Better than -674,000 but...

Unemployment claims upticked to 576,000 last week from 561,000 the prior week. While still better than late March's -674,000, the recent trend shows a stubborn jobless situation. The four week moving average rose a bit to 570,000 and the continuing claims of 6.24 million shows a consumer that is not likely to rise from the ashes all that quickly.

The Fed released a report showing the status of all sorts of loans. While dismal reading, it did not contain anything that was much of a surprise. Total loans in delinquency are at a record 6.49% of all loans; credit card delinquencies are at a record 6.7%; residential real estate loans have deteriorated for 13 quarters in a row and are at a record 8.84%. The only non record is commercial real estate but that's at the worst level since 1991 at 7.91% of all such loans.

On the other hand, the Philadelphia Fed Index followed its New York cousin which reported a good number early this week and rose to +4.2 when the most recent survey had expected a decline. The Index of Leading Economic Indicators - LEI - rose for the fourth month in a row to register a + .6% advance. But this can pale when compared to the consumers situation since about 70% of US economic activity is centered around the consumer. If you take out autos, retail sales have fallen five months in a row. Importantly, real disposable income declined -1.3% last month from the prior four weeks and if you take out the government stimulus that figure has fallen for six months in a row. That is giving rise to talk of Stimulus Two to keep the heat off of Washington.

In all of this there are still good investment ideas and Laura Martin of Soleil/Media Metrics would offer CBS as an example. The stock is around $10.50 with a 52 week range of $17 to $3. She recently met with management and came away convinced of their prospects. Costs are down and appear to be tightly controlled. Last year, management sold 78% of ad time in the "upfront" market. This year, they are at 65%. This would ordinarily make an investor nervous but the "scatter market" has seen prices rise 30%. CBS has said that every $1 in incremental ad revenue translates into $.80 of operating income. With CBS's ratings as strong as they are "make goods" to advertisers will be minimal and the stronger scatter pricing could enable CBS to achieve Laura's well above consensus estimate of $1.10 for 2010. She has a $13 price objective on the stock. Call for the report.
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