Daily Gains Letter

economic recovery

Three ETFs to Profit from Europe’s Economic Recovery

By for Daily Gains Letter | Mar 6, 2015

Europe Economic RecoveryEurozone Still Messy, but Economic Recovery Has Begun

Europe is open for business. Well, kind of. The region—namely the 19-country eurozone—has recently been in the news with the Greece fiasco and its potential exit.

Greece now has a four-month reprieve in the form of an extension to its current bailout loans and terms, but the distressed country still has to convince eurozone finance ministers that its revised bailout plan for austerity measures makes sense.

For the time being, we are seeing some progress in the eurozone that points to growth. I had been worried about the negative impact from the Russian mess, but so far, it appears to be a non-issue. In the end, Germany, the strongest member of the eurozone, remains on solid footing and that’s what really matters.

What’s Behind the Eurozone’s Economic Progress?

The region is also being driven by the flow of easy money after the previous decision by the European Central Bank (ECB) to maintain near-zero interest rates and buy back about US$70.0 billion in eurozone bonds monthly. Sound familiar? It’s just like what the Federal Reserve did for years. The ECB’s similar actions will likely mean gross domestic product (GDP) growth and higher stock market prices ahead in the region.

Now the eurozone is not as strong in its recovery as the U.S., but I sense there will continue to be good investment opportunities to come, especially given the cheaper relative valuation of the eurozone.

Depending on whom you listen to, the eurozone’s GDP is expected to expand anywhere from 1.2% to perhaps as high as 1.5% this year. Again, not great, but it’s … Read More

Banks a Better Play Than Market-Leading Tech Picks?

By for Daily Gains Letter | Sep 26, 2014

Bank Stocks Are Now Looking Good for InvestorsWhile it’s well known that technology has led the broader stock market higher, there is a safer and more conservative play for investors at this time, according to my stock analysis. Where? Investors may want to take a glance at the banking sector.

Banks have dug themselves out of the financial crater that was imposed on the group by the sub-prime debt crisis back in 2007, which sent the global economy and banks into a massive tailspin, as is well represented in my stock analysis.

But that was then. As my stock analysis indicates, the banking sector has been rallying over the past seven years, beefing up their balance sheets, cutting risk, and creating a much stronger overall structure.

The chart of the Philadelphia Bank Index below shows the upward move of bank stocks from their 2009 and 2011 bottoms. Bank stocks staged a nice rally, but retrenched from March to May 2012 on the European bank concerns and Moody’s downgrade of the sector. However, the group has since staged a rally back to above the index’s 50- and 200-day moving averages (MAs), as my technical stock analysis indicates.

Bank Index Chart

Chart courtesy of www.StockCharts.com

What has helped to drive the banks upward on the charts, based on my stock analysis, has been the recovering global economy and the rules set in place to help prevent excessive risk among bank stocks. At the core of the changes was the establishment of the “Volcker Rule,” which was economist and ex-Fed chairman Paul Volcker’s move to cap the speculative trades and risk banks are allowed to assume. Since these changes were put in place, … Read More

Student Debt on Course to Sink America’s Economy; Here’s How to Profit

By for Daily Gains Letter | Jun 2, 2014

How to Protect Your Portfolio Coming Domino Effect Student DebtIn April, the unemployment rate dropped to 6.3%—its lowest level since 2008. While Wall Street and Capitol Hill might be giving each other high-fives, there is still plenty left to lament.

At 12.3%, the U.S. underemployment rate is still eye-wateringly high. (Source: “Alternative measures of labor underutilization,” Bureau of Labor Statistics web site, May 2, 2014.) Sure, it’s down from 13.9% in April 2013, but it’s still at an unacceptable level. And it’s not exactly an encouraging statistic for those entering, already in, or recently graduated from a post-secondary school—or those still struggling to pay off their student debt.

In this economic climate, graduates can either stay unemployed or take lower-paying jobs. Sadly, this could take a serious toll on the so-called economic recovery.

For starters, student debt is the fastest-growing category of debt. At the end of the first quarter of 2014, student debt had soared $125 billion year-over-year to $1.11 trillion. And right now, 11% of all loan debt is either in default or delinquent by 90-plus days. (Source: “Quarterly Report on Household Debt and Credit,” Federal Reserve Bank of New York web site, May 2014.)

