Pros Say: Inflation Danger = 'Kryptonite for Superman'
Tuesday: Consumer confidence squeaked above its record low. Ford announced an incentive program -- covering payments if a buyer is laid off -- similar to Hyundai's. GM's new CEO Fritz henderson said bankruptcy is possible within 60 days. J.P. Morgan said global banks will write down $17 billion more. CNBC heard from experts who said retail looks less scary, housing is finally coming back — but warned that inflation could be "kryptonite."
Housing's Coming Back — The Key to Restoring Confidence
Ned Riley of Riley Asset Management said the housing industry has already turned, although it has a lot of ground to recover. He's never seen so much devastation in such a "compressed period of time" as he has seen in the last four months. A housing comeback will be the critical element in restoring consumer confidence. He's strong on technology; the institutions, particularly the hedge funds, are very underweighted in tech, giving him encouragement for that sector. Financials still have to stabilize.
Currency Fluctuations Muddy The Global Picture
Kevin Ferry of Cronus Futures Management said the economic news from Japan and China will be closely watched as an indication of recovery on the global level. There is currently too much volatility among currencies; a swing of nearly 9 cents between the yen and the euro over the last 48 hours makes it very difficult for an investor to assess how his global stake is doing. Attention to the global picture was drawn away yesterday by the paradigm shift in the auto industry.
Bonds Could Suffer If Recovery Is Too Fast
Morgan Keegan's Kevin Giddis said the wisdom of the crowd is skeptical at best, so recovery may well be under way — but he's worried about the amount of debt that will have to be incurred as recovery goes forward. The debt will be around for a long time, and if the recovery is sharp, bonds could suffer badly. As far as bonds are concerned, inflation is "the only Kryptonite for Superman." We may be well into next year before any comeback can be perceived. He believes that deflation has been avoided, a positive.
Malls Not Mauled as Badly; But True Improvement On Layaway
The retail sector is finally showing some signs of stabilization, according to Dana Telsey of Telsey Advisory Group. Inventories have come down fast, and there should be a little more of a pickup in April than in March. Improvement, of course, is relative: business is not getting any better, but it's also not getting worse as fast as it was. The mall parking lots are deceptively full; people are not buying at anywhere near full price.
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