BloggingStocks

U.S. Productivity, Increased Efficiency Continue to Aid Corporate Bottom Lines

Joseph Lazzaro — Wed, 24 Nov 2010 18:00:00 EST

An excellent interpretative report by Bloomberg News Friday summarized the two-edged sword nature of continued U.S. productivity growth, and it's one investors should review.

Here's the low-down:

U.S. worker productivity, which increased 1.3% in the third quarter, is creating even-more-lean U.S. corporations. Productivity has also risen at an impressive 3.4% annualized rate over the past five quarters.

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Corporate Profits Set a Record in the Third Quarter

Connie Madon — Wed, 24 Nov 2010 09:30:00 EST

Filed under: India, China, Economic Data, Recession, Financial Crisis

Our economy has all the earmarks of schizophrenia. We have unemployment at 9.6% with little chance of a turnaround any time soon. But at the same time, corporate profits set a record in the third quarter at $1.659 trillion, on a non-inflation adjusted basis, according to the Commerce Department, as reported in the New York Times.

Corporate profits reached a cyclical low in the fourth quarter of 2008. Since then they have grown for seven consecutive quarters. As a share of GDP, corporate profits account for 11.2% of total output.

How did corporations manage to do so well? One reason is productivity growth -- being able to do more with less. Another reason is that multi-nationals are benefiting from expanded sales from emerging markets like China and India.

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U.S. gross domestic product contracts by 5.7% in the first quarter

Connie Madon — Fri, 29 May 2009 14:20:00 EST

Filed under: Economic Data, Recession

We have some good news and some bad news. The bad news first: The U.S. Gross Domestic Product declined by 5.7% in the first quarter, compared with a drop of 6.1% last month. This was a slight improvement over the 6.3% decline in the fourth quarter. The last six months have been the weakest in the past 51 years. Pulling the economy down were plunging exports, business inventories and the collapse of spending for non-residential construction.

Now for the good news: Corporate profits surged 3.4% to $1.307 trillion, after plunging 16.5% in the fourth quarter. The financial sector led the way with a jump of 94.9% compared with a drop of 18% last quarter. It is believed that the massive stimulus spending has prevented the economy from spiraling downward any further.

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So you want to know what a 'growth-recession' looks like? Look around

Joseph Lazzaro — Fri, 01 Aug 2008 16:21:00 EST

Filed under: Forecasts, Economic Data, Recession

The stock market has fallen about 3000 points in a year. Corporate profits among the Fortune 500 are likely to decline a double-digit rates. Consumer spending is down. And the nation has lost more than 463,000 jobs in seven months, with unemployment rising.

And yet, we're told 'the economy is growing.'

What's going on here? Or, investors and readers may justifiably exclaim, "If this is growth, I'd hate to see what a recession looks like."

On Friday,BloggingStocks asked economist Peter Dawson to give an accurate read on the economic situation in these United States.

"Don't you have an easier question for a summer Friday?," Dawson said. "Kidding aside, what we're experiencing now is a growth-recession. And at this point, and we'll need a few more data points to confirm it, it's looking close to a textbook case of one."

During a growth-recession, the economy continues to grow, barely, Dawson says, but almost all of the other indicators continue to move in a destructive direction.

Continue reading So you want to know what a 'growth-recession' looks like? Look around

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The June Swoon: DJIA set to record worst June since Great Depression

Joseph Lazzaro — Mon, 30 Jun 2008 13:30:00 EST

Filed under: Forecasts, Economic Data, DJIA, Recession

That the U.S. economy has recorded a series of rather negative statistics lately, would not be a revelation to the informed investor / trader.

That the U.S. economy is set to record a new data point of ignominious distinction, perhaps would be.

Assuming a modest 50-point close higher or lower Monday, the Dow Jones Industrial Average will have declined about 9% in June 2008, its biggest drop in June since June 1930 in the Great Depression, when the Dow fell 18%.

At mid-day Monday, the Dow was up about 45 points to 11,390.95. The Dow is down about 3,000 points since trading above the 14,200 level in October 2007.

Stock analyst C. Leonard Bauer said "the Dow reflects the underlying economic reality."

Many negative fundamentals

'We have a smorgasbord of negative fundamentals. Housing is in a deep slump. Oil and gas prices are at 20-year highs. Corporate costs are rising. Disposable income is falling. Credit requirements are way up. Inflation is rising. And job growth doesn't look too good right now," Bauer said. "Other than that, as Groucho Marx would say, everything is fine economically."

