Wednesday, October 22, 2014

The most expensive midterm elections ever? #myvoteisnotforsale

Presented without comment via the NY Times. #myvoteisnotforsale

At Nearly $4 Billion, the Most Expensive Midterms Ever

The 2014 congressional contests are on track to be the most expensive midterm elections in history, according to a new report from the Center for Responsive Politics, which projects that nearly $4 billion will be spent by candidates, parties and outside groups by Election Day.
Candidates and parties are projected to spend about $2.7 billion, while outside spenders — chiefly “super PACs” and political nonprofit organizations — will spend about $900 million. In 2012, in the midst of President Obama’s re-election campaign, total outside spending reached $1.3 billion.
The total does not include additional money spent on so-called issue ads and get-out-the vote activities, which outside groups and labor unions are not required to report to the Federal Election Commission. All told, 2014 spending is projected to exceed by $333 million the amount spent in 2010, but will be roughly on par with the $3.6 billion spent on congressional races during the presidential election cycle in 2012.
Conservative and pro-Republican forces are on track to spend at least $1.92 billion, while liberal and pro-Democratic groups will spend somewhat less, about $1.76 billion. Those totals may significantly underestimate the gap, however: About three-quarters of all political advertising in this cycle benefiting Republicans has flowed through groups that are not required to disclose their finances, compared with about a quarter of all advertising benefiting Democrats.

Lighter side

In a day of heavy news, I thought I'd offer up some great little stories about the food adventures that seem to know no bounds.

1) So Deep Fried Candy Corn is now a thing. 

2) Korea took the KFC double down and put it on steroids - THE ZINGER DOUBLE DOWN KING.
Two chicken patties, a burger and bacon = road trip.

3) Photo of the day - behold the Tunacorn! That image should haunt you every time you open a can of chunk light tuna.

Cheers!

Disruption 3.0 - #myvoteisnotforsale

When a new idea or concept enters a static industry or profession, it is said to be "disruptive".  This is typically viewed as a positive because, while there will be some hiccups along the road, in the end we'll all be better off for it.

We had the dotcom bubble 1.0 which despite all of it's problems left us with a new way to buy everything via Amazon.

We're in the middle of dotcom bubble 2.0 and while I think most of these companies will fade into the background over time, the emergence of social media is not going away.

I'd like to take a moment to discuss an industry which is absolutely ripe for disruption - the US political system.  I will use the current Congressional race in NY-21 as the template but this is an issue across the nation.

Background: Our current Congressman - Rep. Bill Owens (D) - announced that he was not running for re-election earlier this year.  This caused quite a stir as both parties scrambled to find candidates to place on the ballot.

Both parties are running candidates from outside of our district.  Okay, okay, I know you can argue they both "live" here but come on, we know they live in the North Country like I eat "healthy" :). However, the national and state parties believe that they are candidates who can raise lots of money and will vote the party line.  This is why the election process is ripe for disruption: your congressional representative is no longer seen by the national parties as representing you, but rather a permanent vote in their column on national issues.

There are enormous sums of money being spent to discourage you from voting one way or the other (very little of the advertising has focused on ideas).

But here's the secret that no one at the DNC or RNC wants you to know: They can spend millions and millions of dollars on ads to try and buy your vote, but if you won't sell ...it doesn't matter! 

Every election in America has become a battle of who can raise the most and spend the most in an effort to buy your vote.  A critical piece of this equation though is you and your vote - you have to be an willing participant in this process for that model to work.  If you walk into your voting cube and check (R) or (D) just because they told you to, then they win and the "spend, spend, spend" model remains legitimate.

However,if we can get enough Americans to say "my vote is not for sale" they can spend every dime in their pocket and it won't matter because you won't sell to the highest bidder.

Okay, I can see you nodding along - Great you say, let's be the change!! What are the alternatives? Well, there are the third parties, but as my Mom said, if you don't have anything nice to say, it is better not to say anything at all.

Here's where it gets really radical: write-in.  I know, I know the concept of a write-in feels like throwing away your vote, but hear me out.  You aren't going to get the 50,000 - 75,000 people to back one write-in candidate at this point that would be necessary to win an election.  Since this is an off year, turnout could be low so I expect the winner of NY-21 will get somewhere around 80,000 votes.  Who knows, maybe in today's Facebook era you could pull this off, but it's unlikely.  

