Equities and the Economy

Good morning and happy National Get Out of the Dog House Day. Stocks closed mixed on Friday but of note was the Nasdaq closed at a new record high gaining 47 points (0.91%) to 5,201. The tech heavy index was powered higher by Google which announced Q2 spectacular earnings. So how good were the earnings? Good enough for Google to set the record, formerly held by Apple, for the biggest one-day market capitalization gain by a company in U.S. history! The stock skyrocketed an incredible 16% increasing its market cap by $65 billion to $475 billion. I need to put this in perspective for you. The one day, repeat “one day,” gain is bigger than the total valuation of more than 400 of the 500 companies of the S&P 500! Caterpillar’s market cap is $50 billion. Ford Motor Company’s is $58 billion. Netflix Inc.’s is $49 billion. Mind boggling! And the effect of Google’s earnings call were far reaching. During the call Google representatives made a one sentence pretty much off-the-cuff comment that the e-commerce company Etsty Inc. was enjoying a boost in traffic related to new Google Inc.’s algorithms. The result: Etsy’s stock immediately shot up gaining 31% on the day! Now there’s some happy campers!

The other equity indexes, the Dow and S&P 500, didn’t go much on Friday with the former down 34 points to 18,086 and the latter up 3 to 2,127. For the week the Dow rose 1.8%, the S&P gained 2.4% (after 3 weeks of losses), and the Nasdaq was up 4.25%.

Regarding domestic economic data, on Friday we learned that consumer prices rose a bit but the increase was probably less than the Fed was hoping. The broad CPI rose 0.3%, down from May’s 0.4%. This data has to suggest to the Fed that inflationary pressures are tame. Also released were Housing Permits for June which came in at 1.343 million annualized units and well above last month’s 1.25 million units. This definitely bodes well for the future for a permit precedes construction which means jobs.

This morning Asian shares were sedate closing mixed while European shares are starting the week nicely up between 0.29% and 0.95%. Here in the U.S. we’re positive but it’s much more muted with Dow futures up 35 points.

Oil

The oil market was extremely quiet on Friday with WTI closing down a meaningless 2¢ at $50.89. The recent price drop from $60 is once again putting pressure on the rig count (funny how that happens!). Baker Hughes reported on Friday the U.S. rig count dropped by 7 to 638 rigs. The rig count has dropped 30 of the last 31 weeks with the week before last week being the lone gainer. There are now 962 (60%) less rigs working today than at last year’s peak. The U.S. dollar is stronger vs. the euro to start the week (a 3 month high) which is putting marginal pressure on WTI with it trading down 23¢ this morning. Pretty much chatter.

By the way, gold has been getting whacked lately. On Friday gold futures prices settled at their lowest level in more than 5 years.

Courtesy of MDA Information Systems LLC

Natural Gas

After falling on Thursday natural gas prices stabilized on Friday with natty closing up 1.6¢ at $2.870. Volume was light. Traders pushed prices lower in the morning but buyers were lurking below. Due to numerous maintenance and new construction projects U.S. dry natural gas production has dipped and the weather has been supportive (above normal temperatures) so the lower prices go the more coal fueled electric generation will be displaced by natural gas fueled generation. Today’s forecast is marginally cooler than Friday’s which is putting pressure on natty with it being down 7.4¢ as I write. The forecast now goes out through the end of July and there are no heat waves of significance in the picture for the month. It’s still a little too early for the bears to exert themselves for we do have the month of August ahead which as you know can bring some hot temperatures. However, the clock is ticking.

Elsewhere

A 22 year old college student in Atlanta blew her $90,000 college fund. And blames her parents. The girl, Kim (she would not give her last name) a junior, was on a radio show (with disguised voice) last week and confessed to blowing through a $90,000 college fund left to her by her grandparents. She has one year left of school and no way to cover her remaining $20,000 balance. She went to the radio station for some untold reason (probably would have been a better idea to go see a financial aid officer!) and the benevolent show’s hosts tried to be sympathetic and give her advice. Unfortunately, in the interview Kim managed to personify just about every parent’s worst nightmare, an entitled 20-something who asks for handouts rather than face the very real financial challenges of young adulthood.

“Years ago my grandparents set up a college fund for me, which was amazing, and I haven’t been very good with my budget for school. The first payment for my senior year just arrived and I don’t have the money basically. I’ve been avoiding it. I knew the bill was coming.”

“I used it to budget for school clothes and college break money. I probably should have not done that. I took a trip to Europe. The Europe thing I though was part of my education and that’s how I tried to justify it.”

“Maybe [my parents] should have taught me a budget of something. They never sat me down and had a real serious talk about it.”

“[My parents] said there was nothing they could do for me. They’re not being honest with me saying they don’t have [money] because my dad has worked for like a million year and they have a retirement account.”

“Then my parents suggested I to take a loan at a credit union and I’m, like, how am I supposed to do that?” “I have to go inside the bank to get a loan?”

The show’s hosts offered “You could get a job for the school. May the cafeteria’s hiring?” Kim responded, “That’s embarrassing.”

“I know they’re trying to teach me a lesson and blah blah blah and character building but, like, I hope they realize [working part-time] could have such a negative effect on my grades as a person.”

A few days later Kim called back into the show and stated she’s coming to grips with the fact she will, indeed, have to get a job. She added how difficult it’s been to find a place that will hire her because she has no job history.

Take Kim, multiply by 11 million, and you have Greece.

On a logistical note, I will at our Stamford, CT., our U.S. headquarters, for the next four days at our annual meeting and will have limited access to email and the telephone. However, feel free to contact me and either myself or my associate will respond. Have a good day.