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Five Things You Need to Know: Retail Sales; Stocks vs. Economy?; Countrywide Barometer; Housing Problems Now "Well-Spread"; NASCAR Immunization Recommended for Southern Travelers


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


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Retail Sales

September same-store sales this morning came in weaker than expected, growing at their slowest pace in three years.

  • The Thomson Financial Same Store Sales Index rose 1.4% in September, the weakest gain since August 2004's 1.2% gain, according to the Wall Street Journal.
  • Here's the run down as of 9 a.m.:
    - 34 total reports
    - 20 or 59% missed
    - 3 on plan
    - 11 beat
  • Of the the ones that beat , Costco (COST) was the biggest, the rest were mostly smaller, niche players.
  • Target (TGT), Wal-Mart (WMT) and Kohl's (KSS) missed.
  • According to Minyanville's Scott Reamer, if you look at the names that missed based on revenues, given the fact that WMT and TGT account for such a large portion, then what you have is a clear slowdown.

2. Stocks vs. Economy?

The obvious question raised by today's Number One is this: If the economy is clearly slowing, why are retail stocks ripping higher today?

  • The short answer is that if all one needed to do to be a good trader or investor is watch economic news trickling out from the previous month or quarter, then everyone would sit home and just play the stock market all day instead of working a real job.
  • The longer answer is that not only are stocks and the economy not very correlated, but rising stocks and a rising stock market really don't have very much to do with economic health.
  • After all, was the 87% rise in the Nasdaq Composite in 1999 saying anything important about the health of the economic conditions in which the companies listed there were operating?
  • But the reality of market speculation is not attached to economic fundamentals.
  • That is why Scott Reamer can be correct when he says the same-store sales numbers clearly show slowing consumption, and it's why Minyanville Professor Jeff Macke can at the same time be right in saying some of these retail stocks look like buys here.

3. Countrywide Barometer

Countrywide Financial (CFC) said late payments on loans handled by its servicing business rose, foreclosures doubled, and originations fell 44 percent as housing sales slowed.

  • Delinquencies as a percentage of unpaid principal increased to 5.85% last month from 4.04% a year earlier, and were 0.8% higher than in August.
  • Foreclosures rose to 1.27% from 0.51% , the company said.
  • However, the company said that about half of the increase in September delinquencies above August were due due to the fact there were four fewer business days, Countrywide said.
  • Of note is that CFC said 89% of its production in September came through its own bank - that's about three times year-earlier levels when the company relied on independent mortgage brokers to make many of its loans, Bloomberg reported.
  • Because CFC is the country's largest mortgage lender, results from the company's mortgage servicing business are viewed as a reasonable barometer for the overall health of the industry.

4. Housing Problems Now "Well-Spread"

An interesting article in the Wall Street Journal this morning looks at how widespread subprime lending practices were from 2004 to 2006.

  • From 2004 to 2006, more than 2,500 banks, thrifts, credit unions and mortgage companies made $1.5 trillion worth of high interest rates loans, according to the Journal's analysis of more than 130 million home loans made over the past decade.
  • High-rate mortgages accounted for nearly 30% of total home loans last year.
  • Over the past three years, 10.3 million high-rate loans were made out of a total of 43.6 million.
  • High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash, the analysis found.
  • "The Journal's findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography. From investors hoping to strike it rich by speculating on condominiums to the working poor chasing the homeownership dream, subprime loans burrowed into the heart of the American financial system -- and now are bringing deepening woe."
  • This probably explains why usage of the phrase "well-contained" has dried up so quickly.
  • Meanwhile, the problems in housing are now spreading from buyers to renters, according to new Boston Fed President Eric Rosengren.
  • Rosengren said yesterday, that the high number of foreclosures on multifamily homes in parts of Massachusetts "highlights a potentially serious problem for tenants, who may not have known that the owner might be in a precarious financial position," the Journal reported in a separate story.

5. NASCAR Immunization Recommended for Southern Travelers

Congressional aides about to set out on a public health fact-finding trip to two NASCAR races were advised to get a range of vaccines before attending, including hepatitis A, hepatitis B, tetanus, diphtheria and influenza, before attending the events the Charlotte Observer reported.

  • The House Homeland Security Committee planned the fact-finding trip about public health preparedness at mass gatherings, and decided to conduct the research at two of the nation's most heavily attended sporting events, NASCAR's Bank of America 500 event this weekend at Lowe's Motor Speedway in Charlotte, and the UAW-Ford 500 last weekend in Talladega.
  • Minyanville visited the Center for Disease Control Health Information Website to see how the disease-spreading NASCAR fans in Alabama and North Carolina compare to other dangerous travel destinations.

CDC Health Information and Recommended Vaccines for Travelers

CDC Health Information and Recommended Vaccines for Travelers

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