However, the margin of victory in NY-21 district is likely to be far less than 10,000 votes (more likely +/- 5,000).

If we can start a #myvoteisnotforsale movement online, I think it is possible to get 1,000 people to write-in a candidate other than the two chosen by the state and national parties.

A thousand votes in a tight congressional race would be a catalyst for a conversation about the future of politics and the influence of money in our political system.

So every time you post a comment on facebook or mention tweet out your dinner plans use the hashtag #myvoteisnotforsale #NY21 and let's stake our claim to the seat in Congress which claims to represent us, okay?

Perhaps you are happy with the candidates that the two major parties have put forth.  However, if you think there has to be a better way:

* Go to www.grindstonefinancial.com (many of you only get my emails and never visit the site) - click the "share this on Facebook" button up on the right hand side.

* Post something on your Facebook wall, twitter feed about this post and link to it (go to your browser bar, click copy, then paste it in your Facebook wall).

* I joined the borg so I could create a new FB page: My Vote is Not For Sale. Like the page.

Cheers!

* markets are wobbling back and forth with little sense of direction today, so far :)

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Coming soon - Part 2 - Okay, you talked me into it now how do I write-in someone??




Tuesday, October 21, 2014

Best day for stocks in 2014 because Coke, IBM and McDonald's all whiffed on earnings

Wait, that doesn't sound right?

Maybe companies like Coke, IBM and McDonald's aren't representative enough to gauge what's going on in the global economy?  No, that's exactly why they represent 10% of the Dow Industrial Average.

So if America's largest industrial companies are showing signs of distress how do we explain today's buy everything strategy?

I alluded to the drivers in the morning but here's my summary:

* Stocks were weak after the release of questionable Chinese GDP data.

* Suddenly a rumor emerged in a Reuters story that the ECB could begin buying bonds again.

* This rumor was quickly refuted in the Financial Times but the damage was done as stocks were now above technically important levels.

* This led to further program buying throughout the day which never relented.

So to recap, stocks fell 9-10% to begin the month on fears that the global economy was faltering (seems to be evidenced in reports from IBM, Coke, McDonald's and others).  A steady stream of leaks and rumors from the Fed, and the ECB have sparked stocks and caused them to soar 7% not in a year, quarter or month but in the past 4.5 days.

As Goldman Sachs noted tonight - "has the market, like the hare in Alice in Wonderland, gone mad?"

We shall see.

Cheers.

And you get cheap gas and you get cheap gas....

Well, cheap is a relative term.  After three years of consistently high oil and retail gasoline prices (averaging between $90-$105/barrel for West Texas crude) oil has suddenly hit an air pocket and it is getting economists excited and worried all at once.

On the plus side, cheaper retail gas would be a nice bonus to consumers who have grown accustomed to paying $3.75/gallon for gas.

However, the concern has to be what's driving this decline?  Historically, a weaker global economy has led to lower prices and that is obviously not a good thing.

Here's what we know:

* oil is at about it's lowest level since 2011.
* the weakness in the global economy is real

What we don't know have a good handle on is the role geopolitical maneuvers are having on the price.  If the Saudis are trying to impact other major player through oversupply, we could be drawing conclusions from data that isn't representative of the facts.

Finally, just a little perspective on all of this "cheap" oil via the Fed Reserve of St. Louis.


Yes, oil is down to it's lowest levels in 3 years, but it's still 2-3 times higher than where it was for the previous 20 years.

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Overnight update: Global markets shrugged off the Chinese GDP data because we all know they are just making up the numbers at this point.  However, a Reuters story which said an anonymous source indicated the ECB (Europe's Fed) was looking at buying bonds (ie, their version of QE) has sparked another monster rally in stocks this morning.

To recap - stocks fell roughly 9% from their peak at the beginning of this month and have now jumped back up 5% in the last 4 days.  This is a sign of the kind of volatility that says something big is afoot (or someone is making up for lost time by trading like a madman .... or a madcomputer).

Cheers!

Monday, October 20, 2014

More of the same out there today...

Markets were weak when volume emerged this morning but slowly but steady volume disappeared and a few buyers were able to march the market straight up.

A couple of notes:

1) IBM's results should be something to watch.  They didn't miss their expectations by a couple of million dollars -- they missed by almost a billion dollars.

