Thursday, October 29, 2009
For the most part all of these phones are the same, but I think the bottom line is just startling. I think if people saw a "TOTAL COST OF CONTRACT" line on their cell phone bill they'd be a little more hesitant to sign up for the latest and greatest phone.
Think about $2,500 for a palm pre and $3,800 for the iphone or droid. Remember these are after-tax dollars to you. You have to earn $6,000 to $7,000 pre-tax to pay for the most expensive cell phones and plans. I guess if you have to have one, the palm pre is a relative deal, but $6,000 would look a lot better in your retirement account than in AT&T's sales data.
There are pretty heavy lobbying efforts on both sides of this discussion. Maybe someone will ask Mr. Owens, Ms. Scozzafava or Mr. Hoffman what is their position on net neutrality?
The GDP number was +3.5% for the third quarter which was the first expansion of the US economy in over a year. There will be revisions to this number in November and December, but let's look at the details.
1 - The consensus estimate fell from 3.2% to 3.0% earlier this week because Goldman Sachs dramatically lowered their estimate. This pulled down the average GDP estimate and made today's "outperformance" seem more dramatic.
2 - Now this gets a little too detailed for the average person to care about but the GDP deflator was 0.8% vs. a consensus of 1.4% indicating that prices did not rise as much as economists expected…. This adds 0.6% to GDP for the quarter. If prices had risen as expected, the GDP for the quarter would have been 2.9% and would have been below expectations.
#2 is really the key point. There are so many variables in the GDP calculation that any single change in the assumptions can have a meaningful impact on the final number.
Don't get me wrong, this is a step in the right direction, we want the economy expanding. However, I think by the time people dissect the data and strip out the impact of cash for clunkers and the homebuyer tax credit we may realize that we're still bouncing along the bottom.
This is purely anecdotal and it may have something to do with the end of the shipping season approaching, but the volume of traffic on the St. Lawrence Seaway has spiked substantially in the past month. I don't have the hard data, but during the summer we might have seen 1-4 ships per day and lately it seems as though there might be 8+ ships going through on any given day.
Again, this might just be fleet repositioning for the upcoming closure of the Seaway or it may be a sign of life in the Canadian economy. We won't really know until we see some data on gross tonnage going through the locks.
thus 60bp of the “beat” was due to lower than expected price increases..
so the actual number missed analysts expectations for growth and inflation…
Wednesday, October 28, 2009
* Income eligibility for home buyers increases to $125,000 for individuals and $225,000 for couples.
* The tax credit for first-time home buyers (anyone who has not owned in the last 3 years) will be the lesser of $8,000 or 10% of the purchase price.
* For move-up buyers - "who have lived in their current home for at least five years" - the credit would be limited to $6,500.
* The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow.
I think it's interesting but the cost of moving, closing, real estate fees is probably at least $6,500 for most move-up buyers. I'm not sure this will stimulate as much demand as the first go around.
In a related story - Uncle Sam adds 5% to home prices.
"Uncle Sam’s interventions in the housing market have pushed home prices 5% higher on a national average than they would have been otherwise, Goldman Sachs estimates in a report released late Friday.
The government over the past year has slowed the pace of foreclosures through moratoria and the drive to modify mortgage terms to keep more borrowers in their homes. It also has pumped up demand for housing by giving tax credits to many first-time home buyers and by driving down mortgage interest rates."
I'd also agree with this analysis. Most people that took advantage of cash for clunkers were going to buy a car anyway. Thus....
"Edmonds.com today is estimating that the Cash for Clunkers program cost taxpayers $24,000 per vehicle sold. They estimate that 82% of sales would have happened anyway and thus the handout of up to $4,500 really only enticed 18% of the buyers of 690k vehicles sold under the program."
Much of this seems tied to surprising strength in the US dollar. Again, this is one of the weird connections of global finance. A couple of months ago, the US economy looked very weak relative to the rest of the world so our dollar fell, which drives up all asset prices (stocks, gold, oil, corn, etc). Now, it appears that the rest of the economies in the world are struggling just as much as the US, so people flock to US dollars for safety, which pushes up the dollar and hurts prices of stocks, gold, oil, etc.
One thing I'll be watching is to see if people are ready to call it a year. If you are one of the few money managers that got it right this year.... you bought in March or April and you're up 50%-60% on many of your holdings. Depending the structure of your fund, if you sold everything and called it a year, you could be in line for a huge payday (if you run a hedge fund that is taking 20% of the trading profits). It would be extremely tempting to shut it down for the year and wait to collect your big payday rather than watch your bonus pool shrink as the market retreats. This might just be a blip on the radar, but some big stocks are showing cracks (Alcoa's down 15% since Monday, Apple's down 5% since earnings were anounced) and I think the flow of funds around Wall Street might be very telling in the next few weeks.
This is a stunning article on the number of people doing strategic defaults on their mortgages in South Florida. I recently looked at condos in the Miami area and there are 21,000 plus condos for sale just in Miami!
"Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.
And so, faced with the prospect of being underwater on his mortgage -- owing more than the unit is worth -- for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run.
He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure."
Whatever happened to the stigma of being a debtor? Not paying your mortgage and squating in your condo? The house market in bubble areas is YEARS from recovering.
"SAP, which today reported a less-than-expected 12 percent increase in third-quarter profit, cut its sales outlook for the second time this year. Software and related service revenue will fall between 6 percent and 8 percent in 2009"
Pushing up profits via cost cutting only lasts so long.
Oh boy, here come the holiday surveys.
When asked in November how much they will spend on the holidays consumers are always terrible at gauging their spending. We tend to overestimate what we will spend and that has been shown repeatedly as the surveys always are more optimistic than the real spending results.
It one of the more detailed surveys I've seen on the subject, Deloitte Consulting (yeah, Deloitte!!) has some interesting observations from consumers. Again, I think all of these numbers will probably be cut substantially, because consumers tend to be overly bullish about their future in surveys, but we'll see how it plays out.
Even Deloitte is guilty of a little happy pill spin when they title the report "Holiday Cheer Makes a Comeback", but then they note
"The amount consumers plan to spend on gifts is down as well, to $452 compared with $532 in 2008, and $569 in 2007.
Consumers, however, do appear willing to increase their spending on the non-gift items that traditionally account for a smaller portion of the holiday budget. These categories include socializing away from home, entertaining, non-gift clothing and home/holiday furnishings. These increases lift consumers’ total anticipated holiday spend to $1,145, which is a 16 percent increase over last year."
