Economic and Market Cross Currents

On an otherwise uneventful Summer afternoon in the markets a few developments today caught my eye.

1. Retail Sales remain decidedly sluggish as same store sales declined in July by the second sharpest amount of  the year. Is that any indication of an economy truly turning the corner? As I wrote on July 29 in my post, Economy and Markets: Improving, Declining, or Adapting?,

While most economists and market analysts are looking at statistics and data to determine whether the economy and consumers are improving or rolling over, my take is different. I view the economy and consumers as adapting to the new dynamic at work in our country.

Economists point to the drawdown in inventories as a reason why future GDP reports will rebound strongly. That rebound will only occur if consumers start spending. I personally do not expect that to happen to a meaningful extent anytime soon.

2. Bloomberg reports Tudor Hedge Fund Says Gain in Stocks is ‘Bear-Market’ Rally,

Tudor Investment Corp., the $10.8 billion hedge fund firm run by Paul Tudor Jones, told clients that the gain in U.S. stocks in the past 100 days is a “bear- market rally.”

“Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets,” the firm said in an Aug. 3 investor letter. “We are not inclined to aggressively chase the market here. Rather, we eye a better opportunity to be long equities into year-end on a potential autumnal pullback.”

The Standard & Poor’s 500 Index of the largest U.S. companies has climbed 47 percent since falling to a 12-year low on March 9. The index broached 1,000 for the first time in nine months this week after companies reported better-than-expected profits.

“Investor psyche is still fragile,” Greenwich, Connecticut-based Tudor said. Slowing growth in China and the return of front-page stories on swine flu are “further catalysts for global equity markets to pause in September,” the letter said.

Tudor is viewed as one of the top money managers in the business. I respect his opinion.

3. The third story that caught my eye is also released by Bloomberg regarding tomorrow’s highly anticipated employment report, Goldman Sachs, Deutsche Boost U.S. Payroll Forecast.

Economists at Goldman Sachs Group Inc. and Deutsche Bank Securities Inc. changed their July employment forecasts to predict a smaller drop in payrolls.

Jan Hatzius, chief U.S. economist at Goldman Sachs in New York, projected the world’s largest economy lost 250,000 jobs last month, down from a previous estimate of 300,000, according to a note to clients. Joseph LaVorgna, chief U.S. economist at Deutsche, changed his projection to a loss of 150,000 jobs, the lowest of any economist surveyed, from a decline of 325,000.

Neither changed projections for the unemployment rate, with Hatzius calling for it to climb to 9.7 percent and LaVorgna estimating it will rise to 9.6 percent from June’s 9.5 percent.

Having dealt with numerous economists over the years, I know they take tremendous personal pride in the accuracy of their calls. I am not a conspiracy theorist, but I find it somewhat uncanny that Mr. Hatzius is upping his forecast the day before the report for the second month in a row.

I believe the Bureau of Labor Statistics does heavily massage this report.

Check in tomorrow morning around 9am as I will provide my review of the report.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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