STOCK WATCH THREAD.....FRIDAY, DECEMBER 5, 2003

Ozy couldn't hang around until the board tweaking was done, but he'll try to drop in on us later. I kinda like that cartoon--it points out that Dubya didn't quite make that particular decision without some, um, pressure.

Jobs are the issue of the day, with nonfarm payroll, unemployment numbers, hourly earnings and average workweek reports all due out at 8:30 (market expects anywhere from 110-150K new jobs added, no change in the 6% rate of unemployment, wages up .2-.4% and basically the same workweek @ 33.8-33.9 hours)

May be another bumpy ride :shrug:

:donut::donut::donut::donut::donut::donut:

TGIF indeed!! In about a half an hour I reckon we will know where today's markets will go.

Have you caught the wrap-up yet? I would post it but I have a feeling you may be doing so as I write.

Thanks for kicking things off. Preparing for who-knows-what~

Julie

"Could the Stock Market Crash? Everyone Says 'No.'"
Congratulations to the traders who rode this market rally up from what Larry Kudlow refers to as “the mother of all bottoms”. The rally appears to be in full bloom and stockowners are happy. Any one suggesting that a crash is possible would be dismissed as a nut case. Yet that’s exactly what I am going to suggest in this article. So you may want to dismiss me now and move to the technical analysis section below.

Once again, nobody cares that stock investing consists of owning shares in businesses. No one cares that any purchase of a business should be viewed as an investment, and should provide earnings, growth prospects, and dividends to justify the purchase. Today’s market is speculative and prices are being determined purely by happy feelings and emotions. There is a gigantic discrepancy between intrinsic values of most companies’ stocks and their stock market prices. In many companies, wealth continues to be transferred from its shareholders to its management via stock options and share buybacks of stock market-overpriced businesses. Shareholders don’t have a clue or even care. At the margin where prices are being determined, shareholders are not shareholders at all. Consider two of the top performing stocks of this year, Cisco and Amazon.com. An average share of Cisco changes ownership every 5 months or so, and the average share of Amazon.com changes hands every month! Imagine any company that is under new ownership every month! Under these “hot-potato” share-trading schemes promoted by Wall Street and practiced by many well respected money managers, would the shareholders care about the long-term prospects of the company? Of course not. Most are only trying to roll triple hearts at the slot machine.