Gift spending is forecast to fall 15% but socializing, entertaining and holiday furnishings are expected to jump 16%. Maybe, but that seems like a stretch. "I'm cutting back on gifts to my kids so I can buy some more junk from the Christmas Tree Shop." I'm not sure I buy that logic.
Here's a great excuse to use my favorite line re: consultants....
Consulting: If you can't be part of the solution, there is good money to be made prolonging the problem!
That's gold, Jerry, gold!
Tuesday, October 27, 2009
People keep citing the expiration of the homebuyer tax credit as a reason for the sell-off over the past couple of days. This is silly, the homebuyer tax credit, much like the cash for clunkers merely pulled forward demand. We stole from 2010 to feed 2009. The extension of this credit is only going to do more of the same. However, if politicians hear this story enough times "markets fall because of housing credit expiration" they might fall for the gimmick of the NAR and NAHB.
According to this Bloomberg story the tax credit is getting closer to an extension and expansion.
"U.S. Senate leaders moved closer to an agreement replacing an expiring $8,000 tax credit for first- time homebuyers with a smaller one that would expand access to so-called step-up purchasers, two people familiar with the matter said.
The deal would reduce the size of the tax credit to 10 percent of the sale’s price, capped at $7,290, the people said. The credit would be available on home purchases that are under contract by April 30, and borrowers would have 60 days more to close the sale. The existing credit is due to end Nov. 30.
The new agreement, which is still being negotiated and may change, would grant the credit to borrowers who have lived in their current home for at least five years."
What happens in April 2010? Do you think the housing market will have healed itself? Of course not. The builders and realtors will be back asking for another extension and expansion.
Mrs. Grindstone calls this the tax consultant full employment act.... IRS to tax cheats: Be afraid.
"The Internal Revenue Service detailed plans on Monday to weed out wealthy, international tax cheats with renewed urgency.
IRS Commissioner Douglas Shulman said the agency recently formed the Global High Wealth Industry task force to target investors with assets "in the neighborhood of $30 million."
Max Baucus, D-Mont., chairman of the Senate Finance Committee, Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, and other members of Congress announced Foreign Account Tax Compliance Act, which would force foreign finance companies to reveal information about U.S. account holders."
As I've said, tax revenues are plummeting thanks to job losses and falling corporate profits (note that the homebuilders are asking for a bill to be passed that will speed their ability to ask for a refund of taxes paid over the past 5 years) so the government could go after John and Jane Doe for deducting too much for charitable contributions last year or they can go after the big fish.
The risk is that the big fish start to leave the US. If you already have a home in NYC, Geneva, Shanghai and Rio maybe you might just chose to reside elsewhere.
3. Even Tehran is anxious to cut the ambitious Shiite making waves in Baghdad down to size. Five months ago, US and Iraqi intelligence noticed that the Iranian Revolutionary Guards al Qods Brigades chief, Brig. Gen. Qassem Suleimani was actively feeding Iraqi Sunni networks across the country with logistical and intelligence assistance for shaking the prime minister with terrorist attacks.
Monday, October 26, 2009
One of the issues that we haven't addressed as a nation is the length of time that it is taking the unemployed to find work. We've kicked the can down the road by continuously extending unemployment benefits.
Right now there is a bill in the Senate that will extend benefits again for 14 weeks (or up to 20 weeks in states with high unemployment). However, until this bill is passed - the two sides are fighting over the source of funding the extension via an extension of unemployment payroll taxes or from stimulus funds - roughly 7,000 people per day are seeing their benefits expire.
I'm not going to take a position on what should be done, that's for the politicians to decide. However, I'd note that dropping 200,000 people per month off the unemployment list will have a couple of implications: The unemployment rate may look better as these people fall off the rolls, the economic impact at the low-end of the income curve could be substantial and the strain on social safety nets will grow.
The San Jose Mercury News reported last week that nearly 20% of commercial office space in Silicon Valley was vacant. The Big Picture posted a comment from someone in the area on the bloodbath in commercial real estate in California right now.
"Ahh, the real issue in commercial RE: Too many sq ft.
Even in “leased up” buildings. The sub-lease market on the whole West Coast (and East Coast too most likely) is wide open. Deals are getting done at 35-40% of 2005-7 lease rates.
And, I see no private sector growth here in California that would even remotely start to fill existing space – let alone what is still coming on the market.
None of this analysis takes the public sector into account. State and local governments use alot of space in CA – they are all broke BEFORE taking the pension issue into account. If, over the next 5 years, the public sector disgorges sq. ft. onto the market, things could get even worse."
Sunday, October 25, 2009
It was a pain, but I understood Citibank's decision. However, now we are hearing word that Citi is going nuclear on existing cardholders. The word on the street is that Citi just upped the rate to 30% for nearly 6 million cardholders many with excellent credit. Citi will allow people to opt out and many will, but this seems like an act of arrogance or desperation.
Either Citi thinks they can get away with modern day usury or they know something that we don't about the state of their balance sheet. Remember those accounting rules that were relaxed back in the spring? Well, it may have made things appear better on the surface while the reality was things were still deteriorating. It's uncertain at this time which is true, but watch for this to become a story this week.
Other interesting reading from the weekend....
This sounds like something from the Daily Show or The Onion - Rich Germans Demand Higher Taxes.
Former Celtics Star Pursued by Creditors - Several National Basketball Association sources, among them friends and former teammates of Walker’s, said the 33-year-old player may well have squandered much of his $110 million-plus in career earnings.
Friday, October 23, 2009
NJ Pays Goldman Sachs for Insurance on Retired Bonds
"New Jersey taxpayers are sending almost $1 million a month to a partnership run by Goldman Sachs Group Inc. for protection against rising interest costs on bonds that the state redeemed more than a year ago.
While New Jersey replaced the debt with fixed-rate securities in 2008 after the $330 billion auction-rate bond market froze, the swap, in which two parties typically exchange fixed payments for ones based on floating interest rates, isn’t scheduled to expire until 2019.
The state paid $940,000 under the agreement last month and a total of $11.4 million since the auction-rate bonds were redeemed."
So a state in serious financial peril is sending $12 million a year for insurance on bonds that no longer exist to a company reporting massive profits. Oh, and the current Governor is the former Chairman of Goldman Sachs. Yikes.
I've said repeatedly that I avoid politics like the plague. I think there is nothing to be gained by debating political issues online.
However, since more than a few have asked, I'll offer up my analysis of the NY 23 race.
I'm not politically astute to know this for a fact, but get the sense that this race is kind of like watching the Yankees and Red Sox at the end of September after the race is over. The teams call up a bunch of rookies and has beens to go through the motions while the real players catch their breath.
