Market Talk

We’re starting to get the damage report from the weekend’s snowstorm on the east coast, in terms of how it affected holiday sales, and it’s not very good. From the Journal:

The conditions cost retailers an estimated $2 billion in sales, according to weather consultancy Planalytics, which devises its estimate by modeling sales for a clear day and subtracting sales from stores based on how affected they were by the weather.

Michael Niemira, chief economist at the International Council of Shopping Centers, says there was a significant hit to sales this weekend, but some of the sales may have shifted online and others to periods before and after the storm.

“Super Saturday,” the last Saturday before Christmas, saw $15.1 billion in sales last year, according to Mastercard Inc.’s SpendingPulse unit.

“Retailers got hit right at crunch time,” says Todd Slater of Lazard Capital Markets.

Retailers are now hoping for a last-minute surge of shoppers before Friday, as more than 40% of consumers still have shopping to do, more than double last year’s figure at this time, according to a survey from America’s Research Group and UBS.

Remember, nobody expects holiday sales this year to be any great shakes to begin with. If sales are up from a year ago, well, they’re coming off the worst holiday season in four decades. If they’re flat, or even down as the National Retail Federation expects, then that’s even worse.

US stocks jump on this winter solstice day, driven early on by healthcare shares, after the healthcare bill takes another step in the Senate, and investors are encouraged by some M&A and earnings news.

DJIA rises 85 (0.8%) to 10414, S&P 500 gains 12 (1.1%) to 1114, Nasdaq Comp jumps 26 (1.2%) to 2238, hitting a year high of 2242. NYSE volume very light. S&P’s still stuck in that 1110-1120 range. Dollar rises, but stocks pay scant attention.

Healthcare fades a bit during the session, and financials actually end the day with the strongest gains. Consumer discretionary does well, also, as most people say the weekend’s snowstorm on the east coast didn’t have a big effect on holiday sales (although there are some dissenting voices out there.)

The gains put stocks back in the black for December, and while the year’s gains will be solid, the decade of course tells another story.

It may get hot in the valley again pretty soon.

Local review website Yelp.com reportedly has turned down Google’s (GOOG) $500 million offer, marking yet another curious event in the world of tech start-ups.

TechCrunch’s Michael Arrington reports Yelp CEO Jeremy Stoppleman walked away from “an all-but-signed deal” as the two companies had agreed on a price and were working through the acquisition’s final details. But “something happened” and Yelp notified Google over the weekend that it wasn’t going to sell, he says.

The news comes on the heels of reports that Twitter may actually turn a profit this year. The microblogging sensation will make $25 million from search deals with Google and Microsoft (MSFT), according to Bloomberg, which estimates Twitter’s operating costs between $20 million to $25 million a year.

And just a few days ago, Digital Sky Technologies, a Russian firm that has invested in Facebook, said it is buying a $180 million stake in social-gaming company Zynga.

These developments prompt VC Paul Kedrosky to wonder whether the tech world has gone crazy, or if the industry is on the verge of something big.

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- Still too early for backslaps and handshakes. “I will be convinced that the crisis has been resolved at a profit when the Fed disgorges the $1.5T in Fannie Mae and Freddie Mac securities it has bought for us, and if the U.S. government does not end up having to bail those securities out because the cash flows from the underlying mortgages prove inadequate,” John Hussman says.

- Large caps have lagged amid broader sideways trade.

- Corporate insiders continue to show little faith in this rally.

- Goldman Sachs (GS) takes damage control to the Zero Hedge blog. Firm defends its actions on prop trading operations and risk, but more telling is the fact that Goldman took time to respond in detail to these questions and criticisms. Perhaps it realizes its image has taken a beating and needs to be repaired.

- GM gets a new, high-powered CFO.

- ‘Arrogance’ behind Blackfein, Mack and Parsons’ no-shows at last week’s banker meeting? “They do not see the need to show deference or even respect,” former IMF chief economist Simon Johnson says. “They won big from the crisis and that is now behind them.” That “arrogance will eventually prove their undoing.”

- Twitter’s profitability may be short-lived.

- Labor data show surge in hiring of temp workers.

- Morgan Stanley’s new CEO exemplifies change. The rise of James Gorman shows how the firm is trying to change the restless, swing-for-the-fences culture personified by John Mack.

Tomorrow the Commerce Department’s Bureau of Economic Analysis reports the final estimate of third-quarter GDP (although they don’t call it that anymore; now it’s just called the “third estimate.”) A Dow Jones survey of economists pegs it at 2.7%, down slightly from the second estimate of 2.8%, and the first estimate of 3.5%.

That’s pretty weak, especially considering how much money the federal government’s thrown at the economy. But while that initially reported 3.5% figure led just about everybody to declare the recession over, nobody much cares about this upcoming revision; they’re already looking forward to the 4Q report. The Journal’s most recent survey pegs 4Q GDP at 2.9%, but Capital Economics’ Paul Ashworth sees it a good deal better than that.

