Bulltard investors these days are like horny sailors on leave in an island full of leper women. It doesn't take much to get them excited I guess. Case in point is today's interesting run up in the market. Oil jumps $5, a suspect employment report comes out and WalMart and Costco beat expectations. Wow...that's something to get excited about.
First off, anybody who sees light at the end of the tunnel on that employment report is about to get run over by a freight train. In case you haven't read the news lately, just about every single sector in the US has companies announcing layoffs. Has anybody read about any hiring surges? Employment is heading off a cliff regardless of what numbers may or may not come out this month.
Second, who didn't expect WalMart and Costco to kick ass this quarter? I certainly did and it was completely predictable for all the wrong reasons. People are downgrading their purchases to the discount stores in record fashion. If you really want to see what's happening in retail, look at earnings at all the other retailers, especially discretionary spending. It ain't pretty. Keep loading up on WalMart and Costco, but it isn't a good sign for the economy.
Oh well, just another opportunity to load up on shorts.
Thursday, June 5, 2008
Gound and pound (update 2)
And the hits just keep on coming...
Continental to cut 3,000 jobs, slash domestic flights
Citing a "crisis" because of record fuel prices, Houston-based Continental Airlines said today it will cut 3,000 jobs and reduce 11 percent of its domestic flight capacity starting later this summer.
It appears the "grounding" is picking up steam. Airlines are going to need to keep moving in this direction and quickly. Airfares are set to skyrocket, flight options are shrinking, a la carte fees will keep appearing and airlines will still teeter on the brink of bankruptcy. Unions will need to concede to modified contracts and "we the people" will need to get used to massive price increases and decreased service in air travel. The party is over.
Please see
Ground and Pound (May 23rd)
Ground and Pound Update (June 4th)
Continental to cut 3,000 jobs, slash domestic flights
Citing a "crisis" because of record fuel prices, Houston-based Continental Airlines said today it will cut 3,000 jobs and reduce 11 percent of its domestic flight capacity starting later this summer.
It appears the "grounding" is picking up steam. Airlines are going to need to keep moving in this direction and quickly. Airfares are set to skyrocket, flight options are shrinking, a la carte fees will keep appearing and airlines will still teeter on the brink of bankruptcy. Unions will need to concede to modified contracts and "we the people" will need to get used to massive price increases and decreased service in air travel. The party is over.
Please see
Ground and Pound (May 23rd)
Ground and Pound Update (June 4th)
Wednesday, June 4, 2008
Ground and Pound Update
This didn't take long...
Here comes the Ground:
Reports: United to ground 737s, 747s to save fuel
The Pound is looming in the not so distant future. Inquiring minds may wish to revisit:
Ground and Pound
Spoiled Americans are going to really feel the effects of airline cut backs. Look for domestic flights to be trimmed by 20%-30% within the next 2 years. Many smaller airlines will cease to exist and bigger airlines will continue to consolidate. Regional airports and discount fare flights will all see major contraction. Business travelers will be expected to keep higher fare flights full (that will be a tall task in the face of a recession).
The decline in the standard of living of America is in 2nd gear and picking up steam. You can expect cheap airfares to favorite spots to become a distant memory in the near future. Boy I'm glad we did a good job of updating our rail infrastructure and high speed commuting based on electricity. Ooops, that money went to handouts and subsidies. My bad.
Here comes the Ground:
Reports: United to ground 737s, 747s to save fuel
The Pound is looming in the not so distant future. Inquiring minds may wish to revisit:
Ground and Pound
Spoiled Americans are going to really feel the effects of airline cut backs. Look for domestic flights to be trimmed by 20%-30% within the next 2 years. Many smaller airlines will cease to exist and bigger airlines will continue to consolidate. Regional airports and discount fare flights will all see major contraction. Business travelers will be expected to keep higher fare flights full (that will be a tall task in the face of a recession).
