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Trader Talk with Bob Pisani

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  Tuesday, 20 May 2008 | 1:23 PM ET

Market's Problems: Oil, Retail, Financials, Dollar

Posted By: Bob Pisani

The market is grappling with a series of macro and individual stock problems today.

--Oil at new highs is the main problem , but the slow drop in the dollar (at the lows for the month, and reversing much of the gains from its bottom in April) is a particular aggravating factor;

--Core PPI higher than expected has the inflation hawks out;

--Cautious retail commentary two days in a row.

The retail issues are not surprising; we heard Lowe's talking cautiously yesterday, now Home Depot is guiding toward the low end of its previous guidance . The Saks CEO got a chuckle on trading desks this morning by saying that the consumer is acting as if there's a recession, whether there is one or not.

Bottom line: the retail turnaround is less certain, and further out.

Financials are also weak today:

--Fannie Mae officials, speaking at their annual meeting, saying home prices could fall as much as 25% from their highs, and even though they are short-term winners int he housing bill they are clearly taking on more risks;

--AIG hitting 10 year lows as executives there say they are looking to shed non-core assets;

--Oppenheimer's Meredith Whitney again trash-talking financials, saying the credit crisis will extend into 2009,


Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 20 May 2008 | 9:37 AM ET

Home Depot's Bottom Line: Weaker Sales

Posted By: Bob Pisani

Futures dropped a bit as core PPI for April was a stronger than expected.

Elsewhere:

1) Home Depotbeat estimates, reporting earnings of $0.41 (14 percent below last year's $0.48), vs. consensus estimates of $0.37.

Despite the apparent beat, the stock is down 3 percent:

a) the company gave no guidance, though they may say something on the conference call;

b) a calendar change may have been the reason for the beat. There were a number of analysts, including Deutsche Bank and Goldman Sachs, noted that they traded a lower volume week this year (in February) and included a higher volume week (in April). That helped growth by $536mm or 2.9%. According to Deutsche Bank, "We're not sure if HD's comp result is adjusted, but our guess is that it is not, meaning the shift accounted for the sequential improvement in comps."

Adjusted for this calendar shift, same store sales fell 9 to 9.4 percent, according to Goldman.

Bottom line: like Lowe's , Home Depot is also experiencing notably weaker sales.

On the conference call, they have been talking about "significant" commodity cost pressures and "relatively weak demand."

2) Staples earnings were in-line.Though Staples also had a decline in comp store sales (down 6 percent), European comp store sales were up 4 percent, they came in in line with estimates and reiterated their full year outlook.

3) Autozone beat expectations. Same-store sales were down 0.3 percent, a tad shy of expectations.

4) Lehman joining other firms in raising target prices on oil service names like Baker Hughers and Cooper Cameron reflecting, they, say, "a strong recovery in 2008 and 2009 for North American natural gas drilling and substantial growth internationally over the next few years."

5) Barclaysis considering acquisition of banks including UBS or Lehman Brothers, according to unsourced sources being used at the Daily Telegraph in London. The purchase would be funded by a large rights issue that would also have the purpose of shoring up the balance sheet.

6) JP Morgan and Fannie Mae hold their annual shareholder meetings.


Questions? Comments? tradertalk@cnbc.com

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  Monday, 19 May 2008 | 9:32 AM ET

Out Of Office Reply

Posted By: Bob Pisani

It's Monday, but I'm still on a mini-vacation of sorts from the market floor. I'll be back tomorrow with more posts. See you then.


Questions? Comments? tradertalk@cnbc.com

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  Friday, 16 May 2008 | 9:58 AM ET

No Posts Today

Posted By: Bob Pisani

I'm away from the trading floor today but I'll be back next week with more posts. See you then.


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 15 May 2008 | 4:49 PM ET

Market Trend Is Up Thanks To Philly Fed, Oil

Posted By: Bob Pisani

The trend is up! Despite initial disappointment withpoor industrial production numbers , things improved when the Philly Fed came in stronger, and got a lot betterwhen oil dropped midday.

Stocks close at the highs for the week, and we had significant breakouts:

--Transports: 10-month highs (near historic highs!)