The economy is likely to post 5% GDP growth in the 4Q, Ashworth says, and while it will enjoy some growth in the first half of 2010, the recovery will ultimately fade, leading to just 1.5% GDP growth in 2011. “The main upward impetus is coming from inventories, which may contribute as much as 3% to growth,” he writes. Trade will add another 1%, “but once inventories are rebuilt and pent-up investment demand has been released, a prolonged period of weak consumption growth will mean the recovery fades.”

Watched part of Oliver Stone’s “Wall Street” last night, for the umpteenth time, and was a bit amazed at how relevant some of the dialogue still sounds today, even after nearly a quarter-century since the movie’s release.

In particular, wise elder broker Lou Mannheim’s first volley at Bud Fox and Marv:

Jesus, can’t make a buck in this market, country’s going to hell faster than when that sonofabitch Roosevelt was around… too much cheap money sloshing around the world. The biggest mistake we ever made was letting Nixon get off the gold standard.

Country’s going to hell? Too much cheap money sloshing around the world? Sound familiar? And the stuff about the gold standard, very Ron Paul-ish these days.

After suggesting the boys take a look at a stock called “Putney Drug,” Lou further counsels:

Stick to the fundamentals, that’s how IBM and Hilton were built…good things sometimes take time.

Lou’s right, good things do take time. Too bad no one has any patience any more, everyone’s in a hurry to declare the recession over, it’s a new bull market and dawn of renewed prosperity. “Fundamentals,” like double-digit unemployment, suggest otherwise. 

Other notables:

You’re on a roll kiddo. Enjoy it while it lasts — ’cause it never does.

Good advice for the bulls, who’ve enjoyed gains of more than 60% from March lows and 22% year to date.

And:

Man looks in the abyss, there’s nothing staring back at him. At that time a man finds his character — and that is what keeps him out of the abyss…

Just plain good cryptic advice that holds up during any near catastrophe. Could still come in handy next year. 

(Photo courtesy 20th Century Fox)

See this line here, guy? Yeah, well, it's going down.

The stock market’s putting finishing touches on its worst decade in nearly two centuries.

Take a deep breath and think about that. No decade has experienced worse returns in about 200 years. Not even the 1930′s, which produced only a 0.2% decline. WSJ’s Abreast of the Market column has the details:

Investors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade.

The period has provided a lesson for ordinary Americans who used stocks as their primary way of saving for retirement.

Many investors were lured to the stock market by the bull market that began in the early 1980s and gained force through the 1990s. But coming out of the 1990s—when a 17.6% average annual gain made it the second-best decade in history behind the 1950s—stocks simply had gotten too expensive. Companies also pared dividends, cutting into investor returns. And in a time of financial panic like 2008, stocks were a terrible place to invest.

This lost decade for stocks certainly makes for bold headlines, but the fact remains that “stocks can only gain so much relative to earnings,” writes FusionIQ CEO Barry Ritholtz.

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Healthcare stocks are leading the market today, as the healthcare bill winds its way through the Senate. Cigna, Aetna, Express Scripts leading the sector higher. MarketWatch’s Steve Gelsi breaks it down.

Do I look like I'm doing better?

It doesn’t look like a recession by looking at the stock market, but it sure does if you’re looking at the income of the American worker. The take-home pay of taxpayers in 2009 fell 12%, TrimTabs says, citing “real-time” tax data, and the biggest obstacle workers face is the lack of any catalyst to drive income growth.

TrimTabs made its name reporting on the mutual fund industry, but it’s been branching out lately into more general economic data. Take-home pay fell by $800B in 2009 to $5.8 trillion, firm says, while the market value of US stocks rose by $3.5 trillion, or 27%, to $16 trillion.

“Flooding the market with newly printed money generated huge profits for Wall Street firms and some investors,” TrimTabs CEO Charles Biderman says. “But the money printing did little to restart the country’s growth engine and bring prosperity to average Americans.”

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All right, Jackie, time to leverage that pair of twos.

A few weeks after Bernie Madoff got pinched, it occurred to me that this was a story that could define our times: a conniving hustler who promises easy money, doesn’t say how, has his clients salivating over fictitious profits, and has everybody else wondering how he does it, and  hoping he’ll do it for them (there were, of course, a few people who questioned his methods and returns, but they were just jealous, just sore losers. No need to pay heed to them.)

I pitched that to the Journal’s editorial page, but by then they were already burned out on Bernie. (If only we’d had this blog then, but that’s besides the point.) But maybe I was wrong, maybe Madoff isn’t the poster boy for the decade, after all: Maybe it’s Tiger Woods.

That’s the argument Frank Rich makes in the Times. After dismissing the idea that Ben Bernanke is “Person of the Year,” and pointing out that the public’s been played for fools by everybody from Woods to Ken Lay to George Bush, he says the Woods scandal perfectly illustrates a decade that’s been one long suspension of disbelief.

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