Consumer Sentiment

Given all of the international excitement, one burning question fills the hearts and makes sleepless the nights of the average broker:  How is the American consumer taking the news?  Well, maybe I exaggerate.  But it is an interesting question.

 

For January, the Consumer Sentiment Index came in at 74.2, which beat expectations (but was lower than December's results).  The Consumer Expectations Index rose to 69.3, and the Current Conditions Index fell to 81.8.  The Econoday-surveyed analysts are expecting a new level of 75.1.

 

Now, turning to the University of Michigan for the report (cheerfully titled "Improved Job Prospects Trump Rising Prices"), we get a fairly sunny picture.  The Consumer Sentiment Index rose to 77.5, the Consumer Expectations Index rose to 71.6, and the Current Conditions Index rose to 86.9.

 

Interestingly enough, the Consumer Sentiment Index moved along household income lines.  It was up 9.7% among households with incomes above $75,000, but fell 1.4% among lower income households.

Fourth Quarter 2010 GDP, Preliminary Revision

The big mover for economic data today is Gross Domestic Product, which (if you aren't familiar with it) is the sum of all private domestic consumption, plus gross private domestic investment, plus government spending, plus the current trade balance.  It is pretty much assumed to represent the health of a nation's economy.

 

GDP reporting is, in a word, peculiar.  It gets reported three times for each quarter.  There is an advance report, a preliminary revision the following month, and then a final revision.  This month, we're getting the preliminary revision for Q4 2010.  The advance report showed GDP up 3.2% for the quarter, with the price index (one possible measure of inflation) up 0.3%.  The Econoday-surveyed analysts are looking for the preliminary revision to show Q4 GDP increase to 3.4%, with the price index remaining at 0.3%.

 

For the actual results we turn to the Bureau of Economic Analysis, which has chosen to crush the fragile hopes and dreams of the analysts.  In the preliminary revision, real GDP was revised downward to 2.8% for Q4 2010.  This still represents an increase from Q3's 2.6% final result, but it is not calculated to make the markets happy.  The price index rose 2.1% in Q4, unchanged from the advance report[1], while the "core" price index rose 1.2%.

 

I would say that this is likely to shake the markets up, but the futures are still green.  As of right now, anyway.  Go figure.

 

[1]  I took the 0.3% price index for Q3 from the Econoday page.  I'm not sure where they got it from, looking at the BEA information.

Al Qaeda's Hallucinogenic Chocolate Milk

The Libyan "protests"[1] continue to escalate.  Reuters is reporting that that the fighting in Zawiyah has resulted in fatalities.  The official Libyan newspaper puts the death toll at 23, and Al Jazeera is reporting it at 100 or more.  This, combined with the fact that the US is "examining all options, including imposing a no-fly zone over Libya, in its response to the Libyan government's attempts to crush the revolt"[2], combined to drive domestic April oil futures to a high of $103/barrel before finally settling at $97.28 (according to CNN Money).

 

Gaddafi himself has blamed the entire revolt on milk.  Milk and al Qaeda.  "Their ages are 17.  They give them pills at night, they put hallucinatory pills in their drinks, their milk, their coffee, their Nescafe," he said in a statement to Libyan state television yesterday.

 

The Swiss government has also frozen all assets he has on deposit in their nation.  After the "milk and Nescafe" comments, it seems a little unclear as to whether this move was done to prevent him from accessing his cash if he flees the country, or if it was done to comply with Swiss regulations regarding seniors with diminished capacity.

 

Algeria - Libya's eastern neighbor - seems to be the next player in the game titled "Islamic nations facing demands for democracy".  In an effort to get ahead of the curve, they have ended their 19-year state of emergency[3]. The protestors seem to be of the opinion that this is not really enough at all, but they aren't nearly as frisky as the Libyan protesters.  Not yet, anyway.  But Algeria is also an OPEC member nation, and holds (as of 2009) 1.1% of OPEC's oil reserves.  That means they have 0.8756% of the world's crude oil reserves.  They also export something on order of 747,000 barrels of oil per day.  This means that any and all concerns about protests and uprisings in Algeria will be the same concerns about protests and uprisings in Libya, albeit on a slightly smaller scale.

