June 14, 2010, 08:00 EST [img]http://www.joe-duarte.com/images/line_main_top_03.gif[/img] Dr. Joe Duarte's Market I.Q. [img]http://www.joe-duarte.com/images/line_main_top_05.gif[/img] [img]http://www.joe-duarte.com/images/line_main_top_07.gif[/img] [img]http://www.joe-duarte.com/images/000.gif[/img]
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Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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University Town Shows Relative Strength During Tough Economy
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[img]http://www.joe-duarte.com/images/pic_04.gif[/img] What's Hot Today:
U.S. investors may be ready to reverse course as the S & P tries to form a W bottom. The 1092-1107 trading range is crucial as the 20, 50, and 200-day moving averages are all clustered in this range. A break above it would be bullish for stocks.
- the 4-Week Bill Announcement 11:00 AM ET
- 3-Month Bill Auction 11:30 AM ET
- 6-Month Bill Auction 11:30 AM ET
Rising violence in Eurasia. According to The Wall Street Journal: "More than 75,000 Uzbek refugees have fled the rising ethnic violence in neighboring Kyrgyzstan, officials said Sunday, amid reports of Kyrgyz mobs torching Uzbek villages and slaughtering their residents."
"Euro" risk remains highest for French and German banks. According to The Wall Street Journal: "French and German banks continued to hold the greatest exposure to euro-zone countries facing market pressures at the end of last year, according to the Bank for International Settlements, underscoring their interest in restoring investor confidence in the region."
Home construction surge tied to government program. According to Bloomberg: U.S. home builders "are on a tight deadline to finish houses by the end of June so purchasers can get a federal tax credit of as much as $8,000. Buyers had to sign a contract by April 30 and must complete the transaction by July 1 to qualify. That’s speeding up a construction process that for some builders can take five to six months." The implication is not lost. Once this blows over, we may have a major pullback in the housing sector.
Asian exporters worry about European economy's problems. According to The Wall Street Journal: "Economic woes in Europe are already digging into the profits of Asia's manufacturers. The worry is that the pain will spread more broadly if European demand for Asian exports falters." [img]http://www.joe-duarte.com/images/000.gif[/img]
[img]http://www.joe-duarte.com/images/pic_04.gif[/img] University Town Shows Relative Strength During Tough Economy [img]http://www.joe-duarte.com/images/blok_rub_top.gif[/img] Texas A & M Keeps College Station Together During Recession [img]http://www.joe-duarte.com/images/blok_rub_bot.gif[/img]
It's been a year since we've been to College Station, Texas. And although there are changes, they are subtle and within the context of a small city that, despite a troubled economy, continues to hold up.
On the way into town, on Old San Antonio Road, off of I-45 South, we saw several oil derricks moving at a good clip. We hadn't seen those oil fields working in three years, even when oil was at $150 per barrel. That's interesting in and of itself, as it signals that there is an increasingly tight supply, or perhaps demand that is not being reported. That could be a sign that some shift in the economy, either strength or weakness lies ahead.
As we drove into town on Thursday evening, it was clear that little had changed on the main drag, University Avenue, which starts to get busy starting at the exit from Texas Highway 5. That's where the Scott & White Hospital clinics stand on one side of the street, and the restaurants and hotels start on both sides of the street for several miles until you hit Texas A & M University, home of the George H.W. Bush library.
The usual mix of casual dining names and hotels dot the landscape, starting with Texas Roadhouse (Nasdaq: TXRH), Starbucks (Nasdaq: SBUX), and Darden Inc.'s (NYSE: DRI) Red Lobster and including local and regional names such as Fish Daddy's Grill, and Mc Allister's Deli. A personal favorite, Abuelo's Mexican Food Embassy also makes an appearance as does TGI Friday's.
The parking lots were all full in the evening, on a Thursday, and our Friday night drive-by showed the same for Texas Roadhouse and Red Lobster as well as good showings at meal times for most of the names. We actually dined at TGI Friday's, Abuelo's, and Fish Daddy's and Mc Allister's as of this writing and found that although prime hours, lunch and dinner times were fairly well attended, there was little follow through in the off hours. The pattern was all similar in all the places. That's different than last year.
Hotels showed fairly good occupancy over the weekend, as several junior sport events: basketball, tennis, and baseball tournaments all hit the city simultaneously.
