The Tycoon Report

Insider Buys and Sells: Weekly Wrap-up

Monday, September 14, 2009 | Tycoon Staff

BUYS

Southern Copper (PCU)

President and CEO Oscar Gonzalez Rocha BOUGHT $3.2 million in shares. View details.

SELLS

Cell Therapeutics (CTIC)

CEO James A. Bianco SOLD $2 million in shares. View details.


Dril-Quip (DRQ)

Co-Chairman of the Board Gary D. Smith SOLD $2.7 million in options. View details.


Gilead (GILD)

Chairman and CEO John C. Martin SOLD $4.7 million in options. View details.

President and COO John F. Milligan SOLD $2.7 million in options. View details.


Kohl's (KSS)

Director John F. Herma SOLD $3.1 million in shares. View details.

Director William S. Kellogg SOLD $9.3 million in shares. View details.

Chairman, President and CEO Kevin Mansell SOLD $2.8 million in shares. View details.


Micros Systems (MCRS)

SVP & Corporate Controller Cynthia A. Russo SOLD $2 million in options. View details.


Service Corp. International (SCI)

Chairman of the Board R.L. Waltrip SOLD $2.2 million in options. View details.


Pediatrix (MD)

Director Robert Fernandez SOLD $4.6 million in shares. View details.




TUESDAY, SEPT. 15

8:30 a.m. Producer Price Index

    * Importance (A-F): This release merits a B-.
    * Source: Bureau of Labor statistics, U.S. Department of Labor.
    * Release Time: Around the 11th of each month at 8:30 a.m. Eastern for the prior month.
    * Raw Data Available At: http://stats.bls.gov/news.release/ppi.toc.htm

The Producer Price Index measures prices of goods at the wholesale level. There are three broad subcategories within PPI: crude, intermediate and finished. The market tracks the finished goods index most closely, as it represents prices for goods that are ready for sale to the end user.

Goods prices at the crude and intermediate stages of production often provide an indication of coming (dis)inflationary pressures, but the closer you get to crude goods, the more that these prices track commodity prices which are already available in traded indexes such as the CRB (Commodity Research Bureau).

At all stages of production, the market places more emphasis on the index excluding food and energy, referred to as the core rate. Food and energy prices tend to be quite volatile and obscure trends in the underlying inflation rate. Though the market reaction is determined by the month/month changes, year/year changes are also noted by analysts. The index is not revised on a monthly basis, but annual revisions to seasonal adjustment factors can produce small adjustments to past releases.

Highlights

    * Producer prices fell 0.9% month-over-month, a much greater rate than expected in July and may increase deflationary worries.

    * Most of the decline was due to the volatility in the energy and food market, which saw drops of 2.4% month-over-month and 1.5% month-over-month respectively.

    * Core prices also declined 0.1% month-over-month and signaled a much wider-spread negative price movement.

    * Finished consumer goods excluding food declined 0.9% as nondurable goods fell 1.0%. Durable consumer goods fell 0.5% as car prices fell 1.7%. Capital equipment prices declined a modest 0.2% month-over-month.

    * The intermediate materials, supplies and components stage of processing group posted a drop of 0.2% month-over-month in July. Most of the decline was due to falling energy prices. The crude materials stage of processing group declined 4.5% month-over-month with energy materials declining 6.2%.

Key Factors

    * At this time we are not worried that the declines in the early stage of processing groups will pass through to the headline numbers.

Big Picture

    * PPI trends were highly volatile in 2008, mirroring the trends in global oil prices.  Falling global commodity prices and weak economic demand will keep inflation in check at the producer level.  If global economies remain weak in 2009, as is widely expected, inflation at the producer level will be insignificant.  There may even be concerns about global deflation.


8:30 a.m. Retail Sales

    * Importance (A-F): This release merits an A-.
    * Source: The Census Bureau of the Department of Commerce.
    * Release Time: 8:30 a.m. Eastern around the 13th of the month (data for one month prior).
    * Raw Data Available At: http://www.census.gov/svsd/www/advtable.html

The retail sales report is a measure of the total receipts of retail stores. The changes in retail sales are widely followed as the most timely indicator of broad consumer spending patterns. Retail sales are often viewed ex-autos, as auto sales can move sharply from month-to-month. It is also important to keep an eye on the gas and food components, where changes in sales are often a result of price changes rather than shifting consumer demand.

Retail sales can be quite volatile and the advance reports are subject to rather large revisions. Retail sales do not include spending on services, which makes up over half of total consumption. Total personal consumption is not available until the personal income and consumption reports are released, typically two weeks after retail sales.

Highlights

    * Retail sales were down -0.1% in Juy.  Excluding autos, they were down -0.6%.  Both figures were well off the consensus forecasts that called for increases of 0.8% and 0.1%, respectively.

    * The few pockets of growth were in motor vehicles and parts dealers ( 2.4%), health and personal care stores ( 0.7%), clothing and clothing accessories ( 0.6%), nonstore retailers ( 0.1%) and food services and drinking places ( 0.4%).