Second, it’s going to get worse. With an average graduating debt of $33,000, the class of 2014 is the most indebted ever. They’re also finding it more and more difficult to pay off that debt. Between 2005 and 2012, the average student debt, adjusted for inflation, has climbed 35%. The median salary, on the other hand, has dropped 2.2%. This doesn’t bode well for the graduating class of 2015.

Granted, not all college degrees are created equally. Healthcare and education grads have … Read More

How to Protect Your Portfolio and Profit as Interest Rates Rise

By for Daily Gains Letter | Apr 9, 2014

Interest RatesAccording to data released by the U.S. Bureau of Labor Statistics (BLS) last Friday, the unemployment rate stood at 6.7% in March, which is similar to the unemployment rate in February. A total of 192,000 jobs were added, of which food and drinking places added more than 30,000 and “temporary” help services in the professional and business industry added more than 29,000 jobs. The labor market fell slightly short of expectations as analysts had forecasted the unemployment rate to be 6.6% for March. (Source: “The Employment Situation — March 2014,” Bureau of Labor Statistics web site, April 4, 2014.)

The Fed announced it would start to scale back its monetary stimulus last December, after jobs numbers started to show signs of a recovering economy. The unemployment rate initially dropped, only to settle at levels that have remained unchanged for the greater part of the winter season. Simultaneously, initial jobless claims increased by 5.16% during the week ended March 28, 2014, raising eyebrows toward the ability of the Fed’s policies to carry the string of economic recovery further. (Source: Federal Reserve Bank of St. Louis web site, last accessed April 7, 2014.)

While most economic challenges faced by the Fed for the last four months have been blamed on cold weather, a rigid unemployment rate and increasing jobless claims point towards a weaker-than-expected recovery. Amidst this, the Fed chair, Janet Yellen, while speaking at a press conference on March 19, confirmed that the Fed plans to go ahead with the tapering program in its bid to elevate interest rates up from their near-zero levels. (Source: Risen, T., “Janet Yellen Continues Tapering … Read More

Where Investors Can Find Stability in These Economically Unstable Times

By for Daily Gains Letter | Feb 11, 2014

Stable Investment for Economically Unstable TimesWhile most astute investors would point to a weak U.S. economy as the reason for the recent lackluster U.S. employment data, economists, in their infinite wisdom, point to Mother Nature. She seems to shoulder a lot of the economic blame in this country.

In January, the U.S. economy added just 113,000 new jobs, far fewer than the expected 180,000 jobs. Freezing winter weather is being blamed for the weak U.S. unemployment data. This is the second straight month of disappointing jobs data from the U.S. Department of Labor.

Last month, the U.S. economy added just 74,000 jobs—far, far below the forecasted 200,000 jobs. The back-to-back weak employment numbers continue to fuel fears that the so-called U.S. economic recovery might be stalling…if one could ever really say the U.S. economy took off.

The new unemployment data shows that 10.2 million Americans in the U.S. economy have work. While the number of people who have been out of work for more than 27 weeks declined by more than 200,000, the number was probably impacted by the 1.7 million Americans who lost their extended federal unemployment benefits at the end of December.

Last Thursday, attempts to revive a program aimed at extending unemployment benefits by three months for the long-term unemployed failed, being supported by just 59 of the 60 senators needed to pass the motion. At the end of the day, in this U.S. economy, 3.6 million Americans, or 35.8% of the unemployed, are stuck in long-term unemployment limbo.

And they might be stuck there for a long time. A recent experiment conducted by a visiting scholar at the Boston Fed found … Read More

Three Indicators to Turn Your Trust Back to Precious Metals

By for Daily Gains Letter | Dec 12, 2013

Trust Back to Precious MetalsDespite the wintry Arctic chill, the economic recovery is in full bloom. Or is it? Wages are stagnant, unemployment remains stubbornly high at seven percent, and consumer confidence remains tepid at best. The average American investor clearly isn’t enjoying the Wall Street perpetual momentum machine.

