Suitably Flip

And There Was Light

And it was good.

Apologies for the unplanned hiatus.  Been in the dark ever since Irene pitched her little fit.  84 hours it took the Long Island Power Authority to switch us back on.  And 165,000 of our neighbors remain powerless for a fifth night.  (If only someone had outlined a simple way for New York to improve the "expensive and dangerously unreliable service provided by many public authorities..." *cough*).

Anyway, as soon as I figure out in whose direction I'm indignantly incensed over this, I look forward to shaking my fist thusward.

Welcome back, electrons.  Manbearpig forgive me, I'm going to sleep with every light and appliance in the house turned on for at least the rest of the week.

Revised GDPick'em

In a few minutes, we'll get a revised look at second quarter GDP growth.  Forecasters expect the piddling advance estimate of 1.3% to be further degraded to 1.1%.

What say you?

Below is a chart of GDP growth over the last two years.  It sure would take a more meaningful downward revision to keep this well-formed second-order trend intact (something closer to -2%).

I'm not going to go that far off the reservation, but considering first quarter growth was revised from 1.9% to 0.4% less than a month ago, a considerable demotion may be in the offing.

Let's plant a flag at, say... 0.8%.

Stay tuned!

Real GDP Growth (%)

Update:  1.0% on the nose.  Worse than initially measured, and more worse than the consensus forecast, but not quite as much worse as I expected.

Stock futures are fractionally lower following the report, but all eyes are on Big Ben.

Jobless Thursday

Initial unemployment claims continued to climb last week, from an upwardly revised 412,000 to 417,000.  Forecasters were looking for a decline to 400,000.

Given that the first look is now almost always adjusted upward by 3-4k (leading reasonable readers to wonder why they don't tweak the methodology, assuming the desire for accuracy trumps the desire to improve the headline rate of change), it's highly likely the real number was at least 420,000.

As noted yesterday, the markets have little use for economic news this week and stocks are continuing their data-defying surge this morning, in fevered anticipation of Bernanke's comments tomorrow.  If he disappoints the stimulus-thirsty (which I'm increasingly convinced he will), watch for carnage on Wall Street.

Update:  Looks like investors are begin to prepare for heartbreak.

Will a Slew Of Ugly Data Interrupt Market's Lusty Fedward Gaze?

Stocks are defying gravity (and the unflinchingly negative data that continues to spew from the economic news hole) lately, as investors blush in anticipation of "a gift-wrapped stimulus package from Ben Bernanke at the end of the week."

I don't know whether that's in the offing or not (my gut is highly skeptical), but there are quite a few double-dip-reinforcing (or, theoretically possibly, refuting) datapoints to be digested between now and Friday, if only the market would take notice.

One just crossed the wires, the weekly MBA Mortgage Index.  This only measures mortgage applications, so the number was expected to improve, as mortgage rates have plummeted in the volatility-fueled flight to Treasuries.  Surprise, surprise, it did not.  Instead, it swung from last week's +4.1% to a decline of -2.4%.

But we're just getting started...

At 8:30, brace for the monthly durable goods report.  Economists are looking for a 2.0% bounceback in July, from June's -1.9% contraction.  Another negative print here would should sour investors' mood a bit.

At 10 am, another look at housing prices in June.

Tomorrow, of course, is jobless Thursday.  Initial unemployment claims are expected to moderate slightly, but hold at the miserable 400,000 threshold.  And this highly volatile number loves to humiliate the forecasters.

And Friday morning will clarify for us just how much worse than the initial reading of 1.3% Q2 GDP actually was.  1.2%?  1.0%?  0.5%?  Consensus is 1.1%.

Any and all of these have the potential to come in significantly worse than expected and further lily-gild the argument that the economy has crapped out something awful.  But with Wall Street eyelashes batting so unabashedly at Chairman Bernanke, it may take more than one downside surprise from the bunch to pierce this mini Fed bubble.

Twitter Propagates Fast Than Earthquakes

This:

...might have actually happened.

(Via Gizmodo)

New Home Sales: Expectations Right On Target*

Economists had expected this morning's look at new residential sales for July to show a decline of 2,000 to 310,000, roughly half the pace typical for a healthy economy.

And sales did indeed decline by 2,000.  But...

Sales of new single-family houses in July 2011 were at a seasonally adjusted annual rate of 298,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.7 percent (±12.9%)* below the revised June rate of 300,000, but is 6.8 percent (±13.5%)* above the July 2010 estimate of 279,000.