I suspect that the big players in NNY politics decided to sit this one out because
1) As a special election it would draw national attention and money
2) If you win you get to turn around and start running again ASAP for 2010's election.
I imagine (maybe hope is the right word) that we'll have a stronger field of candidates in 2010 when the national spotlight will be shining on the many Senate and Governor's races around the country.
Finally, has no one inquired as to Sec. McHugh's opinion? It seems like his endorsement would carry a good deal of weight and conversely, his silence is saying volumes about the quality of the candidates.
Thursday, October 22, 2009
Now comes confirmation that the IRS is struggling to keep up with the suspect claims that were filed.
"Tens of thousands of people may have taken advantage of the first-time home buyer tax credit to defraud the government, an IRS watchdog office said Thursday, in testimony that could jeopardize efforts to extend the popular program.
Treasury Inspector General for Tax Administration J. Russell George told a House panel that more than 19,000 people filed 2008 tax returns claiming the credit for homes they had not yet purchased. Russell said his office had identified another $500 million in claims, by some 74,000 taxpayers, where there were indications of prior home ownership.
He told a House Ways and Means oversight subcommittee that they also found 580 taxpayers under the age of 18 who claimed $4 million in first-time home buyer credit. One was 4 years old."
Give an inch and they'll take a mile. Another reason to tell the NAR and NAHB that the tax credit has to die on the vine.
"Hyundai Motors has done what no other global car company has–grown through the recession.
The Korean operation released financial results. It believes it will sell over three million cars this year compared to 2.8 million in 2008. Hyundai’s third quarter global market share rose to 5.5% compared to 5.2% in the second.
Hyundai’s third quarter profit tripled to $827 million from the same period in 2008. Chrysler and GM should be as lucky."
Over $800 million in profits is admittedly very impressive and if their products prove to be reliable, Hyundai will solidify it's position in the global market for decades. However, I'd argue that this is more a matter of people moving down market in this economy. People are shifting from Costco to Sam's, Target to Walmart, Walmart to Dollar General, Applebee's to McDonalds dollar menu, etc. This has led to a mini-boom at the low end of the economic food chain. I think this trend explains Hyundai's success. People that were marginal Toyota, Ford, Nissan, or Honda buyers in the past have moved down to the "dollar menu cars" --- Kia and Hyundai.
Admittedly, I'd rather the US government owned a bunch of Hyundai shares than a pile of GM and Chrysler at this point, but I think we need to be careful jumping to conclusions about what is behind this growth for Hyundai.
New Jersey has fought and is still fighting this decision but the Army is moving forward with it's plans. Here's the kicker: The Army has had a long-standing policy of paying at least 95% of the market price of a home if displaced workers can't sell their home but have to relocate. It's a fair policy that creates some artificial floor under housing prices (similar to farm subsidies) but it's a small concession to those that work for and serve in our military.
However, this is where the story separates from reality. According to the NY Post
"But employees recently got some unbelievably good news. Our government in Washington, with your taxpayer money and mine, will make sure that people who must sell their houses in the Fort Monmouth area because of the base closing get 95 percent of the 2005 fair market value.
Just in case you've forgotten, house prices have come down tremendously since 2005. In fact, the market peak was in mid-2006, according to the Case Shiller index, which tracks real estate trends.
I'm told that those affected by the decision, which incidentally also includes people who retired because of the impending closing, were ecstatic at what was called a Relocation Fair last week. Nobody could recall the government ever making quite such a good offer."
The people that take the Army up on the offer will get to sell at a peak NJ price (2005) and buy in a lower priced state (Maryland) in a post-bubble era. Pretty sweet deal.
I think the Army should really re-think that decision if someone has to move in 2009 why pay 2005 prices? What would have happened if prices doubled from 2005 to 2009? Would the Army still be paying 2005 prices or current market rates?
At least those Dow 10,000 hats will get a workout on CNBC as we oscillate around Dow 10k.
Wednesday, October 21, 2009
"We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all".
That is just begging to be turned into a campaign slogan for some 3rd party in 2010.
Oil hit a new high for the year today and seems to be heading back toward the mid $80s per barrel. In my opinion, while you'll hear people say that oil is heading higher because the global economy has rebounded, I'd argue that it's all about the dollar. As the dollar falls, oil rises. The problem is most people have expected the dollar to stop falling and we haven't stopped the slide yet.
While many will point out that oil and prices at the pump are far below their highs, I think it's important to note that when the market last broke out to these levels (Feb 07 - Apr 08) unemployment was about 40% lower. John and Jane Doe are going to really dislike $3.25 gas when the unemployment benefits start expiring.
Good piece from the FT on the perils facing the central banks...
"Our present situation can give rise to two scenarios - or some combination of the two. The first is that central banks start exiting at some point in 2010, triggering another fall in the prices of risky assets. In the UK, for example, any return to a normal monetary policy will almost inevitably imply another fall in the housing market, which is currently propped up by ultra-cheap mortgages.
Alternatively, central banks might prioritize financial stability over price stability and keep the monetary floodgates open for as long as possible. This, I believe, would cause the mother of all financial market crises - a bond market crash - to be followed by depression and deflation.
In other words, there is danger no matter how the central banks react. Successful monetary policy could be like walking along a perilous ridge, on either side of which lies a precipice of instability.
For all we know, there may not be a safe way down. "
I'm always going to partial to RATM's "Freedom" but Mr. Haven's song is a timeless treasure of American music.
Courtesy of 18th century Scottish historian Alexander Fraser Tytler:
"The average life span of the world's greatest civilizations has been 200 years" progressing from "bondage (British Rule) to spiritual faith (18th Century)... to great courage (Boston 1775)... to liberty (Viva La Revolucion) ... to abundance (early 20th century) ... to selfishness (1980s-2000)... to complacency (2003-2008)... to apathy (today) ... to dependence (???) and ... back into bondage!"
My only disagreement with Mr. Tytler would be that I don't foresee the US falling back into bondage, but I suppose you could argue that the massive amount of debt our government owes is a form of bondage. We'll see how this plays out, but history isn't on our side.
I haven't touched on oil in awhile, but it's going to be an issue soon, if the current trends continue. Oil has soared from $30 to $80 in six months. Regular unleaded is likely to cross $3 again locally before Thanksgiving if the current trends continue. It's not a big move from $2.75 to $3.00 but psychologically, $3.09/gallon will be a tougher pill to swallow heading into the holidays.
Tuesday, October 20, 2009
The return on investment for US public and private universities has been falling steadily for the past decade. The best and brightest US students may have to consider traveling internationally to get a good return on their education investment by 2020.
