One particularly vitriolic reader of my last article on The Distorted Shape of the Recovering Economy seemed to think I was predicting a doomsday scenario. I was not at all. Richard Duncan’s tentatively predicted Fall of Rome scenario is a true doomsday scenario, not mine.My focus of late has been much more on the need for transparency and candor from our government on TARP I and II and the stimulus program results, as well as, more importantly, on getting the stimulus infrastructure program facilitated, expanded and working much better. The Administration needs to confess errors, fix them and get on with things.Meanwhile, there are some signs of life in our economy and they should not be overlooked or ignored. I am not arguing we will have a robust recovery. I am arguing we will not have a depression and things will pick up, just more slowly than we would like and in the face of more risk, such as much higher oil prices, than we would like. Also, with more unemployment than we would prefer.Consider these improvements:-- The Baltic Dry Index is up-- Multinationals and related companies are improving fast-- The U.S. share of world GDP is staying about constant-- With exceptions, the world economy is improving well-- UPS (UPS) and FedEx (FDX) are seeing and expecting increased traffic-- The rate of new jobless claims is dropping steadily-- The housing market is tending to bottom-- New housing starts are up in many areas-- The U.S. private sector is slowly getting deleveraged-- Oil prices could be a lot worse-- Leading economic indicators (LEI)are on the rise -- Soros and Buffett are buying, e.g., Wal-Mart (WMT)-- U.S. exports are picking up-- Big TARP banks are doing better-- The velocity of money is improving-- Inflation and deflation are under decent control-- GDP growth, while small last quarter, was not negative-- The dollar is not in freefall-- Our debt-to-GDP ratio is not at all bad, contrary to popular belief-- Most economists do not believe a depression is very likely-- Price earnings ratios of large cap stocks are at a discount-- We are economically better off than we were a year ago-- Credit availabilty, while not good, is not frozen as it was-- The retail sector is doing better, according to the NBER-- Government will have paid-back TARP moneys to use soonWithout dwelling on or developing these points, but by simply listing them, I want to make clear that, in my view, we are not heading for a depression and we are not heading for a doomsday scenario. To be sure, we have buckets of trouble, but it is all in the framework of a slow, troubled recovery with excessive unemployment tenaciously hanging on.With a good, cleaned-up and expanded infrastructure rebuilding program that is legally facilitated, made more labor intensive and well administered, we can attack the unemployment program directly and help improve our infrastructure for the future recovery at the same time.We need to take heart, fix things and get busy. Disclosures: none.Complete Story »

  Brendan Wagner submits:The Gap (GPS) reported earnings of 44 cents for the fiscal third quarter, right in line with the guidance they updated back on November 5th. They also announced a $500 million stock buyback.Gross margin was up almost 4% versus a year ago thanks to better inventory management and less markdowns. The Street seems to expect fourth quarter gross margin improvement to be as impressive as this quarter's was, but management guidance in the press release suggests that they may be a bit more promotional in an attempt to grab market share. If that's the case, actual earnings may disappoint by a few pennies per share.“We’re pleased with our third quarter results, particularly our ability to deliver earnings 25 percent above last year and our highest third-quarter operating margin in a decade,” said Glenn Murphy, chairman and chief executive officer. “Looking ahead to the holiday season, we’re focused on gaining market share as we invest in marketing and present a strong value proposition to customers across our brands.”Complete Story »

  Joe Eqcome submits:Having the privilege to have met Sir John Templeton, the founder of The Templeton Funds, I was stuck not only by his crushing intellect but also by his sense of optimism regarding investing. Warren Buffett, a fellow optimist, who upon acquiring Burlington Northern Santa Fe Corp. (BNI) for $26.3 billion said, “It was a bet on America”. Optimistic Investing: Being an unblinking optimist has been a helpful personal affliction for successful investing post-WWII. The S&P 500 is up 65 times since 1950. On a weekly basis it has advanced 56% of the time. Prior to the most recent stock market peak in Oct ’07, you would have made money even if you were unfortunate enough to have purchased the DJIA at any of its peaks since 1900 (see accompanying chart). It was the equivalent of throwing darts at a dartboard with nothing but a “bull’s eye” on it. Complete Story »