If you get all cynical and assume that there's a systematic overstimation bias in the first reading, then we should really be comparing first readings to first readings, which suggests a much sharper drop of 12,000.  That would be a monthly decline of 3.8% (37% annualized), versus the much tamer 0.7% (8% annualized) reported.

God bless the revisions for sparing us ever seeing such unappealing numbers.

CNBC Million Dollar Portfolio Challenge - Eligible Stocks, Funds

Due to popular demand, I've put together a table of all the equities, exchange traded funds (ETFs), closed end funds, exchange traded notes, depositary receipts (ADRs), and real estate investment trusts (REITs) eligible for trading in the 2011 CNBC Million Dollar Portfolio Challenge.  Everything but the currencies.  (And I might add the currencies if there's sufficient interest.)

You can filter by country where each is listed (US, UK, or Australia) and asset class.  You can also click any name or ticker symbol to jump to the corresponding stock page at CNBC.com.

At the bottom of the table, there are links to view or download the data to Excel.

Let me hear about any suggested improvements.  I'll be continuing to roll out research features (in addition to thoughts on contest strategy, in light of the new rules) as we get closer to the first day of trading, in hopes of giving you, loyal readers, the edge to be at least as well-represented on the leaderboard and winners' circle as you have been in prior contests.

Previously:
8/21:  CNBC Million Dollar Portfolio Challenge (More Details)
8/20:  CNBC Million Dollar Portfolio Challenge (Kicks Off Sunday August 21)

Full Archive:  CNBC Portfolio Challenge 2011

Powered by Tableau

FoxNews.com Live 9-10

I was on FoxNews.com Live this morning from 9-10, discussing the GOP field, Libya, Obama, the economy, etc.

You can catch a replay at the link until 5 pm (dial the tape back to 00:00:00).

Will update with embedded video highlights if the archivists deem any of it clip-worthy.

Update:  Here's a clip.

CNBC Million Dollar Portfolio Challenge (More Details)

For answers to the most recent Bonus Bucks trivia questions, click here.

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 Registration starts today (Sunday), but not until 8 pm.

[Update:  Registration is a go.  Have at it.]

In the mean time, we have some more info about the contest and can now parse out how it compares with the previous MDPCs:

• The full list of prizes (1st: $1 million, 2nd: the Maserati, weekly: the trips).
  
  
• As noted yesterday, this contest is different from the previous ones, in that you can trade in real-time, rather than just rebalancing once per day.
  
  
• Trading will begin Monday, September 19 and will continue for 10 weeks.
  
  
• Multiple accounts are forbidden (like the previous contest, unlike two contests ago) and attempts to register more than one may result in disqualification of all accounts and portfolios.
  
  
• Like last year, each contestant can play up to 5 independent portfolios.
  
  
• Equities vs. currences: similar to last year, but now there's an international component.  Like last time, each portfolio is allocated 90% equities and 10% currencies and you can't transfer between the two accounts.  Eligible equities are those that "have a one hundred (100) day average trading volume of at least fifty thousand (50,000) shares, and which stocks must have a market capitalization of at least five hundred million U.S. Dollars (US$500,000,000), all of which UK-based Equities must be part of the FTSE 100, all of which Australia-based Equities must be part of the ASX 200, and all of which stocks and ETFs must have a price per share of at least two U.S. dollars (US$2.00), each as of the close of the markets on August 15, 2011 (the “Eligible Equities”).
  
  
• Once again, currency trading enjoys 10:1 leverage.
  
  
• No stock can represent more than 25% of your equity portfolio (unless it grew its way there from <25%).
  
  
• Bonus Bucks:  Only 3 questions per day this time, each worth $2,000.  They'll be posted at 8 pm on the eve of trading days, rather than throughout the morning, and are answerable until 4 pm the following trading day.  Come on back this way each trading day for your ready-made daily trivia answers.  (That's $30k in free money across your portfolios every day that there's no excuse for missing.)
  
  
• Winners:  Each week, the highest percentage-gaining portfolio wins the weekly getaway prize.  At the end of the 10 weeks, the single highest-gaining portfolio wins the $1 milllion; 2nd highest wins the car.  Note:  There is no 2-week post-season playoff among the 10 highest gainers + the 10 weekly winners.  Weekly winners win trips this time, not post-season bids.

And that's about it!