Another factor weighing on stocks, at least for the near-term: 'sell in May and go away' - - the seasonal closing out of positions, particularly winning positions, Bauer said, as key decision makers at institutional banks and investment / hedge funds head for the Hamptons (Long Island, N.Y. ), the south of France, and other destinations, for the summer.

Continue reading The June Swoon: DJIA set to record worst June since Great Depression

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May consumer sentiment drops to 28-year low on falling home prices, tepid job market

Joseph Lazzaro — Fri, 16 May 2008 11:11:00 EST

Filed under: Bad News, Economic Data, Recession

U.S. consumer confidence in May 2008 plunged to its lowest level in almost 28 years, an indication American adults are very concerned about the near-term health of the U.S. economy as it slides into its first recession in six years.

The Reuters/University of Michigan Surveys of Consumers said its index of confidence fell to 59.5 in May 2008, Reuters reported Friday.

It was the index's lowest reading since June 1980 -- a period also characterized by high oil/gasoline prices and a sluggish U.S. economy.

Economists surveyed by Bloomberg News had predicted that the April 2008 index would fall to 62.5. The index stood at 63.2 in April 2008 and 69.5 in March 2008.

'An awful number'

Economist Peter Dawson told BloggingStocks Friday May's consumer sentiment reading reflects conditions on the ground. "It's an awful number, but it reflects conditions on Main Street, as the typical person experiences them," Dawson said. "We've got falling home prices, record-high gas prices, rising food prices, property taxes increasing in many areas, and no job growth. It's not a happy time for Americans right now and the University of Michigan sentiment numbers reflect that."

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Exxon Mobil: Don't waste money on global warming -- no to the Rockefeller's

Aaron Katsman — Thu, 01 May 2008 10:55:00 EST

Filed under: Industry, Annual Meetings, Exxon Mobil (XOM), Politics, Oil, Green Stocks

As was reported in AP online, "Members of the Rockefeller family are pressuring Exxon Mobil (NYSE: XOM) to focus more on renewable energy. The family members, who say they are the oil giant's longest continuous shareholders, say Exxon is too focused on short-term gains from sky-high oil prices. They also argue splitting the roles of chairman and CEO will help the company be more flexible in the future."

Last time I checked, companies had a responsibility to provide value for shareholders, and no one has done it better than the oil giant. It has been producing record earnings quarter after quarter, and that is exactly what it is supposed to do. Corporations are not supposed to be politically correct organizations that throw money around at the latest fad. Maybe Exxon doesn't believe that there is a global warming problem? Or maybe it wants to see a lot more scientific evidence of the problem before committing billions and billions of dollars to research. If I were a shareholder, I would want management to take the exact approach that it has been taking. The fact that it is the most profitable company in the world means something. It should be commended for providing shareholder value.

In fact, Bloomberg has an article that says that ocean cooling will stop global warming. Moreover, the article indeed mentions that the authors tried to spin the article because of Exxon. "We thought a lot about the way to present this because we don't want it to be turned around in the wrong way," Keenlyside said. "I hope it doesn't become a message of Exxon Mobil and other skeptics."

Sounds to me that they are right to be skeptical.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/1/08

Exxon Mobil: Don't waste money on global warming -- no to the Rockefeller's originally appeared on BloggingStocks on Thu, 01 May 2008 10:55:00 EST. Please see our terms for use of feeds.

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'Growth recession' means mostly the latter

Joseph Lazzaro — Wed, 30 Apr 2008 15:09:00 EST

Filed under: Forecasts, Economic Data, Federal Reserve

U.S. gross domestic product did not turn negative in Q1 2008, according data released by the Commerce Department Wednesday, but economists are quick to point out, that's not only nothing to write home about, the recent mild data is cause enough for concern.

U.S. GDP registered a minuscule annualized rate of 0.6% in Q1 2008, above the 0.3% consensus estimate of economists surveyed by Bloomberg News, but nevertheless, well below what economists believe is adequate for national economic health.

Economist David H. Wang told BloggingStocks Wednesday that, technically, because GDP is still positive, the U.S. economy is not in a recession. However, as a practical matter, Wang said the economy is in a "growth recession." Further, Wang said to not be alarmed if you can't tell the difference.

"A growth recession is when the economy grows so slowly, profit grows slowly or declines, manufacturing activity grows slowly or declines, job creation stops, unemployment rises, retail sales growth slows or tails off, home foreclosures rise, and other measures also slump," Wang said. "So even though the economy may still be expanding, few indicators are at satisfactory levels. So a growth recession is mostly the latter."

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Is the U.S. entering a conventional, or unconventional, recession?

