GDP and Unemployment Claims

GDP rose to 2.5% from the forecast of 2.2% and the Unemployment Claims declined 10,000 from forecasted rise of 4,000. My take on this number is that it is essentially a compilation of old stale data. But judging by the way the market is reacting to this number, it shows that the market is willing to take any data that contradicts a Recession scenario. But if you heed what Ben Bernake said yesterday in front of Congress, you will note that these numbers are highly inflationary and does not bode well for rate cuts in the near term. Once the market digests this number you will see continued weakness in the market. These numbers essentially are a non event, nothing really exciting. Let's see how much the markets can advance today which should put us into the overbought territory rather quickly again, setting us up for another leg down.

Inflationary pressure is what is important and these data suggest that further pressures from inflation remains. Oil is up above $64 at the moment and the Iran tension is no where near resolution and can in fact escalate at the moment.

CFC is upgraded by Morningstar once again as a strong buy. They are anticipating a 20% rise in profits. Based on what metrics, I have no idea. But if you take the cues from the home builders and the data suggestive of contraction in this market, you can pretty much bet that Morningstar is off base again and analyst upgrades at this point is a contrarian indicator. Housing bubble has been pricked and there is no stopping it now. Again, I believe Morningstar's criteria is a bit archaic and relies heavily on PE and PEG / PS ratios and does not take into account the rising debt to equity ratio. Thus if you are a value investor, you must heed the red flag of high debt to equity ratio of above 7. That will give you an idea of the unsustainable price of CFC stock price.