The decline in the standard of living of America is in 2nd gear and picking up steam. You can expect cheap airfares to favorite spots to become a distant memory in the near future. Boy I'm glad we did a good job of updating our rail infrastructure and high speed commuting based on electricity. Ooops, that money went to handouts and subsidies. My bad.
Here comes the commercial real estate shoe
After Mortgages, Construction Crisis May Be Building
Always a lagging market behind residential, commerical real estate and residential construction is lining up to be a serious problem for banks on top of their already mounting problems. This will affect the national banks, but local banks will really be pounded by this. Look for the FDIC to be a busy beaver in 2008 and against the ropes in 2009. Their reserves are paltry when you look at the potential losses mounting at banks tied to the real estate markets.
Always a lagging market behind residential, commerical real estate and residential construction is lining up to be a serious problem for banks on top of their already mounting problems. This will affect the national banks, but local banks will really be pounded by this. Look for the FDIC to be a busy beaver in 2008 and against the ropes in 2009. Their reserves are paltry when you look at the potential losses mounting at banks tied to the real estate markets.
That right hand hurt Rocky
Round 1 of the financial crisis is over and the fighters have just gotten back off their stools. The most recent punches have been not so subtle and it looks like this is going to be another tough round. Lehman appears to be heading down a similar path to Bear Stearns and I predict a similar fate in the not so distant future. Housing continues to spiral downward and the next round of economic malaise will take the wind out of any false bottom feeders. The effects of $120+ oil and reduced income to states and local governments is just starting to appear in bottom lines at corporations and budgets. Commercial real estate is cracking and corporate debt is showing stress. Round 2 is not going to be a pretty sight. Consumer sentiment is already at stunning lows relative to the economic indicators. When the next round of awful news comes out, the bottom may quickly fall out from underneath the markets. Don't stray far from your basements. The sun is still poking through, but the clouds are all around.
Tuesday, June 3, 2008
What do GM and married men have in common?
They've both given up on Hummers.
GM is again a little late to the dance, even though it's the right decision. The Hummer was the auto industry's version of the Macarena. Good riddance.
GM to Close Four Truck Plants, Shift Output to Cars
"...may drop its Hummer brand of large sport-utility vehicles. "
GM has consistently made bad choices, ill timed investments and shown a complete lack of vision in the marketplace. They appear to be trying to make some good choices now, but they are way too late to get the penetration they will need. The US auto industry is in a precarious position. They will need to go to the bond market well to survive and when they get the price tag, they won't be happy campers. Neither will the poor schmucks who own their stock. Look for GM's dividend to be non-exisitent within the year.
GM is again a little late to the dance, even though it's the right decision. The Hummer was the auto industry's version of the Macarena. Good riddance.
GM to Close Four Truck Plants, Shift Output to Cars
"...may drop its Hummer brand of large sport-utility vehicles. "
GM has consistently made bad choices, ill timed investments and shown a complete lack of vision in the marketplace. They appear to be trying to make some good choices now, but they are way too late to get the penetration they will need. The US auto industry is in a precarious position. They will need to go to the bond market well to survive and when they get the price tag, they won't be happy campers. Neither will the poor schmucks who own their stock. Look for GM's dividend to be non-exisitent within the year.
Monday, June 2, 2008
NYT on state cut-backs
The New York Times this weekend chimed in on states cutting back...a frequent theme of mine. Worth reading.
Think the Economy Is Bad? Wait Till the States Cut Back
States contribute over 10% to the GDP each year, a not so insignificant piece of the puzzle. As stated in this article, states have not yet begun the draconian cuts that they will need to do, but they are coming. I think it will be worse than anyone is predicting.
Think the Economy Is Bad? Wait Till the States Cut Back
States contribute over 10% to the GDP each year, a not so insignificant piece of the puzzle. As stated in this article, states have not yet begun the draconian cuts that they will need to do, but they are coming. I think it will be worse than anyone is predicting.
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