I believed that throughout this rally, the stock market has had the potential to crash. It hasn’t yet, but when the market does crash, it may crash in a devastating manner. You should consider the question of, “If the market goes down, HOW would it go down?” The questions that are explored in the mainstream financial media, TV, and Internet, deal with IF and WHEN the stock market can go down. They rarely explore the question of, HOW it may go down? How far, how fast, how devastating? The dumbed-down public does not consider this question because in their collective minds, we have already seen the answers to these questions in the stock market from March of 2000 to October of 2002. The answers in their minds are VERY far, PRETTY fast, and by in large, NOT TOO devastating. By in large, they think we are now in a new bull market.
~~~~~~~~~~~~~~

If you're not already spooked, I recommend reading the rest of this article.

first the numbers

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 89.65 Change +0.05 (+0.06%)

then some talking-head commentary

http://news.moneycentral.msn.com/breaking/breakingnewsarticle.asp?feed=OBR&Date=20031205&ID=3172217

Against the yen, the dollar was propped up by speculation that Japan, seeking to limit damage to its exporters, would intervene if the U.S. currency fell below 108 yen.

But doubts remained about the dollar's ability to benefit from strong payrolls figures due at 8:30 a.m. EST, as positive U.S. data recently has been stifled by worries about U.S. current account deficits and geopolitical security concerns.

``How the dollar reacts to the payrolls is an open question. It's really 'roll your dice' time today,'' said Ryan Shea, senior international economist at Bank One.

<snip>

Japan has sold a record 17.8 trillion yen ($164.5 billion) this year in currency interventions to stop any rise in the yen from killing off the country's export-led recovery.

Japan's Nihon Keizai business daily reported the Japanese government planned to raise its ceiling on intervention funds by 20 trillion yen to nearly 100 trillion yen when it compiles an extra budget for the fiscal year which ends in March.

...more...

and now it's my turn ...

It is amazing that these folks sleep at night. It really pisses me off that this has been going on for almost 3 years and not one of these stupid "analysts" have thought it important to notice that there have been major shifts in the ways that our country is financed and propped up by governmental (ours and others) intervention.

Yesterday, 54anickel posted a story about how the weak dollar was great for Mergers and Acquistions because foreign countries can now come in and buy up what is left of our country.

This is shocking and anxiety-causing in that there is absolutely no thought given to the future - who the hell will be minding the ship if our political system is bought through corporate bribes (I mean campaign contributions) and those corporations will then become "American" but owned by foreigners - excuse me, but isn't there a law about foreigners' contributions - oh that's right - Rev Moon did that for RayGun and he owns the Moonie Times which influences politicians all the freakin' time!

okay - off my soapbox for now - but think of the future ramifications if we (all Americans) do not think about safeguarding our country and what it stands for.

...but its Good to see the Washington Post is speaking a little truth about the dollar crisis that we are in...

http://www.washingtonpost.com/wp-dyn/articles/A37123-2003Dec4.html

'Fiddling While the Dollar Drops'

By David Ignatius
Friday, December 5, 2003; Page A31


...."The dollar crisis is the story," warns James Harmon, an investment banker who headed the Export-Import Bank during the Clinton administration. "A lot of smart money has moved out of the dollar in the last six months," he explains. "Now the latecomers are rushing to sell, and that's adding to the momentum."

The "smart money" includes financial guru Warren Buffett. He disclosed last month in Fortune that since the spring of 2002, he has been making "significant investments" in foreign currencies for the first time in his career. What worries Buffett is that the U.S. trade deficit has "greatly worsened," and is now running at more than 4 percent of GDP. That puts the U.S. economy at the mercy of foreigners, and their willingness to hold surplus dollars.

So long as global investors believed that U.S. authorities were ready to protect the dollar as a reserve currency, they kept adding to their stashes of greenbacks, despite the trade deficit. But that confidence may finally be disappearing.

..."Hence the nightmare scenario: Between them, China and Japan now hold more than $1 trillion in U.S. Treasury bonds, the trader estimates. But with the declining dollar, the Asian giants have suffered severe losses on these portfolios. If they decided to hedge just 20 percent of their dollar exposure, they could drive the dollar down from this week's low of about $1.21 against the euro to $1.35, contends the trader, and other sellers would trigger a further weakening to $1.45 or so. Facing that sort of decline, the Fed would have to boost interest rates to protect the currency. And higher rates, in turn, would drive down the U.S. stock market."

stock market would collapse in the case of higher interest rates?

