norm - nobank Don't think BB&T fundamentals matter. It's the possibility of world wide recession. Nothing but cut backs in China in the news. China stops buying commodities, stock market crashes!! All banks are down! All commodities are down! Most stocks are down! Would like to see some discussions about the bigger issue.
"It's the possibility of world wide recession. Nothing but cut backs in China in the news. China stops buying commodities, stock market crashes!!"
China has a history of stock piling copper, running their inventory down and then restocking at lower prices. Happened couple of years ago. I would not be too concerned because worldwide production of copper is still less than demand. China growth may drop some but it's still going to be 7 to 9% annually.
Fundamental do matter. Today's selloff may be partially due to the order component of the ism data released today. The data showed that for the 3rd consecutive month the orders index was below 50 indicating contraction. CNBC made a big deal of this. The ism data is simply a diffusion index. It does not quantified the dollar amount of orders.
Of course, no one bothers to tell you that the ism data is seasonally adjusted. The institute of supply management obtains the seasonal factors from the Census Bureau.
So where am I go with this? Well the Census Bureau releases the dollar value of durable good orders on a seasonal adjusted and unadjusted basis on a monthly basis. Go to their website. Look for economic indicators. Go to their 9/28/11 release on durable good orders.
The data shows that orders and shipments for August ytd for 2011 vs. 2010 are up 11% and 8% respectively. Orders and shipments for August of 2011 vs. 2010 are up by the same %. Backlogs are also up. In fact, as I recall orders for August 2011 were up $28 billion or 11% from July of 2011. But when they apply their magic seasonal adjustment factors it shows a small decline from July to August - about the same magnitude as the ism index. The September data will be released on October 26, 2011 by the Census Department but I'm not too concerned it's going to break trend vs. last year.
Without getting too boring here are some other data points to check out:
-weekly rail data. American Association of Railroads. Last week carloads excluding grain and coal were up 2% vs last year. Containers/trailers were up 3%.
- weekly fed data on commercial banks. Looks ok. Credit improving. Loans growing in certain categories. Huge unrealized gains on investment securities.
- Federal Reserve Data on household financial obligation as % of disposable income. Household financial obligations include mortgage payments, homeowners insurance, property taxes, auto loans, credit card debt, student debt etc. Over last 4 years it's been going down every quarter. Down around 18% over last 4 years.
Things are not great but we'll muddle along at 2% growth until housing comes back. Look at the employment data. We've lost 2 million construction jobs since Lehman. On top of this you have to add all the lost jobs that supplied materials to the construction business. Probably several million lost jobs. Additionally, you have to also consider all the lost jobs not directly linked to construction because many folks had less money. Add it up - probably around 8 million jobs.
When housing recovers, the jobs will come back. Basic demand for housing is about 1.4 million units. We're running about 30% of that level. Tax cuts proposed by Republicans will not do much to create jobs. I think we should cut $4 trillion in spending and increase revenues by $2 trillion with most of the increases coming from the Buffet guys.
Hope this helps. I'm long and will continue to buy into the market should it drop. Look at the current situation as a tremendous opportunity to buy some great companies although I must admit I get nauseated to see how much money I've lost over the last few months. I'm down to about 15% cash.
You make some very good points boat but as some would say that's looking in the mirror. The point that I am making is that the media is now looking for 1020 (from 1,100)on the S&P. No one seems to be looking at the fundamentals for individual stocks. The media might be leading us into a recession. Looks like another bad day coming up.
First - BBT is a bank and the financial mess in Europe is affecting banks (does not matter if they have no exposure). Second - the economic mess we are in was 25 or more years in the making. Slight improvement in a few indicators does not fix the problem. The cycle of healing the economy and resetting world finances will take years - nor weeks or months. Third - the FED is out of bullets and deflation is here (check oil, metals, ags, etc) and the FED cannot stop the natural economic cycle (they have delayed it, now it happens).