Ed’s Daily Notes for August 12th   Leave a comment

Bloomberg: Euro Area’s Recession Seen Over as Champagne Kept on Ice

The euro-area economy probably edged back to growth last quarter for the first time since 2011, ending the longest recession since the single currency union started 14 years ago.

Gross domestic product in the 17-nation region expanded 0.2 percent in the three months through June after shrinking for the previous six quarters, according to the median of 41 forecasts in a Bloomberg News survey. The European Union’s statistics office in Luxembourg will release the data on Aug. 14. Germany probably grew about 0.75 percent, according to a government estimate, exceeding the 0.6 percent economists predict.

A year of relative calm on financial markets, budget cuts from Spain to Italy and accelerating growth in the U.S., the world’s biggest economy, have helped the euro area start to recover. While the overall outlook has improved, the recession has left the region with a youth unemployment rate of 24 percent, and parts of southern Europe remain mired in a slump.

Mind you, this doesn’t mean Europe is fixed, and this “growth” is only for the region as a whole:

Spain’s economy shrank just 0.1 percent in the second quarter from the prior three months. Still, the country’s youth unemployment is 56 percent. In Italy, where Prime Minister Enrico Letta is easing last year’s budget austerity, GDP fell a less-than-forecast 0.2 percent.

…Greece’s economy contracted for a 20th quarter, extending an economic slump that has left more than six in 10 young Greeks out of work, the Athens-based Hellenic Statistical Authority said today.

Gross domestic product shrank 4.6 percent in the three months through June from the same period last year after dropping 5.6 percent in the previous quarter. That’s better than the median estimate of a 4.9 percent contraction in a Bloomberg News survey of six economist. Greece doesn’t publish seasonally adjusted or quarter-on-quarter GDP data.

For the time being, I would approach European investments with great caution.

Business Week: Wal-Mart’s New Goal: Sell All the Beer

When Wal-Mart (WMT) began buying a greater number of locally grown fruits and vegetables in 2010, it made sure its efforts got plenty of publicity. But when Walmart decided it wanted to double its alcohol sales by 2016, it didn’t exactly issue a press release.

Customers noticed, and those in the alcohol industry—or, as Walmart prefers, the adult beverage business—certainly took note of the change. “They’ve said they want to be the No. 1 beer seller in the world,” Cameron Smith, the president of an executive search firm that works closely with Walmart’s supplier network, told Bloomberg News. “They’re getting there quick. Everyone in the supplier community is on cloud nine.”

While this may be true, I personally quit buying beer at Walmart because they were hit-and-miss on stocking my favorite beer brands. In more than just alcohol, re-stocking has been Walmart’s achilles heel lately, and may end up being their downfall if they don’t fix it.

For the record, I wouldn’t touch Walmart’s stock. Before the internet, their superstore business model was gold. Now, it’s becoming obsolete, and they don’t look like they have any solutions (cutting staff and costs only gets you so far until it starts to create other problems). Unless Walmart gets an innovative CEO in the next 5 years, they could become the next Sears or Kmart.

Speaking of Walmart, their earnings report is due Thursday. Wednesday, we get Cisco Systems (CSCO) and Deere & Company (DE).

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Posted August 12, 2013 by edmcgon in Economy, Market Analysis, News, Stocks

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