Archive for July 30th, 2010

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Trucking Industry Says Economy Is Slowing

July 30th, 2010 | Author:

snail truck slow

The quote of the week comes from Bob Costello, Chief Economist of the American Trucking Association who is warning of an economic slowdown:

ATA Chief Economist Bob Costello said that the two sequential decreases reflect an economy that is slowing.  Furthermore, growth in truck tonnage is likely to moderate in the months ahead as the economy decelerates and year-over-year comparisons become more difficult.  Nevertheless, Costello believes that tonnage doesn’t have to grow very quickly at this point since industry capacity has declined so much.  “Due to supply tightness in the market, any tonnage growth feels significantly better for fleets than one might expect.”

This came on the back of yesterday’s data release showing the second consecutive month of declines in truck tonnage:

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index decreased 1.4 percent in June, although May’s reduction was revised from 0.6 percent to just 0.1 percent.  May and June marked the first back-to-back contractions since March and April 2009.  The latest reduction lowered the SA index from 110.1 (2000=100) in May to 108.5 in June.

Source: ATA

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This guest post previously appeared at The Pragmatic Capitalist >

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CHART OF THE DAY: If Don Draper Weren’t A Fictional Character From 50 Years Ago, He’d Be All Over Hulu (CMCSA, NWS, DIS)

July 30th, 2010 | Author:

Hulu’s business mission to stuff its pro-quality web video full of ads is working: The site’s viewers watch significantly more ads per month than other pro-quality web video sites.

In June, Hulu watchers saw 24 ads each, on average, as they watched an average 135 minutes of video on the site, according to comScore.

That’s higher than Hulu’s rival sites, but it’s obviously much lower than the number of commercials people watch monthly on TV. If you figure each hour of TV has 15-16 minutes worth of ads, someone could see as many 30- and 60-second ads in 2 hours of TV-watching as in a whole month of Hulu-watching (assuming they aren’t skipping them with a DVR). And since the average person watches almost 160 hours of TV per month, per Nielsen, well… you get the idea.

Still, at least the ads-per-hour rates are similar. And at least all those ads aren’t scaring Hulu’s viewers away.

SAI chart Hulu ads

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Big, Breathtaking Photos Of California Burning

July 30th, 2010 | Author:

Raging wildfires broke out yesterday just south of Los Angeles, forcing mandatory evacuations and major firefighting response.

California spends an average of $500 million each year on wildfire damage and control. Unfortunately, those fires are just getting worse.

See incredible fire photos >

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Are Investors Being Set Up For Another Fall?

July 30th, 2010 | Author:
In the early 1930’s, after the 1929 crash, Wall Street could not get nervous investors interested in stocks again. However, with interest rates dropped to extreme lows in the Great Depression, those who still had money were eager to invest in something that would provide more income than they could receive on savings accounts. As a result Wall Street had no trouble selling them bonds.
 
It was later said to have been a slower disaster than the stock market crash, but almost as devastating. Bonds decline in price when interest rates and yields rise. Over the next two decades interest rates began to rise from their extreme lows, and the price of bonds declined. Investors new to bonds discovered it was not a safe haven to be receiving 4% annual interest on bonds if the bonds were dropping 10% in price annually due to rising interest rates.
 
I bring that up because of reports this week that the major U.S. banks are on a tear to raise huge amounts of low cost capital by issuing bonds while rates are at record lows, and while investor demand for higher returns is on the rise as an alternative to stocks. Some of the low cost capital being raised is being used to pay off the higher cost bonds and debt on their books. Moody’s estimates that U.S. banks have already refinanced $200 billion of the $372 billion in debt that is coming due in 2010.
 
The Financial Times quotes an executive with one of the big banks as saying, “There’s a bit of a food fight among investors to get hold of paper from U.S. banks.” (It’s not the same situation in Europe where banks need to raise capital but are struggling to issue new debt in the midst of the Eurozone debt crisis). 
 
The large U.S. banks are not the only corporations having an easy time issuing new bonds, benefiting from the flight to safety. Investors have been piling into corporate and treasury bonds for quite some time, and it continues. The Investment Company Institute, which tracks money flows in retail mutual funds, estimates that individual investors pulled another $9 billion from U.S. stock funds in the first three weeks of July, even as the stock market was rallying again, and poured $20 billion more into corporate and government bond funds.
 
Tom Lee, chief U.S. equity strategist at JP Morgan Chase, speaking at the Reuters Investment Outlook meeting in New York on Wednesday said that, “Retail investors buying bonds today, at a time when the supply of corporate bonds is shrinking . . . they’re chasing a bubble.”
 
Assuming the issuer does not default on its bonds, an investor will not lose money on individual bonds if they are held to maturity, when the issuer returns the borrowed money to the investor. However, holding to maturity may be difficult, as bond investors discovered in the late 1930’s and 1940’s,  once stocks begin producing 10% to 25% in some years, while the 20-year corporate bond will continue to pay only 4.5% or whatever annually to maturity (and meanwhile may be significantly underwater until maturity due to rising interest rates).
 
As Tom Lee of JP Morgan also said Wednesday, “Have Americans ever been satisfied with earning a steady but low rate of return? What we have in American history is rolling from bubble to bubble, whether it’s stocks, real estate, commodities, emerging markets, time shares . . . when one bubble bursts they are moved to the next one.” Lee implies that the bubble currently forming is in bonds.
 
But it should be okay as long as the Fed holds interest rates at record low levels near zero for “an extended period of time” as they say they will, and particularly if the stock market has another leg to go on the downside (keeping the appeal of safe havens alive). But investors probably need to be aware of the potential that it is a bond bubble, and be prepared to bail out early when rates and yields begin rising, or if the stock market bottoms and begins a new leg up. With so much money in bonds and bond funds, the exit doors will be crowded when the time comes.
 

Sy Harding is editor of the Street Smart Report, and the free daily market blog, www.streetsmartpost.com.

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United Utilities leads water utilities up in London

July 30th, 2010 | Author:

European equities markets were mostly lower Friday after the US gross domestic product was reported only 2.4 percent higher in the second quarter, close to expectations but well below the revised 3.7 percent growth in the first quarter.
The FTSE 100 was down 1.05 percent to 5,258.02 in London, while the FTSE 250 dropped 1.25 percent [...]

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