I'll poke around the rules a little more closely to make sure there's nothing else major that's changed, but it looks pretty straightforward (until, of course, they actually begin trading and the brand new real-time feature proceeds to cause enough hell to break loose as to make last year's technical difficulties blush).

Happy trading.  And to my crowdsourced strategy players (and other contest commentary readers, Bonus Buck-hungry visitors, etc.) from last time, if you're in the house, sound off in the comments, let us know you're here, and share any insights or thoughts you have about this go-round.

Previously:
8/20:  CNBC Million Dollar Portfolio Challenge (Kicks Off Sunday August 21)

Full Archive:  CNBC Portfolio Challenge 2011

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Need to kill some time until 4 pm?  Why not peruse last contest's archives, bookmark your source for daily Bonus Bucks trivia answers, and make with the Twitter:

Follow @FlipPidot

CNBC Million Dollar Portfolio Challenge (Kicks Off Sunday August 21)

For answers to the most recent Bonus Bucks trivia questions, click here.

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Here we go again, folks.  It's been a couple years, but it's back.

Registration starts tomorrow.  Meanwhile, you can follow the MDPC on Twitter.

Not a ton of details out there, but one significant change is that you'll now be able to trade equities in real-time, rather than just rebalancing your portfolio once a day.  Should scatter the distribution of daily results quite a bit more, which means we're going to need to get more creative.

We also know that 2nd prize is a Maserati Gran Turismo convertible (retailing for $146,300, the taxes you incur will get you behind the wheel of this fabulous car for roughly the price of a regular car).

The weekly prize is some kind of getaway package to the One&Only resort in Maldives.

Bookmark this site for your daily trivia answers (earn those Bonus Bucks), trading strategies, and contest commentary.

Nostalgic types are invited to review the archives of content from the last two contests (more than 100 lovingly handcrafted posts!).

• CNBC Portfolio Challenge (2008-09)
• CNBC Portfolio Challenge (early 2008)

And be sure to...

Follow @FlipPidot

Update:  Registration is now live and we're breaking down this year's contest tweaks and rule changes at "CNBC Million Dollar Portfolio Challenge (More Details".

JP Morgan, Goldman Slash GDP Estimates

Oof.

JP Morgan stated that the risks to its previous projection for 2.5% growth in the fourth quarter “are now very clearly to the downside,” and thus lowered its forecast for growth in that quarter to 1.0%. It also lowered its first quarter 2012 growth forecast to 0.5% from 1.5%.

“Declining energy prices should help to cushion some of the weakness in the economy, and the still-low levels of cyclically-sensitive spending could reduce the chances of getting a negative GDP quarter,” said JP Morgan’s analysts. “Nonetheless, the risks of a recession are clearly elevated.”
...
[Goldman Sachs] cut its 2011 GDP growth forecast for the U.S. to 1.7% from 1.8%, and for 2012 to 2.1% from 3.0%.

Equity futures are pointing to a drop of more than 1% 1.5% at the open.  At yesterday's close, stocks were 2%+ above last week's lows.

Jobless Thursday (With Philly, Inflation Kickers)

I'm late on this, but initial unemployment claims popped back above 400,000 last week (to 408,000, worse than the expected 400,000 even) from an upwardly revised 399,000 in the week prior.

And following on the heels of yesterday's hotter-than-expected wholesale inflation data, this morning also brought us the latest reading on retail inflation, which was much hotter than expected.  Consumer prices rose 0.5% in July (versus consensus of 0.2%), up from a decline of -0.2% in June.

With that one-two punch, we have no choice but to revisit the dreaded S word.

"I'll take Swords for $200, Alex."

Not surprisingly, stocks opened sharply lower on the news, trading down a couple percent for the first 90 minutes of the session.  Then, at 10 am, all hell broke loose.

The Philly Fed released its August business outlook survey (which we'd noted surprisngly clawed back into positive territory last month), reversing a decline that seemed to be heading back into decidedly recessionary territory.

Economists had expected to see the gauge fall from its modest level of 3.2 to an even more negligible 1.0.  Instead...

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009 (see Chart). The demand for manufactured goods, as measured by the current new orders index, paralleled the decline in the general activity index, falling 27 points. The current shipments index fell 18 points and recorded its first negative reading since September of last year. Suggesting weakening activity, indexes for inventories, unfilled orders, and delivery times were all in negative territory this month.

-30.7 is an ugly number even for a recession.  During the Great Recession, we averaged a comparably mild -21.2.  And post-9/11, we only blipped momentarily below -20.

