Well, today is both a happy and sad day for me and for my colleagues here at The Tycoon Report.

It marks the end of one era and the beginning of a new one.

By the somber tone in these first few lines, I’m sure you can guess what I’m about to say... I am announcing my departure as an editor here at The Tycoon Report. 

I’ll no longer be bringing you technology sector news and analysis or general market commentaries and life lessons I’ve picked up during my years in the markets.

It’s been a very fun ride, and I can’t even begin to describe how exciting and enjoyable an experience I’ve had writing to you and other Tycoon members over the course of the last two years. 

Even though one of my primary responsibilities was researching and picking stocks, truth be told, those were probably my least favorite parts of this job – by far and away, my favorite thing to do each and every week was answer questions and e-mails from the thousands of Tycoon Report readers out there.

More than anything else, those e-mail conversations gave me a unique perspective on the investing public.  The experience has really shown me how hungry people are for knowledge.

I’m honored to have been part of your education in this space – I really hope I’ve added some value to your life.

But like I said, while this is a sad day, it’s also a very happy one as well.  I have a very exciting announcement to make...

In the same spirit of educating individual investors, I decided to go off on my own and launch a brand new web site – TickerHound.com!  My team and I have spent a lot of time building this site, and all the while, we’ve kept YOU and other individual investors in mind... the goal was to make TickerHound the first place you went when you had questions about investing.

TickerHound will be launching next week, so keep your ears open and eyes peeled.  You won’t want to miss this!

Before I go any further, I’d like to take a minute to thank some of the Tycoon members who have been testing the site and have provided invaluable feedback that has helped us make TickerHound even better.  These members are dedicated to educating and empowering other individual investors, and therefore I think it’s only right that I recognize them publicly.

TickerHound would have never become a reality if it weren’t for the help, encouragement and feedback of Joe Conlin, Stephanie, Ethan Roberts, Michael O’Connell, and Jester112358.

Thank you all so much!

And while TickerHound is completely independent of The Tycoon Report, I wanted to take this opportunity to make another exciting announcement...

As of last week The Tycoon Report has agreed to partner with TickerHound and feature our tools and content right here in the Tycoon Report newsletter!
 
This is one of the many partnerships TickerHound has in the works, so you might begin seeing us all over your favorite financial web destinations.

So don't be too sad.  I’ll be back in The Tycoon Report next week with the launch announcement, and you can begin using the site and its features right away!  I think we built something really special with TickerHound, and I can’t to hear what you think.

Have a great week!




Wayne Mulligan
Chief Investment Officer
<>






Tuesday, December 11

10:00 - Wholesale Inventories (for October): Consensus 0.5%

Big Picture: Wholesaler inventories growth of 5% yoy is running at half the pace of the 10% annual growth in sales.  The inventory to sales ratio reached a record low 1.10 months in September.  The early 2007 inventory drawdown was relatively quick and less of an interruption for the economy.  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 drawdowns 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.  Wholesale inventories sometimes swing enough to change the aggregate inventory profile (aggregate inventory is the sum of inventory at the manufacturing, wholesale, and retail levels), which may affect the GDP outlook.  In that event they can elicit a small market reaction.  More often than not, however, this release goes unnoticed except by market economists.


Wednesday, December 12

8:30 - Export Prices ex-ag. (for November): Consensus NA, Import Prices ex-oil (for November): Consensus NA

Big Picture: Core import and export prices are breaking out a bit, as overall growth has turned sharply higher.  The movement in the volatile petroleum import prices and surging agricultural export prices provide the swing.  The strong 27% yoy rise in agricultural export prices reflect the increased demand for grains that are now being increasingly used as alternative fuels.  Petroleum import prices have shot 41% higher from a year ago.

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 - Trade Balance (for October): Consensus -$57.0B

Big Picture: The August 2006 deficit reached a record high -$68.6 bln which has fallen off to a 28-month low in September of -$56.5 bln.  The weak dollar and strong global growth now provide a strong upward trend for exports as the deficit has fallen -18% from the peak.  From a year ago, exports have risen 14% as imports have risen 5%.  Import growth carries a larger effect as they are about 40% 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 as the weaker dollar value reflects global demand for the dollar given the massive size of the trade deficit.

