Radio Free Wall Street 4/8/09

Lee Adler, Russ Winter and Aaron Krowne discuss whether energy markets have turned along with variety of other issues impacting the outlook for the financial markets.

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  1 comment for “Radio Free Wall Street 4/8/09

  1. Don
    April 9, 2009 at 1:31 pm

    How does the current economic and financial downturn match up to past contractions? To answer, we looked at
    how current economic indicators compare to the past. The following graphs plot current indicators (in red) to the
    average of all post World War II war recessions (blue).

    http://www.cfr.org/content/publications/attachments/2009OutlookFinal_Long.pdf

    As for the notion that inventories have plummeted to such an extent that supply shortages will take hold driving up price inflation, here is a differing take:

    Inventories down but not enough

    Wholesale inventories fell by 1.5% m/m in February there is much more de-stocking needed, in our view, to realign inventories with sales. The inventory-to-sales ratio (I/S) only edged down to 1.31 months from a cycle high of 1.34 months (the ratio needs to decline to about 1.12 to 1.14 months), which likely means continued production cuts and job layoffs in the coming months.

    The durable goods sector saw the most improvement in the inventory-to-sales ratio (1.82 months in February versus 1.90 in January), where the auto, furniture, machinery and tech sectors managed to make at least some dent in their excessive stockpiles. However, there is no industry that has managed to completely realign its inventories yet. The nondurable goods sector inventories held steady at 0.89 months, just off the cycle high of 0.9 months. The build-up in this sector has not been as excessive as in the durables sector since nondurable inventories are easier to manage through business cycles. Still, the chemical and petroleum industries have not fared as well in inventory management: the I/S ratios continued to press to new cycle highs in February.

    http://zerohedge.blogspot.com/2009/04/week-that-keeps-on-being-not-what-you.html

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