Big Jump in Profits

The Lehmann Letter (SM)    This morning’s GDP report included good news on profits. After-tax corporate profits surged to $1,669.3 billion in this year’s first quarter, rising substantially from last quarter’s $1,493.9 billion. Look at the chart to put it in perspective. The new reading is off the top of the chart, breaking away from an earlier plateau of around $1,400.0 billion. That’s bullish for the stock market and, we hope, an omen of future good news. This letter has been skeptical: Seeing a top in profit margins and leery of future sales-volume gains. Perhaps that skepticism was unwarranted.    Continue reading

June Publication Schedule

The Lehmann Letter (SM)    Let’s watch these as June unfolds. The profits data should be important for the stock market. We’ll also keep our eyes on inflation and housing. Let’s hope the former remains mild and the latter picks up pace. ECONOMIC INDICATOR PUBLICATION SCHEDULE June 2012 Source (* below)……Series Description……Day & Date Quarterly Data BLS………Productivity…………..Wed, 6th BEA….US Internat’l Transacs……Thu, 14th BEA……….GDP & Profits..…..…Thu, 28th Monthly Data BLS………….Employment…….…   Fri, 1st ISM..Purchasing managers’ index…Fri, 1st  BEA.New-vehicle sales.(Approximate).Tue, 5th Fed. Consumer credit..(Approximate).Thu, 7th Census………….Inventories…….. Wed, 13th BLS…………Producer prices……. Wed, 13th BLS……….Consumer prices.……. Thu, 14th Fed……….Capacity utilization……Fri, 15th Census………Housing starts…….Tue, 19th NAR………Existing-home Continue reading

Consumer Confidence: Has It Hit A Plateau?

The Lehmann Letter (SM)    Uh Oh…….. This letter has remarked on consumer confidence’s rise from recession’s trough. And it had. But now matters are not so clear. This morning The Conference Board announced that consumer confidence, ”,,, declined slightly in April, (and) fell further in May. The Index now stands at 64.9 (1985=100), down from 68.7 in April.” https://www.conference-board.org/press/pressdetail.cfm?pressid=4499 That wouldn’t be too bad except that April’s reading was about the same as March’s. The chart reveals that we haven’t been able to break through 70 when we should be heading toward 100. Consumer Confidence (Click on chart to Continue reading

Greece: What Leaving Means

The Lehmann Letter (SM)    Greece may no longer have the economic base to remain viable under any circumstance. Although economic doctrine decrees: Devalue you currency to stimulate your economy. If your money costs less, your goods will be cheaper for the rest of the world. As your exports surge, so will production. Economic problem solved. “Not so fast,” say many Greeks. See two excellent New York Times articles to understand the practical pitfalls for Greece of exiting the euro. Begin with today’s: Facing a Teetering Greece, Europe Plans for the Worst http://www.nytimes.com/2012/05/25/world/europe/risk-of-greek-euro-exit-has-europe-making-plans.html?ref=todayspaper Here’s a key paragraph that describes another Continue reading

Business Investment: Trouble Brewing?

The Lehmann Letter (SM)    Business new orders for machinery and equipment fell in April and have not grown in the last three months. It’s a bad sign if that plateau extends through the summer. This letter has spoken of a bifurcated economy: Housing flat while everything else expands. If business investment in plant and equipment also flattens, that would reinforce housing’s drag on the economy. Look at the chart and you will see a great deal of noise in the data. Business’s new orders for machinery and equipment are volatile because they include aircraft orders which fluctuate sharply from Continue reading

New Home Sales: L-Shaped Not V-Shaped

The Lehmann Letter (SM)    All past housing recoveries have been V-shaped not L-shaped. The current recovery is L-shaped rather than V-shaped. That’s because the Fed contributed to past downturns by raising rates and sparked recoveries by reducing rates. This time we had an asset-bubble that popped and the Fed can’t stimulate expansion by lowering rates. Yesterday’s letter pointed out that optimism accompanying April’s increase in existing-home sales should be tempered by placing recent data in historical context. That context shows how weak existing-home sales are compared to past performance and how anemic this recovery remains when compared to past Continue reading

Housing Recovery: Where Are the Numbers?

The Lehmann Letter (SM)    Housing has not snapped back as it did following past recessions. In those cases the Fed contributed to the downturn when it raised interest rates to ward off inflation. The Fed let interest rates fall as soon as inflation eased, and housing swiftly recovered. Think of the Fed as a rider on a frisky horse: Pulling back on the reins whenever inflation threatened and letting the reins dangle when the inflationary threat passed. The housing horse would gallop and stop, then gallop and stop. In the chart you can see home sales plunge and surge Continue reading

Germany May Be Tired of Other People Playing With Its Money

The Lehmann Letter (SM) As the G-8 nations met this weekend it seemed as if the tide was turning from austerity to stimulus. But there may be more to Germany’s demand for repayment than a simple, “You borrowed the money, now pay it back.” Germany and its electorate want a deterrent. They want to punish Greece and create an object lesson that will be long remembered. Germans see the Greek electorate favoring the left-wing parties who advocate renegotiation, default and even repudiation. The Greek left-wingers believe that Germany will relent under pressure and provide an even larger bailout, permitting additional Continue reading

Europe: Rupture Increasingly Likely

The Lehmann Letter (SM)    If Alexis Tsipras heads the next Greek government, a rupture with Europe seems increasingly likely. Will Europe survive? Consider two stories in today’s press. Begin with this headline in The Wall Street Journal: Defiant Message From Greece http://online.wsj.com/article/SB10001424052702303879604577410301931020894.html?mod=ITP_pageone_0 The important passages are: “The head of Greece’s radical left party—throwing down a gauntlet that could increase tensions between Greece and its frustrated European creditors—said he sees little chance Europe will cut off funding to the country but that if it does, Athens will stop paying its debts…… “Our first choice is to convince our European partners Continue reading

Greek Kamikaze Pilots?

The Lehmann Letter (SM)    Is Europe’s drama just high-stakes bluffing? Or do these folks mean what they say? Is it possible that the situation is so fluid that the authorities’ positions are evolving? More darkly, are some Greek politicians “kamikaze pilots” (as a recent New York Times article put it), bent on self-destruction for the nation they seek to lead? Stock markets began today with losses stemming from continued concerns over Greece’s struggles and their impact on Europe. This letter believes that Europe will, once again, muddle through. But today’s news reports are so contradictory it is difficult to Continue reading