In the WSJ "The College Board reported that average tuition at four-year public colleges and universities in the U.S. rose 6.5% in 2009-10, to $7,020 -- even as overall consumer prices fell. Average tuition at private, nonprofit four-year schools rose 4.4% to $26,273 for 2009-10."
Asian Universities are making real inroads in the world of higher education and may represent 30% of the best science and technology schools in another ten years. While the flight home for Thanksgiving would be a pain, the return on a degree from Hong Kong University of Science and Tech might be worth it.
Okay, put on your tinfoil hat for this story....
Visible Technologies, a company that monitors online social activity and packages the findings for clients, has forged a "strategic partnership" with In-Q-Tel, the CIA's not-for-profit investment arm, to give the organization insight into social media.
According to Visible Technologies, In-Q-Tel is also investing in the company through a "technology development agreement." It did not release more details than that.
However, examining Visible Technologies' work may offer insight into what In-Q-Tel has in mind.
In-Q-Tel apparently sees Visible Technologies' offering as ideal for monitoring social media overseas.
The CIA may or may not be interested in what people think about it, per se. However, In-Q-Tel spokesman Donald Tighe told Wired that the organization plans to use Visible Technologies' service for "early-warning detection on how issues are playing internationally." He noted that it has no intentions of monitoring activity in the United States."
Well, when CIAdarkops starts following me on Twitter I'll be a twitter quitter faster than you can say Grindstone.
"The Obama administration is still considering whether to back extending a popular tax credit for first-time home buyers but is skeptical the government can afford the cost, Housing and Urban Development Secretary Shaun Donovan said Tuesday.
The $8,000 tax credit, which will expire at the end of November, has boosted home sales in recent months, helping to revive a flagging housing market that had been a key factor driving the recession.
Donovan told the Senate Banking Committee that while he was aware the program was popular with lawmakers, "At the same time, I am mindful that these proposals can be very expensive, especially at a time of significant budget deficits."
"I do not believe that a catastrophic decline would be the result of the end of the credit," Donovan said."
I think the big difference here is in the parties speaking. Mr. Donovan is not running for re-election so he is able to tell the truth about the cost of this tax credit. Senators running for re-election are looking for something to take home before the 2010 election.
In a related story the IRS is reporting massive amounts of fraud from the first round of tax credits for first time homebuyers. Imagine that in an industry as clean as housing people were trying to take advantage of the system (snark free of charge).
"The internal watchdog for the U.S. Internal Revenue Service is expected to warn the agency for the fourth time about fraud in the multibillion dollar homebuyer tax credit program, according to a report to be released at a congressional hearing later this week.
About 1.4 million tax returns have been filed to take advantage of the United States' $8,000 credit and many lawmakers want to extend the credit, which expires on Nov. 30. It has cost the U.S. government about $10 billion.
The IRS faces significant challenges preventing individuals from scamming the tax credit program, the inspector general for tax administration for the U.S. Treasury Department will tell lawmakers on Thursday.
The inspector general found at least 70,000 tax credit claims, totaling $489 million, were granted to individuals who do not appear to qualify for it. These include those who had filed recent mortgage interest deduction forms, indicating they do not qualify."
Again, this was a credit for first time homebuyers. It's pretty easy for the IRS to cross-check your previous filings to see if you filed a tax return that included a deduction for mortgage interest -- indicating that you were a homeowner recently. I'm stunned that people would be so foolish as to assume that IRS wouldn't catch this. The fact that 70,000 people appear to have filed false claims seems more than a coincidence, it seems like a coordinated effort.
Monday, October 19, 2009
On a separate note, the new Verizon Android "i-Dont" ads are awesome.
It looks like the $15,000 tax credit for home purchases is closer to reality today.
"Lawmakers have said they are considering extending or expanding the tax credit.
Senate Majority Leader Harry Reid backs a bipartisan bill to extend the credit for six months. A Senate Republican plan would expand it to $15,000."
Keep that in mind the next time you hear either party claiming to be the party of fiscal responsibility. The real revolt should be to take back the power of the purse from Congress. This collection of lawmakers has the financial sense of a meth addict. The solution for too much debt, must be pumping more debt into the system, right? Keep feeding the addiction.
I've already figured out a loop hole through which I can steal from taxpayers, I mean, utilize the the expanded credit.
As soon as it passes, I buy a fixer upper in Clayton for $60k and collect $15k credit. A month later I sell it to my brother for $45k, he collects $15k credit. A month later he sells it to my mom for $30k and she collects $15k credit. A month later she sells it to my daughter for $15k and she collects $15k credit. YEAH!! We just got a free house on the back of the TAXPAYER, but at least the real estate agents won't get rich charging 6% on every transaction.
Don't think some of the people that participated in various mortgage frauds won't see this "opportunity".
John Hussman - one of the more respected names on Wall Street - says that stocks are at their most overbought state since, well, EVER. This isn't really news, and stocks can stay overbought for an extended period, but at some point the equilibrium has to be restored.
"That said, investors clearly are approaching the current market with every belief that the extreme valuations of 2007 represent the sustainable norm to which stocks should return. This despite the fact that the 2007 peak reflected rich valuation multiples against earnings that were themselves inflated by abnormally elevated profit margins. Last week, Bill Hester reviewed the evidence that forward earnings estimates presently assume a return to record profit margins observed just before the market turned down. If the expectations of investors and analysts are heavily anchored to those 2007 levels, as seems to be the case at present, then the fact that stocks are richly valued on the basis of sustainable, normalized earnings and cash flows may not be sufficient to give investors pause."
"I would be less than forthright, however, if I didn't admit that I suspect the current overbought condition may be cleared somewhat violently."
This is an option expiration week and that means there is a lot of incentive to pin the markets at 1,100 on the S&P500 by Friday. Looks like that's where we're headed.
When Intel started goosing estimates last week I wondered... Do you think Intel thinks Windows 7 is going to be another Windows 95? It wouldn't surprise me if the forecasters at the various parts of the PC food chain have ramped production in expectation of a big upgrade cycle from Vista to Windows 7. I'm not as close to the corporate tech buying cycle as I once was, but I can't imagine any CIO going to the CFO and asking to upgrade 20,000 pc's just because Microsoft launches a new operating system.
Seems like others are thinking the same thing.... via Barrons.com
"Comments by Advanced Micro Devices (AMD) yesterday apparently have triggered worries on the Street that the PC manufacturers, in their zealous optimism about the prospects for Microsoft Windows 7, may have built too many PCs.