Are stocks fairly valued (i.e. cheap), and is the current momentum sustainable? If you consider the charts, it looks like well-heeled investors think the market is inexpensive; how else can you explain the current bull market marathon? This is after an increasingly larger number of companies on the S&P 500 warned about revenues and earnings.

In the third quarter, a record 83% of all S&P 500 companies revised their third-quarter earnings guidance lower. So far, 92 of the S&P 500 companies, or 89%, have already issued negative earnings guidance for the fourth quarter. In spite of the warnings, the markets continue to tread higher.

I’m not the first person to say you can’t beat the Fed; but this market proves it every day. Thanks to the Federal Reserve’s $85.0-billion-per-month easy money policy, the markets just go higher and higher.

So, are the markets fairly valued? Not if you think S&P 500 revenues and earnings are important. Over the last few years, companies have been doing a good job at cutting costs; in fact, corporate profits are at an all-time record high at 70% of GDP. (Source: “Corporate Profits Are At An All-Time Record Peak At 70% Of GDP,” Forbes web site, November 30, 2013.)

S&P 500 earnings are also being artificially inflated due to low corporate tax rates. While the top corporate tax rate is … Read More

Not Much for Retailers to Be Thankful for This Past Thanksgiving

By for Daily Gains Letter | Dec 3, 2013

Thankful for This Past ThanksgivingDespite the retail sector’s every attempt to generate sales this Thanksgiving, from sharp discounts to being open earlier than ever, their efforts fell flat. It’s further evidence that the U.S. economic recovery is not as entrenched as many think it is, and once again shows the economic disconnect between Wall Street and Main Street.

In spite of high unemployment, stagnant wages, consumer confidence at a seven-month low, and a smaller number of people forecast to hit the shops over the Thanksgiving weekend, the National Retail Federation still predicted sales to grow 3.9% from last year. (Source: Banjo, S., “Holiday Sales Sag Despite Blitz of Deals,” Yahoo.com, December 2, 2013.)

Over the Black Friday weekend in 2012, U.S. shoppers spent roughly $60.0 billion in the retail sector, but this year, it was a different story altogether. While the final numbers have yet to be tallied, early indicators show that total U.S. retail sector spending over the Thanksgiving weekend fell to $57.4 billion. It’s also the first time that retail sector spending over the Thanksgiving weekend has dipped in at least four years.

Even during the worst of the recession and the beginning of the so-called economic recovery, U.S. shoppers were willing to spend, buoyed by optimism. Five years into the so-called economic recovery, and shoppers are tightening their belts, weighed down by pessimism.

But it didn’t start out that way; in fact, most U.S. retail sector stocks were initially quite enthusiastic about their prospects. Wal-Mart Stores, Inc. (NYSE/WMT) had originally planned to open its doors at 8:00 p.m. Thursday night, but instead opened its doors at 6:00 p.m. Target Corporation (NYSE/TGT) … Read More

This Sector the Only Bright Spot in October Retail Sales

By for Daily Gains Letter | Nov 22, 2013

October Retail SalesOctober U.S. retail sector sales numbers are in, but are they worth getting excited about?

The Census Bureau announced on Wednesday that October retail sector sales increased 0.4% month-over-month and 3.9% year-over-year to $428.1 billion. From a shorter-term perspective, the 0.4% increase really isn’t anything to get excited about; that 3.9% year-over-year increase, though, looks pretty good. (Source: “Advance Monthly Sales for Retail and Food Services October 2013,” U.S. Census Bureau web site, November 20, 2013.)

Or does it? Take a step back, and you can see we’ve been in a downtrend for the last few years.

In October 2010, U.S. retail sector sales were up 6.9% month-over-month. This isn’t a big surprise when you consider the so-called economic recovery only began in mid-2009. In October 2011, U.S. retail sector sales were up 7.6% year-over-year, another strong gain on the back of ongoing optimism that the economy would rebound. (Source: “Retail and Food Services Sales,” Federal Reserve Bank of St. Louis Economic Research web site, November 20, 2013.)

But then we realized the economic recovery wasn’t much of a recovery at all. In 2012, October retail sector sales were up just 4.4%, almost half the gain of the previous year, and in October 2013, U.S. retail sector sales were up just 3.9%. Looking at it from a longer-term perspective, even the recent October year-over-year numbers aren’t anything to get worked up about.

