What these two big benchmark stocks are telling us about the economy now


Published on

The Dow Jones Industrial Average opens this morning up 4.7% for 2011, excluding dividends. I’m convinced that if it were not for the economic crisis in the eurozone, the stock market would be trading much higher

Published in: Business, Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

What these two big benchmark stocks are telling us about the economy now

  1. 1. About UsWe publish Profit Confidential daily for our Lombardi Financial customers because webelieve many of those reporting today’s financial news simply don’t know what they aretelling you! Reporters are trained to tell you the news—not what it can mean for you!What you read in the popular news services, be it the daily newspapers, on the internetor TV, is the news from a “reporter’s opinion.” And there’s the big difference.Topics GuidanceGold Stocks Investment GuidanceStock Market Retirement PlanBear Market Chinese StocksBull Market The Best StocksUS Dollar Gold Stock PickingEuro Real Estate InvestmentInterest Rates Real Estate Market http://www.profitconfidential.com/
  2. 2. What These Two Big Benchmark Stocks Are Telling Us About the Economy NowBy Michael Lombardi, MBA for Profit ConfidentialTwo very confusing signals today about the economycome courtesy of two big benchmark stocks.Wal-Mart Stores, Inc. (NYSE/WMT) missed analyst earningsexpectations yesterday. The world’s largest retailer earned2.9% less in its fiscal third quarter of 2011 compared to thesame period of 2010. But here’s the important part:Wal-Mart reported yesterday that sales at its stores open atleast one year rose a pathetic 1.3% in the third quarter.Sales at Wal-Mart, a company that caters to the lower endof retail, are growing at a slower pace than AmericanGDP. http://www.profitconfidential.com
  3. 3. Now let’s move to another big retailer and anotherbenchmark stock, The Home Depot Inc. (NYSE/HD). Theworld’s biggest home improvement retailer saw its earningjump a big 12% in the third quarter of 2011, compared tosame period of last year.If we look at the all-important same-store sales, we see thatbenchmark stock Home Depot reported that stores openat least one year saw sales grow 3.8% in the U.S. in the thirdquarter of 2011, compared to the third quarter of 2010.Why are same-store sales pathetic at benchmark stockWal-Mart (actually a concern), while same-store sales arerising at benchmark stock Home Depot? Simple answers. www.profitconfidential.com
  4. 4. The persistent high unemployment in the U.S. is having ahuge impact on low-end retail. At the beginning of arecession, you see consumers cut high-end retail spendingand increase low-end retail spending. But, as the economyhas not turned around, with the underemployment rate atabout 16%, consumers are cutting back on all kinds ofspending, including low-end retail. We clearly see this inbenchmark stock Wal-Mart.The really important numbers to help us understand whatkind of economic year we will have in 2012 will be theChristmas 2011 retail sales in the U.S.—and we’ll bewatching them like a hawk. Wal-Mart’s poor same-storesales number is another red flag for the U.S. economy. www.profitconfidential.com
  5. 5. As for Home Depot, the real estate market in the U.S. isstill in disarray. People are not upgrading theirhomes, because bank financing is hard to get andbecause the underlying fear that property prices willfall further persists. So, what do homeowners do if theyare not upgrading their homes? They improve whatthey have…which is why benchmark stock HomeDepot’s same-stores sales have risen 3.8%. www.profitconfidential.com
  6. 6. Michael’s Personal Notes:While I see it’s not getting much mainstream mediaattention, what’s happening in California with its finances couldturn out to be of great concern for all of America.In case you are not familiar with the situation, in June, CaliforniaGovernor Jerry Brown adopted an $86.0-billion budget. To getthe Democratic-led budget through, the state governmentmade concessions in its plan, which I call built-in austeritymeasures.If California state revenue falls $1.0 billion, California’s two majoruniversities will need to cut their budgets by $100 million each(austerity measures). If the state revenue shortfall comes in at$2.0 billion, the school year will be cut by seven days to savemillions and $248 million in school bus subsidies will vanish (moreausterity measures). These crazy austerity measures type triggerswere built into the state budget to win Republican support for thebudget. www.profitconfidential.com
  7. 7. Here’s the bad news…California is only four months into its current fiscal yearand state tax collections are already off $1.5 billion!And since the fiscal year started, the stategovernment has spent $1.7 billion more than it hasbudgeted! The austerity measures, although they willnot go into effect until February, look almost certain.It’s ironic that the biggest austerity government cutsthis nation will start to see will come from the state thatlays claim to some of the highest real estate prices inthe world. Looks like this one will play out just like aHollywood movie, but without a good ending. http://www.profitconfidential.com/
  8. 8. Where the Market Stands: Where it’s Headed:The Dow Jones Industrial Average opens this morningup 4.7% for 2011, excluding dividends. I’m convincedthat if it were not for the economic crisis in theeurozone, the stock market would be trading muchhigher. Europe’s economic issues are a problem forAmerican banks that have exposure to bonds issuedby euro countries with high debt levels relative to theirGDP.We are in an aging bear market rally that started inMarch of 2009. www.profitconfidential.com
  9. 9. What He Said:“Recipe for Catastrophe: To me, the accelerated rateat which American consumers are spending, coupledwith the drastic decline in the amount of their savings,is a recipe for a financial catastrophe.” MichaelLombardi in PROFIT CONFIDENTIAL, September 7, 2005.Michael started talking about and predicting thefinancial catastrophe we began experiencing in 2008long before anyone else. www.profitconfidential.com
  10. 10. Thank YouFor more information visit our websitehttp://www.profitconfidential.com