"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
The stock market leap higher right out the gates this morning as Intel's first-quarter earnings were in-line with expectations ($0.25) and the company raised its forecast for revenues, gross margins and capital spending for the second quarter and 2008.
I just bought a new laptop and desktop from Dell, and I paid less for the two new ones than I did for my old desktop. That just goes to show you that all is not necessarily bad in a down economy. Remember the old saying, "buy low". Oh, I forgot, in recent years the old saying was, "buy high" because it’s going higher.
The other news that was spun positively this morning was JP Morgan's (JPM) earnings shortfall and news the company would need further reserves for $5.1 billion in credit losses. The company's CEO Jamie Dimon said the bank JPM had enough cash to weather the credit crisis, but stopped short of giving the all clear signal.
Wells Fargo (WFC) beat earnings expectations, and Bank of America (BAC) rose in sympathy with the report. That's all well and good but there has not been any insider buying in either company to get me excited right now.
Value investors should be accumulating the quality bank stocks on days of sharp sell-offs. Once the carnage is over, banks will have easy y/o/y earnings comparisons to beat over the next few years. In addition, while some (and more to come) banks have cut their dividends, I think they will aggressively raise those dividends as a giveback.
The March consumer price index (C-an't P-roject I-nflation) rose 0.3%. The market is calling the number "in line with expectations". Excluding stuff we use (food and energy), the core rate rose 0.2 percent.
One of my economic sources said (and I agree) that the "stupid energy policy" that we have in the US has led us into the black hole that we are currently in. He said;
Core inflation is due to poor energy policy and global demand for industrial materials. The Chinese want roads, so yellow metal, and all the inputs to produce it, are in demand. The Indians want office buildings for their call centers so copper and fiber optic are in demand. Both are causing concrete to go through the roof.
But it is energy policy that has caused the price of meat, milk and bread to be higher. The ethanol mandate and associated blending subsidy (52 cents a gallon) is responsible for as much damage as anything wrought by congress in my lifetime.
Corn based ethanol make no sense economically, even if it had no ill affects on food stocks, feed stocks, and land use decisions. But it does. Instead of planting wheat, farmers are planting corn. Bread goes up. Instead of planting corn for feed stocks, corn is planted to make corn liquor, so the price of feed corn goes up. As a result the price of meat goes up.
Never mind that only a very small portion of us will put ethanol into our cars to burn at less than 70 percent of the efficiency of gasoline. It takes more energy inputs to grow corn, ferment it under heat from natural gas, truck it to a jobber who pumps it into his fuel stores, and then truck it to the gas station, so can be realized from burning in an internal combustion engine.
Nuff Said ?