 

So watch the news, and see how long it takes for Algeria to drive the market down.

 

[1]  You know.  With the protest with the guns.  And the pitched battles.

[2]  As a side question, you have to wonder where we get off doing that.  I mean, if there was an uprising in the United States that left the government trying to retake everything west of the Rockies, and Canada attempted to impose a no-fly zone on us, we wouldn't take it well.

[3]  You could probably argue that after 19 years, it isn't so much a "state of emergency" as "the status quo".  But then you wouldn't be an Algerian despot.

New Home Sales

Better late than never, right?

 

Last month, we had results that were substantially better than expected.  The Econoday analysts were looking for 300,000 new single-family home sales in December, and we had 329,000 sales.  This month, the same analysts are looking for 310,000 new home sales for January.  Are they overoptimistic, or are they playing it safe?  Let's find out.

 

The joint US Census Bureau/HUD press release seems to have kicked those analysts in the metaphorical teeth.  Seasonally adjusted, January 2011 saw 284,000 new single-family home sales.  That's 'only' about 26,000 short of expectations.  Also, the December figures were revised downwards to 325k (not all that big an adjustment, really).  The median home price decreased $10,900 to $230,600, while the average price decreased $31,100 to $260,300.  The report doesn't come right out and say so, but the drop in sales can probably be blamed on last month's showing of Fimbulveter II:  Snowmageddon.

Guns, Swords, And Oil

What we may have to be calling the Libyan Revolution continues to dominate the news.  Reuters reports that rebel forces have seized important cities near the capital of Tripoli, including Misrata (the third largest city in Libya) and Zawiyah )an oil terminal just 50 km west of Tripoli).  Pro- and anti-Gaddafi forces (including, according to some reports, the Libyan army) are reported to be clashing.  "It is chaotic there," stated Mohamed Jaber who passed through Zawiyah on his way to Tunisia, "There are people with guns and swords."

 

Al Jazeera is reporting that "major swathes of territory in the east of the vast North African country now appear to be under the control of pro-democracy protesters."  They also report soldiers firing on protesters in Az Zawiyah with "heavy artillery", killing as many as 100 protesters and injuring 400 more.  They also confirm the Reuters report that pro-Gaddafi forces (called the "Hamza brigade") attacked Misrata, but that so far the revolutionaries have held the town in the face of "heavy machine guns and anti-aircraft guns".  They also state that the protesters/revolutionaries control the coastline from the Egyptian border to the cities of Tobruk and Benghazi.

 

One effect this has had on the international market is to drive up April oil futures internationally.  The price per barrel hit $119.79 intraday before falling back to around $114 per barrel.  On an average day, Libya produces 1.6 million barrels of oil.  The revolution[1] has cut that production by at least 25%.  Analysts are concerned that if the disruption continues it will force prices up further, because OPEC's "spare capacity" may be unable to absorb the losses.  One Reuters analyst feels that we could see oil hit $158/barrel.

 

So, naturally, the US indexes are green at this moment.  Go figure.

 

[1]  Because, really, once the swords and the guns come out, it's hard to call it a "protest" with a straight face.

And Toyota Looks Like It'll Have A Bad Day As Well...

From: CNN Breaking News [mailto:BreakingNews@mail.cnn.com]

-- Toyota recalls more than 2 million vehicles to fix problem of gas pedals getting stuck in floor mats.

One CNN Center Atlanta, GA 30303
(c) & (r) 2011 Cable News Network

When Your Husband Goes To Jail, How Do You Pick Up The Pieces?

Well, if you're Diane Passage, the third wife of convicted-but-not-yet-sentenced Ponzi fund operator Kenneth Starr, you do it by returning to the career you left behind when you got married.

 

In this case, as a stripper.  At Scores.  On their reality TV show, following the lives of Scores strippers.

 

Don't worry, though.  She's keeping it classy.  ""They'll be filmed at work," stated a spokesman for the Scores Media Group, "but there will be no nudity."