As i noted last night, AMD said on its post-earnings conference call with the Street that it expect a less-than-seasonal sequential increase in Q4 revenues, due in part to the “the big build we’ve seen of PCs in anticipation of the Win 7 launch.”
A couple of interesting geo-political stories that could evolve into really big stories.
China rolls out water diversion project
China on Sunday unveiled a giant plan to relocate a vast population to make way for the south-north water diversion project. It is this project, which has caused concern with some experts saying it might affect the flow of Brahmaputra in Assam.
The Indian government has said it will try to find out if Chinese authorities are building a dam in Tibet as part of the project, which would cause serious harm to the Brahmaputra. Resettlement authorities in Henan said they have drawn up a massive resettlement project involving 330,000 people living in central China's Hubei and Henan provinces to make way for the water diversion project, which cut across the whole country. The process of resettlement will be completed by 2011, sources said.
Areas around the proposed Danjiangkou reservoir will be evacuated to build sluice for diverting water from the Yangtze River to meet water requirement in Beijing, Tianjin, Henan and Hebei.
This is a relatively small issue today, but India and China have about 2.5 billion people that need clean, fresh water. At least 100 million people in India depend on the Brahmaputra for their livelihood and daily water needs. As the glaciers in Tibet and Kashmir continue to retreat the battle for that water could one day be the next great conflict. China does not view India as a world power and will likely dismiss their complaints. India has a serious inferiority complex and they tend to overreact to items like this. President Obama should work on earning that Peace Prize by seeking to diffuse this situation ASAP.
Iran threatens to invade Pakistan?
I think you have to take these "threats" with a tablespoon of salt because I think they would have a hard time pulling this off. However, Iran is pretty confident that the attack against it's military this weekend came from Pakistan and that could be a problem for the US. Which horse do we back in that race -- Taliban, Al Qaeda hosting nuclear power Pakistan or nuke building Iran?
The commander of Iran's Revolutionary Guards (IRGC) Maj. Gen. Mohammad Ali Jafary, Monday, Oct. 19, threatened "crushing" retaliation against the US, UK and Pakistan including the invasion of its eastern neighbor.
Jafari expanded on his charge by saying: "New evidence has been obtained proving the link between yesterday's terror attack and the US, British and Pakistani intelligence services." He spoke of evidence showing that all three supported the group. "A delegation would soon travel to Pakistan to present it," he said.
A military official in Tehran then suggested Iran might launch a military thrust into Pakistan against the group blamed for the attack. Lawmaker Payman Forouzesh said: "There is even unanimity that these operations (could) take place in Pakistan territory."
Friday, October 16, 2009
In our society's effort to avoid all hard conversations, we shy away from money discussions at every turn. As the US enters this "new normal" period of less consumption and more saving it should offer plenty of opportunities to teach kids about money through words and actions.
1. Know how to use a credit card.
A credit card is like an car in my opinion. Use it wisely and it's a great tool to improve your efficiency. Drink a 12 pack and get behind the wheel and the car becomes a deadly weapon just like a credit card. A credit card is a vehicle to speed your payment, but if you don't have the cash to pay to balance at the end of the month you're shooting yourself in the foot. If you carry a balance and pay interest, you're never going to break free. Every time you whip out the credit card remind your kids that "This is a promise to pay. The bank pays the store and I promise to pay the bank at the end of the month."
2. Set-up a slush fund.
Emergencies happen. That's part of life, the bigger your slush fund, the better. The size of your slush fund needs to depend on your own personality. Some people need 3 months of cash to feel comfortable, some need a year's worth. Teach your kids to separate their money - savings/investments, expenses, slush fund, etc.
3 – Establish Routines.
The banksters are going to look for every opportunity to trip you up over the next couple of years. One area that may end up costing many undisciplined people is consistent bill paying. Sit down with your kids and show them how you write the checks (or e-pay) on the first and third Thursday of the month. This will help them understand the importance of routine bill paying and avoid hefty fees in the future.
Thankfully, Mrs. Grindstone has been a structured bill payer since she was in her teens. I've almost forgotten how to write a check :)
4 - Try Downsizing.
I recommend that everyone try downsizing one of their big bills if only for a few months. Would you really miss cable? Garbage pick up? That rarely used gym membership? That morning Vente Latte? The storage unit you haven't opened in 4 months?
Try to get your kids to purge their toys, especially before the holidays. It's a good exercise in downsizing.
5 - A car is a mode of transportation. Nothing more, nothing less.
Now, I'll admit to drooling over some cars, but kids need to hear it from you that your car does not define your family's status. A used Camry is sooo much more valuable to your bottom line than a leased BMW. Now if you are in a financial position to afford a luxury vehicle feel free to go down that road (I think there are plenty of values in the high end vehicle market), but too many kids graduate college with $80k in debt and rush right out and throw a $429/mth car payment on top of their debt. They'll never get off that treadmill.
Young people are very enamoured with luxury names - Mercedes, BMW, Lexus, but if I see some 25 year-old in a Lexus IS or a BMW 325 it screams "I'm sending HALF of my take home pay to BMW Credit Corp". However, a 53 year old in a 760Li or the new Porsche Panamera I think maybe that guy has a couple of nickels. Not all nameplates are the same.
SEC to Hire Goldman's Storch to be Chief Operating Officer
Talk about the fox in the hen house. I'm sure Mr. Storch has plenty of experience in the field, but this is a job that requires a wealth of managerial skill and incredibly complex analysis of transactions to find fraud. Mr. Storch at 29, probably has 6 or 7 years of work experience, at Deloitte (yeah, Deloitte!!) and Goldman. Plus, with the bonus pool at Goldman approaching a half a million dollars per employee, who leaves Goldman at this point? Interesting career move.
Thursday, October 15, 2009
I've talked about the mark to mark scam for the better part of the past year, but it's worth a little review. When assets fall in value a company historically has had to adjust for that change in value and book a loss. However, early last year the Financial Accounting Standards Board caved and decided that this policy was just too painful for companies to follow so poof!!! It's gone. Now when assets fall in value, you just ignore it and report massive profits.
This is one of the reasons why this market has become so frustrating. Reality has taken a vacation.
Via Bloomberg: Mark to Make Believe turns Junk into Gold
Citigroup reports a profit - Almost exclusively because they added very little to loan loss reserves. This seems unbelievably aggressive because it implies that Citi will see dramatically lower loan losses going forward. Maybe though Citi feels they can lower loan loss expectations because they feel someone will be there to bail them out for future losses (I wonder who that would be?)
Goldman continues to blow away their estimates - It's almost all due to trading, remember the good old days when they were an investment bank, Goldman is basically a giant, market moving hedge fund.
