Fiscal Cliff? Sequestration?

The Lehmann Letter (SM) Fiscal Cliff? What’s that? Sequestration? Who cares? The Fiscal Cliff and Sequestration seem like oddities now that the stock market has reached new high ground. Cyprus made more news than our dual dilemmas. So we’ll just keep plugging along, feet on the ground, analyzing the indicators below. ECONOMIC INDICATOR PUBLICATION SCHEDULE April 2013 Source (* below)……Series Description……Day & Date Quarterly Data BEA……….GDP  ……..…..……Fri, 26th Monthly Data ISM..Purchasing managers’ index…Mon, 1st    BEA.New-vehicle sales.(Approximate).Wed, 3rd Fed. Consumer credit..(Approximate).Fri, 5th  BLS………….Employment…….…   Fri, 5th BLS…………Producer prices……. Fri, 12th Census………….Inventories…….. Fri, 12th BLS……….Consumer prices.……. Tue, 16th Fed……….Capacity utilization……Tue, 16th Census………Housing starts…….Tue, Continue reading

S&P Reaches Record

 The Lehmann Letter (SM) This morning the S&P rose above 1,565, regaining its record close of six years ago. This follows upon the heels of the Dow’s recent record. (The S&P is a broader measure than the blue-chip Dow.)  What’s driving the stock market?  You need look no further than the chart below.  Corporate Profits  Recessions Shaded  Earnings and earnings growth have been robust.  This morning the Commerce Department announced another record quarter for after-tax corporate profits:  http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=53  (See line 45 of table 1.12.)  Fourth-quarter after-tax corporate profits were $1,773.7 billion. That continues the trend you can observe in the Continue reading

Cyprus: Socialism Versus Austerity

The Lehmann Letter (SM)  Yesterday a reader wrote that the bailout of the Cypriot banks appeared, as had earlier European bailouts, to continue Europe’s socialist march.  The evidence, however, doesn’t support that.  Rather than traveling the socialist road, which would maintain European income and employment, Europe has chosen austerity in its demands that European nations and banks protect their balance sheets.  Consider, as an example, the massive unemployment confronting Greece and Spain as well as the continued hardship facing Ireland. Europe punished these nations for perceived past profligacy.  Bailouts? Yes. But only after severe belt-tightening by the recipients of assistance. Continue reading

Consumer Confidence Stalls

The Lehmann Letter (SM) This morning new reports appeared on consumer confidence, capital-goods orders and home sales. The Conference Board reported that March consumer confidence fell to 59.7 from February’s 68.0: http://www.conference-board.org/press/pressdetail.cfm?pressid=4767 Update the chart with those numbers and you can see that this is reason for concern. Consumer Confidence (Recessions shaded)  The key question: Will consumer confidence stall at around 60 or resume its upward climb? There is a lot of noise in the monthly data, so we should wait and see.  This morning’s capital goods and home sales reports were also weak. New orders for nondefense capital goods Continue reading

A Federal Budget Deal: Keep Hope Alive!

The Lehmann Letter (SM)  As Jesse Jackson says, “Keep hope alive!”  So there may yet be hope for the federal budget. That is, there may be hope that Democrats and Republicans – the President and Congress – can reach a deal.  To do the deal, the President and Democrats must agree to entitlement cuts and Republicans must agree to tax increases.  Well, you might say, if they could do that it would have happened already.  Perhaps. Consider, however, these paragraphs from the March 16 and March 18 editions of The Wall Street Journal.  “Talks Open a Window for Deal on Continue reading

The Russians Are Coming, The Russians Are Coming………..

The Lehmann Letter (SM) “The Russians Are Coming, The Russians Are Coming” was the title of a movie made approximately half a century ago during the height of the Cold War. It was a comedy about a Russian submarine crew forced to land on Cape Cod during a balmy vacation summer. The local sheriff and other residents get along well with the erstwhile invaders and the story ends happily.  Meanwhile, in modern Cyprus, today’s New York Times reports that the Cypriot Parliament will vote on Europe’s final offer:  “Under Pressure, Cyprus Lawmakers to Vote on Bailout” http://www.nytimes.com/2013/03/23/business/global/cyprus-bailout-vote.html?hp&_r=0  Let’s hope the Continue reading

The Fed Speaks

The Lehmann Letter (SM)  Yesterday the Federal Reserve released its latest report from the Fed’s Federal Open Market Committee:  http://www.federalreserve.gov/newsevents/press/monetary/20130320a.htm  Here are some important sentences:  “Information received since the Federal Open Market Committee met in January suggests a return to moderate economic growth following a pause late last year……  “To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time … In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently Continue reading

Europe Thrashes It Out

The Lehmann Letter (SM) The problem with making promises to the electorate: Occasionally your constituents demand that you keep those promises.  In the course of resolving its banking crisis by negotiating a loan from Europe, the Cypriot government had promised to save bank depositors harmless. Then the government reneged on that promise by agreeing to a tax on bank deposits. People took to the streets and the parliament refused to ratify the deal. Now the government must reopen negotiations with Europe if it wishes to save its banking system from collapse.  You can read all about it in today’s New Continue reading

Meanwhile, Back at Home………

The Lehmann Letter (SM) It appears that Europe will resolve the Cypriot crisis and move on. So let’s return to domestic events. There was a good report from the Commerce Department this morning. There were 917,000 new homes started in February at a seasonally adjusted annual rate: http://www.census.gov/construction/nrc/pdf/newresconst.pdf That is the third month in a row that housing starts have exceeded 900,000. Housing Starts (Recessions shaded) The chart makes clear that, after a long trough, building activity is expanding once again. It can’t be too long before housing starts exceed 1 million at a seasonally adjusted annual rate. Let’s hope the Continue reading

The Euro Will Survive!

The Lehmann Letter (SM)  The stock market is down this morning and today’s papers carried stories of turmoil in Cyprus. Depositor withdrawals threatened Cypriot banks, which in turn threatens Europe’s bailout of Cyprus. See for instance these articles in The New York Times and Wall Street Journal: “Turmoil in Cyprus Over a Bailout Rattles Europe”  http://www.nytimes.com/2013/03/18/business/global/facing-bailout-tax-cypriots-rush-to-get-their-money-out-of-banks.html?ref=todayspaper&_r=0  “Cyprus Rescue Risks Backlash”  http://online.wsj.com/article/SB10001424127887323639604578366700444429538.html?mod=ITP_pageone_0 The Wall Street Journal began its story by saying: “The euro zone took the unprecedented step of taking a bite out of depositors’ bank accounts to help pay for its bailout of Cyprus, a high-risk decision that could erode Continue reading