Would that imply that there is a disconnect between the value of the stock and profits and earnings of the companies?

What ever could have given them that idea?

Have they finally gotten around to reading the daily thread here at DU?

Seems like they are simplistic dullards and slow on the uptake -

Radfringe
Ozymandius
JulieNelson
Maeve

:yourock:

find this stuff fasinating, can't help myself.

is made by the Daily Reckoning crew:

Now, tax and rate cuts have produced another bubble. And
this time there are plenty of fools - foreign and domestic
- who are willing to lend money at rates that barely cover
the current inflation rate. It is as if they hadn't noticed
that the dollar is falling... that the federal deficit has
reached half a trillion... that the trade deficit is another
half trillion... that consumer debt is higher than
ever... that the federal government is $44 trillion in the
hole... that debt has reached three times GDP... and that it
is growing 6 times as fast... and that consumers are already
going bankrupt at record rates.

Borrowed money may not seem cheap today. But it will likely
seem almost free before it is paid off. Advice to
borrowers: just don't forget to hold onto it.

Or to put it another way: rates have to increase or the people or entity holding the lending bag make a loss with every loaned penny - with the fall of the dollar taking chunks out of the "investment" and the low interest rates not covering the falling dollar - it makes the dollar a "hot potato" that will be hurled away from any left holding them.

8:30 U.S. Nov. manufacturing job losses 17,000
8:30 U.S. Nov. nonfarm payrolls up 57,000 v 137,000 expected
8:30 U.S .Nov. unemployment rate falls to 5.9% v 6.0%
8:30 U.S. Nov. strike-adjusted payrolls 83,000 to 88,000

8:30am 12/05/03
U.S. Nov. unemployment rate dips to 5.9% By Rex Nutting
WASHINGTON (CBS.MW) - The U.S. unemployment rate dipped to 5.9 percent in November while nonfarm payrolls rose by a disappointing 57,000. Payrolls rose for the fourth month in a row, the Labor Department reported Friday. Grocery store strikes reduced the level of employment by about 26,000 to 31,000. Nonfarm payrolls grew by a revised 137,000 in October, up from the previous estimate of 126,000. Economists expected payroll growth of about 140,000 and expected the unemployment rate to remain at 6 percent. The average workweek rose by six minutes to 33.9 hours. Aggregate hours worked in the economy rose by 0.2 percentage points. Average hourly earnings rose 0.1 percent to $15.46.

CBS Marketwatch

While it had been reported as 126K, it was revised up to 137K for October.

A lot of raw numbers being tossed around with little mention of seasonal adjustments or other variables.
And this tidbit from the bottom of a story:
Of the 8.7 million officially classified as unemployed, 23.7 percent or 2 million, have been out of work longer than six months. It's the highest percentage of long-term joblessness during this business cycle. The average duration of unemployment was 20.1 weeks, also the most during this cycle.
CBS MarketWatch

Dollar down after weak payroll data.

Unemployment rate 5.9%.

"24th month of "recovery" and we are still struggling with this job market"

Hence the blather on CNBC. Futures aren't looking very healthy.

Julie

Just to keep up with the population growth (120-170K, estimates vary within that range), so the hole is still expanding.

As for the media-types who trumpet new jobs in this economy, I am reminded of the waiter listening to a speech in which a politician bragged about creating new jobs. "Yeah," said the waiter. "And I'm holding down three of them!"
Quantity does not equal quality. Someone should be asking "what kind of jobs?"

From a CNN article - citing the recent reports of a major upturn

_________

The best news has come from the nation's purchasing managers. The Institute for Supply Management said this week that the employment indexes in its manufacturing and non-manufacturing surveys were both above 50 -- a level showing payrolls are growing -- for the first time since September 2000.

Since the non-manufacturing ISM survey began in 1997, in months when both employment indexes have been above 50, non-farm payrolls have grown by an average of 238,000 jobs.

http://money.cnn.com/2003/12/04/news/economy/jobs_walkup/index.htm
_____________

Looks like this administration has managed to reverse another trend.

I have a feeling their numbers also mean squat.

The story quoted is midway down the linked article. I want to do a bit more research on these ISM numbers when I get the chance.

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=247228#253414

I'd love to send that to someone!

http://www.nytimes.com/2003/12/05/business/05norris.html?ex=1071291600&en=15de7296b2cbdd8a&ei=5062&partner=GOOGLE

Manufacturing Leap Is Good News for Jobs, but for Investors?

Whether it is also good news for investors is not, however, so clear. Such surges in manufacturing tend to come a little before stock market investors get a nasty shock.

The good news this week was that the Institute for Supply Management reported that its manufacturing index leaped to 62.8 in November. That index is supposed to measure the rate of change in manufacturing from month to month, not the level of activity itself. A reading above 50 means growth; one above 60 indicates a real surge.

