One hundred thirty Congressmen sent a letter to the President and the secretaries of Treasury and Commerce. In it they said “We write to express our serious concerns about China’s continued manipulation of its currency.”

The most serious charges in the letter were that “Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors.  U.S. exports to the country cannot compete with the low-priced Chinese equivalents, and domestic American producers are similarly disadvantaged in the face of subsidized Chinese imports. ”

Nearly one-third of Congress is willing to go to an economic and trade war with the Chinese. The letter that went to the Administration calls for duties on some Chinese goods. The communication also suggests that China go on the Treasury list of nations that manipulate their currencies.

We have tallied many companies for dividend hikes this year, but we have also predicted a few companies which may initiate dividend payments in the very near future.

QUALCOMM Corp. (NASDAQ: QCOM) recently stopped its stock slide by announcing the same sort of dividend hike and buyback boost.  Its shares are up almost 10% since then.  Applied Materials Inc. (NASDAQ: AMAT) was at $12.29 about a week ago before it announced its dividend hike and $2 billion share buyback.  Its shares are unfortunately down at $12.15 today.  On that news, we showed which stocks in the chip and semiconductor sector might be candidates to boost their dividends and even noted which ones were likely not candidates for new dividends or dividend hikes.

“In light of the muted recovery, discretionary fiscal adjustment is now the principal means of repairing the damage that the global crisis has inflicted on government balance sheets,” Pierre Cailleteau, managing director of Moody’s Sovereign Risk Group, said in a statement according to MarketWatch. And, that is at the core of the problem in general and in the US in particular.

The American government is still for a deficit of over $1.5 trillion this year. If the economy does not recover, and with its tax receipts lackluster, the red ink could be as large again in 2011. The unemployment that creates low IRS collections also leads the government, at least based on its current philosophy, to ratchet up spending for the social safety net, including extended unemployment benefits.

The Administration and Congress jawbone the deficit issue, but there is no sign that they intend to do anything meaningful about it. Like almost all countries burdened by debt, the US hopes that rapid GDP expansion, which will happen at some point in the relatively near future, will cause tax receipts to fill the nation’s treasury again.

China’s premier Wen Jiabao recently spoke about a global double-dip recession as a possible outcome of the still-boiling financial crisis and high unemployment. Those are odd words from the mouth of a man who runs a nation which has nearly 10% GDP growth. But, even from Beijing he can see what Moody’s sees. The aggregate foreign debt of the world’s largest developed nations will grow for years.

Douglas A. McIntyre

The measurement of Chinese real estate prices may be off by some amount because the value of property in the largest cities grows faster than it does in rural areas,.  But, the differences between figures given by the private sector and those issued by the government are too big to be ignored.

The Chinese statistical agency also said recently that inflation in the world’s most populous nation was up 2.7% in February. The figure was higher than the government would like it to be, but not so high as to set of alarm bells. National bank regulators believe that they can bring inflation down by choking off the supply of money to individuals and businesses. On paper that should work. But, if inflation is much higher than the government claims, shutting off liquidity will not arrest price increases overnight. Rampant inflation would indicate that there is already too much capital in the market and shutting down bank lending cannot adequately resolve a situation that may already be dangerous.

Any flaws in the numbers given by the central government for exports, imports, inflation, and bank lending raise questions about how well outsiders can gauge the core of China’s economic engine. That effects negotiations on the value of the yuan, the tariffs imposed on some Chinese goods, and whether the People’s Republic is actually consuming enough raw material and oil to affect inflation outside the mainland.

Beijing may have made a conscious decision to mask some of its inflation problems by releasing incomplete date, or even worse, misleading numbers. If that is the case, setting policy to curb bubbles in China will be compromised and the world may be caught by surprise when some of the bubbles burst. China’s economic situation may be much more unstable that the government lets on.

Douglas A. McIntyre

The unemployment rate is slightly below the 10% mark, which seems terribly important psychologically. It seems that the economy is fine if the jobless rate is 9.7% but is in horrible shape if the number is 10.1%. The Labor Department put the statistic in perspective when it said that unemployment went up in 30 states last month. Five states had record high jobless rates including the most populous state California. Florid hit a record high unemployment level at 11.9%, just below California’s 12.5% number. Michigan, brutalized by the disintegration of the American car industry, topped the 50 states with a jobless rate of 14.3%. The figure is probably closer to 20% in some of the urban areas around Detroit. Detroit itself is so deserted that former professional basketball player and current mayor, David Bing, has proposed that a quarter of the city be bulldozed to the ground. It would be hard, if not impossible, to find a similar proposal by the mayor of a large American history from any time in the republic’s history.