Needless to say, the already jittery market freaked out a little harder, with the Dow selling off more than 500 points at its intraday low (though it fared better than the other major averages, as the Nasdaq and S&P 500 both fell more than 5%).

And there's still another 22 minutes 'til the closing bell...

Update:  Incidentally, If you've been following market coverage at all today, you've likely heard today's action described as the result of renewed concerns that the "economy may be slowing."  This is an astounding understatement.  Everyone's pretty certain the economy is slowing (even in comparison the hideously anemic growth most recently eked out by this "recovery").  The concern that has Wall Street drenched in red is (as illustrated so nicely in the above chart) not that the economy is "slowing" but that it's "contracting."

Unless the Philly Fed data is suddenly much less well correlated with recessions than it has been in prior decades, we seem to be either racing toward a double dip recession or possibly already enjoying one.

Observe how gentle our glide path was into recessionary levels in late 2007 as we began the "worst recession since the Great Depression."  Compare that with the absolute freefall we're seeing in 2011.  That's a trend to send shivers down investors' spines, far worse than any "concerns" of potentially "slowing" growth.

Belated: FoxNews.com Live 9-10

I was on FoxNews.com Live this morning from 9-10, discussing the GOP field, terror attacks in Israel, and the economy.

You can catch a replay at the link until 5 pm (dial the tape back to 00:00:00).

Update:  Here's a clip.

Week Kicks Off With Cruddy Economic News: Empire Manufacturing Down Again

Economists had expected the New York-area gauge of manufacturing activity to snap its two-month losing streak and jump from July's -3.76 into positive territory.

Instead....

The August Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to worsen. The general business conditions index fell four points to -7.7, its third consecutive negative reading. The new orders index also remained below zero, at -7.8, while the shipments index was positive at 3.0. The unfilled orders and inventories indexes dropped further into negative territory.

This dive below the centerline is proving regrettably less fleeting than the one we saw toward the end of 2010.  Much more of a decline would return us to levels not seen since the end of the recession.

WSJ MarketBeat reacts:

This is the first time the index has been in negative territory for three straight months since the recession. In fact, in its short history, the index has only been negative for multiple months during recessions.

That’s not to say we’re definitely in a recession or anything. But it suggests that, rather than snapping back, the economy has lost momentum as financial markets have melted down, US politicians have behaved like three-year-olds and Europe has teetered on the brink of disaster. This is not a great sign.

Consumer Confidence Plunges 7x Faster Than Expected

Economists were looking for a mild decline from 63.7 to 62.5.  Instead...

U.S. Consumer Confidence Drops to Three-Decade Low Amid Economic Headwinds

Confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month.
...
The biggest one-week slump in stocks since 2008 and the threat of default on the nation’s debt may have exacerbated consumers’ concerns as unemployment hovers above 9 percent and companies are hesitant to hire. Rising pessimism poses a risk household spending will cool further, hindering a recovery that Federal Reserve policy makers said this week was already advancing “considerably slower” than projected.
...
Estimates of 69 economists for the confidence measure ranged from 59 to 66.5, according to the Bloomberg survey. The index averaged 89 in the five years leading up to the recession that began in December 2007.

This lowest-in-a-generation consumer confidence, we are assured, is the combined result of flawed White House messaging and trauma suffered by the fragile populace from having witnessed debt ceiling negotiations.

In light of this latest empirical Carter comparison (not to mention such parallels now being reluctantly drawn even by "Democratic strategists and commentators"), I'm struck by this guy's prescient and hilariously illustrated post from May 2008.

After all, what President in the modern era does Senator Obama's agenda most resemble?

Huge expansion of the federal government?  Check.  Letting entitlement spending run wild?  Check.  "Windfall profit" taxes on oil companies?  Strong desire to meet with dictators and state terrorism sponsors?  Big doofy grin?  Check, check, and check.

Do political fashions run in 30-year cycles?  If so, then get ready for the fabulous comeback of energy crises, stagflation, high unemployment, and national malaise.

Jobless Thursday (Eighteenpeat?); Update: No!

In an hour, we'll get the most recent weekly unemployment report, expected to show initial claims jumping from 400,000 to 409,000.  (Faithful readers are also expecting last week's only-barely-into-the-4s reading to be revised up to at least 403,000.)