  Tom Brown submits: If you want to know which beaten-up bank stocks will provide the most ample returns from here, go back and look at what happened last cycle. Back in 1990, after bank stocks bottomed in November, the charge was led by those banks that still had significant credit quality problems and were still reporting quarterly losses. Then, as the cycle rolled on, the companies steadily managed through their credit issues and eventually returned to normalized profitability—and their stock prices zoomed. Two of my biggest winners back then were Barnett Banks, at that time the largest bank headquartered in Florida, and Valley National, the largest in Arizona. Both were located in growth areas, and both had above-average exposure to commercial real estate loans. At first, investors (me included) underestimated the magnitude of the companies’ credit problems. It wasn’t pretty. The stocks got clobbered as the market extrapolated problems in selected loan portfolios to the loan portfolios overall, and then significantly overestimated the ultimate size of the companies’ credit losses.Complete Story »

  Gary Weiss submits: David Brooks' New York Times op-ed column today on Tim Geithner (mentioning in the lead my Portfolio cover story) misses the point, I think.The problem with Geithner's approach is not whether or not the banks are recovering because of the TARP program, but the degree to which the profits of the biggest banks have not been matched by a commensurate ability to lend.Complete Story »

  Wall Street Cheat Sheet submits: Last month, star retail analyst Kristin Bentz shared her excellent framework for picking winners in retail for the holiday season. This morning Kristin followed up with her holiday picks as we head into door-busting Black Friday: First, I want to note that Ann Taylor (ANN) is down over 10% since I raised a red flag about their discounts when we talked last month.Complete Story »

  The Burrill Report submits: A small study is causing a big splash in the multi-billion dollar world of cholesterol treatments. The test, pitting a prescription form of the B vitamin niacin against the prescription drug ezetimibe, found that niacin significantly shrank artery walls when taken in combination with a statin. The commercial version of ezetimibe by contrast, sold by Merck (MRK) as Zetia, showed no measurable change in arterial plaque build-up. That result could give doctors pause for thought and has already created a stir among Merck investors concerned about the study’s impact on already-declining Zetia sales. The study, led by Allen Taylor, director of the Advanced Cardiovascular Imaging and the Lipid/Prevention Clinic in the Department of Medicine at Washington Hospital Center in Washington, D.C., was presented at the American Heart Association’s Scientific Sessions 2009 and simultaneously published in The New England Journal of Medicine. Taylor and his colleagues conclude that the “the use of extended-release niacin causes a significant regression of carotid intima–media thickness when combined with a statin and that niacin is superior to ezetimibe.” A second, larger study that relied on medical records collected by UnitedHealth Group found “no significant differences in cardiovascular outcomes when comparing the effectiveness of ezetimibe/simvastatin to equipotent doses of (the statins) simvastatin or atorvastatin alone.” Its results were presented in the Heart Association’s scientific sessions as well. Merck Research Laboratories president, Peter Kim, defended Zetia, saying that "the results of the small ... study (called Arbiter 6) do not, in any way, change our view of Zetia and Vytorin as effective medicines for fighting high LDL cholesterol." The company also questioned the rigor and size of the 208-person study, suggesting it couldn’t provide “meaningful insight into the effect of either niacin or ezetimibe on clinical outcomes.” Taylor’s study follows negative attention Vytorin received in 2008 after two studies questioned Vytorin effectiveness and safety when compared to the use of the statin simvastatin alone.Complete Story »

