A Tale of Two Economies By Rick Pendergraft 
I know you have heard the opening line of Charles Dickens’ classic novel A Tale of Two Cities. It was the best of times, it was the worst of times. This phrase is overused and I hesitated to use it, but it is so fitting for what we are seeing so far this earnings season. We have seen the banks and brokerage houses miss on their earnings estimates and in most cases, their profits are either way down, or they slipped to losses. On the other hand, the non-financial earnings reports have been better than expected for the most part. Most of the companies are showing modest growth in the first quarter. From Google to Apple, Boeing to McDonalds, these companies have exceeded earnings estimates. Some of these companies have charged higher, some have dropped, and some have had little reaction to the earnings reports. As it has been said many times before in IDE, it is all about expectations when it comes to earnings. This may seem all well and good, but I find it concerning. Historically it has been the financials that lead the way out of recessions. The Fed lowers interest rates in order to make credit more readily available and the banks benefit from the increase in loan demand. But I don’t see this happening right now. Just last week, mortgage applications showed a 14 percent decline from the previous week. Both existing home sales and new home sales are at multi-year lows. While the Fed has been dropping rates, the mortgage rates have not been declining. Why is this you ask? INTERNAL ENDORSEMENT Stock Market Shocker: How a Bunch of 5th Graders Made Fools of the Trading Elite…! Wall Street wants you to believe that you have to entrust your money with the professionals and all their skills, resources and systems, if you want to make money in the markets. It’s what these guys do for a living! How could you possibly beat them?! Nothing could be further from the truth. In fact, I have used an embarrassingly simple secret to make $15,048 in just 30 days... and boost my overall account balance 152% in less than a year. Keep reading to learn how you
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| From where I sit, it looks like banks are keeping mortgage rates higher than usual. What I mean by this is that they are setting the rates with a higher spread between what they can borrow at and their lending rate. Back when I was the branch manager of a bank in Ohio, the rate on our 30-year mortgage usually ran about 1.5-2 points above the 10-year Treasury note rate. Right now, the yield on the 10-year treasury is at 3.85 percent while the national average for a 30-year mortgage is 7.15 percent. A spread of 3.3 percent. You can’t really blame the lending institutions, after all, they are trying to recoup some of their losses from the ongoing sub-prime fiasco. The problem is that by keeping the rates inflated, the demand for loans remains low. I have stated on several occasions that I don’t look for the economy to improve until the housing market improves. Given that new home sales in March dropped to the lowest level in almost 17 years and the existing home sales declined after a mild jump in February, I don’t foresee a big improvement in the housing market anytime soon. As I mentioned above, non-financial companies have been reporting better earnings than expected, but the financials have been reporting worse than expected earnings. If this pattern continues past this quarter, the non-financial companies will start to see a decline in earnings as the consumer becomes more and more strapped financially. Food and energy prices continue to skyrocket, eating up more and more of the household income. In the meantime, credit is not as accessible as it has been for the last ten years and we all know that this is not a country of savers. So if food and energy continue to climb, credit remains tight, and the housing market doesn’t improve, the economy is going to get worse before it gets better. The weakness in the earnings of the financials could be leading us deeper into recession rather than leading us out of one this time. Good luck and good trading, Rick P.S. To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com. [Ed. Note: Subscribers to Rick’s KISS Investing service recently closed out gains of approximately 150% on Continental Airlines and 175% on the Diamonds Trust. Click here to learn more about KISS Investing] A Full Plate with Plenty to Chew On
By Christian Hill While last weeks economic calendar was on the lighter side with only four major reports, this week is packed with a whopping nineteen reports. There is an FOMC meeting this week and critical reports such as first quarter GDP, factory orders and April employment figures. This week could be the point where the Fed may finally admit we are in a recession. The GDP report for Q1 will be released Wednesday morning and is expected to show only a 0.40% growth rate, down from the 0.60% of Q4 2007. This would mark the second straight quarter with a decline, and would show an anemic growth rate. However, the bar may just be low enough to beat estimates. The employment numbers are looking just as bleak. The expectation is for another 80k jobs to be lost, matching last months’ numbers. Due to these additional job losses, the unemployment rate is expected to tick up slightly to 5.20%. If this number holds, it will be the highest unemployment rate since March 2005. The report that will get the most attention this week is the Fed policy statement. As it stands, expectations show a 70% chance of a one-quarter percent rate cut and a 25% chance of a one-half percent rate cut. So it is a relative safe bet for a smaller cut, but it wouldn’t be a shocker to see the half-percent cut, considering how bad everything else is going. Date | Time (ET) | Statistic | For | Market Expects | Prior | 29-Apr | 10:00 AM | Consumer Confidence | Apr | 62 | 64.5 | 30-Apr | 8:15 AM | ADP Employment | Apr | -55K | 8K | 30-Apr | 8:30 AM | GDP-Adv. | Q1 | 0.40% | 0.60% | 30-Apr | 8:30 AM | Chain Deflator-Adv. | Q1 | 2.40% | 2.40% | 30-Apr | 8:30 AM | Employment Cost Index | Q1 | 0.80% | 0.80% | 30-Apr | 9:45 AM | Chicago PMI | Apr | 48.5 | 48.2 | 30-Apr | 2:15 PM | FOMC Policy Statement | - | - | - | 1-May | 12:00 AM | Auto Sales | Apr | NA | 4.9M | 1-May | 12:00 AM | Truck Sales | Apr | NA | 6.2M | 1-May | 8:30 AM | Personal Income | Mar | 0.40% | 0.50% | 1-May | 8:30 AM | Personal Spending | Mar | 0.20% | 0.10% | 1-May | 8:30 AM | PCE Core Inflation | Mar | 0.10% | 0.10% | 1-May | 10:00 AM | Construction Spending | Mar | -0.50% | -0.30% | 1-May | 10:00 AM | ISM Index | Apr | 48 | 48.6 | 2-May | 8:30 AM | Average Workweek | Apr | 33.7 | 33.8 | 2-May | 8:30 AM | Hourly Earnings | Apr | 0.30% | 0.30% | 2-May | 8:30 AM | Nonfarm Payrolls | Apr | -80K | -80K | 2-May | 8:30 AM | Unemployment Rate | Apr | 5.20% | 5.10% | 2-May | 10:00 AM | Factory Orders | Mar | 0.40% | -1.30% | INTERNAL ENDORSEMENT Imagine if There Were Only 6 Numbers to
Choose from When Buying a Lottery Ticket! Wouldn’t that be great?! Of course, the less the number of choices, the more likely your chance of success, right? How many choices are there when buying and selling shares? Errmm… a LOT! Hundreds…One of the reasons I enjoy such consistent success from trading, is because I only have 6 options to choose from! Except this is even better in a way, because the lottery is pure luck… I only have 6 choices AND have a VERY good idea about which choice to make because of the insider signal | If you enjoy IDE's daily investing advice, you'll definitely be interested in checking out our sister publication, Early to Rise. Each morning, you'll get powerful wealth-building advice covering real estate, entrepreneurship, personal finance, marketing, and much more.
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