Friday, December 28, 2007
As I close out the first year of this blog,I would like to thank my small group of committed readers.Knowing you are out there makes this more worthwhile.Some of you are in distant lands.Some of you are financial professionals.All are thoughtful participants in the global economy.Whatever happens in the financial markets,we are all better off for having applied our minds to this subject which affects our daily lives.The best-performing Dow stocks in 2007 as of this morning were McDonald's(MCD),Merck(MRK) and Honeywell International(HON).Such large-cap multinationals remain in favor with many analysts.
Wednesday, December 26, 2007
Ford Motor Company(F) isn't just sitting around watching a slowing economy.CEO Alan Mulally says Ford has planned for a slowdown.It is reacting with a little bit less production.Although the Edge crossover vehicle has been a big hit,winning the JD Power and Associates "Most Appealing Midsize Multi-Activity Vehicle" designation,Ford will continue to make production adjustments.It is carrying out a strategic review of the Volvo brand to strengthen it,not sell it.Ford has lost a billion dollars in North America,but it is still aiming for profitibility in 2009.With the success of the new cars and utility vehicles,Ford should be able to stabilize in 2009.There is no reason for the automaker to seek a partner or cash infusion.This has been a year of honors for Ford.In late October,Consumer Guide Automotive recommended a number of Ford vehicles,including the Ford Fusion,Mercury Milan,Ford Taurus,Mercury Sable and Ford F-150.They ought to be strongly considered by customers for their price,features,fuel economy,reliablity,resale value and accommodations.One of the most popular features on Ford's 2008 line-up is the Sync voice recognition system,a collaboration with Microsoft(MSFT) that took eighteen months to develop.Walter Mossberg of The Wall Street Journal praised Sync for being a surprisingly reliable,very well done method for integrating digital devices,such as cell phones and MP3 players,into a car.Ford vehicles also garnered safety honors from the Insurance Institute for Highway Safety.Honorees included the Ford Taurus,Mercury Sable,Volvo C70,Ford Edge,Taurus X,Lincoln MKX and Volvo XC90.A University of Michigan customer satisfaction survey,conducted by its National Quality Research Center,gave Ford's Lincoln and Mercury brands an 86 out of 100.Ford is excited by the data.It shows that what they're doing is working,according to spokeswoman Anne Marie Gattari.Ford shares traded down this morning,at 6.73.
Tuesday, December 18, 2007
Rite Aid Corporation(RAD) is the first pharmacy chain to sell a DNA test.Rite Aid stores in California,Oregon and Washington are selling a DNA paternity test kit.The kit sells for about 20.00,and the lab results,which are obtained by mail,are about 120.00.The Camp Hill ,Pennsylvania firm is in the midst of its busy Christmas selling season.Rite Aid sells a complete line of Christmas decorations,bargain gifts and candy.A good assortment of gift cards is also available.The Rite Aid gift card is blank.The customer specifies the amount at the register.As well,you get a free 5.00 Rite Aid gift card with any purchase of 49.99 or more at 1-800-Flowers.com.You also get one with your first order of 50.00 or more at PetCareRx.The Single Check Rebate program gives Rite Aid shoppers 5.00 back for each 25-50 spent;10.00 for each 51-100;and 20.00 back for over 100 spent.Shopping at this dynamic store,you are almost sure to leave with more than you expected.The service sector,to which Rite Aid belongs,was recently charted by the Institute for Supply Management,a buyers' trade group in Tempe,Arizona.In November,the service sector fell to 54.1,from 55.8 in October.Readings above 50 indicate expansion.New orders plummeted to 51.1 from 55.7.The survey of purchasing managers noted a decline in employment and an increase in fuel prices.The manufacturing sector declined slightly,from 50.9 in October to 50.8 in November.This was slightly stronger than the 50.1 expected by analysts polled by Thomson/IFR Markets.There were gains in new orders and production,while employment declined.The gains were attributed to more export activity,on acccount of the weak dollar.The ISM surveys are important indicators to the Federal Reserve.Shares of Rite Aid were up this morning,at 4.10.Rite Aid reports earnings on Thursday,and rival Walgreens(WAG) reports on Friday.CEO of Rite Aid is Mary Sammons,who has been interviewed by CNBC's Jim Cramer.
