Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

Good is Good but Bad is Better

By

Lately the market has been reacting to economic data releases with the outlook that good is good, but bad is better. Bad news has been rewarded by investors pushing the market to its highest valuations since before the recent recession. This reaction is predicated on the hints of future monetary stimulus from Federal Reserve officials, and new measures recently outlined by the ECB. This week generated much negative economic data, including a major fall in the manufacturing employment diffusion index from the BLS. The index fell to 36.4, signaling that the majority of manufacturing companies … [Read more...]

Into the Abyss: The Bernanke Fed

By

Late yesterday, the Federal Reserve released the minutes from their last policy-setting meeting. In the minutes, Bernanke & Co. all but guaranteed investors that the Fed would fire-up the printing presses for a third round of money printing. The Fed has been dangling the carrot of QE3 in front of investors for months now. That’s partly why the S&P 500 held up better than foreign markets during the summer sell-off and why U.S. stocks are still up double digits for the year. But the meeting minutes signal that the Fed has decided to pull the trigger on more stimulus next month. Just in … [Read more...]

Survival Stock

By

In seventh grade, my school had a program called “Survival” up in the woods of Western Massachusetts. It was for the whole grade. Not just for those who enjoyed the outdoors. It was a big deal—a rite of passage for all of us before moving on to the next grade. Each of us was allowed to fill a milk crate with food. But you had to carry it up to base camp three miles up a hill, so packing only what you could carry took on new meaning. Once base camp was set up, we were split into two teams. One team would go out for three days on the survival part, and the others would stay at base … [Read more...]

India: BRIC Broken

By

India, one of the much hyped BRIC countries (Brazil, Russia, India and China) has seen its currency plunge in recent months. Over the last 12 months the Indian rupee has lost 20% of its value (chart 1) compared to the U.S. dollar. If you have been one of the unfortunate investors who have owned Indian stocks over the last year, you are down 23% (chart 2).   For much of the last decade the hucksters and promoters on Wall Street have pushed BRIC stocks as a growth story. But what your broker likely failed to mention during his pitch was the currency risk of investing in a … [Read more...]

Will the Fed Hold its Fire?

By

Core inflation (chart 1) registered a year-over-year growth rate of 2.1% in the BLS report released today.   The reported rate of inflation is slightly above the Federal Reserve’s 2% target for core CPI growth. The Fed has recently hinted that it may begin another round of monetary stimulus. But with inflation above the Fed’s target, and capacity utilization nearing 80% (chart 2), the wisdom of new monetary stimulus must be questioned.   … [Read more...]

High Corn Prices Threaten Consumer Spending

By

Stockpiles of grains are dwindling across the globe as droughts take hold in the U.S., Europe and Asia. Bloomberg reports: Combined inventories of corn, wheat, soybeans and rice will drop 1.8 percent to a four-year low before harvests in 2013, the U.S. Department of Agriculture estimates. Crops in the U.S., the biggest exporter, are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall already is 20 percent below normal. The International Grains Council began July by forecasting record harvests. It ended with a prediction for a 2 percent drop … [Read more...]

Higher Unemployment amid Slow Job Gains

By

Today’s employment report from the Bureau of Labor Statistics indicated an increase of 163,000 jobs in July (chart 1). That’s the most jobs added in four months, but still not enough to reduce unemployment. Coming in at 8.3% (chart 2), unemployment continued its four month upward trend. The rise in the unemployment rate was telegraphed around 17 months ago when jobless claims lost their downward momentum and began rising (chart 3). If claims numbers continue at elevated levels, expect more trouble in the jobs market. … [Read more...]

Manufacturing Staggers

By

For the second month in a row manufacturers reported declines (chart 1) in overall business, as recorded by the Manufacturing ISM Report on Business for July. Particularly worrisome for the future of the economy was a continued decline in both New Orders (chart 2) and Supplier Deliveries. These two components of the ISM are seen as leading indicators of economic strength or weakness. New Orders contracted for the second month in a row, while Supplier Deliveries (also known as Vendor Performance) contracted for the sixth month in a row. Backlogs of orders continued to decline as well, … [Read more...]

Not a Starbucks Issue

By

In a Wall Street Journal front page report, Starbucks CEO Howard Schultz hit the nail on the head regarding corporate profits. Coffee chain Starbucks last week warned that customer traffic in U.S. cafes began slowing in June. The softness continued in July, so the company cut its earnings guidance for the third quarter. "This is not a Starbucks issue," said Howard Schultz, chief executive. "This is a macro problem of weak consumer confidence." Corporate profits as a percent of GDP have been at unsustainable levels. You can see on my chart below that profits peaked out in the fourth quarter … [Read more...]

Facebook Un-Liked by Wall Street

By

We have warned readers on this website and in our premium strategy reports, Richard C. Young’s Intelligence Report and Young Research’s Global Investment Strategy to avoid Facebook shares. After the company’s first earnings report was released yesterday, those warning were proved prescient. A Reuters report on the release by Alexei Oreskovic and Gerry Shih illustrates the drastic overvaluation that the IPO market attached to Facebook shares. Facebook Inc reported a drastic slowdown in revenue growth and failed to offer financial forecasts to quell fears about its ability to boost advertising … [Read more...]