UPS Points the Way To Reality

http://seekingalpha.com/news/market_currents/post/28716
Thursday, July 23, 2009 12:45 PM

Housing numbers strong? Blah.

* June Existing Home Sales: +3.6% to 4.89M/year, vs. consensus of 4.77M. They're 0.2% lower than a year ago. NAR chief economist Lawrence Yun says he expects the gradual uptrend to continue, and continues to gripe about new appraisal standards which he says are resulting in lost sales.

Jobless claims encouraging? Meh.

Initial Jobless Claims: 554K, up 30K from a week ago (revised), better than the 560K consensus. Continuing claims fell 88K to 6.225M.

The Pragmatic Capitalist says the only news that matters today involved a company in the middle of almost every transaction, and thus in every recovery: United Parcel Service (UPS +3%). And UPS is not confident.

http://pragcap.com/the-only-news-that-mattered-today-3

THE ONLY NEWS THAT MATTERED TODAY
23 July 2009

Forget the seasonal strength in the housing numbers. Jobless claims slightly better than expected? Who cares. UPS reported their earnings today. That’s all you should care about. UPS and FedEx are, in my opinion, the two best barometers of economic growth in the world. While the market rips higher on “better than expected” earnings and the strong housing numbers they are completely overlooking the fact that UPS sees no signs of recovery. As a middle man in almost every transaction it is nearly impossible to see a sharp recovery that UPS is not involved in. CFO Kurt Kuehn had these comments on the call this morning:

“Our trends so far in July show no material uptick in growth, We don’t have any confidence that either demand or activity is going to pick up substantially.”

And directly from the earnings release:

“The economic environment continues to be difficult. Declines in both our domestic and international businesses appear to be stabilizing but volumes will remain significantly below last year’s levels,” said Kurt Kuehn, UPS’s chief financial officer.

“Although declines in economic indicators are less dramatic than earlier in the year, questions remain as to when business activity will begin to strengthen,” he continued. “The business environment in the third quarter should be similar to the second quarter.

Meanwhile, on the other side of the pond Deutsche Post DHL is reporting similar sentiment. CEO Frank Appel says:

“We still don’t have a clear view of . . .further economic development. Though economic conditions haven’t worsened – with new business bustling and our strong market position in Asia – we are not yet seeing any substantial improvement.”

So, the stock market is now getting very euphoric while the underlying fundamentals still show no real sign of a strong recovery. I’m making a list and checking it twice. Although my S&P 1,000 call is still intact, it’s time to start planning for a tactical short position in this environment. The fundamentals don’t rhyme with this this market action in the last few weeks.

 

How can we use this? Should we short the ES? News that you can use? Or just BS?

 

Well, if you believe that consumers lead the way, and that UPS and FedEx are good indicators of levels of consumption (as many do), I'm sure that if one is a shrewd and relatively risk-receptive trader or investor, there's some utility in it.

But maybe not. Maybe UPS & Transports don't matter nearly as much as they used to, or something much larger is at work, at least temporarily nullifying what UPS is telling everyone.

 

Something like this?

http://www.youtube.com/watch?v=wiSzbqFUQNs

or

http://www.youtube.com/watch?v=J2jMizWAgVw

 

news don't matter, fundamentals don't matter (because you can't base your decisions on it if you don't trade on hope) , it's a casino .

 

I've always considered UPS an oil company, delivering packages gives the employee's something to do.