Thursday, July 29, 2010

Initial unemployment claims were roughly inline and the four week moving average dipped a bit, but if you take a step back to see the forest for the trees you realize that job losses remain at a very elevated level and are not signalling any meaningful improvement in the job market at this time. However, Hal9000 only cares that this number was slightly better than expectations so the markets are UP, UP and AWAY (however, they seem to be pulling back a bit at the moment).

There was a fairly interesting consumer survey that was published today that seems to point to June as a turning point for the consumer.

"One of three respondents in a recent survey said they would spend less on consumer goods over the next 90 days than they said they would in June. The drop was 6 percentage points to 32%. Those who said they planned to spend more in the next 90 days declined to 30% to 38%, an especially sharp fall-off in such a short time.

Vacation, consumer electronics, restaurants, and durable goods will all be effected, a sign of how broad-based the pullback is. Plans to shop Best Buy in the next 90 days dropped to a 17-month low. Intentions to shop Amazon.com (NASDAQ: AMZN) also fell sharply."

These surveys can be flawed but the degree of the pullback is worth noting. If these trends gain steam into the Fall it could make things very challenging for incumbents: Do we authorize another stimulus to prop up the economy and risk voter backlash at spending money we don't have OR do we let the economy waffle back and forth on life support and hope that voters recognize our new tight fisted budgeting?

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I don't want to open up a can of worms with the Climate Change Denier crowd but consider this stat from NASA.

"2010 is on course to be the planet’s hottest year since records started in 1880. The current top 10, in descending order, are: 2005, 2007, 2009, 1998, 2002, 2003, 2006, 2004, 2001 and 2008."

The key point there is that we are talking about GLOBAL temperatures. We are often caught up in US weather patterns but places like India, Australia, Russia, China have been stuck in major heatwaves for the better part of the past decade. I think you can debate the causes of this change in temperature - man made or natural phenomena - but you can't deny the data that shows the past 10 years have been the hottest on the planet in the past 130 (I'm the first to admit 130 years is a ridiculously short time period when we're talking about historical temperatures, but it's all we have to work with).

However, given the inability of anyone to predict the temperature at my house with any degree of accuracy maybe we should take all of this data with a grain of salt (yesterday's OPPRESSIVE heat that was supposed to reach almost 90? Yeah, I never hit 79 degrees on my properly shaded thermometer).

But remember, it snowed twice in NYC last year so clearly the planet is not warming :)

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Great. Here's another reason that I'll never be able to move the family to Costa Rica. FLYING MANTA'S....



Apparently the photographer caught them breaking the surface and soon they were jumping out of the water up to 9 feet in the air!


Cheers!

Tuesday, July 27, 2010

If you needed any further evidence that the stock market has become a parody of its glorious past


Who needs stocks anyway when you can just hit the local yard sale market? From here on out, I'm following this guy's investment advice.... Spent forty five dollars on negatives at a yard sale that may be worth up to TWO HUNDRED MILLION!
We may need hire him to run the US Treasury in a few years.
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Just in case your yard sale finds tend toward the trash end of the trash to treasure spectrum Walgreen's has come to the rescue with a new line of $3 wines that according to this writer is "fantastic".
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Cheers!

Monday, July 26, 2010

New Home Sales RECORD!!!

If you've been reading along you know that there is going to be a catch with any headline like that one. Yes, new home sales in June did technically increase by greatest amount from the previous month ever. Here's the catch - actually there are two problems with this data -

1) June 2010 was actually the lowest number of June new home sales EVER. If you ignore all of the month to month data and consider that June is the peak of the summer sales season this number is a disaster. With all of the tax credits, etc., it's not hard to believe that June was a record month, but it is surprising that the record set was for the worst June since data was collected.

2) The revisions to previous month's data makes this month's "gain" worthless. In May the government reported new home sales had occurred at a 300k annualized rate. Now they've said "Ooopsie" and sales really occurred at a 267k which is the lowest number ever recorded. This coupled with ANOTHER downward revision of the April data more than offsets any perceived benefit from June's data.

However, the computers don't care about shades of grey they see things in red and green and today it's all green.