Today, we’re more than 50 months and $3.0-plus trillion into the Federal Reserve-guided recovery, and we really don’t have much to show for it. In fact, you could argue that the economy might have done better without any … Read More

Wal-Mart Asking Employees to Donate Food to Fellow Employees in Need?

By for Daily Gains Letter | Nov 21, 2013

Wal-Mart Asking Employees to Donate FoodThe recent rise on the key stock indices might just be masking a fundamentally flawed economic recovery. Since the beginning of the year, the S&P 500 has gained 25%, the Dow Jones Industrial Average is up 21%, and the NASDAQ is 27% higher. At the same time, unemployment remains high, wages are stagnant, and our day-to-day life costs more.

With the S&P 500 on pace for the best yearly gain in a decade, well-heeled shareholders are rejoicing—at the other end of the scale, many employees aren’t.

You know it’s a touchy economic climate when Wal-Mart Stores, Inc. (NYSE/WMT), the world’s biggest retailer, which reported third-quarter profits of $3.7 billion, is asking employees to donate food to fellow associates in need, so they can enjoy Thanksgiving this year.

A weak economy and stiff competition is taking a toll on Wal-Mart. While Wal-Mart reported third-quarter earnings that beat Wall Street estimates by a mere penny, revenues of $114.9 billion were shy of the $116.8-billion mark Wall Street was hoping for. Not surprisingly, perhaps, Wal-Mart said holiday sales would be flat. (Source: “Walmart reports Q3 EPS of $1.14, updates full year guidance; Aggressive holiday plans to drive sales,” Wal-Mart Stores, Inc. web site, last accessed November 14, 2013.)

In light of Wal-Mart’s recent employee Thanksgiving food drive, it’s interesting to note that third-quarter sales from Neighborhood Market, Wal-Mart’s chain of grocery stores, rose a solid 3.4%.

Where other grocery store chains have reported underwhelming third-quarter results, Wal-Mart’s grocery chain actually bucked the trend. Fourth-quarter results may be muted. Thanks to a U.S. economy that continues to look fragile, grocery store stocks are competing … Read More

How to Play the Rebound in Oil Pipeline Stocks

By for Daily Gains Letter | Oct 4, 2013

Rebound in Oil Pipeline StocksThe idea of nearly one million U.S. federal employees (read: consumers) being furloughed and not getting paid has sent oil prices tumbling to a three-month low, hovering near $100.00 a barrel.

The reach of the U.S. government shutdown goes well beyond those furloughed; it also affects those who rely on government services. Permitting and leasing for oil and gas drilling is at a halt, with 81% of all employees in the Department of Interior (which encompasses the Bureau of Land Management) on furlough. (Source: Ackerman, A., “Which Government Workers Are Affected by Shutdown?,” Wall Street Journal web site, October 2, 2013.)

Investors are also fearful that even a temporary furlough will dampen an already tepid economic recovery and drive the demand for oil and gas lower. And they should be afraid, as fourth-quarter U.S. growth is projected to decline 0.2 percentage points for every week that the U.S. government shutdown continues.

But that’s only one in a number of factors that are putting pressure on oil prices. On Wednesday, U.S. commercial crude oil inventory numbers came in at 5.5 million barrels, well above the forecasted 2.4 million barrels.

On top of that, improving relations in the Middle East, the resumption of full oil production in Libya, an easing of Western sanctions on crude oil exports from Iran, and a relatively quiet U.S. hurricane season could weigh on oil prices even longer.

However, once the U.S. government shutdown is in the rearview mirror, oil prices should start to recover. But in the meantime, while oil prices are trending lower, the price of some pipeline stocks have been breaking out.

Light Crude Oil Chart

Chart courtesy … Read More

ETFs for a Mature Market with Real Signs of Economic Growth

By for Daily Gains Letter | Aug 6, 2013

ETFs for a Mature MarketThe S&P 500 and Dow Jones Industrial Average may be trading at record highs, but not everyone is enjoying the so-called signs of economic growth. In fact, there isn’t too much for the average American to cheer about when it comes to the U.S. economy.

