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Five Things You Need to Know: Employment (yawn), Toll Bros. (Hemingway pun omitted upon request), Also Other Stuff


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


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

1. Employment (yawn)

Sorry but after the new private data that was introduced this past Wednesday by Automatic Data Processing (ADP) and Macroeconomic Advisers, LLC, we just can't seem to muster any enthusiasm for the government's Friday employment data.

  • Judging from the stock market futures following the report, we are alone in our lack of enthusiasm.
  • Futures spiked higher on news that the economy added fewer jobs than anticipated last month.
  • It was the smallest increase in employment since October.
  • Some see that as a sign the Fed will pause their rate hikes after one more 25 basis point raise next month.
  • Oddly, that is precisely what Fed chairman Ben Bernanke said the Fed would do just last week.
  • Minyanville Professor Scott Reamer noted that "the replacement of existing workers needs a 200K +/- print so this (138k) is clearly under employment in any respect."
  • "271K additions were due to the birth/death model. That makes 692K reported adds to payrolls and 329K (48%) of those have been birth/death adds."

2. Toll Bros. (Hemingway pun omitted upon request)

Toll Brothers (TOL) said fiscal second-quarter orders fell 33% thanks to a "temporary" housing glut.

  • It's spring, and that means one thing! No, not that thing. Let's start over.
  • It's spring, and that means one thing other than that thing you thought of first: It's home selling season!
  • Spring is traditionally the busiest time for selling homes in the U.S. market, but rising mortgage rates and record prices have reduced demand, according to recent reports from homebuilders including Hovnanian and Toll Brothers. But let's put a more positive spin on it.
  • "We believe the excess supply on the market is a short-term phenomenon,'' Robert Toll, the company's chairman and chief executive officer, said in a company statement. There, that's better!
  • Wait, there's more. "Speculative buyers are no longer fueling demand; instead they're putting the homes they've recently acquired back on the market or are canceling contracts in mid-construction," Toll said. Hmm, a bit more difficult to put a positive spin on that one... unless you happen to be Wall Street Anti-Negativity Positive Man!
  • We asked Wall Street Anti-Negativity Positive Gravity Man to parse that last statement from Toll for us. You know, make it happy, we said.
  • "If one thinks of homes like stocks, not that they are, but just, you know, if one thinks of them that way, then one could say that what we have here is simply a case where Toll Brothers homes, which have an average price of about $700,000, are simply moving from weak, speculative hands into stronger hands," Wall Street Anti-Negativity Positive Gravity Man said.
  • "That's actually bullish for Toll Brothers longer-term," Wall Street Anti-Negativity Positive Gravity Man said, "because speculators, whom we refer to as "fast money," have a tendency to speculate while the strong holders provide a better foundation for higher prices down the road."

3. Old Yeller vs. Demand Curve

Anglogold Ashanti (AU) more than doubled its earnings in the first three months of 2006, but noted something very interesting in discussing future gold expectations...

  • With gold this morning making another 25-year high, Anglogld Ashanti (AU) provided a positive background for the metal with comments during its first quarter earnings report.
  • The South African mining group posted a 110% rise in adjusted earnings to $86m in the first three months of the year.
  • AU said the gold market was in a "sustained positive cycle."
  • The company also noted that demand from banks looking to diversify their holdings helped boost demand.
  • However, the company noted what economists always warn about - but commodities investors sometimes forget - higher prices is dampening demand.
  • "Physical demand for gold has begun to fall in the last two quarters - especially in the jewelery sector - because of the high gold spot price," the company noted.

4. Asian Single Currency

Korea, China and Japan have agreed to start joint research on introducing an Asian single currency comparable to the euro.

  • The three countries will set up a research team staffed by government officials and experts at public and private research institutes to come up with a framework for the Asian currency unit (ACU) by the end of the year.
  • This is the first time governments have decided to make concrete efforts toward the launch of the ACU.
  • Ok, so what does this mean?
  • Given the political "sensitivities" involved (read: U.S. dollar), the Asian Development Bank stresses that an ACU, which would be made up of a basket of currencies, would not be traded and would simply be an "indicator of the stability" of participating currencies.
  • But what if? What if the ACU did trade like the euro? Wouldn't that potentially harm the U.S. dollar? Of course.
  • Meanwhile, Timothy Adams, U.S. Treasury under-secretary for international affairs, told the International Herald Tribune "We don't oppose it. I have no concerns about this issue."
  • Remember when your best friend in college asked you if he could start dating your ex-girlfriend a couple of weeks after you broke up? You talked a good game didn't you? Might have put on a brace face, said something like, "I don't oppose it. I have no concerns about this issue."
  • Of course, some skeptics (there's always one) question the viability of an ACU in any form for the same reasons some questioned (and continue to question) the viability of the Euro: too many different levels of economic development in the region and a lack of economic transfer systems between areas that are doing well and those doing poorly.

5. Hey there, little filly

While tomorrow is the Kentucky Derby, the most exciting two minutes in sports, today is Kentucky Oaks Day, a one mile and one-eighth race for three-year-old fillies, the sister companion to the Kentucky Derby.

  • The first Kentucky Oaks race was held on Wednesday, May 19, 1875.
  • The race was one of four stakes races created by Churchill Downs founder M. Lewis Clark.
  • The other three races were the Kentucky Derby, the Clark Handicap, and the Falls City Handicap, all of which are still held at Churchill Downs even today.
  • Like the Derby, the Kentucky Oaks has been held each year since 1875 without interruption.
  • While there is not an official "filly triple crown" the Oaks is the first of three races that make up an unofficial triple crown. The other two races are the Black-Eyed Susan, traditionally held the Friday before the Preakness, and the Acorn Stakes, traditionally held the Friday before the Belmont Stakes.


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