Farrell: Let's Enjoy the Numbers for a Moment

Initial unemployment claims dropped a surprising amount. The expectations were for 600,000 odd and the number came in at 565,000. That is still a staggering number but the breach below 600,000 has been long coming. This measure peaked last April at 659,000. The four week moving average dropped 10,000 to 606,000. While only one week's number, let's still take an encouraging moment and hope that we might be entering a better phase of the economy. The initial negative view is that the number could have been distorted by the July 4th holiday but we will know that soon enough.

The drawback to the report was that continuing claims rose to a record and the length of time people are staying on the rolls is also at a record. The National Employment Law Project projects that by September some 650,000 people will have exhausted their unemployment benefits. If there is to be a "Stimulus II" it will, I believe, be some sort of extension of benefits. There might also be an extension of aid to the states many of which are struggling with budget gaps. It might sound heartless, but to extend further aid to states allows them to avoid taking the harsh cost cutting measures needed to live within their means.

The Conference Board's CEO Confidence Index surged in the second quarter to a 55 reading from the prior quarter's 30. A sub component that measures the current economic environment relative to the environment 6 months ago rocketed to 47 from only 5 the previous quarter. This index has been helpful in the past anticipating upturns in capital expenditures. The index leads cap ex outlays by a few quarters, but this survey is very encouraging. It also dovetails with Soleil's Lyle Gramley's outlook that the economy will turn slightly positive by the third quarter.

Speaking of Lyle, we emailed each other regarding the $3.2 billion decline in consumer credit the other day. It's possible that the dramatically lower decline in consumer credit (the prior two months saw a roughly $16 billion decline for each) is due to better credit availability. A recent survey of "banks willingness to lend" has improved a bit. This will play out but it still marks a huge $62 billion contraction in consumer debt since the peak last year and shows how cautious the consumer is and the level of financial stress they are under.

Laura Martin of Soleil/Media Metrics had an advertising industry expert conference call the other day on the state of the ad world and upfront advertising sales. The consensus seems to be that that total upfront will be down between 10 and 12%. Within that Laura figures NBC will be hardest hit since they have a bunch of new shows to sell ad time for including a very big bet on Jay Leno in prime time five days a week. CBS has been painted with the same brush, but we feel they will have better selling success. They only have four new shows to sell so advertisers know for the most part what they are buying. They also don't have cable affiliations pressuring them to get deals done since cable usually has to wait for its parent to finish its sales cycle. Laura sees CBS as holding prices flat with last year which would be a bit of a surprise to the consensus view. I might be cautious about buying the stock going into the quarterly release of earnings as I have seen some estimates come down and I wonder if that process is done. But that is a very short term view and we would be looking to buy the stock at the right moment as it has corrected sharply the last few weeks. Laura has a $9 price target. It's currently trading around $6.

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