  Vinny Catalano submits:So, here we are. More than two years into what started out as a credit crisis, one plus year after the Lehman collapse and a question that pertains to the one of the central workings of the equities market cannot be answered.At last evening's Market Technicians Association Educational Foundation seminar, the question your trusty moderator (that's me) posed to the esteemed panel with its decades of experience was in regards to volume. Specifically, the equity markets' volume as recorded each day for every stock traded. That is, the volume that accompanies the price action that results in the market capitalization of the stock market that results in the market value of every investor's portfolio. Complete Story »

  TheCarConnection.com submits: We've been keeping a close eye on the evolving Ford/Volvo/Geely saga. So far, the biggest point of contention in the brou-ha-ha has been Ford's concerns about intellectual property, which Geely might or might not respect after the ink dries. (China hasn't exactly been at the forefront of IP law.) However, there have also been unspoken worries about the shift in production that could result from such a deal, moving factories and jobs from Europe to the Far East. Geely tried to quell some of those concerns by saying that it intends to keep Volvo's production in Europe -- if the sale goes through, of course -- but there's also talk of a new, 300,000-capacity plant in China. Awkward. [Reuters via egmCarTech]Complete Story »

  Larry Dignan (ZDNet) submits: Dell chief Michael Dell is projecting a Windows 7 upgrade cycle that could put PC growth “well into the teens.” What’s unclear is whether Dell will be able to grab a bigger share of the revenue pie or be outmaneuvered by rivals like HP (HPQ) and Acer. Following the company’s disappointing quarter, Dell executives said the timing of the Windows 7 launch hurt revenue and earnings. That’s why Dell’s third quarter results fell short of expectations.Complete Story »

  Rolfe Winkler, CFA submits: Moody’s/REAL released September data for their commercial real estate price index. Month over month drops have been fast and furious this year. -8.6% Mar to Apr-7.6% May-1.0% June-5.1% July-3.0% Aug-3.9% Sept Since the peak in October 2007, CRE prices are down 43%.Complete Story »

  Zacks.com submits: Stone Energy Corporation (SGY) reported third-quarter 2009 earnings of $1.06 per share, beating the Zacks Consensus Estimate of 66 cents and the year-earlier earnings of $1.04. The robust results were driven by increased production volumes and reduced costs.Production during the quarter averaged 239 million cubic feet of gas equivalent per day (MMcfe/d), compared to average daily production of 209 MMcfe/d in the prior quarter and 129 MMcfe/d in the year-ago quarter. This increase was primarily due to the company’s successful execution of its hydraulic rig work over program, reduced cycle time and optimization of individual well rates.Complete Story »

  This week was the second-busiest IPO week of 2009 with network security specialist Fortinet (FTNT) making its debut on Wednesday, followed by four additional companies that began trading today. Fortinet led the group with a first day pop of 33%, climbing even higher in the aftermarket to a total return of 35.8%.The companies that traded today were Archipelago Learning (ARCL), 7 Days Group (SVN), Global Defense Technologies (GTEC), and Cloud Peak Energy (CLD), spanning a wide range of industries from education to energy. Archipelago Learning, an online education company, and 7 Days Group, the third largest economy hotel in China, posted respective first day gains of 13.8% and 13.6%. Attractive margins seemed to appeal to investors in the case of Archipelago's offering, while an aggressive growth strategy and China's expanding economy were the main drivers for 7 Days. Complete Story »

  Tech Confidential submits: EBay Inc. (NASDAQ:EBAY) announced Friday that it has completed its spinoff of the Internet telephony unit to a consortium of investors that includes Silver Lake, Andreessen Horowitz and the Canada Pension Plan Investment Board.The deal values Skype at $2.75 billion, with the investor group getting 70% of the company and eBay retaining the rest. Skype founders Niklas Zennstrom and Janus Friis also got a 14% slice of the company, after settling litigation between their latest project, Joltid Ltd., and Skype that alleged patent violations (The Deal Pipeline subscribers can read more about the settlement here). EBay said it got about $1.9 billion in cash and a $125 million note.Complete Story »