Young Research & Publishing Inc.

Investment Research Since 1978

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Consumers Forecasting Recession

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Consumers are now forecasting a recession. The Thomson Reuters / University of Michigan final index of consumer sentiment was released today. The index fell to levels not seen since the height of the financial crisis. The expectations component of the survey plummeted to a three decade low. In the almost 60 year history of the Michigan consumer sentiment survey, every time the index dropped below 60 as it did in August, the economy was in recession.    … [Read more...]

Counting on QE3

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Is this becoming a tradition? I am of course talking about Wall Street’s calls for the Federal Reserve to fire up the free money truck. It was this time last year at the Fed’s annual Jackson Hole symposium that Chairman Bernanke first signaled QE2 was on the way. Now as then, Wall Street is demanding that Mr. Bernanke signal another round of money printing during his keynote speech. The Street has read in Mr. Bernanke’s playbook that for years now, the Fed has been targeting stock prices. Anytime the Dow tumbles, the Fed eases monetary policy. Just look at its latest action to prop up the … [Read more...]

The Pinnacle of Hubris

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Following the latest FOMC meeting yesterday, the Federal Reserve announced that it will maintain its zero-interest-rate policy until at least 2013. This is the first time the Fed has given the market a timeframe for keeping rates on the floor. Plunging global equity markets apparently panicked a reactionary Ben Bernanke. I guess you can’t blame him. After all of the hard work he put into artificially levitating stock prices with QE2, the market has given up almost all the phony gains in only two months. But Mr. Bernanke’s latest attempt at monetary stimulus may be worse than QE2. It is … [Read more...]

More Alarming than the Debt Ceiling Debate

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While the financial press and many market participants are focused on the debt ceiling issue in the U.S., an equally if even more alarming issue is developing in Europe. After retreating following the latest Greek bailout, Spanish and Italian government bond yields are again rising. Yields and spreads are now only a few basis points away from their pre-bailout highs. It would seem that Europe’s latest attempt at a solution to the sovereign debt crisis hasn’t convinced market participants. Bond yields near 6% in economies that are expected to grow at less than half that rate in 2011 are … [Read more...]

Housing Prices Still in the Tank

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The S&P Case-Shiller home price indices were released this morning. On a non–seasonally adjusted basis, home prices rose for a second consecutive month in May, but are still down 4.5% over the last 12 months. After adjusting for seasonality, home prices are down slightly in May. The Case-Shiller 20-city composite has now fallen in 11 of the last 12 months. To get a better look at the breadth of home prices we’ve set up one-month and six-month diffusion indices of the Case-Shiller 20-city composite. Our diffusion indices measure the percentage of cities in the index showing a gain in … [Read more...]

The Gloves are Coming Off

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Below are two excerpts from Wynn Resorts latest conference call. The speaker is Stephen Wynn the company’s Chairman and CEO. Rarely do you hear so much candor out of the C-suite of one of America’s leading firms. It’s quite refreshing.  On Pricing “It’s where they are and who are the people that are staying in the hotel, and why they’re staying in the hotel that make the difference competitively and create the franchise in our business.” “We did not lower our rates like some of our competitors did. We’ve come to the conclusion here, incidentally, I’d like to add this parenthetically, … [Read more...]

Rail Stock Divergence

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The Association of American Railroads (AAR) put out its weekly rail traffic report today. For the week ending July 16, total carloads fell 0.3% compared to the same week last year. The AAR’s weekly rail traffic data is famously noisy. To get a better read on the underlying trend in rail traffic, it is useful to adjust the data. In the first chart below, you are looking at the year-to-year rate of change of the 13-week moving average in both total carloads and cyclical carloads. Both series have dipped into negative territory. The next chart shows the four-week moving average of total carloads … [Read more...]

It’s the Spending, Stupid

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Just in case you needed more evidence of the seriousness of the federal deficit, these two charts provide some historical perspective. The first chart shows the federal deficit as a percentage of GDP since 1930. The deficit as a percentage of GDP is at a post–World War II record. This administration and Congress are running deficits that are twice as high as those run by FDR during the Great Depression. The profligacy is truly staggering. How did we get here? Is the federal government spending too much or taxing too little? Let’s start with revenues. Revenues as a percentage of GDP are … [Read more...]

Consumer Sentiment Sinks

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The Reuters/University of Michigan Survey of Consumer Sentiment plummeted to a post-recovery low of 63.8 in July. According to Bloomberg, economists were projecting a level of 72. The expectations component of the index, which asks consumers about their outlook over the coming 12 months, also fell to a post-recovery low. You can see in Young Research's chart above that sentiment is now clearly rolling over. But the weakness in the Michigan survey is contrary to what the stock market is saying about sentiment. The S&P 500 Consumer Discretionary Index hit a new all-time high this … [Read more...]

Are You Financially Prepared for Retirement?

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I just finished wading through the Employee Benefit Research Institute (EBRI) 2011 Retirement Confidence Survey (RCS). My findings are problematic. The EBRI is a private, non-profit, nonpartisan public-policy market research firm.  The 2011 RCS is the EBRI’s 21st annual retirement survey. The survey attempts to measure the attitudes of working-age and retired Americans regarding retirement, their preparation for retirement, and their confidence in various aspects of retirement. It is based on an interview of more than 1,200 individuals over 25 years old. The survey’s margin of error is +/- … [Read more...]