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I don't tend to place a great deal of weight on the many regional manufacturing reports but the trend across all of the reports has turned decidedly negative.

"The general business activity index fell sharply to –21, its lowest level since July 2009. Thirty-one percent of firms reported a worsening of activity, up from 22 percent in June. The company outlook index also fell to a 12-month low, as only 13 percent of manufacturers said their outlook had improved over the previous month, compared with 24 percent who said it had worsened."

This fits with the trend I'm seeing across many industries. Business activity is worsening but firms remain profitable as they cut costs.

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Cheers!

Monday, July 19, 2010

Rainy day reading....

Wow - tons of new info out over the past 4 days.

* The political tug of war over the extension of unemployment benefits appears to be over.


* Consumer Confidence data last week was scary bad. I'm not sure what to make of it - maybe it's a combination of factors (BP, weak job market, a stock market that is now flat for 10 months) but this number was historically bad. For some context:

"You have to go back to the aftermath of the Lehman collapse in October 2008 and before that in September 2005 after Katrina. The decline we saw, believe it or not, was nearly as big as the plunge we saw right after 9/11.

Let’s talk about what is normal and what is not. What is normal is that at this stage of the cycle, a year into a supposed recovery, the UofM sentiment index is sitting at 89.3. In recessions, the index averages out to be 73.8, and in expansions, it is usually already sitting at 90.9, on average. Today we sit at 66.5." Or maybe it's just that the cast of Jersey Shore has been making the rounds on the talk show circuit and everyone is really terrified by the next generation.


* Builder confidence hit its lowest level since April of 2009. Any reading below 50 indicates a poor market for home builders. July's number was 14! If this wasn't an election year, I'd expect a series of tax credits to start working their way through Congress again.


* Chocolate market goes crazy - this is really an interesting read for the heavy finance freaks out there but someone in Europe either has a massive sweet tooth or the urge to bankrupt someone.

According to zerohedge "The WSJ reports ten brokers (mainly BNP Paribas) took possession of more than 240,000 tons of cocoa, valued at as much as $1 billion, leaving just 6,710 tons available for purchase. The Telegraph adds some further color: "The cocoa beans, which are sitting in warehouses either in The Netherlands, Hamburg, or closer to home in London, Liverpool or Humberside is equivalent to the entire supply of the commodity in Europe, and would fill more than five Titanics. They are worth £658 million."

Anyone short European Cocoa is looking for a new job today.
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More data on China's empty cities. For a place with 1.3 billion there seems to be tons of available space.

"an economist at the Chinese Academy of Social Sciences noted estimates from electricity meter readings that there are about 64.5 million empty apartments and houses in urban areas of the country!"

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Booming business of the day: Sign makers telling us about all of the cool new projects funded via the stimulus.

"On the road leading to Dulles Airport outside Washington, DC there's a 10' x 11' road sign touting a runway improvement project funded by the federal stimulus. The project cost nearly $15 million and has created 17 jobs, according to recovery.gov.

However, there's another number that caught the eye of ABC News: $10,000. That's how much money the Washington Airports Authority tells ABC News it spent to make and install the sign – a single sign – announcing that the project is "Funded by The American Reinvestment and Recovery Act" and is "Putting America Back to Work." The money for the sign was taken out of the budget for the runway improvement project.

ABC News has reached out to a number of states about spending on stimulus signs and learned the state of Illinois has spent $650,000 on about 950 signs."

On a related subject, does anyone have any info on the bridge replacement project going on in Cape Vincent on Rt. 4? It seems like an obscure back country road with more cows than houses, but there were 2 large cranes and probably a crew of 10 working there last week when I was detoured while biking to the Cape.


Fact of the day: A decade ago China consumed 1/2 as much energy as the US. This year, they consumed 4% more than us. Stunning.

Bonus Fact of the day: Almost a quarter of students in two- and four-year colleges in New York now take remedial classes.

Cheers!

Tuesday Funnies

Because sometimes it just isn't classy to chug straight from the bottle....



"Holds a FULL BOTTLE of wine!"