    * The biggest declines were seen in gasoline station sales (-2.1%), electronics and appliance stores (-1.4%), sporting goods (-1.9%), furniture (-0.9%), general merchandise (-0.8%), and miscellaneous store retailers (-0.8%).

Key Factors

    * The July Retail Sales report is a disappointment and yet another reminder, in the midst of a rising stock market, that the consumer isn't all he/she used to be due to weak wage growth, depressed asset prices, and concerns about job security.

    * The government doesn't provide any context behind the numbers, but with broad declines in most sales categories, it is clear that consumers weren't doing a lot of discretionary spending.

    * There will be a tendency to dismiss the weakness as being the result of consumers delaying purchases to take advantage of tax-free holidays that got pushed into August this year.  There will likely be some makeup in August, but there is still no other way to read the July data than to consider it a disappointment.

    * Retail sales, excluding autos, gasoline station, and building materials, which is a measurement that flows into GDP estimates, were down for the fifth straight month.

Big Picture

    * Retail sales fell off dramatically starting in September.  That was when the financial markets fell apart and the news became apocalyptic.  Auto sales also collapsed as the news of potential auto company bankruptcies dominated headlines.  Retail sales are likely to remain weak for quite a while given the current trends in employment, and the negative wealth impact for depressed prices for homes and stocks.


WEDNESDAY, SEPT. 16

8:30 a.m. Consumer Price Index

    * Importance (A-F): This release merits a B .
    * Source: Bureau of Labor statistics, U.S. Department of Labor.
    * Release Time: 8:30 a.m. Eastern, about the 13th of each month for the prior month.
    * Raw Data Available At: http://stats.bls.gov/news.release/cpi.toc.htm

The Consumer Price Index is a measure of the price level of a fixed market basket of goods and services purchased by consumers. CPI is the most widely cited inflation indicator, and it is used to calculate cost-of-living adjustments for government programs, and it is the basis of COLAs for many private labor agreements as well.

It has been criticized for overstating inflation, because it does not adjust for substitution effects and because the fixed basket does not reflect price changes in new technology goods which are often declining in price. Despite these criticisms, it remains the benchmark inflation index.

CPI can be greatly influenced in any given month by a movement in volatile food and energy prices. Therefore, it is important to look at CPI excluding food and energy, commonly called the "core rate" of inflation. Within the core rate, some of the more volatile and closely watched components are apparel, tobacco, airfares, and new cars. In addition to tracking the month/month changes in core CPI, the year/year change in core CPI is seen by most economists as the best measure of the underlying inflation rate.

Highlights

    * There were no surprises in the July CPI data.  It was precisely in-line with the consensus estimates that called for an unchanged reading in total CPI and a 0.1% increase in core CPI, which excludes food and energy.

    * Total CPI is down -2.1% year-over-year as the effects of the collapse of oil prices beginning last July continue to filter through the data; meanwhile, core CPI is up just 1.5% year-over-year, which is within the Fed's comfort zone.

Key Factors

    * The overriding message in the report is that inflation is not a problem at this point.

    * The soft comparison on oil prices will become less soft in the months ahead, so we should see the annual decline in CPI arrested in due course.  With the market cognizant of this point, the month-to-month readings will take on more importance.

Big Picture

    * Inflation trends have weakened.  The decline in energy prices after the summer spike has taken CPI down to -2.1% on a year-over-year basis as of July 2009 data.  Energy prices have again increased, yet the core rate should ease due to weak demand.  Low inflation rates are likely to continue through 2009 although deflation is not likely.


9:15 a.m. Industrial Production

    * Importance (A-F): This release merits a B-.
    * Source: Federal Reserve.
    * Release Time: 9:15 a.m. Eastern around the 15th of the month (data for month prior).
    * Raw Data Available At: http://www.federalreserve.gov/releases/G17/Current/g17.txt

The index of Industrial Production is a fixed-weight measure of the physical output of the nation's factories, mines, and utilities. Manufacturing production, the largest component of the total, can be accurately predicted using total manufacturing hours worked from the employment report.

One of the bigger wildcards in this report is utility production, which can be quite volatile due to swings in the weather. Severe hot or cold spells can boost production as increased heating/cooling needs drive utility production up.

In addition to production, this monthly report also provides a measure of capacity utilization. Though the rate of capacity utilization is seen as a critical gauge of the slack available in the economy, the market does not completely trust this measure.

Capacity is very difficult to measure, and the Fed essentially assumes that growth in capacity in any given year follows a straight line. One can therefore predict the capacity utilization rate quite accurately based on the assumption for production growth. The 85% mark is seen as a key barrier over which inflationary pressures are generated, but given revisions to these data and the difficulties with capacity measurement, the 85% mark should be viewed cautiously. It would be appropriate to look for corroborating inflation indications from commodity prices and vendor deliveries.

Highlights

    * Industrial production increased 0.5% in July (consensus 0.4%) while capacity utilization jumped to 68.5% (consensus 68.3%) from 68.1%.

    * A 1.0% increase in manufacturing output was led by a boost in motor vehicle assemblies, as the market expected.