2) Apple's results were fine but we all knew they were going to sell a pile of shiny new ithingys.  I'm more concerned about their focus on buying their stock instead of innovating.

3) Stat of the day from the UK.  In 1964 the mode (most frequently occurring age) of death was 0 - meaning more people died between 0-1 than at any other age.  In 2013, the mode in the UK jumped to 87.  Wow.

4) Scientists demonstrate the world's smallest generator - 1 atom thick. Double Wow!

Cheers!

Sunday, October 19, 2014

What happened last week?

Futures and overseas markets are looking up again as the deep abyss of the crisis from way, way, way back on Wednesday continues to dissipate.

I guess the fact that only one school was shelled over the weekend in Ukraine, one nuclear sub did or did not go missing, ISIS is only "training" pilots with the help of the Iraqis, Hong Kong chaos has stabilized and no new cases of Ebola popped up in the US, so that has given everyone the green light to buy every stock that isn't nailed down.

However, insiders are still having hushed conversations about last Wednesday's market freak out.  This is pretty wonky stuff so I'll boil it down to the basics - someone was sufficiently scared to buy every US treasury future they could get their hands on.  This panicked buying pushed yields in the 10 year treasury below 2% and the volume of contracts was the stuff of legend.

As one Wall Street quote machine said last week "this is the stuff you'll be telling your grand kids about".

For a little perspective the volume of contracts traded was roughly 5 times (!) the number of contracts traded during the previous peak of panic - when Lehman Brothers collapsed.

So, here's what we know - either someone is really, really in the know about something or some computer program ran wild and moved the biggest market in the world like it was the market for beanie babies.

I'm leaning toward this was a computer model run amok but hey, what do I know.

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From the "America's Ebola panic files" - via the dailymail

A Maine elementary school teacher has been barred from school after visiting Dallas, Texas, where Ebola patients have been treated - despite having no contact with any suspected sufferers.

* It comes after hundreds of parents removed their children from a middle school in Mississippi because the principal visited Zambia - 3,000 miles from any countries struck by the deadly disease.

#SMH at you 'murica :(

Cheers!



Friday, October 17, 2014

Stock market is all fixed. Return to your regularly scheduled Dancing with the Stars episode

The market has exploded higher today on hints, rumors and innuendo that the world's central banks were just kidding about that whole "ending QE" thing.

This is the quandary that the central banks have created.  Every time there is a hint of ending their low cost borrowing programs (QE) the markets throw a mini-temper tantrum until the Fed relents.  This time all it took was 2 weeks to get the Fed to calm everyone with rumors of QE4.

As a point of reference consider this chart from Goldman & The Federal Reserve.


5 yr chart of the S&P 500



The stock market has gone so long in this artificially supported mode that all of the "corrections" of the past 5 years barely even register.

However, look at these 2 charts - see that little dip in stocks (the blue line) in mid-2010?  That is when QE was supposed to end.  However, stocks dipped 10% and the Fed came to the rescue with QE2 at the end of 2011 (note stocks not only recovered from the dip but added another 15%).

Then in the end of 2011 stocks started to dive again - so Operation Twist was launched and stocks recovered in early 2012.  In late 2012, stocks just flat-lined and that was enough to garner QE3 which led to the 30% explosion in stocks over the past 18 months.

This brings us to the present day - the blue line shows the 5-8% decline we've seen in stocks this month.  The top chart shows what the Fed is supposed to do with QE.  However, now that is clear that the Fed really intends to take away the markets meth this month, the stock market freaked out again and that has caused many to say that QE4 is on the table.  We all joked about QE2, 3, 4.... when the original QE program was launched, but here we are.  Stocks have become fully dependent on central bank support.  Without this support I suspect stocks would be 30% lower than they are today however, there is no one willing to force them to pull the plug and thus it's rally on for today.

Buy the dips and sell the rips.......

Cheers!

Thursday, October 16, 2014

Making a living by 11am, Oils big reversal and EBOLA - EVERYBODY FREAK OUT!

For the second straight day stocks took a dive on the open only to sharply recover most of those gains by the end of the day.  I've been telling people that I talk to that October has felt like someone is desperately trying to make their entire bonus for the year in 2 weeks.