Fortunately, investors looking to benefit from real economic growth may consider diversifying their investing boundaries and looking at exchange-traded funds (ETFs) with exposure to one of the most mature economies in the world: the United Kingdom.

As Wall Street and the Federal Reserve celebrate economic growth in America, here are a couple numbers to consider: U.S. unemployment remains stubbornly high at 7.4% (and has been above seven percent for over four years now) and the underemployment rate is at an eye-watering 14% (and has been at least 14% since 2009). On top of that, wages are flat (minimum wage has been stuck at $7.25 an hour since July 24, 2009), personal debt is up, the growth rate of real disposable income is at its lowest levels in decades, and, not surprisingly, July’s consumer confidence numbers slipped.

Many point to housing as a sure sign of economic growth; however, U.S. home ownership is at its lowest level in 18 years and U.S. housing prices are still 25% below their 2006 highs. Those who lost their homes or are unable to get a foot on the property ladder are left paying all-time record-high rent prices.

The long-running bull market has more to do with the Federal Reserve’s $85.0-billion-per-month stimulus package and artificially low interest rates. Real economic recovery is rooted in economic growth and jobs, not downward … Read More

How to Protect Your Assets While the Majority of Americans Aren’t

By for Daily Gains Letter | Jul 15, 2013

How to Preserve Your Wealth While 93% of Americans Lose TheirsYou can’t always believe the markets. Since 2009, the S&P 500 and Dow Jones have been on a tear and are, thanks to the Federal Reserve, making new record highs. Since the markets are considered an indicator of the health of the U.S. economy, one could be forgiven for thinking the economic recovery has been benefiting most Americans. It isn’t.

In fact, the economic recovery has left the majority of Americans in the dark. But there are a number of investment opportunities available to those who think they missed the so-called economic recovery—opportunities that can protect them from inflation.

During the first two years of the economic recovery (2009-2011), the wealth held by the richest seven percent of households rose 28%, while the net worth for the bottom 93% fell four percent. (Source: Fry, R. and Taylor, P., “A Rise in Wealth for the Wealthy; Declines for the Lower 93%,” Pew Research web site, April 23, 2013.)

Why the large discrepancy? During the start of the economic recovery, stocks and bonds rallied, but the housing market remained flat. Wealthier households park their assets in stocks and other financial products, while less affluent Americans have their wealth tied up in the value of their homes.

Between 2009 and 2011, the S&P 500 rose by 42%—and has since climbed another 30%—while the S&P/Case-Shiller Home Price Index fell by five percent. While housing prices have benefited from the economic recovery, they are still 25.5% below their 2006 highs.

And don’t forget about the millions of Americans not fortunate enough to own a home. After bottoming on March 6, 2009, the S&P 500 closed … Read More

Two Ways to Protect Yourself from America’s Deteriorating Economic Divide

By for Daily Gains Letter | Jun 7, 2013

Two Ways to Protect Yourself from America’s Deteriorating Economic DivideAs I’ve been noting in this column since the beginning of the year, there is a major economic disconnect between what is happening on Wall Street and what is happening on Main Street. Eventually, the great divide will come into focus and the U.S. economy will react accordingly.

The evidence: if the stock market is a leading indicator of economic health, then the U.S. is running full steam ahead. The current bull market is now in its fifth year. The S&P 500 is up more than 18% since December 31, 2012 and the Dow Jones Industrial Average is up almost 20% since the end of 2012; both are trading near record highs.

If the life of the average American is the litmus test for America’s economic health, then things are not as rosy as they would appear. U.S. unemployment remains high at 7.5%; median income levels are down 8.1% from their 2007 levels; the number of Americans relying on food stamps has soared 80% to 47.5 million (or 23 million households) since 2007; wages are stagnant; and 40% of Americans have at least one credit card with a balance of close to $15,800.

This economic reality is being reflected in the 2013 first-quarter and second-quarter financial results. During the first quarter of 2013, 78% of the so-called red-hot S&P 500 companies issued negative earnings-per-share (EPS) guidance. For the second quarter, almost 80% of S&P 500 companies have issued a negative outlook.