NY Manufacturing index jumps - This story really cracks me up. There was an uptick in manufacturing in the past month, due in large part to stimulus spending. However, buried deep in the article they note that manufacturing represents 6% of NY's economy. So any uptick in manufacturing is really just white noise.
This is a well written piece from the NY Times on what happened on Wall Street. My comments are at the end.
Wall Street Smarts
By CALVIN TRILLIN
“IF you really want to know why the financial system nearly collapsed in the fall of 2008, I can tell you in one simple sentence.”
The statement came from a man sitting three or four stools away from me in a sparsely populated Midtown bar, where I was waiting for a friend. “But I have to buy you a drink to hear it?” I asked.
“Absolutely not,” he said. “I can buy my own drinks. My 401(k) is intact. I got out of the market 8 or 10 years ago, when I saw what was happening.”
He did indeed look capable of buying his own drinks — one of which, a dry martini, straight up, was on the bar in front of him. He was a well-preserved, gray-haired man of about retirement age, dressed in the same sort of clothes he must have worn on some Ivy League campus in the late ’50s or early ’60s — a tweed jacket, gray pants, a blue button-down shirt and a club tie that, seen from a distance, seemed adorned with tiny brussels sprouts.
“O.K.,” I said. “Let’s hear it.”
“The financial system nearly collapsed,” he said, “because smart guys had started working on Wall Street.” He took a sip of his martini, and stared straight at the row of bottles behind the bar, as if the conversation was now over.
“But weren’t there smart guys on Wall Street in the first place?” I asked.
He looked at me the way a mathematics teacher might look at a child who, despite heroic efforts by the teacher, seemed incapable of learning the most rudimentary principles of long division. “You are either a lot younger than you look or you don’t have much of a memory,” he said. “One of the speakers at my 25th reunion said that, according to a survey he had done of those attending, income was now precisely in inverse proportion to academic standing in the class, and that was partly because everyone in the lower third of the class had become a Wall Street millionaire.”
I reflected on my own college class, of roughly the same era. The top student had been appointed a federal appeals court judge — earning, by Wall Street standards, tip money. A lot of the people with similarly impressive academic records became professors. I could picture the future titans of Wall Street dozing in the back rows of some gut course like Geology 101, popularly known as Rocks for Jocks.
“That actually sounds more or less accurate,” I said.
“Of course it’s accurate,” he said. “Don’t get me wrong: the guys from the lower third of the class who went to Wall Street had a lot of nice qualities. Most of them were pleasant enough. They made a good impression. And now we realize that by the standards that came later, they weren’t really greedy. They just wanted a nice house in Greenwich and maybe a sailboat.
A lot of them were from families that had always been on Wall Street, so they were accustomed to nice houses in Greenwich. They didn’t feel the need to leverage the entire business so they could make the sort of money that easily supports the second oceangoing yacht.”
“So what happened?”
“I told you what happened. Smart guys started going to Wall Street.”
“I thought you’d never ask,” he said, making a practiced gesture with his eyebrows that caused the bartender to get started mixing another martini.
“Two things happened. One is that the amount of money that could be made on Wall Street with hedge fund and private equity operations became just mind-blowing. At the same time, college was getting so expensive that people from reasonably prosperous families were graduating with huge debts. So even the smart guys went to Wall Street, maybe telling themselves that in a few years they’d have so much money they could then become professors or legal-services lawyers or whatever they’d wanted to be in the first place. That’s when you started reading stories about the percentage of the graduating class of Harvard College who planned to go into the financial industry or go to business school so they could then go into the financial industry. That’s when you started reading about these geniuses from M.I.T. and Caltech who instead of going to graduate school in physics went to Wall Street to calculate arbitrage odds.”
“But you still haven’t told me how that brought on the financial crisis.”
“Did you ever hear the word ‘derivatives’?” he said. “Do you think our guys could have invented, say, credit default swaps? Give me a break! They couldn’t have done the math.”$
“Why do I get the feeling that there’s one more step in this scenario?” I said.
“Because there is,” he said. “When the smart guys started this business of securitizing things that didn’t even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn’t have the foggiest notion of what a credit default swap was. All our guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness.”
“So having smart guys there almost caused Wall Street to collapse.”
“You got it,” he said. “It took you awhile, but you got it.”
I think they are on the right path, but they took a wrong turn at the light. It's too hard to paint Wall Street with a broad brush. Fifteen years ago there were some really, really bright people on Wall Street as well. The big difference was that there were very few workers that felt entitled. Firms recruited from business schools all over the US looking for the brightest kids that would work their tail off (and every once in awhile, a kid from upstate NY would sneak through the cracks).
In the late 90's that model shifted to being a race to sign the most MBA's from Kellogg or Wharton. I saw it transform the culture of Wall Street right before my very eyes. Suddenly, I was working with people that were obviously very smart, but they'd never had to work very hard for anything. As these people moved up inside the management structure of the firm it created a culture that chased the fast buck and ignored long-term planning. This led to increased trading, use of derivatives, etc, etc. I'd argue that it wasn't smart people that did in Wall Street (I worked with more than a few people that were truly brilliant) but rather a cultural shift to trying make the most $$ for me in the shortest amount of time with the least amount of work. The fact that Goldman now has over $500k/employee in their bonus pool probably means this culture remains intact.
Wednesday, October 14, 2009
A couple of other blogs, picked up on the latest hot items at Costco.com. I've seen these survivalist specials advertised and I don't get it. Who is buying a year's worth of freeze dried food? And seriously, why? What do you think is coming --- other than another ice age to Upstate NY?
Leave it to Costco. They aren't passing judgement, they see a market need and are filling that need with freeze dried food. Apparently demand is so strong for this stuff that it's taking 6 weeks to fill orders.
This is kind of a weird rumor....
Apple to turn on secret FM Radio Transceiver
Rumor site 9to5Mac reports that Apple is on the cusp of releasing an FM radio application for the iPhone and iPod Touch. And get this: it will be for the current models, not for some new hardware revision. According to the rumor, Apple will awaken the slumbering FM transceiver already dormant within the devices, currently only used to talk to the Nike+ widget.
Thanks to everyone that put the Alexa toolbar (bugs and all) on your browser. We're now top 950k sites globally and top 178,000 in the US!!!
Cheers! I owe you an adult beverage of your choice;)
Things look pretty rosy, but it's all in the presentation of the data.
Intel beat expectations but profit margins are getting squeezed ---- ignore reality and rally on the fact they beat expectation.
Retail sales tumbled on the expiration of Cash for Clunkers (auto sales down 10%) but ex-autos sales were up and beat expectations --- rally b/c they beat expectations.