By moving the markets violently in one direction and then whipping them back in the course of an hour, active traders in options are making small (and not so small fortunes) as long as you are on the right side of the trade.

Today's recovery seemed to be driven by the sudden, and as of right now, unexplained spike in oil prices this afternoon.  As I mentioned earlier this week, oil prices have been tumbling on rumors that Saudi Arabia was going to sell oil below the market price to hurt the economies of two major producers (namely, Russia and Iran).  However, what the parties involved forgot was that the US Shale boom is premised on oil being at or above $100 (exploration and extraction of shale oil puts the cost per barrel at $65-$90/barrel for most locations).  With oil trading at $80 this morning, many of the US shale companies were starting to get crushed in the stock and bond market.  This is the funny thing that all of the "frack, baby, frack" people tend to forget.  We've known that this oil was in the ground for decades but it's only economically feasible to get it out at a certain price.  When oil is $100 and you're paying $3.85/gallon, they will keep fracking.  If oil fell to $50 per barrel (I know that seems crazy but oil spent most of the 90's and early 2000's between $18-$38/barrel), you'd see every domestic oil project come to a halt.

I hesitate to mention the ebola hysteria, but I will say that the most disconcerting fact to me is that of the 4,500 deaths 200 of those deaths (4.4%) have been health care workers.  I know that protocols weren't always followed perfectly but the fact that 4% of the deaths in this outbreak have been health care workers is troubling.

In my opinion, the greatest risk from ebola isn't catching the disease for the average American.  Rather the risk is that fear grips the nation to a point where people stop traveling, avoid going to work or school, etc.  This is a worst case scenario but today I read that 50% of Americans were re-evaluating plans to travel overseas (I'm not sure how they came up with that number b/c I'm pretty sure most Americans don't travel overseas to begin with but another story for another day).

If that became 50% of Americans cancelling Christmas ski trips or golf trips to Myrtle Beach our economy which is on shaky footing could tumble right back into a recession.  That is what you should fear when you hear ebola and that may explain why certain AM radio hosts are so worked up about it (they stoke the fear which leads to reduced economic activity in 2014-15, the economy slips into recession and BOOM Mitt/Jeb/Christie to the rescue :) )

Cheers!

PS - as election day draws near remember that your vote is not for sale.  I'm working on writing something on this subject but for now remember that if you don't fall for Party A or Party B's million $ ad campaigns, you can change course of history.

Tuesday, October 14, 2014

It's 1999 all over again!!

** Special note: for all of my Facebook bashing, note the new "Facebook share button" to the right of this post.  If you like what you see, share the post and I'll see if that works (I'm not on Facebook - yes apparently I'm THE ONE - so I have no way of testing the button).
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I wish that I had saved some of my old files from 1999 aka the dotcom bubble version 1.0.  I distinctly remember a pitch from a new cell phone concept (this was the pre-app era) that would "pitch you deals or coupons as you walked down Park Ave. in NYC".  For a number of reasons this concept died on the vine.

However, fast forward 15 years and what's old is new again....

"Facebook's location-based ads pitch you on the store you just walked by"

"On Tuesday, the company began rolling out a new feature for local advertising that lets businesses target users based on whether they’ve gone near the physical store that’s being advertised. The ad could pop up in your Facebook feed around the same time you walk by, or some time later.

The localized targeting could help smaller businesses on Facebook reach a larger number of would-be customers, giving Facebook a new revenue stream in the process. Over the past year or so, some smaller businesses have seen their exposure decline on the site as Facebook has tweaked its formulas for promoting their Pages."
Yeah, just what I want more Facebook ads!!!
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This is an interesting chart which got some coverage last week.
The red line represents the official "headline unemployment rate".  The grey line is U-6 which includes the short-term discouraged workers, marginally attached and part-time for economic reasons.  The Blue Line represents ShadowStats estimate of Unemployment if you take U-6 and the long-term discouraged that are no longer measured by the BLS.  I'm not sure I buy 23% unemployment, but if you've ever been out and about at 1pm on a Wednesday you might believe that unemployment is actually higher than the reported 5.9% number.
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Quick mkt commentary - markets were extremely volatile again today.  Despite finishing mixed, some markets were up nearly 1.5% earlier in the day so a flat day has to be discouraging.  The liquidity is so incredibly thin that I think some people are getting very rattled.  It's worth watching closely. 
Cheers!