November 14, 2002 6:15 PM
Tech Near A Top - Weill Hits Rock Bottom - Companies Stuck in The Middle
Retail sales dropped slightly in October. However, excluding autos, which declined by 1.9%, sales were actually up smartly (+0.7%). (Excel) Yes, those optimistic analysts that didn’t want to back out autos in September, or when auto sales made overall sales look better, did a flip flop today; the norm seems to be that autos are given weight when then they are strong and ignored when they are soft. Nevertheless, that consumer confidence crashed in October and retail sales didn’t budge is surprising, and this could bode well for Christmas sales. At minimum, and regardless of how sustainable the trend might be, consumers are still spending right now.
Also impacting trade today was news that HSBC Holdings is taking over Household International for $13 billion, and weekly jobless claims dropped by 8,000 (bringing the 4-week moving average below 400K). Thankfully, both of these developments helped take some attention away from the incessant debate on the impact, if any, of last weeks FOMC meeting and this weeks Greenspan speech.
Tech stocks led today’s charge, with the Nasdaq tacking on 50 points (+3.69%). The Nasdaq is now 15 points from reaching its former intraday high of 1426 (Aug 22). The last time the Nasdaq tried to topple this level buyers quickly vanished (Nov 6 - 1,419.04).
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With today’s events bears seem to have fallen behind the curve. To be sure, yesterday everyone was arguing (hoping), that retail sales would soon pick up. By contrast, after today’s retail data the consensus is that consumer will continue to hold on (benefiting from last weeks Fed cut, of course). In sum, it is the bears, which are clearly in the minority, that have been left wondering whether or not sales will soon slow down.
Due out tomorrow is November consumer confidence (Mich), producer prices, and Industrial production – Capacity utilization. Tomorrow is also options expiration.
Did Weill have anything to gain by telling Grubman to ‘Take a Fresh Look At AT&T’?
The most recent developments in the Citigroup/Grubman fiasco are as follows:
-- Grubman upgraded AT&T after Sandy Weill told him to take a ‘fresh look’ at the stock.
-- Weill pulled a few strings to get Grubman’s kids into a high class nursery school.
-- Grubman previously said he upgraded the stock to help out with Weill with his boardroom struggles. He now claims otherwise.
Suffice it to say, in a perfect world Citigroup and other Wall Street banks would be forced to pay back billions of dollars to duped investors, Sandy Weill would be forced to take a lie detector test on national television, and Jack Grubman would be sitting behind bars. Incidentally, in a perfect world Robert Rubin would also be questioned about his phone calls to try and influence Enron’s credit rating, but this is another matter altogether. Instead, Wall Street banks will likely settle their suits out of court for a fraction of the money they stole, and Mr. Grubman, public humiliation aside, is not likely to be prosecuted. As for Weill, who previously testified that he barely knew Jack Grubman, think about it:
What is Sandy Weill doing walking around talking to strangers about stocks at the height of the bull market?
A final verdict on the new ‘global settlement’, being negotiated between Wall Street, Spitzer and the SEC, is supposed to be announced next week. Instead of breaking up research and investment banking departments the plan is to put a single guard at each of the 10 firms under investigation. Question: when Weill uses Citigroup funds to put the guards’ children into an exclusive nursery school is he breaking the law or just being a nice guy?
Sluggish Growth Not Enough Reason For Companies To Spend
News this week that 60% of ‘America’s leading CEOs’ plan to lay off workers next year was barely covered by the media. Instead, as the BTR survey was released, it was optimistic words from Oracle and an ‘increased backlog’ sound bite from Cisco’s CEO that caught investor’s attention.
Point being, while today’s retail sales data was shocking – very shocking! – it will take many more reports like this to delude companies into hiring more workers/spending more money. With this in mind, so long as the U.S. economy is stuck between recovery and retrenchment surveys of 150 CEOs should be regarded as more important than the words of a handful of tech CEOs. As for the optimistic words being spouted by tech CEOs -- how many of those CEOs expecting a pick-up in business are they themselves planning to spend more money and/or expand their workforce? Not many:
‘Hold on tight – the recovery is gaining momentum! By the way, we are planning to spend less money next year and lay off 20% of our workforce...’
The reality is that Greenspan, Ferguson, and other Fed members can not conjure up convincing arguments on why corporate America needs to spend more money.
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