--S&P 500, NASDAQ, Russell 2000: 4-month high

--S&P Energy and Materials: historic high

--Emerging markets index: high for year

There are problems:

--Low volume

--Complacency

Still, look at the facts: there is a very small group (10-15 percent of traders, by my estimate) who are bullish, and modest gains like this followed by breakouts like those above are just what is needed to get the perhaps 40 percent of traders who are fence-sitters back in the market. The other 50 percent are outright bearish—it will take a lot more to get them back in.


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 15 May 2008 | 4:05 PM ET

CNBC's "Boomer Angst": There's Plenty Of It Out There

Posted By: Bob Pisani

As I've said, CNBC is airing a special tomorrow night, “Boomer Angst,” which will air at 9 pm and midnight. There is plenty of angst out there. This week, a new coalition was launched to encourage the American public to save more. They point out that:

--Debt payments now consume 15 percent of family income;

--63% of Americans say they don't save enough;

--The U.S. saves less than almost all industrial nations.

A separate study at the Center for Retirement Studies at Boston University found that:

--Nearly 45 percent of households are "at risk" of not having enough to maintain their living standards in retirement, even if they retire at 65;

--The median balance for household heads approaching retirement is only $60,000 (!)

For more information on the new coalition that is being formed—and how you can get involved—check out their report atwww.newthrift.org.


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 15 May 2008 | 3:59 PM ET

CNBC's "Boomer Angst" And Myths And Facts About Getting Old

Posted By: Bob Pisani

CNBC has a special out tomorrow night titled "Boomer Angst" that will air at 9 pm EST and midnight. Watch it--because you need to know that baby boomers are not even close to having enough for their retirement. I've put upa number of facts on my blog today about this crisis .--here's a few more.

This is in the form of "Myths and Reality" from an upcoming book from the Center for Retirement Research at Boston University. The authors are Alicia H. Munnell and Steven Sass, the book is entitled "Working Longer: The Solution to the Retirement Income Challenge," and will be published by the Brookings Institution Press.

Myth: Older workers will choose to work longer on their own.

Reality: Most people retire as soon as benefits are available at age 62.

Myth: As baby boomers approach retirement, employers will embrace older workers.

Reality: Many employers are lukewarm toward retaining older workers due to concerns that they cost too much, lack current skills, and don't plan to stick around long.

Myth: Older workers have little to offer employers.

Reality: Older workers often have advantages over younger workers - including higher productivity, better judgment, a stronger work ethic, and better people skills.

Myth: Most workers can work longer by remaining with their career employer.

Reality: Career employment is declining fast - only 44 percent of male workers age 58-62 are still with their age-50 employer, down from 70 percent two decades ago.

Myth: The working longer prescription is the answer for everyone.

Reality: While today's older workers are generally healthier and better educated, up to a third could be hard pressed to work into their mid-60s due to poor health or job prospects.

Myth: Government cannot do much to encourage longer work lives.

Reality: Raising Social Security's earliest eligibility age of 62 could push back the work/retirement divide by changing the mindset of both workers and employers.


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 15 May 2008 | 2:49 PM ET

CNBC's "Survival Guide: Boomer Angst" And The Retirement Crisis

Posted By: Bob Pisani

This Friday at 9 pm EST and midnight, CNBC will air a special, "Boomer Angst," on the difficulties the baby boomers are facing in their retirement. We did a similar special a year and a half ago, and the facts have not improved since then.

The Center for Retirement Research (CRRS) at Boston College, in a paper published in August, 2007, noted that:

--Nearly 45 percent of households are "at risk" of not having enough to maintain their living standards in retirement, even if they retire at 65;
--The median balance for household heads approaching retirement is only $60,000 (!)

What accounts for this declining prosperity? There are three legs to retirement: Social Security, personal savings such as a 401(k) plan, and a pension or defined benefit plan.

But there are cracks everywhere: Social Security is increasingly strained, and there are clear problems with pensions and 401(k)s.

One major problem is that the percentage of households with pensions are declining. The CRRS study noted that in 1992 most households age 51-61 were covered by a pension (defined benefit plan). By 2004, 35 percent of households in this age group with pension coverage were covered by a 401(k) plan only; in other words, an increasing number of households have no pension, just a 401(k) or similar instrument.

