Oil Prices and Spending, Part II (ge)
Oil prices are back to moving higher as Kuwait has suspended exports due to sandstorms. Also underlying oil's move is March consumer spending numbers. While the headline retail sales number was up 0.4% vs. expectations of 0.5%, sales gains excluding gas and autos were better than expected.
We've discussed the relationship between spending and oil prices. The market clearly likes the implication that higher oil prices have not impacted spending much.
Also helping the stock market today are the 1Q earnings results from JP Morgan (NYSE:JPM). The bank beat earnings expectations handily. JP Morgan recorded a $5.56 billion profit in the 1st quarter. The biggest driver was investment banking. But the credit card division turned a profit too, which is another positive sign for the health of the consumer.
Earnings were also helped by a $2 billion reduction in loan loss reserves from the credit card division. This money gets treated as a profit, even though CEO Jamie Dimon acknowledges that it's not "quality" earnings because it doesn't represent growth.
$7 billion of 2010's $17 billion profit came from this type of non-quality earnings. JP Morgan had to add $1.1 billion to its mortgage loan loss reserves.
*****As if this week's earnings reports aren't enough, we'll get the last round of inflation data on Thursday and Friday.
*****There was a report circulating that General Electric (NSYE:GE) was going to return its 2010 tax refund to the Treasury. Tax refund, you say? Well, not exactly. GE claims it paid taxes after the New York Times reported the company did not.
GE acknowledges it paid a very small tax bill in 2010 due to losses at GE Capital. The report that GE was returning a refund is a hoax.
Still, it's completely absurd the way foreign earnings are dealt with in terms of taxation. And while Congress and the President grapple with cutting Medicare and Medicaid and raising taxes (as the administration wants), why not actually deal with the corporate tax issue?
And while they're at it, let's have a capital repatriation holiday and offer up lower rates for profits held in foreign currency to come home. Then let's close that tax loophole as well.
*****The administration appears to be on the verge of joining Republican calls for Medicare and Medicaid spending cuts. While many retirees will oppose the plan, something needs to be done to cut spending.
Like it or not, it's clear that Americans must take more responsibility for retirement expenses. The government safety net may not be there for long.
*****TradeMaster Daily Stock Alerts' Jason Cimpl led his readers to yet another impressive profit yesterday. The stock was a small specialty retailer, Joe's Jeans (Nasdaq:JOEZ). Jason recommended the stock at $0.85. And TradeMaster Daily Stock Alerts members sold the stock Monday at $1.18 for a sweet 40% gain.
Jason closed the trade ahead of Joe's earnings report. And the stock was down big yesterday morning. But I understand Jason may get back into Joe's on the earnings weakness for the next move higher.
In the meantime, his readers have another position that's up 21% currently. Jason thinks the stock has another 50% to go. You can get details HERE.
