More Trouble on Wall Street
Monday, July 9, 2007 | Wayne MulliganRating:
I hope you’ve been enjoying the new Tycoon Report website since we re-launched it. I know I’ve personally received a number of e-mails and comments from happy Tycoon members – everyone seems to be enjoying the new clean look and the ability to communicate with one another on the Comments section of every article.We’ve also had a number of members – especially the Tycoon Beta Testers who I owe a HUGE “thank you” to for helping us get the site up to par – submit articles to the "Member Articles" section of the website.
Please keep those articles coming – I know that I’ve personally enjoyed reading them, and I know a few of the other editors over here have commented directly on a number of them.
More Problems on Wall Street
If you recall, I discussed some of the problems we’re currently seeing in the financial services industry a few weeks ago.
After reading through all the feedback, I think the vast majority of the people out there would tend to agree with me. We really need to focus on educating investors and providing the tools necessary to help them make informed investment decisions.
We’re obviously not the only company trying to do this on the web.
There are other newsletters out there, and there are other web sites, all trying to “educate” investors.
Well, in my opinion these people and their companies aren’t doing anything new – they aren’t doing anything innovative in the arena of investor education.
They’re simply continuing with the one-directional lines of communication that you’ve been accustomed to, but they just happen to be doing it on the web.
Let’s take a look at a few examples to see what I’m talking about here:
1. Yahoo! Finance – Let’s start with the biggest first.
Yahoo! Finance is by far and away the largest finance site on the web. They have everything from portfolio and stock tracking to news and real-time quotes.
Now, don’t get me wrong, these are great tools for keeping up with the investing game, but do they really teach you how to play it better?
The first things I see when I go to this site are some quotes for the major indices (nothing new about that), a few bits of news, and a big fat banner advertisement. If I scroll far enough down the page I start to see articles about “4 stocks you need to know about now,” but I don’t get how that’s any different than watching CNBC or getting a cold call from a stock broker.
2. TheStreet.com – Instead of attacking the biggest site on the web, I’m going to attack the biggest ego – you guessed it, Jim Cramer.
While I respect the guy for his ability to go on national television and make a complete fool out of himself on a regular basis, the company he founded does very little to help educate investors. There are no “two-way” methods of communication on that site.
Click on any of their articles to see what I mean – you can’t even comment on them – I guess they might not like what their readers might have to say.
We want to hear what you have to say about our writing – good or bad, it’s all good to us because it helps us improve and it creates an atmosphere of two-way communication.
That means that every comment you leave goes to us and to every other Tycoon Report reader – you help us learn and help other members learn as well. And that’s what this new site is really all about.
3. MarketWatch.com – Here’s another “biggy.”
This site is owned and operated by Dow Jones, the same company that publishes The Wall Street Journal.
This site reminds me more of a highway with endless amounts of billboards than a place to come for information on investing. On 3 of the 4 articles I just clicked on, the advertisements took up more of the page than the actual articles did.
Do you see something wrong here? This is even worse than the other two sites – this is the equivalent of calling your broker up, listening to him pitch you a stock, and then getting interrupted every few seconds with a commercial for toothpaste.
And these are the biggest, most highly trafficked, and most popular finance sites on the web – I just don’t get it. Can someone please explain the appeal in going to sites like these? I’m serious, if you’re one of the users of these sites, please tell me what you like about them, then tell me what you dislike.
Homework Assignment
In fact, I have a little assignment for everyone this week: I want you to share your favorite investing sites in the comments section of this article. Then I want you to talk about why they’re your favorites.
If you’d like, feel free to discuss your answers with other people who have posted theirs. Maybe you like the same sites for different reasons – maybe you think the sites they like are terrible ... talk about it.
I’ve gotten a few “suggestions” over the last few weeks like, “Wayne, you should add quotes and charts to the Tycoon Report site”. Or, “I think your site needs more news headlines.”
While those are certainly important features, I don’t feel like they help you at all – I mean, you can find that information ANYWHERE. It doesn’t even have to be on a finance site. I can pull up stock quotes on any site I go to these days. Where’s the value in that?
How will that make you or me a better investor?
Answer: It won’t.
If you really want to “learn how to fish” then you need to buck the trend, go against convention, and stop relying on advisors and websites that refuse to educate you properly.