JP Morgan is making boatloads of cash in their trading ops ---- rally b/c they are really good at assessing $25 overdraft fees.
The reality is that the dollar continues to depreciate and that forces up the prices of all other assets: gold, oil, stocks. For global corporations selling internationally, this is a beautiful scenario, but for the average man on the street it may end badly.
If and when we cross 10,000 on the Dow look for more headlines highlighting this as some sort of significant event. It's just a number, nothing more or less.
However, I was early in thinking this rally was going to fall apart, looks like were back in rally mode (at least today).
Tuesday, October 13, 2009
"When the Obama administration began its $75 billion Making Home Affordable program in March, it said the plan would spare as many as four million households from foreclosure. On Thursday, Treasury announced that 500,000 homeowners had since had their payments lowered on a trial basis, celebrating this as a milestone.
But the report from the oversight panel directly challenged the administration’s characterizations.
Most prominently, the panel had grave uncertainty about whether large numbers of the trial loan modifications — which typically run for three months — would successfully be converted to permanent terms.
As of the beginning of September, only 1.26 percent of trial modifications that had made it through the three-month trial period had become permanent, the report found. Of course, very few of those trial loans had reached their three-month expiration because the program only recently began processing large numbers of applications. As of Sept. 1, the Obama plan had produced 1,711 permanent loan modifications."
“These Treasury people are all from Wall Street, and they’re not doing anything but protecting Wall Street,” said Melissa A. Huelsman, a Seattle lawyer who represents homeowners fighting foreclosure. “They don’t care in the least about protecting homeowners.”
Monday, October 12, 2009
According to the Wall Street Journal Foreclosures Grow in Housing Market's Top Tiers
"About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.
The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. "The slope of that curve in recent months is much sharper than it was recently," said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.
Default rates are particularly high and expected to rise on option adjustable-rate mortgages, which allow borrowers to make minimum payments that may not cover the interest due. Monthly payments can increase to sharply higher levels after five years or when the outstanding balance reaches a certain level. A study by Fitch Ratings found that 46% of option ARMs were 30 days past due last month, even though just 12% of such loans have reset to higher monthly payments."
Think about that almost half of option ARMs are past due, but only 1 in 9 has actually reset to a higher monthly payment! How do you think that trend might play out over the next year?
Hotel Industry Survey Retreats
“The hotel industry recovery hit a snag this month, which is common,” said Evangelos Simos, chief economist of e-forecasting.com. “At this point, we still see that the major declines ended in June and believe that will be the true turning point. Yet, with this reading, we are hit with the reality that recovery may be a bumpy ride.”
The probability of business expansion declined to 17.5 percent in September, after reaching 76.1 percent in August.
“The HIP had shown improvements over the previous two months, but we’ve tried to approach those gains with cautious optimism,” said Chad Church, industry research manager at STR. “Over the past months, we saw leisure demand continue to make strides in recovery while business travel maintained its downward trend. Now that the summer travel season has come to an end, we’re waiting to see any signs of life from the business segment.”
This fits with my discussions with business travelers that it is a ghost town out there. Hotels, restaurants, bars that used to be packed with business travelers are now struggling to keep the lights on. Watch for more developments here (or consider booking a hotel this fall, there are some decent deals out there).
FHA loans are a growing concern
“F.H.A. has stepped into the void left by the private market,” Representative Maxine Waters, Democrat from California, said at the hearing. “Let’s be clear; without F.H.A., there would be no mortgage market right now.”
That was the case for Bernadine Shimon. Like many Americans, Ms. Shimon has recently been through some rough times. She lost a house to foreclosure, declared bankruptcy, got divorced and is now a single mother, teaching high school English in a Denver suburb.
She wanted a house but no lender would touch her. The Federal Housing Administration was more obliging. With the F.H.A. insuring her mortgage, Ms. Shimon was able to buy a $134,000 fixer-upper in August.
“The government gave me another chance,” she said.
The F.H.A. is insuring about 6,000 loans a day, four times the amount in 2006. Its portfolio is growing so fast that even F.H.A. backers express amazement.
Any more than that and Ms. Shimon, 45, would still be a renter. As it was, she cashed in her retirement savings account to come up with the necessary funds. She did not have enough to spare for closing costs, so her mortgage broker arranged a deal where the charges were wrapped into the loan at the cost of a higher interest rate. She cried when the deal was done.
The house was empty and trashed. Slowly, she is trying to bring it back to life. She spent the first few weeks picking up garbage in the backyard.
Is Ms. Shimon a good bet? Even she has no easy answer. Her mortgage payment, $1,100, is half of what she takes home every month. It is not easy to make ends meet. Teachers can get laid off like everyone else.
“The government,” she said, “is doing what it needed to do — taking a risk on people.”
Chaz Fullenkamp, an automotive technician in Columbus, Ohio, got an F.H.A. loan even though he was living on the financial edge. “If I got unemployed, I’d be wiped out in a month or two,” he says. Thanks to the F.H.A., however, he is better off than he used to be.
Mr. Fullenkamp used F.H.A. insurance to buy a house this spring for $179,000. The eager seller paid the closing costs and also gave Mr. Fullenkamp $2,500 in cash. He immediately applied for the $8,000 tax rebate. Even taking his down payment into account, he came out ahead.
“I knew in my heart I could not really afford the house, but they gave it to me anyway,” said Mr. Fullenkamp, 22. “I thought, ‘Wow, I’m surprised I pulled that off.’ ”
Have we really learned nothing? 50% of your take home as a mortgage payment? Loans to 22 year olds that have a financial safety net of a month or two? Sounds like the makings of another crisis. I wonder if the head of FHA has his testimony for Congress prepared..."No one could have foreseen that a 22 year old that put down $6k on a $180k house (when the government gave him $8k) and a month of financial security would be a bad credit risk".
Sunday, October 11, 2009
Ever heard of Stanislav Petrov?
Probably not—but you may very well owe him your life.
Petrov, a former member of the Soviet military, didn’t actually do anything but that’s precisely the point.
In 1983, Petrov held a very important station: As lieutenant colonel, he was in charge of monitoring the Soviet Union’s satellites over the United States, and watching for any sign of unauthorized military action.
Petrov was stuck working a double shift at a secret bunker, monitoring satellite activity, when “suddenly the screen in front of me turned bright red,” Petrov told BBC News. “An alarm went off. It was piercing, loud enough to raise a dead man from his grave.”
According to the system, the United States had launched five missiles, which were rapidly heading into Soviet territory. The U.S.S.R. was under attack.