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Those of you complaining about our recent "heat wave" where daily temps in NNY exceeded historical norms by... gasp! 7% last week be thankful you're not in Phoenix.

Good news - it's "only" going to be 105-108 this week.

Bad news - the nightly lows will fall back to a chilly 95 degrees.

If we cut off power to Phoenix air conditioners the population would fall to 132 people.

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I always consult QVC before making any major health and beauty choices so I really appreciate their latest research.

"Women are at their attractive peak when they are 31-that's the precise age when, according to a survey, they are considered most beautiful. The poll of 2,000 men and women, commissioned by the shopping channel QVC to celebrate its Beauty Month, found that females in their early thirties are seen as more attractive than younger girls as they are more confident and stylish."

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Sean Penn is on Charlie Rose and if you get past all of the sound bites and political rhetoric you have to appreciate his passion for saving Haiti.

It's worthwhile to look for his interview online after it is posted.

Cheers!

Tuesday, July 13, 2010

Random College Articles

There were a series of college articles that appeared in a variety of publications last week that caught my eye.

1 - Share of College Spending on Recreation is Rising

American colleges are spending a declining share of their budgets on instruction and more on administration and recreational facilities for students, according to a study of college costs released Friday.

“This is the country-clubization of the American university,” said Richard K. Vedder, a professor at Ohio University who studies the economics of higher education. “A lot of it is for great athletic centers and spectacular student union buildings. In the zeal to get students, they are going after them on the basis of recreational amenities.”

2 - Could story #1 be the cause of #2? What happened to studying?

They come with polished resumes and perfect SAT scores. Their grades are often impeccable. Some elite universities will deny thousands of high school seniors with 4.0 grade point averages in search of an elusive quality that one provost called “intellectual vitality.” The perception is that today’s over-achieving, college-driven kids have it — whatever it is. They’re not just groomed; they’re ready. There’s just one problem.

Once on campus, the students aren’t studying.

It is a fundamental part of college education: the idea that young people don’t just learn from lectures, but on their own, holed up in the library with books and, perhaps, a trusty yellow highlighter. But new research, conducted by two California economics professors, shows that over the past five decades, the number of hours that the average college student studies each week has been steadily dropping. According to time-use surveys analyzed by professors Philip Babcock, at the University of California Santa Barbara, and Mindy Marks, at the University of California Riverside, the average student at a four-year college in 1961 studied about 24 hours a week. Today’s average student hits the books for just 14 hours.

The decline, Babcock and Marks found, infects students of all demographics. No matter the student’s major, gender, or race, no matter the size of the school or the quality of the
SAT scores of the people enrolled there, the results are the same: Students of all ability levels are studying less.


“It’s not just limited to bad schools,” Babcock said. “We’re seeing it at liberal arts colleges, doctoral research colleges, masters colleges. Every different type, every different size. It’s just across the spectrum. It’s very robust. This is just a huge change in every category.”

3 - To Stop Cheats, Colleges Learn their trickery

However, I'm not sure colleges were aware that kids would be ready and willing to do stuff like this....






This image isn't very clear on the blog, but the idea is that if you have a color scanner you could scan a coke label and then change all of the info on the label from an ingredients list to a series of formulas for your Calc II class. Crazy stuff.

It's all good at Alcoa....or is it?

Well, the market suddenly thinks everything is peachy at Alcoa rallying sharply on the heels of Alcoa's better than expected results - although it's worth noting that by the end of the day and the market had resumed it's silicon-based upward march Alcoa had been left in the dust up just a dime on the day. Alcoa's analyst played one of the old school analyst games and hoping no one would notice. Over the past couple of months, they've slowly lowered their expectations for earnings. When Alcoa manages to surpass these lowered expectations, it's time to pop a bottle of Dom and celebrate the return of the recovery!! Only not everyone is reading from the same script and a number of analysts keep cutting their Alcoa estimates as pricing pressures mount in the aluminum market.

Intel has also provided a further boost to Asian markets tonight. So until further notice it seems as though the machines have determined that if they just keep oscillating the market up and down 6 percent every 3 weeks they can buy up all the luxury yachts being auctioned in Miami by the end of the year.

Cheers.