Readings above 60, or below 40, are rare. But when they happen, they can signal a stock market reversal. The most recent dip below 40 came in January 1991, just as stocks began to soar. In the last 25 years, there were two moves above 60 after a sustained period of lackluster activity. Each arrived, as did the current one, after stocks had already been rising for about a year.

snip>
There's more in the article.

Dow 9,888.08 -42.74 (-0.43%)
Nasdaq 1,951.14 -17.66 (-0.90%)
S&P 500 1,064.93 -4.79 (-0.45%)
10-Yr Bond 4.275% -0.094


And I've got to leave for the store before this rain turns to snow or the cookies won't get baked this afternoon. Later! :hi:

at 10:37 AM

Dow 9,902.16 -28.66 (-0.29%)
Nasdaq 1,959.02 -9.78 (-0.50%)
S&P 500 1,067.47 -2.25 (-0.21%)
10-Yr Bond 4.276% -0.093

and the dollar is giving all it has

Last trade 89.39 Change -0.21 (-0.23%)

Dow 9,893.35 -37.47 (-0.38%)
Nasdaq 1,956.65 -12.15 (-0.62%)
S&P 500 1,066.51 -3.21 (-0.30%)
10-Yr Bond 4.275% -0.094

Big rally in Treasuries. Gold up again too. Dollar in rough shape.

Julie

Dow 9,886.97 -43.85 (-0.44%)
Nasdaq 1,948.55 -20.25 (-1.03%)
S&P 500 1,065.16 -4.56 (-0.43%)
10-Yr Bond 4.242% -0.127

dollar still dropping

Last trade 89.17 Change -0.43 (-0.48%)

Looting the Future

<snip>

In the early months of the Bush administration, one often heard that "the grown-ups are back in charge." But if being a grown-up means planning for the future — in fact, if it means anything beyond marital fidelity — then this is the least grown-up administration in American history. It governs like there's no tomorrow.

Nothing in our national experience prepared us for the spectacle of a government launching a war, increasing farm subsidies and establishing an expensive new Medicare entitlement — and not only failing to come up with a plan to pay for all this spending in the face of budget deficits, but cutting taxes at the same time.

Recent good economic news doesn't change the verdict. These aren't temporary measures aimed at getting the economy back on its feet; they're permanent drains on the budget. Serious estimates show a long-term budget gap, even with a recovery, of at least 25 percent of federal spending. That is, the federal government — including Medicare, which Mr. Bush has given new responsibilities without new resources — is nowhere near solvent.

<snip>

What really makes me wonder whether this republic can be saved, however, is the downward spiral in governance, the hijacking of public policy by private interests.

more

http://www.nytimes.com/2003/12/05/opinion/05KRUG.html

Thanks for posting this, lots of excellent points.

Julie

12:11:

Dow 9,888.23 -42.59 (-0.43%)
Nasdaq 1,949.02 -19.78 (-1.00%)
S&P 500 1,065.33 -4.39 (-0.41%)
10-Yr Bond 4.240% -0.129

Almost 13 basis pts on the 10yr. Zowie!

Julie

...

investors.

http://www.forbes.com/work/newswire/2003/12/05/rtr1171012.html

Good for bonds

The dollar and stocks fell when the jobs number failed to meet elevated expectations, while bond prices surged as investors saw the data as cutting the risk of a near-term interest-rate rise from the Federal Reserve.

Bad for investors (posted in LBN and above)

http://www.nytimes.com/2003/12/05/business/05norris.html?ex=1071291600&en=15de7296b2cbdd8a&ei=5062&partner=GOOGLE

I seem to be betting against myself these days.
I am an investor, thanks to falling for the idea that a 401K was a good thing (close to maxing contributions each year for 9 years), and a job seeker, due to a mass layoff.

I'm screwed.

:crazy:

....load up on bonds in your 401(k)or IRA or whatever....

Bonds dig any ho-hum or bad econ data, this is true.

Dow 9,856.09 -74.73 (-0.75%)
Nasdaq 1,939.45 -29.35 (-1.49%)
S&P 500 1,061.00 -8.72 (-0.81%)
10-Yr Bond 4.213% -0.156

dollar still down

Last trade 89.16 Change -0.44 (-0.49%)

The EConomic Policy Institute sent me their recent Jobwatch report. It can be found here: http://jobwatch.org/

From ther site:
"Bush Administration’s tax cuts falling short in job creation
The Bush Administration called the tax cut package, which was passed in May 2003 and took effect in July 2003, its "Jobs and Growth Plan." The president’s economics staff, the Council of Economic Advisers (see background documents), projected that the plan would result in the creation of 5.5 million jobs by the end of 2004—306,000 new jobs each month, starting in July 2003. Although jobs increased by 57,000 last month, November 2003, the "Jobs and Growth Plan" still fell 249,000 jobs short of the administration’s projection. The administration projected that a total of 1,530,000 jobs would be created in the first five months after the tax cuts took effect. In fact, only 271,000 jobs were created over those five months for a cumulative shortfall of 1,259,000 jobs."

Here is an interesting graphic. It shows employment 24 months after the end of a recession.



For manufacturing, the picture is even worse. For manufactuing, which represents 11% of the total workforce, employment has dropped 8.1%,

Greg

"But the job growth so far is unlikely to be much help to President Bush, whose re-election effort in 2004 depends in large part on how Americans feel about the economy, and the job market.

