey and Motorola Solutions. Friday, earnings from Merck and Chevron come out along with the report on September consumer spending and October’s final University of Michigan consume r sentiment index.
Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 10/21/114,5,6,7,8
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
Economy: Amid the good news of a rebounding stock market and better job growth comes a warning: Inflation may flare up soon. If it does, don’t blame business.
Maybe you think it’s crazy to worry about inflation when the consumer price index is rising at a modest 1.5% year over year. That’s a valid point. It’s also true that many of the items that make up inflation in our daily lives are climbing fast.
Raw food commodity indexes, for example, have hit all-time highs. And the broader CRB Commodity Index, including food, energy and industrial commodities, has run up 32% the past 12 months.
As anyone who owns a car or truck knows, oil prices have jumped 29% in the past year to more than $108 a barrel. This has pushed gasoline prices over $3.60 a gallon nationally, twice what they were when President Obama entered office.
As for that weak CPI, there are good reasons to question the government’s benign official readings. Bill Simon is one of them. When the CEO of Wal-Mart’s U.S. arm talks, we listen. And last week he told consumers to get ready for a burst of “serious” inflation.
Toyota Motor Co. is another. Americans typically ignore the impact of a weaker dollar. But the biggest carmaker in the world has announced price hikes across the board for all of its vehicles, in large part due to the weaker U.S. currency.
Monetary officials, including the presidents of the Federal Reserve Banks of Richmond, Minneapolis and Dallas, have also weighed in. They too see inflation ahead and suggest the Fed may start raising rates soon.
John Williams, of the useful and iconoclastic Shadow Government Statistics website, measures prices the old-fashioned way. He employs the methodology used before 1992, when Labor Department changes started producing milder readings.
By his measure, inflation is close to 10%, tracking price increases for commodities, energy, food, precious metals and health care, among other items. Once this is recognized, expect business to get the blame and Congress to convene hearings on “price gouging,” as it’s done dozens of times (without finding any).
It’s really government that causes inflation with actions such as:
• The $2 trillion in money created by the Fed under “quantitative easing” since 2008, an unprecedented shot of liquidity pumped straight into the economy.
• The $5.5 trillion in new debt added by our government in just three years — nearly a 60% rise.
• The Environmental Protection Agency’s move to regulate all stationary producers of carbon dioxide, which has led businesses to put off large investments.
• The surge in regulation at all levels of government, which has added to small-business uncertainty and reduced hiring.
• The record 29% jump in federal spending in President Obama’s first three years, which has crowded out private spending and business investment.
• Spending on TARP and “stimulus,” which could total nearly $2 trillion when all is said and done.
The list goes on. The point is, don’t blame companies like Wal-Mart, a proven price cutter, when inflation hits home.
Blame the federal government, which seems dead set on repeating the same errors it made in the stagflationary 1970s.
Filed under: Economic Recovery, Housing Market Trends, Norhill Wealth Strategies Report, Retirement Investing, Senior Investing, Slow recovery | Tags: economic indicators, Economic Outlook, home sales, housing market, markets updates, Norhill Wealth Strategies Report, Warren Elkin
Mixed news for housing market
The scorching heat wave that set record temperatures across much of the nation didn’t extend to the economy, which remains tepid at best according to the latest readings. There was a rise in the Conference Board’s index of leading economic indicators and a bump in new residential construction. However, existing-home sales dropped for the third straight month as President Barack Obama and congressional leaders continued to negotiate over an increase in the nation’s debt limit.
Leading indicators advance
The index of leading economic indicators rose 0.3% in June, less than May’s 0.8% jump but still an encouraging sign that April’s -0.3% reading represented temporary factors and was not part of a larger trend. Compared to June 2010, the index was about 6% higher. Five indicators rose in June, with real money supply the largest contributor, followed by interest rate spread. Stock prices were the largest detractor, along with consumer expectations. The coincident index, which measures current economic activity, inched ahead 0.1%. The indexes are a compilation of indicators that can provide insight into both current and future activity in the broader economy.
Tumble continues for existing home sales
Sales of existing homes fell 0.8% in June to an annualized rate of 4.77 million. The monthly decline-the third straight-was unexpected but attributed to a rise in canceled contracts and the tough economy. Sales were down 8.8% compared to June 2010, when the first-time home buyer tax credit was still in effect. Most of the decline was the result of condominium sales, which dropped 7%. Single-family home sales were unchanged. Across the regions, sales rose slightly in the Midwest, were stable in the South, and fell in the Northeast and West. Compared to a year ago, the median existing-home price was up 0.8%, to $184,300.
The economic week ahead
Next week’s slate of economic news is a bit heavier. Reports on consumer confidence and new-home sales are scheduled for Tuesday, followed by durable goods and the Federal Reserve’s Beige Book nationwide survey of economic activity on Wednesday, and employment costs and real gross domestic product on Friday.