Thursday, July 08, 2010

Everything is better after 3pm...

As has been the case over the past year the market was relatively flat again today until those clever investors decided that they just had to buy stocks in the last 24 minutes of the day. I've given up trying to understand the rationale - as have most traders - and just decided to go with the flow. Stocks have added about 4 percent in the last 2 days on no news and virtually no volume. Maybe they should leave the rookies in charge all of the time.

The best images on the web today:
1. This is a map showing state obesity rates in 1991 vs. 2007-2009. It is truly startling that our fittest state today - Colorado with an obesity rate of around 19% - would have been the heaviest state in the US in 1991. That's a staggering change and there is plenty of blame to go around - cable TV, the Internet, the industrial food complex, etc. In the current map, states in orange have obesity rates over 30%. What is going on from WV to OK?
I find this snarky poster poking fun at Apple to be very clever. "Hey, our phone isn't broken, your hand doesn't work right. Guess what? Yeah, there's an app for that. The iHand."

Cheers!


Wednesday, July 07, 2010

The heat is on...

Well, yesterday's rally withered in the East Coast heat wave and Europe looks pretty weak this morning. Again trading should be light as the big boys head up to Nantucket for the week.

Trending news...

* The June ISM Non-manufacturing index was at 53.8%, down from 55.4% in May - and below expectations of 55. The employment index showed contraction in June at 49.7%.

* The credit default market is heating up again and European countries seem to be on the menu again.

* Lots of signals that the economy is slowing. The great question before us is - will we have another round of stimulus to save the day or have the politicians lost their appetite for stimulus plans?

* Further evidence that the stock market is no longer a viable investment tool for most - "An analysis by Abel-Noser indicates that the US stock market has now become a concentrated pool in which the top 99 stocks account for 50.09% of total domestic trading volume. In June, the top 20 stocks accounted for 28.94%". That is an insane amount of trading volume in a small number of stocks.

* Great article on what Apple really thinks of their customers. "Angry customers have been told that buying a rubber bumper at a cost of around £25 will cure the problem. This weekend it emerged that Apple staff have been instructed not to provide these bumpers even though the problem stems from a design fault. In a leaked memo, helpline staff for AppleCare have been told: "We ARE NOT appeasing customers with free bumpers – DON'T promise a free bumper to customers."

* Mortgage applications dipped again last week, while refinancings picked up.

Go enjoy the heat today.

******* The market caught wind of a rumor that the European stress tests of Greek bonds was going to require a fairly modest mid-teen haircut and that sent the markets spiraling higher. By markets, I really mean the 20 or stocks that compose the bulk of trading, but that's another story. This might start shaking some of the bulls back into the market if we approach 10k again.

******* Wow, earlier in the week I said we might see crazy trading with the rookies in charge. That was fairly evident today as the robots and freshly minted grads from Princeton all jumped back into Citibank with both hands. The question remains - is this the start of something greater?

Tuesday, July 06, 2010

Rally mode

Apparently, a few fireworks calmed everyone around the world and global markets are spiking today. There should be few traders on the desk this week so that can lead to light volume and weird swings in the market.

Stay cool.

Monday, July 05, 2010

Two reasons to be happy you are not in China...

1) No matter how hot it gets in NNY our pools are NEVER this crowded.....




2) The housing market in China seems to be hitting some potholes. China's growth has been more than just a housing story but the potential impact of a housing slowdown and the hit to their banks is something to watch. If they have to fund a bank bailout that would leave far less money to lend us to fund our deficits. Then the fun really begins....

“You’re starting to see that collapse in property and it’s going to hit the banking system,” [Kenneth Rogoff, Harvard University professor and former chief economist of the IMF] said today [in an interview with Bloomberg Television in Hong Kong]."

However, I'd note that about the only person less connected to accurate market data than an economist would be a former economist now teaching at Harvard.

3) I think this is a pretty cool piece of tech that we should be putting in all our high schools. Basically, it's a 3-d printer that creates plastic mock-ups based on your designs. They cost about $1,000 today but if HP or Canon buy this company, it could be a $200 printer in a few years.

Get out there and enjoy the heat!!