Take some accountability for your financial future and begin studying and learning and communicating with other investors. We’ve given you a number of great tools to get started – it’s up to you to take advantage of them.
I can’t wait to read what you have to say about some of your favorite finance sites.
I hope you have a great week!
(Please let us know what you think about Wayne Mulligan's article.)
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Wayne Mulligan
Contributing Editor
The Tycoon Report
Mark Your Economic Calendar: What's ahead for the week of July 9, 2007
Monday, July 9
15:00 - Consumer Credit (for May): Consensus $6.0B
Big Picture: Tax cuts and cash out mortgage refinancing provided consumer funding in past years as 6% yoy income growth and equity gains now provide the means outside of credit. Credit cards (revolving credit) make up 37% of total consumer credit, which stands at $2.4 trillion. Nonrevolving credit helps finance auto purchases, tuition (including Sallie Mae), vacations and other forms of consumer borrowing. Annual growth of 4.9% has shown acceleration from the 3.4% yoy decade low of a year ago. Consumer credit includes household non-mortgage loans.
Implications: This monthly measure of consumer debt is volatile and subject to massive revisions. It is also released well after every other consumer spending indicator, including weekly chain store sales, auto sales, consumer confidence, retail sales, and personal consumption. For these reasons, the market almost never reacts to the consumer credit report.
Tuesday, July 10
10:00 - Wholesale Inventories (for May): Consensus 0.4%
Big Picture: Wholesaler inventories growth of 7% yoy is below the 9% annual growth in sales. The inventory to sales ratio is back down at the 1.12 month record low of June 2006. The recent draw down of inventories was quick for wholesalers, but continues for manufacturers and retailers. Longer term trends reflect comfort at those I/S lows as technology allows for continued improvement in just-in-time inventory management. The smaller inventory swings from rebuilding and draw downs leaves a steadier pace of domestic growth.
Implications: The wholesale trade report includes sales and inventory statistics from the second stage of the manufacturing process. The sales figures say close to nothing about personal consumption and therefore do not move the market.
Thursday, July 12
8:30 - Initial Claims (for 7/07): Consensus NA
Big Picture: Initial claims had been following a subtle upward trend, which has again been challenged with the recent low levels. Aberrations are watched for clues on the labor market and economy as the recent levels reflect an even tighter labor market. Continued claims also falling off its March highs as the 4-week average stands about 100K above the six-year low of May 2006. Claims provide a nearly real-time read on layoffs and the labor market as the low 4.5% unemployment reflects the broader read of layoffs and hiring.
Implications: Initial jobless claims measure the number of filings for state jobless benefits. This report provides a timely, but often misleading, indicator of the direction of the economy, with increases (decreases) in claims potential signalling slowing (accelerating) job growth. On a week-to-week basis, claims are quite volatile, and many analysts therefore track a four-week moving average to get a better sense of the underlying trend. It typically takes a sustained move of at least 30K in claims to signal a meaningful change in job growth.
8:30 - Trade Balance (for May): Consensus -$60.0B
Big Picture: The August 2006 deficit reached a record high -$68.6 bln as lower energy prices and weaker domestic growth have helped to pull the deficit lower since. The swing of petroleum import prices mask the weakening domestic demand for foreign goods, as the weaker dollar and economy slowly provide the force. Exports feed a stronger world economy and have shown eight new record highs over the last nine months. From a year ago, exports have risen 11% as imports have risen 5%. Import growth carries a larger effect as they are about 50% larger than exports. The massive size of the deficit is eyed for effects on the dollar and interest rates. The trade deficit demands an equal but opposite investment inflow from abroad as current foreign demand remains exceedingly strong given the return of petrodollars and Asian demand.
Implications: The trade report is most widely watched for trends in the overall trade balance. But trends in both exports and imports of goods and services bear watching as well. The export data in particular are important to watch for indications that a strengthening competitive position at home and/or strengthening economies overseas are boosting U.S. growth. Imports provide an indication of domestic demand, but given the severe lag of this report relative to other consumption indicators, it is not particularly valuable for this purpose.
