Keep your Eye on the Ball - All Three

One - Jobs

Company - Job Cut for January 26

Caterpillar Inc. - 20,000 jobs,
Sprint Nextel Corp.- 8,000 jobs
Home Depot Inc. - 7,000 jobs
Texas Instruments - 3,400
Pfizer - 8000 jobs (total will be 20,000)

Total: 207,120 jobs lost in the U.S.
2008 Unemployment total: ~ 2.6 Million (7.2% unemployment rate)
U.S. Unemployment projection is 10% by late-2009 or 2010.

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Two - Home Prices
Case-Shiller Housing Prices for November 2008 (U.S.):

The most important figures to review are the Composite-10 and the Composite-20. The Composite-10 illustrates the price change for 10 Metropolitan areas in the U.S. Likewise for the Composite-20, but for 20 areas.

Significance?

The -10 and -20 are down the most year-over-year since the housing bubble burst. Both are down about 25% from the peak.

November     November/October  October/September   1-Year
Metropolitan      2008           Change             Change        Change
Area             Level           (%)                (%)           (%)
------------   ---------     ----------------  -----------------  -------
Atlanta          116.57          -2.7%              -2.4%         -11.2%
Boston           155.03          -2.6%              -1.1%          -7.4%
Charlotte        125.61          -1.9%              -1.8%          -5.3%
Chicago          141.44          -2.8%              -1.6%         -12.5%
Cleveland        107.43          -1.2%              -1.0%          -5.2%
Dallas           118.34          -1.9%              -1.2%          -3.3%
Denver           127.65          -1.1%              -1.5%          -4.3%
Detroit           83.42          -3.1%              -4.5%         -20.7%
Las Vegas        138.04          -3.3%              -2.8%         -31.6%
Los Angeles      175.85          -2.2%              -2.6%         -26.9%
Miami            169.62          -2.2%              -3.0%         -28.7%
Minneapolis      133.22          -2.1%              -3.3%         -16.3%
New York         186.81          -1.6%              -1.0%          -8.6%
Phoenix          130.54          -3.4%              -3.3%         -32.9%
Portland         162.62          -2.3%              -1.9%         -11.5%
San Diego        155.47          -2.3%              -3.0%         -25.8%
San Francisco    135.28          -3.0%              -4.2%         -30.8%
Seattle          166.23          -2.5%              -1.4%         -11.2%
Tampa            160.86          -2.8%              -3.4%         -20.9%
Washington       180.50          -2.4%              -2.7%         -19.4%
Composite-10     166.05          -2.2%              -2.1%         -19.1%
Composite-20     154.59          -2.2%              -2.2%         -18.2%

Source: Standard & Poor's and Fiserv
Data through November 2008

This current blog entry by Chris Lau was sponsored by ProfessionalStockTraderLive.com. ProfessionalStockTraderLive.com is your source for learning how to become a better and successful trader and for following trades in real time.

Three - Consumer Confidence

• 37.7 in December 2008 (versus a revised 38.6)

Analysis:
These figures obviously add to the doom and the gloom. It is for this reason that the governments are acting on creating aggressive stimulus packages (see the two previous blog entries). Investors need to be cautious on the consumer discretionary sector. There has been speculation that many malls will close, and many retail companies will be bankrupt this year.

Still, I am optimistic on the companies that thrive in this environment. This includes Family Department Stores (dollar stores) and McDonalds ($1 burgers, value menu).
The other sector to therefore avoid is the commercial real estate sector, and especially the companies that rent out retail space.

Prediction for Consumer Discretionary Performance in January 2009

Below is an introductory text taken from John Mauldin's Newsletter:
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/default.aspx

Have you done your Christmas shopping yet? Research shows that more of us are putting it off in expectations of better prices. In other words deflationary expectations! The prices I have seen while out shopping the past few weeks are simply amazing. I have to admit to have made a few purchases for some items that I was not planning to buy just yet because prices were off by 60% or more. A few days ago a friend came in sporting a new black cashmere sweater top with jeweled embroidery and quite fancy. She said she got it at Saks. But the real story is that when she walked into Saks looking for a present for her kids they handed her a coupon with a 30% off any one item from whatever price it was already marked down. That top? At one point it was almost $500. She bought it for $75. I have to confess that made me worry about retail sales and future unemployment. I like low prices, but I like profitable companies and employment. I went and talked to a Saks salesperson a few weeks ago who had been there 25 years and asked if they had ever discounted like that before Christmas and he said never. It was Saturday in New York and the place looked busy. I asked why? And he said, "The store is empty during the week." And I bought a few sweaters at 60% off. Tiffani just got some presents from J Crew at over 60% off. Before Christmas! How many readers have seen the same sales? And yet shopping is down?

As a side note, this year most of the kids and in-laws are all going to get a Visa gift cards so they can take advantage of what I think are going to be even better sales after Christmas. It is not that Dad put off his shopping to the last minute (which I did) but the kids are really looking forward to finding their special items on sale. I wonder how many more are doing that?

[...]

John Mauldin, Editor
Outside the Box

US Housing

For November 2008

• existing home sales declined a record 8.6 percent.
  
• median home price fell 13.2 percent (annualized figure) to $181,300.
• The pace of sales fell to a 4.49-million-unit annual rate.

Source: http://www.bnn.ca/news/5750.html

This does not mean that REITs and home builders are "sell" or a short sell in the medium term. The reason is that we do not know if these sales figures represent a housing slump bottom. The weakness in this sector is being exasperated by the difficulty in obtaining loans. LIBOR figures are suggesting that borrowing will become easier, but at a little at a time. Unfortunately, in the short-term, we are not there yet.

US Consumers Still Shopping

Black Friday in the U.S. still resulted in higher sales over last year. Sales were up by 3%. Online sales were up 1%.

Is there hope that the U.S. economy is still consumer-driven, despite all the housing debt problems?


The market already anticipated decent sales for Black Friday, between late October and November 18. However, the 25% appreciation is unconvincing. Volume has been shrinking on each day the consumer discretionary index rallied. There is still a 10% upside for XLY. After that, the sector may be vulnerable to a sell-off.