Everyone is down on the GDP all of a sudden.
As I related Wednesday – the GDP, like the Beige Book report (which we expected to be poor) is made up of many factors like Trade Balance (same), Government Spending (up due to census), Personal Consumption (earnings reports indicate up), Residential Investment (HD and LOW indicate up), Corporate Earnings (way up),etc. The biggest etcetera is Inventories and they are a major wildcard. As near as I can tell, April was a very enthusiastic month and we began May with the “flash crash” but that was shaken off so I have no reason to think orders didn’t continue to outpace inventory through mid-may at least.
We did, as we discussed, get the best Beige Book in 2 years in early June so I’ve gotta go with expecting two months of inventory builds that trail off sharply as merchandise went unsold in early June as the market collapsed and even the top 10% stopped shopping for a couple of days. Still, it seems to me that that was too late in the month to knock GDP below 2.7% and I think we still have an excellent shot at 3%.
We’ll find out shortly but Asia didn’t wait and had a pity party this morning with the Nikkei giving up all of the week’s gains, back at 9,537 so I’m still loving EWJ if we head higer but, if not, look for the Dow to begin filling that gap! The Hang Seng was choppy but held 21,000 and the Shanghai can afford to take a break at 2,637. India continues to be our top global concern as the Bombay Sensex continues to move to test the rising 50 dma as they fall to 17,868 and it looks like they’ll meet up next week in the 17,600s and that will be a very critical test.
Samsung knocked the ball out of the park with an 83% jump to record profits on amazingly strong memory chip sales. We can probably thank 64-Gig Smartphones and IPads for much of that gain but, holy cow! Net income climbed to 4,280,000,000,000 – too bad that was Won ($3.6Bn) but not bad considering our own chip giant, INTC, only hit $2.4Bn last Q. Despite lower chip prices, revenue was up 17% and I’ve already mentioned that Samsung has pledged $20Bn to become the World’s #1 solar power provider so you’ve gotta love these guys – unlike US companies, they “get” Capitalism and the concept…