Friday, July 02, 2010

Monthly jobs report

Estimates are all over the map for this month's report due to a couple of factors:

When are the census jobs unwinding and what will be the plug.... I mean birth/death adjustment be.

The non-census jobs number should be between 100k-150k+ but the headline number will probably be negative. However, estimates have been falling all week and the whisper numbers are very, very low so unless this is a disastrous report expect the market to breathe a sigh of relief and perk up a bit today.

We'll know more at 8:30....

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Update: The headline number was a loss of 125k jobs but 225 of those job losses were due to expiring Census jobs. Private employment was said to have edged up about 83k - almost exactly in line with expectations.

The good:
The total # of private sector jobs added should keep the market satisfied today.

The bad:
Avg workweek FELL by 0.1 hour to 34.1 hours.
The manufacturing workweek for all employees decreased by 0.5 hour to 40.0 hours.
Avg hourly earnings FELL 2 cents, or 0.1 percent, to $22.53 in June.
The Birth/Death adjustment was a goofy +147k jobs - I had estimated 151k in my private model. I should apply for a job at the BLS.

If this were a non-holiday weekend, I'd say people might get concerned by the underlying weakness of the report, but with the rookies running the show today everyone should be ok with the fact that the report wasn't a disaster.

Cheers!

Thursday, July 01, 2010

Can we all just go home for the long weekend?

Things are getting pretty testy in the market right now. The market broke 1040 yesterday and a second close below 1040 could really open up the floodgates. The powers that be are trying to bring the market back over 1040 by the close. The next real stopping points for the stock market on a technical basis if it doesn't rally today are much, much lower.

I'll caution that tomorrow's jobs report will largely influence the action and it will be another weird census influence report. Also, note that the rookies will be running the show tomorrow which could add to the volatility (this is one of the little known secrets of Wall Street that every Friday in the summer the person in control of market isn't a seasoned vet but rather some kid that was playing lacrosse at Princeton at this time last year).

The employment situation has been troubling for the past 2 years, but Congress finally turning off the unemployment benefit spigot things might get really ugly in the a hurry.

Sorry for the limited updates, but this market is a trader's dream right now.

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Interesting reads from yesterday:

1) It's not much to look at but this building is pretty cool. Tesco - a British version of Target - offers this 500 sq ft, 5 room, DIY building for just $15k.

"With five rooms, a storage loft, a deck terrace and double glazing this is a brilliant addition to our range and could be anything from an office or a gym to a lounging area."

2) Mortgage applications hit lowest level since 1996! Again, we pulled forward demand with the tax credit and right now we're in the post-tax credit vacuum. Refinance applications were up as the 10 yr note continues to plummet.

3) GM's sales were up 10% in June. On the surface this looks good, but remember a year ago we were still in the midst of the recession and GM was in bankruptcy so a 10% increase actually may be viewed as disappointing. I think GM has also increased it's reliance on Fleet sales - I'll follow up when I know more.

4) NYS looking to cook the golden goose for supper - NY May Tax Out-of-State Hedge Fund Managers.

"Recession-hit New York could raise an extra $50 million a year by collecting income taxes from people who work for hedge funds in the state but live elsewhere, according to a legislative plan to raise revenue.

The new plan would tax so-called carried interest.

A spokesman for Democratic Assembly Speaker Sheldon Silver said by telephone on Monday
that it means hedge fund managers would be treated the same way as other commuters.

Congress also has considered taxing carried interest -- profits gleaned by managing assets -- at ordinary income rates -- much to the dismay of hedge fund and private equity titans."

Again, I think carried interest should be taxed as ordinary income but if NYS moves unilaterally on this issue watch commercial property spring up in Greenwich, CT and Short Hills, NJ. These hedge fund and private equity guys don't love the idea of commuting in NYC and if NJ and CT are willing to court them with the promise of lower taxes watch them stay closer to home.

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Update: the market has been almost straight up since my original post. I guess no one wants to the leave the rookies on the hook over the long weekend in case the computers go nuts with 2 down days and the S&P under 1040. Remember we only care about flash crashes, flash melt-ups are perfectly fine :)

Later....