Joseph Lazzaro — Tue, 01 Apr 2008 09:30:00 EST

Filed under: Forecasts, Economic Data, Housing, Recession

As economists and stock reviewers will vouch, analysis can vary depending one's prism, or perspective -- i.e. how one views the economic world.

Look at the 2008 U.S. economy one way, and you see the onset of a conventional recession. Five or so years of GDP growth, earnings growth, investment, resource / commodity / raw material utilization, and consumption have basically run their course, and a pause is due. It's a period of lower earnings, less investment, lower consumption, and we call these pauses recessions.

Look at the 2008 U.S. economy another way and you see a different picture. Five or so years of GDP growth, earnings growth, but also substantial asset price inflation - - primarily in residential real estate - - combined with only modest improvement in the U.S. trade deficit, federal budget deficit, national savings rate, and a substantial weakening of the U.S. dollar. Then, a period of slower growth ensues, a slowdown made all the more onerous by the appearance of a credit crunch that began when the real estate balloon began to deflate, if not burst.

Continue reading Is the U.S. entering a conventional, or unconventional, recession?

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Final Q4 2007 GDP may indicate the U.S. is in a recession

Joseph Lazzaro — Thu, 27 Mar 2008 09:57:00 EST

Filed under: Forecasts, Economic Data, Recession

The U.S. economy slowed substantially in Q4 2007 to a 0.6% annualized rate, the U.S. Commerce Department announced Thursday, in its final estimate for the quarter. It was the slowest annualized growth rate since 2002.

Economists surveyed by Bloomberg News had expected the final Q4 2007 GDP statistic to be 0.6%.

For 2007, the U.S. economy grew 2.2%, after adjusting for inflation -- its slowest growth rate in five years. The U.S. economy grew 2.9% in 2006.

In dollar terms, U.S. GDP in 2007 totaled $13.84 trillion, not adjusted for inflation.

In Q4 2007, business inventories increased 6%, exports increased 6.5%, government spending rose 2%, imports fell 1.4% and residential investment plummeted 25.2%.

The report was a virtual carbon-copy of the Commerce Department's earlier estimate for Q4 2007 GDP, save new data on corporate profits, which were revised $37.9 billion lower to a $1.11 trillion annualized rate. Corporate profits after taxes are up 3.3% from a year ago.

Continue reading Final Q4 2007 GDP may indicate the U.S. is in a recession

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The Fed's quandary: Stimulate economy, but not inflation

Joseph Lazzaro — Fri, 04 Jan 2008 15:11:00 EST

Filed under: International Markets, Forecasts, Other Issues, Economic Data, Federal Reserve

A housing sector that remains in correction mode, to put it diplomatically; a contracting manufacturing sector; declining auto sales; a pull-back in consumer spending; anemic job growth -- historically, these would signal a no-doubt-about-it easing monetary policy by the U.S. Federal Reserve to stimulate the economy.

But hold on, the nation's economic landscape is not that simple, as Fed Chairman Ben Bernanke would no doubt tell you.

Inflation, at both the consumer and producer levels, is rearing its ugly head. Fanned higher by the near-record price of crude oil, inflation is already above the Federal Reserve's target zone (also called the Fed's "comfort zone"), and is likely to move higher later this year if +$80 per barrel oil persists. (Oil fell $1.90 to $97.28 Friday afternoon on fears of a U.S. recession.)

Continue reading The Fed's quandary: Stimulate economy, but not inflation

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Is the U.S. economy signaling slowdown, or recession?

Joseph Lazzaro — Fri, 28 Dec 2007 11:30:00 EST

Filed under: Forecasts, Other Issues, Economic Data

In a column in Forbes Magazine, National Editor Robert Lenzner poses, arguably, the most pressing question for 2008: Is a recession ahead? He then offers barometers that may provide insight on the condition of the world's largest economy.

Modest job creation, manufacturing figures well below their June 2007 high, the housing slump, falling consumer expectations, and decelerating earnings growth are the indicators that suggest a recession may be ahead.

Meanwhile, investor expectations are a mixed bag -- neither bullish nor bearish, but flat -- which makes the argument that investors aren't convinced a recession is ahead because they can't see it.

Economic Analysis: The Forbes review didn't place enough emphasis on two variables that may very well tip the scales, in either direction, regarding a recession in 2008: oil prices and the market's ability to absorb credit market write-offs and defaults. The U.S. economy is likely to continue to expand if gasoline prices retreat below $3 per gallon this year, as opposed to rising above $4; the latter would take a great deal of the wind out of the sails of consumer spending. Similarly, modest additional subprime mortgage / credit defaults are likely to be absorbed by the market; a large body of defaults would pose a more-formidable hurdle.