The White House and many members of Congress have admitted that there is little that can be done about unemployment short-term. The Senate passed a new unemployment benefits package recently that will cost $140 billion over the next two years in terms of what it will add to the budget deficit. Bloomberg reports “The chamber voted 62-36 to approve the legislation, which would also extend dozens of expiring tax cuts, ease corporate- pension requirements and head off cuts in Medicare reimbursements to doctors.” The legislation now goes to the House.

The Congressional Budget Office made the point that the kind of stimulus that extends unemployment insurance has immediate benefits for the economy. The jobless usually spend their checks quickly to handle the costs of essential needs which are often all that they can cover.

The conversation about how the nation could afford to spend the $140 billion was not publicized in the same public fashion as the benefits of the bill. Most of the discussion about the legislation focused on the plight of those in need.  The  Senate approved the unemployment package  at the same time that the Treasury Department said that the February budget deficit hit $221 billion. That is up from the $194 billion deficit in the same month of 2008. Federal government spending rose 17% to $328 billion.

Among the most troubling news from the budget report was that for the first five months of the federal government’s fiscal year, corporate tax receipts were down $7.4 billion to $45.5 billion. Receipts from individuals fell 14% to $334 billion. Unemployment, in other words, is destroying the government’s bottom line at an alarming rate.

It was a coincidence, but The Spectrum Group issued its annual figures on the number of millionaires in the US. People in households with a net worth of over $1 million, excluding the value of their primary residences, rose 16% to 7.8 million. That seems like an impressive number at first pass; until Spectrum points out that the number of millionaires decreased by 27% in 2008. The new 7.8 million millionaires number is barely better than it was in 2004, and it is only moderately better than the 7.1 millionaires that the country had in 1999.

The BLS and Spectrum data have something in common. The numbers look good in a vacuum, but when compared to historical data, both reports are depressing. The fact that there are five unemployed people competing for each job in the US presents a nearly perfect sense of these desperate economic times. There is no reason to think that it will not be years until there is a reasonable balance between jobs and those looking for work. The numbers may seem to get better over the next several months, but that could be due to people dropping out of the labor force completely although they are capable of working. Too many people have just given up hope.

It is crass to compare the out of work to the population of millionaires, but when the two sets of numbers are placed side by side it does show how little progress even the wealthy have made since the beginning of the recession. The United States lost 2.5 millionaires in 2008. The number of households with a net worth of $500,000 or more fell by 4.4 million during the same period.

Joblessness in America is still nearly as bad a problem as it was at its depth last year. Affluence, once a goal for so many people in the US, is not only harder to attain, but harder to keep.

The sense of malaise among the employed and unemployed is barely better than it was a year ago, which is considered to have been the nadir of the recession by most economists. The US was still losing over a half a million jobs a month then. Monthly job loss is closer to zero now, but there does not seem to be any additional optimism in the market, and, in fact, people may be more hopeless because so many have been out of work for a year or more. So many have been out of work so long that their benefits are gone and they must hope that Congress will extend them now and perhaps extend them again.

Someone once observed that being a millionaire is overrated. A million dollars is not enough for most middle class people to retire on. Most millionaires are not corporate executives. They are gas station owners and proprietors of other small businesses. They are the people who used to have a few employees, and now have a few less. Their own net worth has plummeted, but the people who were their workers have no net worth at all.

The recession was bad for the rich and poor alike. But, at least there are still 7.8 million millionaires who can probably send their children to college and retire before they are 75. Tens of millions of other people cannot say the same.

Douglas A. McIntyre

It is amazing that 10 of the 30 DJIA components have more than doubled. Some have done far better than that.  Bank of America Corporation (NYSE: BAC) rose over 400% from its 52-week low, while American Express Company (NYSE: AXP) has risen more than 300% from its 52-week lows.  Alcoa, Inc. (NYSE: AA), Boeing Co. (NYSE: BA), Caterpillar Inc. (NYSE: CAT), EI DuPont de Nemours & Co. (NYSE: DD), Walt Disney Co. (NYSE: DIS), General Electric Co. (NYSE: GE), and Hewlett-Packard Company (NYSE: HPQ) have all risen more than 100%.  Hell, even JPMorgan Chase & Co. (NYSE: JPM), the greatest bank in America, is still up over 180% from its 52-week low.

What is amazing on top of the 100% and exponential gainers is that this was almost half of the companies in the DJIA if you include those which are up 90% from their 52-week lows.  Cisco Systems, Inc. (NASDAQ: CSCO), 3M Co. (NYSE: MMM), Microsoft Corporation (NASDAQ: MSFT), and United Technologies Corp. (NYSE: UTX) are almost at doubles off their lows and some have been doubles if the date was different per their 52-week highs and lows.

We have outlined each of these in the tables below.  Included are prices as of this morning, as well as the average price target from Thomson Reuters analyst consensus data, and a forward year P/E ratio based upon Thomson Reuters consensus data.  We have also shown the actual 52-week trading ranges of each, the market cap, and the actual percentage gains from the lows.