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 November): Consensus -$75.0B

Big Picture: Strong tax receipt growth continued to leave a path toward lower deficits, given the economy, profits and income growth.  Spending was cut back to the slowest growth in ten years in FY07 despite the war expenditures.  The FY05 improvement sliced away a quarter of the record $413 bln FY04 deficit as FY06 sliced away another $71 bln and FY07 another $85 bln.  We're not optimistic that the deficit slimming will continue in to FY08.  The FY07 deficit of $163 bln amounted to just 1.2% of GDP.

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 analyzes 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.


Thursday, December 13

8:30 - Retail Sales (for November): Consensus 0.5%, Retail Sales Ex-Auto (for November): Consensus 0.6%

Big Picture: Retail sales are slowing under the weight of high gas prices, falling home prices and weakening consumer confidence.  The housing recession drags consumer durable goods (e.g. furniture, building equipment, appliances) as auto sales have been weak.  Despite the low unemployment rate and strong income growth, 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.

8:30 - PPI (for November): Consensus 1.5%, Core PPI (for November): Consensus 0.2%

Big Picture: September 2005 PPI growth of 6.9% yoy stood at a 15-year high, and stands back near that pace at 6.1% yoy in October.  The core stands at 2.5% yoy from July 2005's decade high of 2.8%.  However, producer pipeline pressures are not providing any lift to consumer prices.  CPI core commodity prices are lower than a year ago despite the upturn in core PPI prices.  That is, wholesale/commodity pricing pressures aren't yet really affecting retail prices.

Implications: 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).

8:30 - Initial Claims (for 12/08): Consensus 335K

Big Picture: Weekly initial claims can be volatile, as recent movement reflects increased loosening in the labor market.  Layoffs (seen in initial claims) have been rising, and reached above 350K in late November while hiring (seen in continued claims) showed a sharp rise to leave the largest levels in two years.  Claims provide a nearly real time read on layoffs and the labor market as the unemployment rate reflects the broader combined read of layoffs and hiring.  The 350K for claims is worrisome as a 375K level is consistent with recession -- both of the last two recessions were reached with 4-week averages below 375K.

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 signaling 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.

10:00 - Business Inventories (for October): Consensus 0.3%

Big Picture: The inventory to sales ratio stands at 1.27 months, just above the record low 1.25 months in January 2006.  The inventory drawdown in late 2006 and early 2007 is past.  The long trend toward smaller I/S ratios and the tighter range leaves less of a resulting effect on economic growth as the drawdowns or restocking takes place over a quarter or two.  The large inventory drag on GDP in Q4 and Q1 turned to gains in Q2 and Q3 2007.

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.


Friday, December 14

8:30 - CPI (for November): Consensus 0.6%, Core CPI (for November): Consensus 0.2%

Big Picture: The core rate of consumer inflation reached a decade high of 2.9% yoy in September 2006 and has eased off to 2.2% yoy.  The stickier prices for shelter and medical care and tuition will continue to hold firm as yoy core commodity prices have fallen from a year ago.  Energy prices provide the monthly swing and the largest underlying pressure.  In the big picture, its aggregate demand which provides the price direction, as sub-potential growth (below 3%) is easing the core inflation pressures over time.  The Fed more closely watches core PCE prices as an inflation guide which stands at 1.8% yoy -- in the Fed's 'comfort zone'.  Overall CPI reached a 14-year high of 4.7% yoy in Sept '05 and stands at 3.5% currently.

Implications: 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.  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.

9:15 - Industrial Production (for November): Consensus 0.1%, Capacity Utilization (for November): Consensus 81.7%

Big Picture: Industrial production is slowing after the early-year lift that followed the sharper deceleration in late 2006.  Factory orders are rising slowly as exports provide a welcome boost to production.  The risk ahead is that business capital investment stalls again given the weaker economic growth outlook which feeds in to factory orders, production and manufacturing overall.  Capacity use stands at 81.7% -- below the level historically consistent with inflationary pressures -- as manufacturing reflects more excess capacity at 80.1%.

Implications: 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 wild cards 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.


Source: www.Briefing.com