    * The output of utilities fell -2.4% in the midst of unseasonably mild temperatures in July that curtailed the need for air conditioning.  This, too, was expected.

    * The output of mines increased 0.8% after a -1.0% decline in June.

Key Factors

    * The jump in industrial production was the first increase sine last October and only the second increase in the last 19 months.

    * One month does not make a trend, although the market will expect to see back-to-back gains in August as auto plants will be revved up to meet the inventory restocking demand associated with the "cash for clunkers" program.

    * The July number fits neatly with the thinking that data will look comparatively better in the near term as the economy continues to rebound from a depressed base.

Big Picture

    * Production held up surprisingly well through most of 2008 due in part to strong exports.  Exports grew at a 7.0% annual rate in 2005, 9.1% in 2006, 8.4% in 2007, and at an annual average rate of 7.8% through the first three quarters of 2008.  Then, the bottom fell out in the fourth quarter as the financial crisis spilled over to the real economy at home and abroad, severly impacting global trade and end demand that led to declining levels of industrial production and capacity utilization.  The near-term trend is expected to improve as financial markets, and global economies, have stabilized.


THURSDAY, SEPT. 17

8:30 a.m. Housing Starts and Building Permits

    * Importance (A-F): This release merits a B-.
    * Source: The Census Bureau of the Department of Commerce
    * Release Time: 8:30 a.m. Eastern around the 16th of the month (data for one month prior).
    * Raw Data Available At: http://www.census.gov/const/www/newresconstindex.html

Housing Starts are a measure of the number of residential units on which construction is begun each month. A start in construction is defined as the beginning of excavation of the foundation for the building and is comprised primarily of residential housing.

Building permits are permits taken out in order to allow excavation. An increase in building permits and starts usually occurs a few months after a reduction in mortgage rates. Permits lead starts, but permits are not required in all regions of the country, and the level of permits therefore tends to be less than the level of starts over time.

The monthly national report is broken down by region: Northeast, Midwest, South and West. Briefing.com recommends analyzing the regional data because they are subject to a high degree of volatility. The high volatility can be attributed to weather changes and/or natural disasters. For example, an unexpectedly high level of rain in South could delay housing starts for the region.

Highlights

    * Expectations of continued growth in the housing sector failed to materialize in July. Housing starts fell 1.0% month-over-month to 581k starts and are now down 37.7% over the last year.

    * Single-family home starts continued its recent upward trend and increased 1.7%. Multi-family units fell 13%.

    * Regional growth was mixed. Only the Midwest produced a gain in housing starts, but this was due to strong growth in multi-family units. Single family starts declined 3.4%. In the other regions, the Northeast saw housing starts decline 16.3%, the South fell 1.4%, and the West decreased 1.6% over the last month.

    * Building permits also fell below expectation in July. New permits declined 1.8% to 560k. As with housing starts, the decline was caused by a severe 26% drop in multi-family unit permits as single-family permits rose 5.8%.

Key Factors

    * Both the housing starts and building permit results were in-line with our expectations and they have not altered our current economic forecasts.

Big Picture

    * Housing starts are at extremely low levels and the outlook is not likely to improve any time soon due to high levels of inventories of unsold new homes.  An uptrend in construction will require an improvement in employment and income, and then take some time as inventories need to be reduced.  Government action to boost mortgage lending may also help, and starts might stabilize in the second half of the year.


10 a.m. Philadelphia Fed Index

    * Importance (A-F): The Philadelphia Fed Index merits a B.
    * Source: The Philadelphia Federal Reserve bank.
    * Release Time: Third Thursday of the month at 10 a.m. Eastern for the current month.
    * Raw Data Available At: http://www.phil.frb.org

There are many regional manufacturing surveys, and they tend to be ranked in order of timeliness and the importance of the region. The Philadelphia Fed's survey is first each month, actually coming out during the third week of the month for which it is reporting. Several smaller surveys are then released before the Chicago purchasing managers' report on the last day of each month.

These surveys can be of some help in forecasting the National Association of Purchasing Managers figures -- particularly the Philadelphia and Chicago surveys which are more closely watched due to their timeliness and the fact that these regions represent a reasonable cross-section of national manufacturing activities.

Highlights

    * Like the Empire Manufacturing report, the Philly Fed's Business Outlook showed an end to the contraction in the manufacturing sector.

    * The diffusion index jumped to 4.2 in August from -7.5 in July with 26.7% of firms reporting an increase in general business activity.

    * The future also looks bright as 61% of firms believe general business activity will increase six months from now.

    * Raw Data Available At: http://www.phil.frb.org

Key Factors

    * New orders also posted a positive reading of 4.2% as 28.8% of firms reported an increase.

    * The labor market remains subdued but the rate of contraction weakened. The number of employees index read -12.9 as only 10.5% of firms reported an increase in employment. Likewise, only 14% of firms showed an increase in the average workweek. However, the future looks slightly stronger as 28.8% of firms believe they will hire more workers in six months.

    * Capital expenditures are expected to remain neutral over the next six months and signal a continued worry that the economy will not support much growth


Source: Briefing.com