Markets Update
Warren Elkin of Norhill Financial is your safe money strategist. When it comes to your hard earned dollars, he can keep your money secure as it grows. Warren Elkin can be reached toll free at 877-476-5051- or by email at elkininc@aol.com. To learn more about him check out www.warrenelkin.com.
Filed under: Consumer confidence, Consumer Spending, Economic Outlook, Economic Recovery, Foreign Market, Gross Domestic Product, Housing Market Trends, Norhill Wealth Strategies Report, Slow recovery | Tags: economic week ahead, financial advice, housing market, Inflation, investment advice, investments, Market update, Norhill Wealth Strategies Report, Slow economic recovery, Slow growth, Warren Elkin
Emerging Market Unrest
Recent Political Upheaval in the Middle East has raised fears that could have an adverse impact on emerging markets stock prices. While the long-term outlook remains strong, the recent surge in global food and commodity prices has increased concerns that the central banks in developing countries including China, India and Brazil will continue to raise interest rates to combat inflation. This will in turn hurt economic growth as well as US exports.
Worldwide Inflation
Food accounts for roughly 50% of the consumer price index (CPI) in the US. But food accounts for roughly 30% of the CPI in both Brazil and China. In India, food accounts for 47% of CPI inflation. In fact the Central Bank of India has raised interest rates eight times in the past year. While this will have a dampening effect on inflation, it will also decrease economic growth.
While food prices, as measured by the United Nations food and agricultural organizations food price index, have risen 37% in the last year. Oil has increased 27%, and cotton 149%. The Fed has expressed very little concern over inflation pegging core inflation, non-oil and food, at only 2.8%. But as one audience member said to a New York Federal Reserve Board conference, “I can’t eat an iPad”. This was in response to a board member mentioning technology prices have decreased significantly.
QE2
The international monetary fund, IMF, reported recently that the US and Japan face particular challenges in stabilizing their rapidly escalating ratios of debt to GDP. The IMF predicts the US net debt to GDP ratio will reach 86% by 2016, up from 64.8% last year. Japan will reach 164%, up from 117% last year. In comparison France and England will reach a peak of 80.6% in 2013and then gradually declining. The German ratio will peak in 2012 at only 54.7%. If the US ratio does not change soon, borrowing will be crowded out by the US government making capital even more difficult to come by for private industry. This will have a long-term dampening effect on the US economy and maintain unemployment at over 8%.
Nothing easy about this rocky recovery
The U.S. is on the mend from the recession and financial crisis, but while the repairs are evident, the workers aren’t yet ready to pack their tools and take down the scaffolding. The economic situation is serious enough that Fed Chairman Ben Bernanke held the first-ever news conference for the Federal Market Open Committee (FOMC) in addition to releasing a customary statement. Overall, the economic news this week was mixed. Real gross domestic product (GDP) grew at a slower pace in the first quarter than it did in the fourth quarter of 2010. Consumer confidence and the housing market are slowly improving, but still not at levels considered healthy. The stock market surged on good news and shrugged off the bad.
Fed continues course, adjusts forecast
After meeting earlier this week, the Fed amended some of its key forecasts but left its monetary policy unchanged. The central bank voted to keep the target federal funds rate in the 0% to 0.25% range, as it has since December 2008, “for an extended period,” and complete its $600 billion purchase of Treasuries by June. The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually,” the Fed’s statement said. The Fed slightly lowered its forecast for economic growth this year and raised its outlook for inflation, which is expected to decline again in 2012 and 2013. It also modified its view on employment, which it sees falling a bit more than earlier projected.
New-home sales limp ahead
Sales of new homes increased more than forecast in March, but the shaky housing industry still remains a glaring trouble spot of the economy. New-home sales rose 11.1% from February to an annual rate of 300,000, and numbers for February and January were both revised higher. Still, sales are down 21.9% from a year ago–when the federal homebuyer tax credit was in effect–as builders deal with competition from foreclosures and the glut of existing homes on the market. Median sale prices climbed 2.9% to $213,800 from February but are 4.9% lower than March 2010. Also, the months of supply dropped to 7.3 from 8.2. Northeast sales were the healthiest, followed by the West and Midwest. Sales in the South dipped slightly.
Personal spending growth slows
Consumer spending rose 0.6% in March, backing off a bit from the previous month. Higher costs for energy and food triggered much of the growth as “real” spending-which removes the effects of price changes-was up just 0.2%. Spending on services outweighed spending on durable goods. Meanwhile, personal income increased 0.5%, a slight improvement. Rental, dividend, and transfer income–the latter from unemployment payments–drove the gains, and wages and salaries climbed more modestly.
The economic week ahead
A fresh batch of data is due next week. Monday brings releases on construction spending and the Institute for Supply Management’s manufacturing index. The wave of reports continues with factory orders Tuesday, the ISM non-manufacturing index Wednesday, and productivity and costs Thursday. News on employment and consumer credit is scheduled Friday.
Indices are unmanaged, do not incur fees or expenses, and cannot be
invested into directly. These returns do not include dividends.
Norhill Wealth Strategies 