Our conversation with the shift supervisor of the Hilton on University Avenue confirmed most of what we observed. Business, at least in this strip of the town is "always good" with "A & M" bringing in "research money" and convention business to the city. The Hilton is well positioned, being the only "full service" hotel in town. It hosts more conventions, and has revolving business with the local "fireman's school" holding classes here. It's also a fairly good upscale restaurant, bringing in that kind of business at night.
The supervisor told us that this part of town has been little hit by the recession, but didn't really know why the strip mall accross the street was empty except for the liquor store and an upscale eatery accross the street called "The Republic." Our drive bys "The Republic" confirmed the supervisor's notion, as the place was busy every night.
As we looked through the local news, we noted that a big deal is being made of the University president's first year in office. R. Bowen Loftin has been in office for a year and has been cutting costs and jobs. Apparently, he's done a good job of it, by being up front with people and taking their concerns into account as he goes about his business. Mr. Loftin, according to the local news came into office facing a $25 million cut in state funding and is facing another significant cut (10%) starting in 2011.
On the political front, this area seems to be moving right as is a fair amount of the country, especially in the South and Southwest. According to The Eagle.com: "Texas A&M is implementing reforms pitched by a conservative think tank that advocates holding tenured professors more accountable, viewing students like customers and universities like businesses, and reining in spending to become more efficient. "
This is an interesting list of recommendations that we thought would be worth having our readers peruse:
"1. Measure teaching efficiency and effectiveness and publicly recognize extraordinary teachúers
2. Implement a voluntary program that gives cash bonuses to instructors based on student evaluations.
3. Split teaching and research budgets.
4. Require evidence of teaching skill for tenure.
5. Use "results-based" contracts with students to measure quality.
6. Put state funding directly into the hands of students.
7. Create results-based accrediting alternatives."
To be sure, it's a conservative agenda, as it was put together by "The Texas Public Policy Foundation -- whose 14 board members have collectively given more than $1.4 million to Gov. Rick Perry's campaign fund." Yet, it's tangible, and seems to be a sign of what we're seeing in this small town, little growth, but little attrition. Instead the aura of little change is somewhat comforting in this day and age.
Conclusion
The city of College Station seems to be in a time warp. Small businesses, especially restaurant francises, mostly of the low risk type, seem to be holding up through this economy. And they are doing better here than the same brands in places we've visited over the last twelve months.
The university's president is firing people, cutting fat, and implementing what seems to be a no-nonsense approach to dealing with tenured faculties, and people seem to like him.
The one big hotel in town makes money by being a hub, and by executing its well honed business model and by capitalizing on its name Hilton. What is startling is how no one here seems to care about Hilton's debt issues or even Paris Hilton.
And the same number of people that we saw last year coming to the city for junior sporting events seems to be here again this year, doing the same stuff they did last year, eating at restaurants, staying at hotels, and going about their business.
It's mind boggling for now. But maybe it's a sign that maybe other places in America who stick to basics could gain back some of their luster, or even some of what they've lost lately. Small remains a good business model, for cities, for businesses, and maybe for families too.
Interesting times we live in.
We'll be on Twitter some time today before the market closes with some updated comments.
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[img]http://www.joe-duarte.com/images/pic_05.gif[/img] Market Moves S & P SPDR ETF (NYSE: SPY) On Verge Of Key Bullish Reversal
The S & P SPDR ETF (NYSE: SPY) has been improving of late and could return to its bullish trend soon.
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Chart Courtesy of StockCharts.com
The W bottom on the S & P 500 that we've been watching as it potentially develops got another boost on Friday. The S & P 500 is now straddling its 20-day moving average, and is within reach of its 50 and 200 day lines. This is the context of a huge amount of bearish opinion and several days of very heavy up volume versus falling volume in stocks, which is usually a sign of strong momentum.
More important, the S & P 500 has made a new low while momentum oscillators such as the MACD and RSI (see SPY chart) have not. This is usually a bullish divergence, and may be the elusive signal that turns the trend on the current correction.
To be sure, there is no guarantee that this is going to be a new bull run to new highs. But is does suggest with some degree of reliability that we may have seen the trading bottom for the next few days to weeks.
If the market continues to hold up, time will be on the side of the bulls, as more investors may consider taking a chance on buying stocks. When enough momentum builds, prices follow.
We are now along the way in this process. It may well fail, but it's not a good idea to deny that it's happening.