When pushing for tax cuts earlier this year, Bush promised his proposals would create 300,000 jobs a month. And more recently, Treasury Secretary John Snow suggested the economy could start adding 200,000 jobs a month in October.

So far, neither rate has been approached, and Friday's report seemed certain to draw fire from the left, including Democrats seeking to replace Bush."
http://money.cnn.com/2003/12/05/news/economy/jobs/index.htm

Dow 9,853.42 -77.40 (-0.78%)
Nasdaq 1,938.46 -30.34 (-1.54%)
S&P 500 1,060.61 -9.11 (-0.85%)
10-Yr Bond 4.217% -0.152

Not that the shameless cheerleaders at CNBC aren't trying their darndest! Look at that inflow to Treasuries! Wee-hoo! Bet the Cap'n's lovin' this! ;-)

Julie

via Yahoo--
http://finance.yahoo.com/mo
1:30PM: Stocks take a turn for the worst, and set new lows for the day... Valuation concerns have been one of the reasons the market has been underwater during today's session (along with disappointment surrounding Intel's (INTC 32.44 -1.10) Q4 (Dec) business update and the November employment report)... While Briefing.com would agree that shares may be range-bound over the near-term, we continue to believe that there will be further upside over the long-term...
Investors who have held off buying shares following the bubble's collapse should still consider buying stocks at these levels, especially considering their returns relative to cash...

I dont see what all the fuss is about in the stock market....
Shorts are just looking for an excuse to cash in some chips......

As Maeve points out in reply #7 above, in order for the same percentage of people to remain employed, they need to ADD 120K jobs per month to keep up with population growth.

They did manage to add 56K or so last month, so it stopped shrinking in absolute numbers, but as a proportion of the population, they lost jobs.

Think of it like inflation. If inflation is 3%, and you are earning 1% on your savings account, you are earning positive interest, but are losing ground in actual spending dollars, since inflation is higher than the interest you're making.

At 2:31

Dow 9,850.16 -80.66 (-0.81%)
Nasdaq 1,937.68 -31.12 (-1.58%)
S&P 500 1,060.56 -9.16 (-0.86%)
10-Yr Bond 4.200% -0.169

Weren't they jumping up and down and cheering about two weeks ago about how great the numbers were?

New Study in CFO Magazine Casts Doubt on U.S. Corporate Profits; Comparison of Cash Flow vs. Earnings Shows a Troubling Gap

BOSTON--(BUSINESS WIRE)--Dec. 2, 2003--CFO magazine reports that the recent upturn in U.S. corporate profits is not as significant as many press reports suggest it is. A new study, by the Financial Analysis Lab at the Georgia Institute of Technology's DuPree College of Management, finds a troubling gap between cash flow from operations and operating income last year for the 87 nonfinancial members of the S&P 100. The study finds that the difference between operating cash flow and income last year for the median company in the group was almost 12% greater than average for the three years that ended in 2002.
Such a wide gap reflects a heavy dependence on improvements in working capital and other boosts to cash flow that aren't sustainable, simply because such gains aren't generated by the growth of a company's underlying business operations. "At least some of the recent improvement in cash flow is not earnings produced," says Charles Mulford, an accounting professor who oversees the Georgia Tech Lab. "That kind of growth is not sustainable."

the story names names

HP, Lucent, AOL come to mind regarding huge layoffs. Not sure on others.

You are not a "valued employee"; you are a replacable work unit. Deal with it.

Can't ya just feel the compassion?

But if no one's buying your shit, which they won't when everyone's getting laid off, then you ain't making money...

of 1 trillion (if I remember correctly from yesterdays reports) as being unsustainable for some of the companies. Also, finally, this article hints that markets are overpriced (some bluechips at that).

<snip>

DuPree found that the difference between operating cash flow and income last year for the median company in the group was almost 12 percent greater than average for the three years that ended in 2002.

While a small gap of this sort (which DuPree terms a company's excess cash margin, or ECM) is not necessarily a troubling sign (whether positive or negative), a positive ECM in double digits reflects a heavy dependence on improvements in working capital and other boosts to cash flow that aren't sustainable, simply because such gains aren't generated by the growth of a company's underlying business operations.

...."At least some of the recent improvement in cash flow is from liquidating the balance sheet; it is not earnings-produced," says Mulford. And, he asserts, "that kind of growth is not as sustainable."

Ideally, in Mulford's view, operating cash flow and earnings should grow more or less evenly over time. When they don't, and one measure exceeds the other by a large margin, there's reason to doubt that a company's performance is as strong as either measure alone may suggest.

Altho I suppose it could improve in the next eighteen minutes...

Dow 9,863.79 -67.03 (-0.67%)
Nasdaq 1,944.29 -24.51 (-1.24%)
S&P 500 1,062.44 -7.28 (-0.68%)
10-Yr Bond 4.215% -0.154

Dow 9,862.75 -68.07 (-0.69%)
Nasdaq 1,937.82 -30.98 (-1.57%)
S&P 500 1,061.54 -8.18 (-0.76%)
10-Yr Bond 4.215% -0.154

Enjoy the weekend, folks!