Sure, the S&P 500 may be reporting strong returns, but it’s not because of an economic recovery. The current bull market has more to do with the Federal Reserve’s … Read More

How Barbecue Charcoal Reveals the Truth About the U.S. Economy

By for Daily Gains Letter | May 6, 2013

Barbecue Charcoal Reveals the TruthIn a rare miss for a consumer products business, The Clorox Company (NYSE/CLX) disappointed the stock market by reporting very flat first-quarter numbers.

It’s more evidence that real economic growth continues to be elusive.

The Clorox Company is a really good business.

It’s way more than “Clorox Bleach:” it’s also “Pine-Sol,” “Liquid-Plumr,” “S.O.S.,” “Glad,” “Burt’s Bees,” “Brita,” and “Kingsford,” to name a few.

According to the company, it could only generate a one-percent gain in sales, to $1.41 billion.

Diluted earnings per share from continuing operations fell two percent from the comparable quarter.

The company’s domestic U.S. business was stronger than international operations. One sore spot for the company was its “Kingsford” charcoal brand, because of the weather; a stronger winter kept charcoal consumers indoors.

There’s also been a strong movement towards more environmentally friendly cleaning products. Plenty of consumer product brands purport to be “green,” and they line the store shelves at many retailers.

Noticeable in the company’s earnings report was a significant increase in cash and equivalents. This is a trend that is prevalent throughout the entire stock market.

Clorox’s 10-year stock chart is below:

clx clorox co nyse

Chart courtesy of www.StockCharts.com

The company’s long-term stock market performance has been excellent.

Clorox announced third-quarter earnings of $134 million, or $1.00 diluted earnings per share. This compares with $134 million, or $1.02 diluted earnings per share, in the same quarter last year.

Like many consumer goods companies, Clorox recently soared on the stock market. While it should be considered fully valued considering its flat earnings, Clorox is still offering a three-percent dividend yield. This is what has kept institutional investors in the … Read More

Three Tips for Getting Your Savings into Shape

By for Daily Gains Letter | Apr 22, 2013

Three Tips for Getting Your Savings into Shape

Even after taking a slight breather last week, the Dow Jones Industrial Average and the S&P 500 are still unabashedly bullish. However, that doesn’t mean the average American is basking in the glow of the greenback.

While a small majority of American consumers have more savings than credit card debt, almost 25% say they have more credit card debt than money in the bank. And 16% say they have no credit card debt or savings. This means that 40% of Americans are in a financially precarious position. (Source: “February 2013 Financial Security Index charts,” Bankrate.com, last accessed April 19, 2013.)

At the end of 2012, total household debt in the U.S. came in at $11.35 trillion. The largest portion of debt went to mortgages at $8.06 trillion, for a national average of roughly $200,000—non-housing debt is at $2.75 trillion. Broken down, student loan debt has increased to $970 billion, or $24,803 per person. Credit card debt rose to $680 billion; 40% of Americans have at least one credit card with a balance of $15,799. Meanwhile, auto loan debt increased slightly over the third quarter of 2012 to $780 billion. (Source: “Household Debt and Credit Report,” Federal Reserve Bank of New York web site, last accessed April 19, 2013.)

No matter how you look at it, this adds up to a significant debt load for the average American family; and our ability to pay off that debt is limited—and becoming tougher and tougher. In December 2012, the average real disposable income was $32,663 per person, lower than the $32,729 recorded in December 2006. (Source: “Real Disposable Personal Income,” Federal Reserve Bank … Read More

Earnings Results Ahead of the Economy, Day of Reckoning on the Horizon

By for Daily Gains Letter | Apr 22, 2013


Corporations are reporting a mixed bag this earnings season. Some companies are outperforming, while others have come in just a little bit short with their numbers.

The one thing I would say, however, is that the balance sheets continue to be outstanding, especially in large-cap companies. This gives a lot of leeway for corporations to weather any economic storm down the road.

PepsiCo, Inc. (NYSE/PEP) reported wonderful earnings results in its first quarter. The stock popped four percent after reporting its earnings, with news and management affirming solid guidance for the rest of the year. This is one of many corporations that can do well on the stock market throughout the rest of this decade.