Is the U.S. economy signaling slowdown, or recession? originally appeared on BloggingStocks on Fri, 28 Dec 2007 11:30:00 EST. Please see our terms for use of feeds.

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Despite profit slump, recession talk deemed premature

Joseph Lazzaro — Mon, 03 Dec 2007 14:30:00 EST

Filed under: Analyst Reports, Good news, Ford Motor (F), General Motors (GM), Economic Data

Corporate profits have slowed in Q3, and U.S. economic growth most likely slowed in Q4 as well, but analysts say talk of a recession may be slightly premature.

Corporate profits fell to an annual rate of $19.3 billion in Q3 as domestic earnings dropped by $41.2 billion, according to U.S. Commerce Department data. The U.S. economy is being hurt by sluggish retail sales and write-downs in the subprime mortgage sector; the two have been offset by strong earnings abroad, but the domestic side may outdo the international side in Q4.

"The earnings recession has already arrived,'' said David Rosenberg, North America economist for Merrill Lynch (NYSE: MER) in New York told Bloomberg News. "We are going to see an economic recession in '08.''

The Institute of Supply Management's manufacturing index for November 2007 totaled 50.8, above the consensus estimate, but slower than October 2007's reading of 50.9. Any reading above 50 indicates economic expansion.

Continue reading Despite profit slump, recession talk deemed premature

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U.S. Q3 GDP revised to 4.9%, in line with consensus

Joseph Lazzaro — Thu, 29 Nov 2007 09:54:00 EST

Filed under: Economic Data, Housing, Federal Reserve

The U.S. economy grew at an annual rate of 4.9% in Q3, prior to the full impact of the deepening housing recession and extensive subprime mortgage and related asset defaults.

The 4.9% growth rate, a revised statistic announced by the U.S. Commerce Department, was slightly higher than the 4.8% consensus estimate. In Q2, the U.S. economy grew at a 3.8% annual pace.

The U.S. economy has expanded 2.8% in the previous 12 months - close to what many economists believe to be its potential, or sustainable GDP growth rate.

Corporate profits from production fell 1.2% to an annual rate of $1.62 trillion, the first decline in that category since Q4 2006. Personal income rose at a 3.8% annual rate.

Economic Analysis: Given the economic activity lag effect, the market is likely to look past the Q3 GDP report and focus instead on the Q4 GDP report, which will more-fully reflect the effect of subprime losses on the economy. Likewise regarding the U.S. Federal Reserve: the Fed is likely to concentrate less on the solid Q3 GDP stat and focus more on the economic impact of the housing correction, tight credit markets high oil prices, and weak dollar when it meets December 11 to discuss monetary policy. The Fed is widely expected to cut key short-term interest rates by 25 basis points or one-quarter of a percentage point at that meeting.

U.S. Q3 GDP revised to 4.9%, in line with consensus originally appeared on BloggingStocks on Thu, 29 Nov 2007 09:54:00 EST. Please see our terms for use of feeds.

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Serious Money: Alcoa (AA) makes some good and bad moves

Sheldon Liber — Fri, 05 Oct 2007 15:30:00 EST

Filed under: International Markets, Press Releases, Management, Rants and Raves, Competitive Strategy, Berkshire Hathaway (BRK.A), China, Alcoa Inc (AA), ETF Investing, Serious Money, Aluminum Corp of China ADS (ACH)

Today Alcoa Inc. (NYSE: AA) announced some restructuring plans that will trim down (SELL) some under-performing consumer packaging and automotive castings divisions. It will be taking some charges to the tune of $845 million as well, and intends to gear up for expansion into higher margin areas. Alcoa also said it raised cash by selling its 7% stake in Chalco, the Aluminum Corp China ADS (NYSE: ACH) and bringing in $2 billion dollars on what was initially a $200 million investment -- "A ten bagger."

It is this latter decision that is not smart, and without further explanation from management I have to question selling a winner. If you look at all of the things that Alcoa did in the last 10 years you will find that the Chalco investment was the smartest, and more importantly, the most profitable, thing it has done. For many years Alcoa stock has been adrift. Since it sold the stock it has only gone up further and as I write these words and look at the price now, ACH is trading up over 5% more to $75.70.

Continue reading Serious Money: Alcoa (AA) makes some good and bad moves

Serious Money: Alcoa (AA) makes some good and bad moves originally appeared on BloggingStocks on Fri, 05 Oct 2007 15:30:00 EST. Please see our terms for use of feeds.

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