14:00 - Treasury Budget (for June): Consensus $31.0B
Big Picture: Strong tax receipt growth continues to lead a path toward lower deficits given the strong (ex-housing) economy, profits and income growth. Spending remains stronger than desired as fiscal discipline is needed. The FY05 improvement sliced away a quarter of the record $413 bln FY04 deficit as FY06 sliced away another $71 bln. FY07 has already sliced $79 bln through May as the outlook sides with a smaller FY deficit than the current 12 month total of -$170 bln.
Implications: The monthly Treasury budget data follow strong seasonal patterns which produce huge month-to-month fluctuations in the deficit. These fluctuations tell us little about long term budget trends. To the extent that the market analyses the monthly Treasury data, the focus is on year/year changes in receipts and outlays, since the data are not seasonally adjusted. Only in April, the most important month for tax inflows to the Treasury, does the market pay any attention to this report. The data can be predicted with reasonable accuracy by using daily data in the Daily Treasury Statement.
Friday, July 13
8:30 - Export Prices ex-ag. (for June): Consensus NA, Import Prices ex-oil (for June): Consensus NA
Big Picture: Import prices are decelerating, partly due to the effect from petroleum prices and the prices from the Pacific Rim which show small declines from a year ago. Export prices are on the rise as agricultural (18% yoy) reflect the increased demand for grains that are now being increasingly used as alternative fuels. Total export prices are almost four times the annual growth in import prices.
Implications: Though not a market-moving release, export/import prices are a useful indication of inflation pressures created by changes in foreign exchange rates. For example, when the dollar is strong, import prices tend to be under downward pressure. If an item in Japan costs 500 yen and the exchange rate is 100 yen to the dollar, the US$ price $5. If the dollar then strengthens to Y120, the US$ price falls to $4.17. Because US exports must compete with foreign goods, there is also downward pressure on export prices when the dollar is strong. Economists typically look at import prices excluding oil and export prices excluding agricultural. In each case, the category in question is excluded because prices for those items are volatile and the swings are unrelated to foreign exchange rates. Oil prices tend to swing in response to OPEC decisions, and agricultural prices are often affected by weather, neither of which say much about long-term trends in traded goods prices.
8:30 - Retail Sales (for June): Consensus 0.3%, Retail Sales ex-auto (for June): Consensus 0.2%
Big Picture: Retail sales are slowing under the weight of a high Fed policy rate as the current rise in gas prices again drags alternative sales. Strong retail sales growth had been fueled by low interest rates, vehicle discounting and mortgage refinancing as those forces faded in late 2005 and 2006. Despite the improved employment and income growth the Fed tightening and high energy prices have had a deflating effect on consumer spending and big ticket durable goods purchases particularly. Strong income growth and the low unemployment provides support and is the best read on the future sales pace.
Implications: 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.
10:00 - Business Inventories (for May): Consensus 0.3%
Big Picture: The inventory to sales ratio stands at 1.27 months from the record low 1.25 months in January 2006 as inventory gains of 5% yoy compare to a 4% yoy rise in sales. April growth was the strongest since September as the inventory drawdown seems largely complete. The long trend toward smaller I/S ratios and the tighter range leaves less of a resulting effect on economic growth.
Implications: The business inventories report includes sales and inventory statistics from all three stages of the manufacturing process (manufacturing, wholesale, and retail). But by the time it is released, all three of its sales components and two of its inventory components have already been reported. Because retail inventory is the only new piece of information it contains, the market usually ignores the business inventories report. However, sometimes retail inventories swing enough to change the aggregate inventory profile. This may affect the GDP outlook. When it does, the report can elicit a small market reaction.
10:00 - Michigan Sentiment-Prel. (for July): Consensus 86.0
Big Picture: The push to a two-year high in January was largely tied to the drop in gasoline prices, as equity prices have helped in recent months as gas prices turned higher. Fears about housing, higher gasoline prices and now higher interest rates are partly offset by the strong labor market. The University of Michigan survey is significantly smaller (500 phone calls, just 250 in preliminary) than the Conference Board's, includes a longer outlook (for expectations) as questions are focused on the household compared to the business heavy CB survey. The index far better tracks the consumers' mood than spending habits better indicated through interest rates and income growth.
Implications: The Michigan index is almost identical to the Conference Board Consumer Confidence index, though there are two monthly releases, a preliminary and final reading. Like the Conference Board index, it has two subindexes -- expectations and current conditions. The expectations index is a component of the Conference Board's Leading Indicators index.
Source: www.Briefing.com