Some corporations reported basically zero growth, but that doesn’t mean that business conditions have gone bad. The fourth quarter of 2012 saw a gross domestic product (GDP) that was just terrible, and so it’s unreasonable to expect the first-quarter GDP of 2013 to be outstanding.

But what I am reading so far in many earnings reports is that corporations are expecting business conditions to get better, especially towards the end of the year.

Union Pacific Corporation (NYSE/UNP) is another benchmark stock that jumped four percent after reporting great earnings. Even if you don’t own this stock or wouldn’t consider it in your portfolio, it pays to read this company’s numbers, because it’s a great barometer on the U.S. economy. Railroad corporations are leading indicators and Union Pacific was able to grow its earnings by increasing prices—a very good development.

There are still all kinds of earnings reports to come in, and what this stock market … Read More

Dow Jones Industrial Average at Record High; Defensive Plays for the Bottom 99% of Americans Who Missed the Bull Market

By for Daily Gains Letter | Mar 11, 2013

110313_DL_whitefootThe Dow Jones Industrial Average hit an all-time high of more than 14,400 last Friday, soaring past the 2007 pre-recession record of 14,164. Thanks to the Wall Street hoopla, most Americans probably believe the economic recovery is firmly entrenched and the good times will keep rolling.

Those on Wall Street are certainly cheering, as are those privileged few who were already rich before the markets took middle-class American down five years ago. Unfortunately, the rest of the country doesn’t have reason to celebrate.

If you’re the Federal Reserve, this disconnect doesn’t make sense. After all, higher stock prices boost consumer wealth and confidence, which translates into increased spending.

Over the last five years, we’ve learned that unlike water, wealth trickles upward.

During the first two years of the Great Recession (2007–2009), average real income per family plummeted by more than 17%, the largest two-year drop since the Great Depression. (Source: Saez, E., “Striking it Richer: The Evolution of Top Incomes in the United States,” Berkeley University of California web site, January 23, 2013.)

But surely things got better for the average American after the so-called “economic recovery” kicked in? Not quite. Between 2009 and 2011, the top one percent of households by income reeled in 121% of all gains. How can anyone grab more than 100% of anything? It’s easy when you factor in inflation. The top one percent became 11.2% richer, while the bottom 99% became 0.4% poorer.

In 2010, the first full year of the economic recovery, the top one percent claimed 93% of all income gains.

The top one percent didn’t just do better than the bottom … Read More

Trucking Company Bucking Industry Trend with Record Revenues

By for Daily Gains Letter | Feb 25, 2013

250213_DL_whitefootThe first round of unemployment numbers are in for 2013 and things continue to look bleak. In November 2012, unemployment stood at 7.7%; it rose to 7.8% in December, only to rise once again to 7.9% in January.

An escalating unemployment rate does not bode well for a strong economic recovery in 2013.

According to the American Trucking Associations (ATA), trucking serves as a barometer of the U.S. economy; trucking accounts for the transport of roughly 70% of all tonnage carried by all modes of domestic freight transportation. A further 80% of U.S. communities receive their goods exclusively by truck. (Source: “American Trucking Associations: Trucking and the Economy,” American Trucking Associations web site, last accessed February 22, 2013.)

Because trucking accounts for such a large majority of deliveries, a slowdown in consumer spending could negatively impact the industry. The ATA expects slower tonnage growth in 2013 compared to 2012, as a greater number of housing starts and auto sales offset slower factory output and consumer spending. (Source: “ATA Truck Tonnage Index Rebounds 3.7% in November,” American Trucking Associations web site, December 18, 2012, last accessed February 22, 2013.)

Not all trucking companies could feel the pinch. A number of logistic freight companies are bucking the trend.

Wabash National Corporation (NYSE/WNC) is one of North America’s top manufacturers of dry freight and refrigerated vans, and flatbed and drop-deck trailers. The trailers are marketed under several brands, including DuraPlate, ArcticLite, and RoadRailer. Customers have included Averitt Express, FedEx, Knight, SAIA, and Swift.

The company has a market cap of $632 million, a forward price-to-earnings (P/E) ratio of 7.6, and $81.4 million in … Read More