Tuesday, December 11, 2007
Central banks are cutting interest rates in hopes of sparking flagging economic growth.The Bank of Canada was first last week,cutting its overnight rate a quarter of a point,from 4.5 to 4.25.As late as July,the BOC was worried about inflation.Now it is concerned about deflation and the prospect of a failing economy.The Bank of England followed suit.It cut its key rate to 5.5 from 5.75.Growth has begun to slow,though the upward risks to inflation still remain.Credit tightening poses a risk to the Gross National Product.Slowing demand growth will ease pressure on capacity.The European Central Bank left rates unchanged.That may amount to a concession,since the ECB has been a hawk on inflation,and might prefer to raise rates.Today at 2:15 PM Eastern,the Federal Reserve will issue its decision on interest rates.It is expected to cut as well.Bill Gross of PIMCO would like to see the Fed cut all the way down to 3%.To restart the near-recessionary economy,we will need that.The Fed needs to reduce steadily and significantly.There has been a breakdown of the modern banking system.The tangled web of subprime loans has created a shadow banking system.The banking system must be shored up.Home prices may fall another 10% over several years.The banking system exhibits a freezing up of liquidity and a reluctance to make loans to the vital part of the economy.The Fed must use all means to provide liquidity.Troubled Swiss bank UBS has written down another 10 billion of subprime securities,following an initial write-down of 3 billion.To cover this,it has sold a stake in itself to the government of Singapore and a secret Middle Eastern investor.Shares of UBS rose on the news.Longterm investors are building positions in such financial stocks,which are trading at a big discount,although they could well drop further before recovery.Similar holdings are HSBC(HBC) and Citigroup(C).
Tuesday, December 4, 2007
The Conference Board's Consumer Confidence Survey registered 87.3 last week-a drop from 105.3 a year ago,and down 8.3 from last month.A combination of high gas and food prices,coupled with a decline in home values and a nervous stock market,are giving consumers their most cautious frame of mind in two years.Billionaire Wilbur Ross of W L Ross and Company says the consumer is quite a bit overstretched.Spending has exceeded income growth for the past six years.Donald Ratajczak of Morgan Keegan feels that the pressures should create a recession,but the economy's internal dynamics have allowed for absorption to this point.Still,there is a 50-50 chance of a consumer-led recession.Goldman Sachs(GS) issued an analysis upping the chance of a recession to 40-45%.Gross Domestic Product growth will be below trend for an extended period-through 2008.Unemployment will rise to 5.5% from 4.7%.The housing downturn will worsen,and credit availability will decline.To Joe Battipaglia of Stifel Nicolaus,the U.S. is going through financial difficulty that will affect the general economy.We may be in a recession right now.That bonds are outperforming stocks is an indication of this.The equity risk premium is only 2.25%,yet the slowing economy suggests there is actually more risk than that.The correction of stock prices could have as much as 15% more to go.You'll see more rate cuts.Financial institutions will write more losses off.The economy won't pick up till the end of next year and into '09.A growth portfolio should contain 50% U.S. equities,25% international equities and 25% short term,risk averse instruments and gold.David Rosenberg of Merrill Lynch(MER) puts the odds of recession at 60%.Financial and brokerage stocks are already pricing it in.The Federal Reserve is pushing on a string,as we are in a rare environment of national real estate deflation and a credit crunch.Robert Albertson of Sandler O'Neill thinks the market will fall another 15%.The Federal Reserve can't do much about the mortgage problem.You should stockpile cash,as there is no pressing need to buy stocks right now.If you must buy them,then defensive areas such as tech and health care would be best.The iShares Lehman Brothers SHY and TIP bond funds have been good refuges for cash this year.