NEW$ & VIEW$ (15 FEBRUARY 2013)

Jobless claims. Farm jobs. Housing inventory. Eurozone trade. Sentiment: don’t get too sentimental. M & A activity.

Open-mouthed smile  U.S. Jobless Claims Fall Sharply

The number of U.S. workers filing new applications for unemployment benefits fell by 27,000 last week to a seasonally adjusted 341,000, the latest sign of an improving labor market.

The four-week moving average of claims, which smooths out week-to-week volatility, advanced by 1,500 to 352,500. Despite the slight rise last week, the average level remained near a five-year low.

The number of new claims has fallen in four of the past five weeks. The downward trend points to slow but steady job growth. Hiring typically picks up when layoffs decline. (Chart below from Bespoke Investment)


Smile  Farm Boom Sows Jobs Bounty

With U.S. farm incomes hitting record levels in recent years as global grain prices have climbed, farmers have more money to spend on corn seed, harvesting combines, fertilizer and other products, fueling growth for the agribusiness industry.



Housing Inventory, Already Low, Dropped Further in January

The number of homes listed for sale, which stood at an 11-year low at the end of last year, fell even further in January, according to a report released Thursday.

There were just 1.48 million homes listed for sale at the end of January, down by 5.6% from December and by 16.5% from one year ago, according to data compiled by That’s the lowest level since the firm began its count in 2007. The National Association of Realtors separately reported last month that inventory ended 2012 at an 11-year low.

Pointing up  And spring is just about there! (Do Home Prices Risk Overheating Due To Low Supplies?)

Nice set of charts from ZeroHedge which also carries excerpts from a Goldman Sachs interview with Bob Shiller:

Lightning  Europe’s Woes Deepen

Losing Ground

Lightning  Euro-Zone Exports, Imports Weaken

Eurostat, the European Union’s official statistics agency, said exports of goods from the 17 nations that use the euro fell 1.8% in December from November, after growth of 0.6% the previous month.

Eurostat’s figures on Friday also showed imports of goods to the euro zone fell 3.0% in December, illustrating the fragile state of domestic demand in the currency bloc.

Spanish Core Inflation Up Even as Recession Deepens

Core inflation, which excludes energy and fresh food prices, accelerated to 2.2 percent in January, the National Statistics Institute in Madrid said today. Underlying prices fell 1.6 percent from the previous month. (…)

Spain’s headline inflation rate, based on European Union calculations, was 2.8 percent, matching an estimate published on Jan. 31. Stripping out taxes, inflation was 0.7 percent in January, according to the Spanish statistics institute, and 0.2 percent if fresh food and energy were also excluded, according to the Spanish measure.


A flurry of acquisitions announced within hours of each other Thursday suggests big-time deal-making is back after a nearly six-year absence from Wall Street.

The $40 billion-worth of deals struck Thursday brings the total value of M&A transactions announced since January to nearly $160 billion, the fastest start to a year since 2005, according to Dealogic. M&A volumes historically follow the lead of the stock market, and the 6.67% increase in the Standard & Poor’s 500 Index this year suggests more are on the way. (…)

In addition to the Heinz deal, the highlights of Thursday’s bonanza were the $11 billion merger between AMR Corp. and US Airways Group; a reworked deal for beer giant Anheuser-Busch InBev NV over the divestment of some brands to rival Constellation Brands Inc. worth $4.75 billion; and drug wholesaler Cardinal Health Inc.’s $2 billion purchase of rival AssuraMed.

M&A bankers are renowned for their optimism, no matter the conditions. But Mr. Lee and others argue that the recent spate of large deals, which also include the $16 billion merger of cable companies Liberty Global Inc. and Virgin Media Inc., and the $18.1 billion to be spent by Comcast Corp. to buy General Electric Corp. out of broadcaster NBC Universal, are more than coincidental timing.

Their argument is this: Companies have largely exhausted the benefits of cutting costs and improving productivity since the recession. They are now looking elsewhere for the level of growth that keeps shareholders happy. Deals, economic theory goes, are one way. (…)

Hmmm…That last paragraph doesn’t sound bullish, does it? This next one is interesting, however:

Pointing up One thing that has changed is an alignment of both credit and stock markets. In 2013, both are rallying at the same time, offering cheap credit to buyers and the prospect of acceptable prices to sellers. (…)

The number of deals is back to its previous peaks, but not their values.

  • An increase in M&A should not come as a great surprise. Data over the past 50 years shows that M&A activity is strongly positively correlated with inflation-adjusted stock prices and the value of M&A is linked to nominal stock prices.
  • While deal values are not showing nearly as strongly recently as deal volumes, today’s announced activity could be a game changer in this story. (RBC Capital)


Thumbs up  Funds keep flowing into equities

Research firm Lipper Inc. reported $34.2 billion in net deposits into stock mutual funds and ETFs over the four weeks ended Jan. 30, the largest four-week total since January 1996. Several other industry researchers also reported high levels of cash flowing into stocks as the market climbed to five-year highs.

January marked the first time in 11 months that deposits into domestic equity funds exceeded withdrawals. (…)

The American Association of Individual Investors, for example, notes that bullish sentiment – the expectation that stock prices will rise over the next six months – is above its historical average, as it has been for nearly three months now. (WSJ) (Chart below from Bespoke Investment)

High five  On that last sentiment indicator, you might want to read an old post of mine: INVESTOR SENTIMENT SURVEYS: DON’T BE TOO SENTIMENTAL!

Feeling groovy?

The same WSJ article adds this scary view:

Doug Kass of Seabreeze Partners Management told CNBC he’s getting “the Summer of 1987 feeling,” about U.S. equities.

I was there managing money in 1987 and I am not getting that “1987 feeling”. For the record and for sake of objectivity:

  • Earnings troughed in Dec. 85, rose marginally in 1986 and accelerated throughout 1987.
  • Inflation troughed at +1.1% in Dec. 86 and rose sharply to an Oct. 1987 peak of +4.5%.
  • 10y Treasury yields troughed at 7.1% in Jan. 1987 and rose rapidly to 9.5% in Oct. 1987.
  • Trailing P/Es were 14.8x in Dec. 1986 and rose to 18.8x in Aug. 1987.
  • The Rule of 20 barometer moved rapidly from deep undervaluation (-22% in Dec. 1986) to near extreme overvaluation (+20% in Aug. 1987).



Don’t get me wrong. I am not saying this market is riskless (see WINDLESS EQUITIES, STAY CURRENT! if you have been away). Just that this is no 1987 even though currency wars were also present then.

Disappointed smile  Nasdaq Weighs Earlier Wake Up

Nasdaq said it plans soon to start processing trades at 4 a.m., a challenge to NYSE Euronext.


One thought on “NEW$ & VIEW$ (15 FEBRUARY 2013)

  1. Merci beaucoup de remettre les pendules à l’heure par rapport au “feeling de 1987”. J’avais 11 ans à l’époque!

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