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Could Earnings And Economic Indicators Be Pointing To A Recovery Sooner Than Expected? + Lee’s take on AMAT, SLE, WMT, HPQ, BJ, F, GE, AA, GOOG, S, PEP, TAP, CRAY, GS, SHLD, WFMI, PG, DIS, DLTR, NDN, FDO, UAUA, AMR, and LUV |
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InvestorsObserver
Featured
Contributor
Lee M. Allen
As earnings season winds down and investors yearn for quieter days, it seems smart people are getting more optimistic about the economy. Frothy optimistic.
Just a few short months ago we were looking over the edge of a cliff. But now, with stocks like Applied Materials (AMAT), Sara Lee (SLE), Wal-Mart (WMT), Hewlett-Packard (HPQ), and BJ's Wholesale (BJ) ready to report earnings in the next week or so, anything is possible. Could this be the right time to jump back into the stock market and play stocks like Ford (F), General Electric (GE), and Alcoa (AA), or just another case of the little guy buying into the wrong stocks as the big guys are dumping them?
We don’t want to be unduly lured into buying stocks again, just because we heard a few great earnings announcements. These could be short-term blips on the earnings radar from cost cutting, hungry accountants worried about getting a pink slip, or some kind of corporate shell game.
Only two things could make this the right time to start buying stocks again: a solidly improving economy or real corporate earnings increases. But how do we know if the economy or earnings are really improving? I think I may have the answer…
Read on for more of Lee’s insights into ways to spot an improving economy...
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Is this a government economist with his forecasting tool?
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The worst thing that could happen right now is that we get overexcited about recent market action and what seemingly smart people have been saying about how the economy has bottomed out. We just might run out and buy shares of stocks like Google (GOOG), Sprint (S), or Pepsi (PEP), only to see them drop when the potential realities of phantom earnings or a truly weak economy emerges.
Could this be the US Social Security office
in Beaver Creek, Ohio?
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Sorry folks, we don’t want to fall into any 401K- destroying traps again, since I am pretty sure we won’t get a bailout like the auto industry. Or the Insurance industry. Or the banking industry. Or California.
It’s up to you to be sure this economy really is on the mend and if these earnings are more than numbers on a spreadsheet. It would be prudent to be wary about what these so called economists, experts, and guys who have drank too much Coors (TAP) beer have to say about the economy, since most of them missed the last level nine earthquake move in the economy.
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So one thing we know for sure at this point is that things like statistics, indicators, and anything that even smells like a government report could possibly be inaccurate and could result in evaporating your 401K and forcing you to work until the ripe old age of ninety-seven as a greeter at Wal-Mart. That is, unless your life’s goal is to be a greeter until the day you die.
There’s only one thing to do…
We need to all become economists and look for some real-life indicators that the economy is on the rise or that earnings will improve. Why get all tied up in unreliable statics, mathematics, and spreadsheets when all you need to know may be right in your own neighborhood?
Sure, those statistics churned out by some Cray (CRAY) supercomputer may be saying that with about 10% unemployment the economy can’t fall much farther; but that leaves another 90% of the people that could lose their jobs. They are saying the banking crisis has passed, but it seems every week another batch of banks is being taken over by the FDIC - owned by Goldman Sachs (GS). The banking crisis wasn’t over for them. They are saying retail sales are improving, but wherever I look I see “Going Out Of Business” sales. Especially at Oriental rug stores.
You need to go out and dig up your own economic and company indicators so you can be sure the economy and stock market have really bottomed out. Here are some ideas on where to look: |
The reason government economic statistics have
been wrong lately… The computer has been broke
since
January 2001.
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Cardboard Box Index
Check behind your local Sears (SHLD) store. If day after day you see increasing amounts of empty appliance boxes stacking up, you might want to put a few dollars into Sears stock. Those empty boxes mean people have been buying more refrigerators, stoves, dryers, and vibrating mattresses.
Premium Grocery Indicator
Stop by your local Whole Foods (WFMI) once or twice a week around 6:00PM. See if the number of people in the store is increasing or declining. Be sure to inconspicuously linger around the checkout counter to determine what they are actually buying. Some people just go to Whole Foods for the samples and never buy anything. By the way, Saturday morning between 9:00AM and Noon is the best time for samples. The cheese is always especially good.
Could a full parking lot mean the economy is improving? Not if Charmin is on sale.
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Wal-Mart Parking Lot Factor
Try to drive by your local Wal-Mart every day at around the same time. Get a rough count of the cars and see if they are increasing or decreasing. Economists have what they call adjustments to their statistics and you will need to do this, too. Be sure to look at the weekly Wal-Mart ads and reduce your car count the weeks when Charmin toilet tissue – made by Procter & Gamble (PG), and Miley Cyrus – owned by Disney (DIS) CDs or DVDs are on sale.
Dollar Store Traffic Indicator
Tour you local Dollar Tree (DLTR), 99 Cents Only (NDN), or Family Dollar (FDO) store. If the place seems empty and the shelves are full of merchandise, this could be an indicator of a strengthening economy. These stores did well as the economy crashed, but when things really start to improve, people will be willing to pay more than one dollar for the stuff they need like food, clothing, water, tools, and books about writing the perfect resume. |
Airline Ticket Sales Factor
Sure, you can wait until the end of the quarter to see if airlines like United (UAUA), American (AMR), or Southwest (LUV) are doing well, but you could also just call them. Each airline has a toll free number which I would only list here if they paid this fine publication an advertising fee. United’s number is 1-800-United-1 (1-800-864-8331). After a little chit-chat with the reservation agent, ask if they have been busy or if it has been slow. That should give you enough information to buy or short that airline stock.
Hot Waitress Index
Every week make it a point to dine out for most of your meals so you can spend time in every restaurant in a twenty-mile radius. Take special note of the waitresses. Are they hot or pretty normal? Since this is a family publication, I really can’t get into the characteristics of a hot waitress, but you will know one when you see one. If you are male, you will lose your ability to speak; if you are female, you will be saying to your spouse/boyfriend/dad, “What are you looking at?” If all you see are hot waitresses, that means the economy will continue on a gloomy trend for a while since these hot women are refugees from other industries like real estate, high end retail, dot.com companies, and municipal government. In a bad recession, the hot women are the first to be let go; and when it improves, they are the first to be rehired. In the meantime they usually find jobs at your local eateries since the tips can be good.
Oh yeah… by the way, all this including the tips would probably be counted as research for your investment portfolio, so you can probably take a tax deduction for all the gas, shopping, and meals out. At least that’s what a guy I know told me. I’m not sure how that worked out for him, though, since he has been at some place he calls a “fully paid-for by the US Government country club vacation”. He always was a smart guy who knew all the angles. |
If she is serving pizza at your local Pizza Hut, the economy is not in a recovery.
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If you have any insight into other little known economic indicators or have spotted an especially hot waitress, please e-mail me at LeeAllen@InvestorsObserver.com.
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CLICK HERE to begin your 90 DAYS FREE.
We can make this 90 day FREE offer because we are confident you will find our service an essential part of your investing toolkit and stay a subscriber for many years to come. Our biggest risk is that we do find people cancel their subscriptions when they move to their own private islands without internet access. |
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