Good News ... Bad News ... Confusing News???

If you feel confused by the media's analysis, there is probably a good reason for it.  Below are the News highlights about Home Depot this morning ...

- Home Depot 3rd-Qtr earnings fall 8.9 percent.  
- Home Depot raises outlook amid signs of real estate stabilization. 
- Sales at stores open at least a year fell 6.9 percent. 
- For the full year, Home Depot now expects earnings per share from continuing operations of about $1.50. That would be a 9.5 percent increase from last year, better than the company's previous expected range of flat to up 7 percent.
- The company didn't raise its forecast of a sales decline of 9 percent.

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Moving on to another news topic ... "home mortgage delinquency rates on loans 60+ days past due".

This morning's news line:  "The pace at which people fell behind on their mortgages slowed during the summer for the third consecutive quarter, but the overall delinquency rate hit another record, a new report shows."  

So, what is this ... good news or bad news?  The news item  goes on to say: "The rate was up 7.6 percent from the second quarter. That's a much smaller jump than the 11.3 percent rise in the second quarter from the first, and the 14 percent leap seen in the quarter before that."   Oh ... I guess they're suggesting its good news?

Credit reporting agency TransUnion issued a report today and their data can be seen in our chart below.

Our chart shows the number of people who are 60 or more days past due on their mortgages.   How to interpret the graph:  Each state number is a "one in X amount".  For example, in Nevada, 1 in every 6.9 home owners were in arrears 60 or more days on their mortgage. 

Think of it this way ... imagine if one in every 6.9 of your friends were behind in their mortgages, you would be quite concerned wouldn't you?  

Of course, they wouldn't tell you that they were behind on payments, but the way it would show up is in their spending behavior.  If they used to go out to eat with you once a week before, now you would be hearing how busy they were or that something has come up.   The end result, is that they would cut back on that dining to maybe once every three to four weeks.

Why do I mention this?   Because this delinquency problem is now, and will continue to be a drag on our economy until the problem goes away.   Those affected will be spending less at retailers this Christmas, and I doubt that the rest of us are going to be buying so much more that we would be making up for their negative impact on retailer revenues.   Continue below ...

So what is happening with the Kahuna of retailers?  

Below is Walmart's weekly price chart going back to October 2008.  For the past 2+ weeks, its price has been showing improvement.   But, looking back to 2008, it is still behind and has not fared well compared to the S&P 500.   They're hopping that, being a good discounter while holding their profit margins steady will work out well for them.

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