Well, people could make up that loss by putting more in their personal retirement programs, couldn't they? Theoretically, yes, but they appear not to be doing so; many do not fully fund their plans and participation rates are actually dropping. The CRRS report noted that benefits projected from 401(k)s are smaller than those projected from defined benefit plans.

Baby boomers are facing other headwinds as well:

--Lower interest rates, which cut into fixed income;
--Longer lifespans than their parents, which require more overall retirement wealth;
--Rapidly increasing health care costs could substantially increase the number of households "at risk";
--Housing wealth, a substantial part of household wealth in the past, is much lower than in previous decades, thanks to recent shrinkage in home values and a notable rise in mortgage debt. This means that some households will be facing mortgage payments during retirement.

The conclusion of the CRRS study: "Yes, there really is a retirement savings crisis." Americans need to save more and work longer.

Here is the full Boston College paper on retirement, "Is There Really A Retirement Savings Crisis?"


Questions? Comments? tradertalk@cnbc.com

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  Thursday, 15 May 2008 | 9:16 AM ET

UBS Upgrades Oil; Why GE Shares Popped

Posted By: Bob Pisani

1) UBS is pounding the table on oil: It upgraded oil to $115 for 2008, $120 for 2009, and initiates coverage of the offshore drilling sector, with buy ratings on Atwood , Diamond Offshore , Ensco , Noble , Rowan , and Transocean .

The reasons?
a) prices have been stronger and demand more resilient than expected at today's higher prices; and
b) higher than previously expected prices are required to limit demand growth, given anemic supply growth outlook.

2) A disappointing IPO: Verso Paper priced 14 million shares at $12. That is well below the price talk of 18.75 million shares at $16-$18 that was floated on the Street.

Verso was formerly a unit of International Paper; it is now majority owned by Apollo Global Management. All the money will go toward paying down debt of $153.3 million and related prepayment fees, which is the debt that was floated to buy the company.

3) J.C. Penney up 2 percent; they beat estimates by a few pennies. This is good news -- but here's a reality check: the reported earnings of $0.54 per shqre was almost half last year's $1.04. Total sales decreased 5.1 percent to $4.1 billion. Comparable store sales declined 7.4 percent.

4) General Electric (CNBC's parent company) up 1 percent on a Wall Street Journal report that are considering an auction of its appliance unit. Estimates are all over the place: the Journal mentioned it could fetch $5-$8 billion, but Citi's analyst estimated $3-$7 billion.

Tough time to sell an appliance business.

5) At the NYSE, they're having their annual meeting. CEO Duncan Niederauer is saying the American Express takeover is ahead of schedule and could close as early as August 1.


Questions? Comments? tradertalk@cnbc.com

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  Wednesday, 14 May 2008 | 4:20 PM ET

Volatility Level Shows Complacency Too High

Posted By: Bob Pisani

The dangers of complacency were abundantly evident in the last hour.

I have remarked all day that the CBOE Volatility Index (VIX) was nearing its lowest level since July of last year. While this is an indication that the levels of fear are clearly dropping, it also indicates--given the real concerns with the economy--that complacency may be a bit too high.

And traders noticed. Big tech momentum names--Apple , Google , RIM, Baidu --all suddenly reversed and ended down on the day. Materials and industrial stocks, which were strong all day, also weakened in the last hour.

Still, there are equity-friendly trends here...new highs at the NYSE reached their highest levels since November...yesterday, retail sales were better than expected, today CPI better than expected.

Now, if the data the rest of the week (think industrial production, out tomorrow) is equity friendly we could see a drift higher--some bulls think all the way through Memorial Day. Bears, of course, note the lack of volume and the move up is due to an absence of sellers then real buyers.


Questions? Comments? tradertalk@cnbc.com

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About Trader Talk with Bob Pisani

  • Direct from the floor of the NYSE, Trader Talk with Bob Pisani provides a dynamic look at the reasons for the day’s actions on Wall Street. If you want to go beyond the latest numbers— Bob will tell you why the market does what it does and what it means for the next day’s trading.

 

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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