If expectations for the new number are even close to correct (admittedly, a large if), it will be the 18th consecutive week with initial claims above 400,000.  Maybe a dose of such familiar and digestible bad news is just what the market needs to shake off its panic and resume its sideways meandering.

Update:  A mere 395,000, down from a (shockingly) upward revised 402,000.  That might even be low enough to survive next week's upward revision without popping above 400k.  Recovery!

Stock futures are down 1%.

Bizarro Markets

U.S. debt has been downgraded for the first time in history.  Equity markets are selling off (down 1-2% in early trading) as investors flee to safer securities, namely... U.S. treasuries, pushing yields lower.

Is Tim Geithner a secret genius?  Is this why he's all but begging S&P to knock us down another notch?

US Credit Downgraded To Solid B+ AA+

United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

This head looks set to roll.

HSIF

Let's get it started.  T-minus 10 minutes until the monthly employment report.  Economists, bless their hopeful hearts, are looking for 84,000 new jobs in July, up from June's paltry 18,000.

While that would certainly be improvement, it wouldn't be anywhere near the job creation required to keep pace with population growth, so the expectations that the unemployment rate will stand pat at 9.2% also seems a tad optimistic.

My bold prediction calls for job losses of 10,000 and an unemployment rate of 9.4%.

Stay tuned!

Update:  Look at me, the cock-eyed pessimist, eating crow.

Actual payroll growth: 117,000.
Unemployment: 9.1%.

Hopefully, this will spur a little relief rally on Wall Street.  Futures are down fractionally, but that may turn around shortly.

Update:  Oh yes, futures now up smartly (nearly 1%), erasing, oh, a fifth of yesterday's freefall.

A dashes of cold water:

117,000 is still about 10,000 short of of population-growth breakeven, so when you net out people moving in and out of the active labor market (193,000 fled in July), this is still indicative of a rising unemployment rate.

Dow Suffers 9th Largest Decline In History

-512.76.

Someone go update the record book.

Everybody psyched for tomorrow's jobs report?

Jobless Thursday

Posting this early today, because I want to reiterate my call from last Thursday, that the appropriate headline (despite the official initial claims number dipping below 400,000) was "Iniitial Claims Remain Above 400,000 For 16th Consecutive Week."

That's because, at 398,000, the initial reading was under 400,000 by less than the typical weekly upward revision.  Expect to see it revised to 401,000 or 402,000 at 8:30.

(Not that we should get too hung up on 400k.  That's still way above any kind of break-even, despite a number of helpful media outlets' recent assertions to the contrary.)

As for the new data, economists expect an uptick to 405,000.  I expect something a touch worse.

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Oh but how I do hate to be such a persistent downer...  To lighten the mood, here's a monkey riding a goat.

(I'm sure there's some economic metaphor to be crafted here.)

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Update:  I know you're as shocked as I am to learn last week's number was revised up to 401,000.

On the bright side, that revision makes this week's 400,000 seem almost like a slight decline.  (Unless, of course, we recall that this number is all but certain to be revised up to 403,000 or so next week, in which case it sounds a little more like a slight increase.)

Either way, that makes it 17 weeks in a row at or above the hugely inflated ostensible break-even.

Stock futures are wallowing down about 1%.

Update:  Ah, 1%.  That was a pleasant selloff in retrospect.

Manufacturing, Non-Manufacturing Data Deteriorate

Two reports released at 10 am show economy-wide deterioration.  Factory orders for June slipped 0.8%, reversing a 0.6% gain in May (revised down from 0.8%).  And the ISM Services index fell 0.6 to 52.7.

Economists were expecting the factory orders shrinkage (which was actually slightly less dire than consensus), but the services data caught them by surprise.  The market had been looking for a slight gain to 53.7.

Stocks promptly turned negative, with the Dow on pace for its 9th consecutive down day.

Update:  We seem to have graduated from sell-off to bloodletting, with the major indexes all off more than 1%.  Joining the S&P 500, the Nasdaq has just gone negative year-to-date.  (The Dow's got to fall another 150 points to claim that distinction.)

Update:  Eesh.  Assuming it stays down, this 9th consecutive down day will mark the longest losing streak since 1978.

Carterrific!

Update:  Getting whiplash following this market today.

Belated: FoxNews.com Live 9-10

I was on FoxNews.com Live this morning from 9-10, discussing the debt ceiling deal.

You can catch a replay at the link until 5 pm (dial the tape back to 00:00:00).

 And here's a clip from the highlight reel.