Housing Bottom: TOL Reports Tomorrow

Stocks are down this morning after a "surprise" drop in new housing starts and a fall in new building permit applications. This shouldn’t really be a surprise. After all, we are in a recovering economy, and that means progress will come in fits and starts. And since housing was the underlying cause of the last run-up and a major contributor to the market slide, there should be no question that we’ll see "surprises" like this going forward.

Gains on USO, FEED, DRYS, and Update on GHM

Fed Chief Ben Bernanke has his hands full. He’s got enough balls in the air to keep an octopus busy. Consider his prime directives: raise money and keep interest rates low. These are diametrically opposed goals. 
If you’re selling Treasury bonds, the yield is your bribe. The Fed has to offer buyers an incentive to buy the bonds, thereby lending the government money. So, the Fed pays interest to the bondholder.

Rising Oil and Gas Prices During a Recession

You know over the course of the past few months I’ve not held Wall Street or the banking executives in high regard. I hold them almost – that’s almost – singularly accountable for our current recession (Uncle Sam and private citizens who borrowed too much are to blame as well), but the government is beginning to really stick its nose too far. For example, today’s headlines (those not about whether Nancy Pelosi knew about torture and when she knew it) are consumed with government pushing itself on private industry, most notably with the pressure on Bank of America (NYSE:BAC) to change its board.

USO, FEED Deliver: Next Up is GHM

The selling got serious yesterday. But once again, as TradeMaster technical analyst Jason Cimpl forecast, the dip was a buying opportunity. Stocks are up this morning as if nothing happened… 
But of course, something did happen. Cracks in the rally are beginning to show. And economic data is starting to weaken. Consider this morning’s Producer Price Index (PPI). This popular measure of inflation on the wholesale level came in stronger than expected. Prices for food are ticking upward.

GHM Up 65%

Oil is above $60 a barrel. Investors are buying on the expectation that the end of the recession is in sight. And hopefully, Daily Profit readers are benefiting via my recommendation of oil services company Graham Corp. (AMEX:GHM). Graham is breaking above $15 a share today. It’s now up 65% for those who have been following me for a while.

BAC and Banks Lead One Week Gains

The "Stress Test rally" didn’t last long. Bank stocks had a good day Friday. In fact, they had a good week. Bank of America (NYSE:BAC), for instance, went from $8.70 to $14.17, a +62.8% gain. With that type of one-week gain, it’s not too surprising that banks backed off today as investors look to take profits.

SOLF Delivers Gains

The headline reads "Bank Stress Tests Lifts Clouds of Uncertainty." And bank stocks are rallying. Regional bank Fifth Third Bancorp (Nasdaq:FITB) is up 40% in the early going on the news that it needs to raise $1.1 billion.  
In total, the government’s stress tests recommended that banks raise $75 billion to withstand further potential losses. I’m not sure how to reconcile the stress tests results with the IMF report on bank losses that was released in April.

Bank Stress Test Results

The Treasury’s stress tests are now, officially, a joke … 
First, the outcome looked as if all banks would need to raise capital. Then it was reduced to just three. Now it "might" be "about 10" of the 16 banks subjected to the Treasury’s toothless stress tests that may need to raise additional capital to withstand further weakness in the economy. 
And the report isn’t even supposed to be out until Thursday. The Obama administration is doing its level best to make sure the market is perfectly prepared for the results of the stress tests. 

What will full employment look like?

Last week, the Baltimore Sun laid off 61 employees. I heard that a couple reporters were actually called on the phone while they were sitting in the press box covering an Orioles game and told they were no longer Sun reporters. 
It’s no secret that the newspaper biz has gotten tough. The Sun’s parent, the Tribune Company, filed for bankruptcy protection in December of 2008 after its chairman, Sam Zell, took the company private. Analysts knew he was loading too much debt on the company, but the decline in advertising revenues at newspaper was the nail in the Tribune’s coffin.