Then there is the list of “almost made the double” stocks.   As noted, Cisco Systems, Inc. (CSCO), 3M Co. (MMM), Microsoft Corporation (MSFT), and United Technologies Corp. (UTX) are all almost there and some have been doubles if the date was different per their 52-week highs and lows.

As far as how the DJIA itself has done, at 10,570.00 or so, the 52-week low is 6,440.08.  The low close was on March 9, 2009 at 6,547.05.  In short, the DJIA is up a whopping 61.4% in the last year.  We have covered this before in certain sectors, but the 52-week lows and performance metrics are going to start looking far different in just a few weeks.

JON C. OGG

A few businesses do plan to add workers in the next quarter. The leisure & hospitality industry has a strong outlook and is hiring. So does the professional & business services sector. But, other large groups including construction and education & health services are much less likely to add new people.

The news reinforces the precisions of many economists and the CBO that unemployment in the US will stay close to 10% though the middle of this year. That will almost certainly hogtie consumer spending and activity in the housing market.

There had been some hope, particularly early in the current quarter, that business activity had begun to pick up sharply. It turns out that companies were replacing depleted inventory and that core GDP was not improving in any measurable way. Even the government’s economic stimulus programs have done very little so far to help employment and there is no guarantee that the programs will work at all.

The White House and Congress will take one more at bat to see whether pumping additional aid into the economic system will help job levels. The latest programs will focus on direct credits for businesses that hire, more state aid, and more infrastructure investment. The theory is that these plans will mainline capital to the place where the employment problem is most acute–small and medium-sized business which tend to have limited access to credit.

Tax credits for hiring do not improve employment if companies see no increase in the demand for their products and services. A tax credit for a worker that a company cannot afford means very little. Most businesses still seem willing to keep their workforces where they are, press workers for more productivity, and continue to ride out an economic storm which has still not ended in most parts of the commercial world, no matter what economists say.

Douglas A. McIntyre

The CBO estimates are lower than the President’s on both the receipt and expense sides of the ledger. The agency’s numbers assume that current government policies will remain in effect and that discretionary spending will rise at the rate of inflation.

The differences between the White House estimates and those of the CBO are profound when the ten years are added up. US debt held by the public is 67% of GDP under the President’s forecast, but 90% when the CBO estimates are used as the basis of calculations.

The biggest difference between the two sets of projections is that under the President’s plan spending accelerates in the latter part of the decade. The White House plan anticipates expenditures which are $2.3 trillion greater than the estimate offered by the CBO.

Forecasts of financial events that will happen if five or ten years are almost certain to be incorrect. The White House is more optimistic than the CBO about federal receipts which means that it is more hopeful about the rate at which GDP will improve over the next ten years. The President assumes gross domestic product will move up by more than 5% from 2012 to 2014. Some economists believe that 2010 GDP growth will be worse than the President’s forecast of 3.2%. For each month that growth is below projection the deficit it likely to grow–if spending plans stay in place. That almost certainly increases the national debt.

While the debate about the budget in Congress may seem to do with the size of the President’s spending programs for the federal government and the size of the healthcare reform plan, that is only half the story. The half that is largely ignored is the set of estimates about how quickly the economy will grow from 2012 to 2020, which are figures that can only be guessed at. The President’s guess is obviously optimistic. If he is wrong, the price will be high enough that America may not be able to meet its debt obligations with any ease by the end of the decade. That could mean default on US sovereign debt or a period of belt-tightening by the government for several years after 2020. That austerity may be greater than the American public has seen in decades.

Douglas A. McIntyre

We have details on each with added color, opinion, possible price reaction, and related news and background data.

Apple Inc. (NASDAQ: AAPL) hit 52-week highs and all-time highs on Friday.  Stocks that hit new highs (or which hit new lows) rarely do it just once.  It is the extreme momentum.  But there are two big issues here to consider for traders.  First is that its market cap of now almost $200 billion puts it as one of the 5 largest companies in America and the mega-cap status may get in the way of its ability to grow indefinitely.  The second issue is that options trading has exploded as traders are looking for a way to get upside exposure on the cheap.  Friday’s fully leveraged options trading was effectively another 50% of the stock volume depending upon your treatment of speculative stock options versus the shares of stock traded.

Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) has March 12 (Friday) as its PDUFA date for an FDA panel to issue a recommendation on Byetta as the the first once a week treatment for Type II diabetes.  Analysts are mixed on the stock with BMO cutting its rating last week, but there were two positive calls from Credit Suisse and Jesup & Lamont. The open interest of stock options is also large enough that the $20 synthetic options straddle would imply that shares have to rise above $24.70 or drop below $15.30 to be profitable.  Byetta is already sold with Eli Lilly & Co. (NYSE: LLY), and Alkermes, Inc. (NASDAQ: ALKS) provides the technology that makes Byetta last longer in the delivery mechanism for a once per week use.  Open interest in the Alkermes options is elevated but not astronomical.  There is a risk here… some feel the FDA will delay this recommendation with a request for more side effect data.

H&R Block Inc. (NYSE: HRB) is set to report earnings Monday.  The tax filer had already issued an earnings warning based on so many fewer tax returns that will be filed due to unemployment and underemployment.  Thomson Reuters has estimates of $0.15 EPS and $949.55 million for the last quarter, but the coming quarter we are in now has estimates of $$2.13 EPS on $2.47 billion in revenues.  The options open interest is surprisingly tiny considering that this one dropped from almost $20 to under $16 when it guided earnings lower two weeks ago.

Patriot Coal Corporation (NYSE: PCX) saw yet another big price spike on Friday, just of about 13.5% to $21.67.  The reason being the continued chatter and talk of a Massey (MEE) buyout as well as hopes for continued higher prices-paid for coal to make steel.  While we have some pause for concern and while it did temporarily shut its federal mine, the options trading has been very elevated as well in just the March expiration month which means that M&A speculators are betting a deal comes within the next two weeks.  Patriot is one of the newest public coal players as it only came public in late 2007, and it saw a triple in the stock in its first few months due to the commodity and energy bubble of 2008.  If Massey is really buying the company, its shares traded higher as well by 6% Friday.  But there is an issue.  Patriot shot up like a Patriot missile from $17 to almost $22 this last week, so if no deal is announced on Monday or Tuesday then we expect at least some profit taking.

Tivo Inc. (NASDAQ: TIVO) is up for earnings Monday and that is just on the heels of it winning an intellectual property war with Dish Network.  TiVo literally soared from about $10 to end the week at $17.50.  Thomson Reuters has estimates of -$0.12 EPS on $47.45 million in revenues.  The market cap based on its win is now $1.9 billion, so we’ll just have to wait and see what the company says in addition to earnings about what will come from its recent win.  Based on the new win, the earnings report is likely not important in comparison to the money coming its way.  TiVo’s open interest for March options is elevated, and April is now higher than normal.

This weekend’s Barron’s was littered with analysis and picks around telecom.  BCE, Inc. (NYSE: BCE) was given a very positive feature article in Barron’s for having better income growth with more room for upside than AT&T and Verizon in the U.S.  Also touted was Mobile TeleSystems OJSC (NYSE: MBT) in Russia for its return to growth and for its ability to see continued gains after it underperformed the local stock exchange and an analyst calling for the stock to double in five years.  Our call on price impact: On BCE, the tout may generate a 1% or so increase from the $29.51 close; On MBT, the tout may generate up to a 3% increase on top of Friday’s 2.25% gain to $54.50.  QUALCOMM Inc. (NASDAQ: QCOM) was given a lightly defended article about its recent woes with the blame game after its poor earnings being about the mix.  Due to the big bounce we saw last week on its dividend and share buyback raise, it is possible that QCOM sees another 1.5% gain or so on a static basis.

Zanett, Inc. (NASDAQ: ZANE) had an absolutely crazy week.  Its ‘ZANE’ ticker should give this one the new name “Zaney” for traders.  It was just on Wednesday that it warned about expecting to receive a NASDAQ delisting notice.  But then on Thursday the company announced that “business is booming” as it set a record for contracts closed in the months of January and February 2010 with over $12 million dollars in new business put on the books from 42 different customers.  This was a $0.38 stock that is micro-cap and used to sometimes even skip trading days because no volume was there in shares.  Yet is closed up exponentially at $2.12 on 8.09 million shares Thursday, only to be followed by an equally zany Friday.  Friday’s high was $3.11 and share volume was 8.25 million shares… and its close was $1.93.  Call it zany or crazy, but the day traders and speculative penny stock players are all over this one and trading volume here is going to be considerably elevated to its past.

The last issue we want to watch this week is that the valuations are changing somewhat.  For starters, this is the first anniversary of the selling apex of March 2009 that then became the biggest bull market seen since the late 1990’s.  We have shown how the 52-week trading ranges are about to at least normalize and look more rational in the next month or so without so many stocks being up exponentially from their 52-week lows.  We saw this in major tech shares with many normalizations coming, and then the money center bank changes will start to look far more normalized.

A last valuation trend is one that came in the world of biotech and biohealth stocks.  There are suddenly many more biotech and biohealth stocks which have crossed into the $1 billion market capitalization level and higher.  The long and short of it is that this now makes the ‘investable universe of’ those stocks much larger for institutions.

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JON C. OGG