All Petrov had to do was push the flashing red button on the desk in front of him, and the Soviets would retaliate with their own battery of missiles, launching a full-scale nuclear war. (My comment: This is disputed. Apparently Mr. Petrov did not have the ability to launch missiles on his own, but he would have reported the "attack" further up the chain of command).
“For fifteen seconds, we were in a state of shock,” he told The Washington Post. “We needed to understand, what’s next?”
Though the bunker atmosphere was chaotic, Petrov, who had trained as a scientist, took the time to analyze the data carefully before making his decision. He realized that, if the U.S. did attack, they would be unlikely to launch a mere five missiles at once. And when he studied the system’s ground-based radar, he could see no evidence of oncoming missiles.
He still couldn’t say for sure what was going on, but “I had a funny feeling in my gut,” he told The Post. “I didn’t want to make a mistake. I made a decision, and that was it.”
Luckily for all of us, he decided not to push that button. Later, his instincts were proven right—the malfunctioning system had given him a false alarm, and the U.S. had not deployed any missiles. Thanks to Petrov’s cool head, nuclear war had been narrowly averted, and millions of lives were saved.
Unfortunately, Petrov didn’t exactly receive a heroic reward from the Soviet military: Embarrassed by their own mistakes, and angry at Petrov for breaking military protocol, they forced him into early retirement with a pension of $200 a month.
It seems like someone should figure out how to set up a paypal account for Mr. Petrov so we can all wire him $50 or something for his trouble.
Unfortunately, that plan backfired when all asset classes (except government bonds) moved in the same direction. Now, many of these investments -- stocks, hedge funds, real estate, private equity have all made strong rebounds off their bottoms, but pension funds assume it will continue like this for the foreseeable future.
According to the Washington Post....
"The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both.
Within 15 years, public systems on average will have less half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade.
After losing about $1 trillion in the markets, state and local governments are facing a devil's choice: Either slash retirement benefits or pursue high-return investments that come with high risk.
"The amount that needs to be made up is enormous," said Peter Austin, executive director of BNY Mellon Pension Services. "Frankly, they are forced to continue their allocation in these high-return asset classes because that's their only hope."
Despite this situation many local governments are taking the easy (and wrong) road by suspending contributions at a time when they probably should be hiking contributions (expect this to be a huge issue in 2010 when local school budgets are facing big tax hikes to make up for investment performance of the teachers pension).
"And like their counterparts across the country, state officials assumed they would earn around 8 percent a year from investing in financial markets for years to come given the outstanding performance of stocks in the 1980s and 1990s.
But officials in Virginia and elsewhere soon began to wonder whether those two decades were a fluke. As pension deficits began to rise, officials questioned whether the investment assumptions were too optimistic. In 2006, Virginia's pension officials suggested scaling back benefits or requiring current employees to begin paying into the pension fund. The state's lawmakers took no action. (My comment: Again because a hard decision had to be made, the politicians decided to take no action)
Then the crisis hit. Virginia lost 21 percent of the value of its portfolio, or about $11.5 billion. Maryland and the District, meantime, suffered drops of 20 percent.
The losses were typical of what pension funds suffered around the country. State and local government officials had predicted before the crisis they would have $3.6 trillion in their accounts by now, according to the Center for Retirement Research at Boston College. Today, they are $1.2 trillion short of that mark.
Here's the big idea that we all need to remember....
"Even if public pension funds were to hit their 8 percent investment targets every year (my comment: highly unlikely), Nicholl calculated they would have less than half of what they need by 2025. This is because a greater share of the population will be retired and those who are (retired) will live longer, thus collecting benefits longer, she said."
In Ohio, for instance, the teachers pension system reported that it would take 41 years for its investments to catch up with the costs of meeting its obligations to retirees. That was before the worst of the financial crisis.
During the last fiscal year, Ohio's fund lost 31 percent. Its most recent annual report detailed how long it would now take for its investments to put the fund back on track. Officials simply said: "Infinity."
Sometimes I wonder if I was meant to live in Ohio -- they are pessimistic enough to make me look optimistic at times :)
I've said this before but it is worth repeating. A retirement age of 65 may have been appropriate when the bulk of you job involved physically demanding tasks and the average life expectancy was 70 years. However --- hold on a second.... Mom, please avert your eyes....
we can't continue to allow people to retire in their early 60's with life expectancies touching 80 while population growth and immigration levels slow. The math just doesn't work out.
This is the third rail of politics (did you see the reaction to the one county possibly reducing headcount in CNY?) but it needs to be addressed. Again, this is one of those big picture financial issues that should be settled by a non-partisan oversight panel that is not staring down the barrel of an election every 2 years. Wishful thinking, I know.
Friday, October 09, 2009
"Dow Chemical Co said on Monday it would begin selling a new rooftop shingle next year that converts sunlight into electricity -- and could generate $5 billion in revenue by 2015 for the company.
The new solar shingles can be integrated into rooftops with standard asphalt shingles, Dow said, and will be introduced in 2010 before a wider roll-out in 2011.
"We're looking at this one product that could generate $5 billion in revenue by 2015 and $10 billion by 2020," Jane Palmieri, managing director of Dow Solar Solutions, told Reuters in an interview.
The shingle will use thin-film cells of copper indium gallium diselenide (CIGS), a photovoltaic material that typically is more efficient at turning sunlight into electricity than traditional polysilicon cells.
Dow is using CIGS cells that operate at higher than 10 percent efficiency, below the efficiencies for the top polysilicon cells -- but would cost 10 to 15 percent less on a per watt basis."
That's a really interesting idea. I'd like to see a few of these installed and see their performance in all weather conditions before saying it's a $5 billion product.
Canada reported a surprisingly strong number of jobs created in September.
This is tied into the recent uptick in the other major natural resource economy - Australia. China has been on a natural resource buying spree around the globe and that is probably fueling some of this growth.
The Canadian dollar is back to $1.04 to $1 US and that should be a positive for local retailers that look for shopping tourism to help smooth out the peaks and valleys of the local economy.
This is an overly simplistic explanation of the the US dollar's impact on stocks, but consider that as the US $ has fallen in the past year the amount of physical assets (oil, stocks, etc) purchased in dollars has remained static. So while the currency has fallen it's forced the price of the assets up.
I'm still of the opinion that we're going to oscillate in an out of recession for the next few years, but beware the power of asset bubbles to emerge when we least expect them.
Finally, thanks to everyone that installed the Alexa toolbar. I've cracked the TOP 1,000,000 global websites!!!! I've got a long way to go to catch the big boys, but it's a step in the right direction. Thank you for your continue visits and comments!