January 9, 2009

Global Market Comments for January 9, 2009
Featured Trades: (NUE), (WMT), (AMTD), (SWIM), (SCHW)

1) The December nonfarm payroll came in at 524,000, taking the unemployment rate up to a 26 year high of 7.2%. At least the Labor Dept. didn't post a job loss of a million, as the Cassandras had predicted. More than 11 million Americans are now out of work. Some 2.6 million lost jobs in 2008, including 1.9 million in just the last four months. That is almost a whole recession's worth. Seasonal hiring for Christmas by retailers never happened. Only education and health care are still hiring workers. If you throw in those workers who have given up looking for jobs, and those whose unemployment benefits have run out, the real unemployment rate is probably closer to 15%.

2)  Dan Dimicco, CEO of Nucor (NUE), the best run steel company in the US, says that only $1 billion in infrastructure spending can create 35,000 jobs. We need seven million jobs to put the unemployed back to work, along with new workers joining the labor force from natural population growth and immigration. So only $200 billion of well placed public works projects should do the trick.  The only question is, can you turn stock brokers and mortgage brokers into ditch diggers?

3) I can't resist showing you the chart for Greek Shipping giant Dry Shipping (DRYS), which I recommended in November at $3. It is up 500% off the back of a healthy recovery in the Baltic Dry Shipping market ($BDI). This is yet another indication that the world is not ending.

DryShipping.png picture by sbronte

4) 'Abandon Hope All Ye Who Enter.'  So says Dante in his description of the Gates of Hell. This is how retailers must feel after enduring their worst December on record. Yesterday, Walmart (WMT), viewed by many as the only safe hideout in the sector, announced a sales shortfall, taking the stock down 7%. It turns out that WMT has the highest percentage of sales to customers who are getting laid off, maxing out credit cards, and losing homes in foreclosure. It is also believed that the new Obama administration will make it easier for WMT's workers to finally unionize, never a good development for a listed company. Think GM.

5) One of the few safe havens in the financial sectors is online brokers, who dodged the bullet, because they are pure fee collectors, don't have proprietary trading desks, don't take risk, and didn't use leverage to invest dubious high yield paper to artificially boost earnings. This approach was highlighted yesterday by TD Ameritrade's (AMTD) takeover of competitor Thinkorswim Group (SWIM) for $600 million. The move gives AMTD access to a first class online trading platform in options and an expanded customer base. Another good pick in this area is Charles Schwab (SCHW).

Ameritrade.png picture by sbronte

5) Governor Blagojevich was impeached, the vote coming in at 114-1. Thank you, thank you, People of Illinois, for making California no longer appear as the worst run state in the country!

FACT OF THE DAY

If Elvis had lived, he would have been 74 yesterday. Perish the thought of what he would look like now! I have to tell you that I was once given a personal tour of Graceland by his last girlfriend, and was shown the exact toilet where the King expired. It's been a full life. ?.