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Five Things You Need to Know: Employment, Bad Loans, Bad Company?, Ford Gets Boldish, Sideways

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What you need to know (and what it means).

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Five things you need to know to stay ahead of the pack on Wall Street.

1. ADP Report

Automatic Data Processing (ADP), the payroll service which says it pays one in six U.S. workers, today debuted a new measure of employment.

  • The ADP National Employment Report says total nonfarm private employment grew 178,000 from March to April on a seasonally adjusted basis.
  • Great, but what is it?
  • The report, which is maintained by Macroeconomic Advisers, LLC, is a measure of employment based on an anonymous subset of ADP payroll data covering approximately 225,000 establishments and 14 million employees working in all 19 of the major private industrial sectors.
  • Why should we care?
  • First, ADP and Macroeconomic Advisers claim their report is a better advance indicator of the monthly change in establishment employment than available consensus forecasts, and therefore anticipates revisions to the Bureau of Labor Statistics measure.
  • Some market watchers have complained that the difficulty in forecasting the BLS number is due to adjustments that are somewhat arbitrary and perhaps even used for... (gulp)... (shhhh) political purposes.
  • Because the ADP report will come out each Wednesday before the end-of-week BLS number, discrepancies between the ADP number and the BLS number could be market-moving.




2. China Bad Loans

China's total liabilities for non-performing loans may total $900 billion.

  • Ernst & Young's annual global survey of Non-Performing Loans (NPLs) shows China's big four state banks alone have bad loans worth $358 billion, or more than twice official estimates, according to the Financial Times.
  • China's build-up of bad debt, even as the economy has been growing at rates of 9 to 10 percent, is at odds with the survey's broader finding that the global NPL position improved.
  • "With the exception of China, every market covered [by Ernst & Young] in the 2004 report has witnessed a reduction in its level of NPLs written before 1997," the report says.
  • What's that you say? Sounds like a personal problem, huh? Maybe, unless you happen to be one of a horde of foreign investors who have sunk billions of dollars into Chinese lending institutions through recent public offerings.
  • U.S. financial institutions such as Bank of America, Citigroup, J.P. MorganChase, Merrill Lynch, Morgan Stanley and others have invested billions of dollars in the Chinese banking sector.
  • But we're sure they probably know what they're doing.



3. Bad Company? Not anymore. Feel Like Making Loans.

The Kamakura Corporation's monthly global index of troubled companies in April reached 5.5%, its lowest level since the index was begun in 1990.

  • Kamakura Corp. provides risk management software and default probabilities and analysis.
  • Kamakura's monthly global index of troubled companies defines a troubled company as a company whose default probability is in excess of 1%.
  • The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.
  • The all time high of the index was 28% in September, 2001.
  • The April record follows March's record. According to Kamakura, the index means credit conditions in April were better than at any time in the last 16 years.




4. Ford: Built Focus Group Tough

Ford Motor (F) is turning to what it calls a "do-or-die marketing strategy" during one of America's most-watched television shows - American Idol - in an effort to show consumers it has been reinvented.

  • The campaign comes after four months of work by Ford strategists to define its target market. In other words, 16 weeks of focus groups.
  • The strategy reportedly targets values, attitudes and emotion rather than age and other demographics, and it features conventional media as well as the Internet.
  • The marketing campaign features a new song by Grammy-winning recording artist Kelly Clarkson and its commercials are supposed to show active people who value family time, leisure and the outdoors, as opposed to lazy people who sit on the couch ignoring their families and who sometimes start forest fires as a cry for help.
  • The marketing strategy is called... are you ready?.... better sit down for this... "Bold Moves."
  • To capitalize on the "Bold Moves" slogan, company officials on Tuesday said they will take the uniquely American car manufacturer's "bold move" of reducing prices on some models.



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