Today was the big one. Say what you want about yesterday’s rally, the reaction to this morning’s 2Q GDP number should be expected to influence trading going forward.
Now, I’m going to let TradeMaster Jason Cimpl’s morning commentary to his traders provide the in-depth analysis to the GDP number:
Second quarter annualized rate GDP was reported at -1.0%, compared to the consensus of -1.5%.
First quarter GDP was revised lower to a 6.4% decline from the previous reading of a decline of 5.5%. Personal consumption fell 1.2% (the consensus had been 0.5%).
This market might be crazy enough to ignore the downward revision from the previous quarter, but how can they possibly brush off that personal consumption reading?
Personal consumption is the largest portion of GDP. This number should have investors concerned.
Volume numbers today will be a big tell if the street really likes the GDP figures. At the end of the day, GDP is a lagging indicator, so don’t expect that today is the game changer.
He’s got his Friday video online where he’ll do a quick recap of the market for the week and more importantly, provide guidance on market direction and action for the coming week. Click here to watch Jason’s video analysis.
*****Deutsche Bank (NYSE:DB) CEO Josef Ackerman says "The crisis is not over." He told Bloomberg that "[b]ad loans are the next wave. Banks that have fared relatively well so far will also be affected by this."
As evidence, problem loans at Deutsche Bank rose 44% on the last quarter. Deutsche Banks has raised its loss reserves to $1.4 billion and also reduced its balance sheet and risk-taking.
*****I continue to view oil as a critical leading indicator for global economic recovery. So long as oil prices remain strong, investors are clearly ignoring current demand statistics and focusing instead on future demand and slack production growth.
For instance, Europe’s third largest oil company, Total SA (NYSE:TOT) reported that production fell 7.3% in its 2nd quarter. That puts Total’s production back to year 2000 levels.
The reason is obvious: demand is down, and Total, like most oil companies, is cutting back on investment in new production because prices are down.
Despite a slight rise in production, Chevron (NYSE:CVX) reported a 51% drop in revenues. It would seem likely that the revenue shortfall will affect Chevron’s investments in new production, too.
The big question, though, is if investors will shift their focus to current demand numbers. At some point, declining profitability and continuing economic weakness should bring oil prices down.
*****It’s pretty clear now that trends like weak GDP, weak demand for oil, rising unemployment we’ve seen emerging from the financial crisis and recovery will be with us for a long time.
Clearly, these conditions will have a profound effect on your investments in the months and years ahead.
And because many of these conditions are a direct result of government bailouts, I’m calling the condition Managed America.
We’re hosting a video conference to look forward to investing strategies for the remainder of 2009 and beyond, and to explore my concept of Managed America and how you can still make profitable investments. The U.S. economy has changed and investors need to understand the changes in order to make the best investments.
The Managed America video conference will air on August 10, 2009 at 6:00 P.M. You can register for this important event when you click HERE.