Monday, December 19, 2011

Holiday Potpourri

As I've stated repeatedly, I try to avoid political discussions like the plague, but yesterday's end of the Iraq War brought to mind many questions that I thought might be worth reviewing in a non-political way.

1) In 2000 (prior to entering 2 wars) the US Defense budget was $387 billion.  In 2012, when we should only be fighting one "war" as we chase 5 bad guys around a wasteland in Asia our Defense budget will be $662 billion.  If we could somehow turn a switch and ratchet back our defense spending to just the obscenely high levels of 2000 then we could save over $275 billion per year that could pay down debt, cut taxes, build infrastructure or basically pay for every full-time college student's tuition in the US.  I know that's wishful thinking but what is the Holiday season without a little fantasy :)

2) As I read another story about our withdrawal from Iraq (side note: can we please make an effort to pronounce the name of their country correctly? It is NOT eye-rack)  I wondered how well we know the country that we've been at war with for the past 9 years.  As we were departing the country yesterday the country's prime minister, a Shiite, had the country's vice-president, a Sunni, detained at the airport.  If you had to guess what percentage of the population in Iraq is represented by Sunnis, Shiites and Kurds what would you say?

If you guessed 52% for the Shiites, 28% for the Sunnis and 20% for the Kurds give yourself a gold star (these are all rough estimates).  The point is that during out time in Iraq the Shiites and Sunnis have appeared to be working toward the same goal - namely getting us out of there.  However, now that we are gone there is a real risk that the Shiites will decide they'd like to run the show as they are a majority.  Oh, and that real big country to the east of Iraq that seems to want to stir trouble --- roughly 90% of their population is Shiite.

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Here's another step forward in the future of higher education - "On Monday, MIT is announcing that for the first time it will offer credentials — under the name "MITx" — to students who complete the online version of certain courses, starting with a pilot program this spring."  This is one of the two models of higher education emerging over the next twenty years.  Gone are the days of sending Johnny off to some campus in the rolling hills of Vermont.  The college experience of the future is going to be online, rigorous and target specific career opportunities. 

Stanford opened up a course earlier this year for free and the response has been overwhelming.  The professors have said that the quality of work they are receiving from the online students is on par with what they are getting from their Stanford students.

I even downloaded one of their courses on App development and watched the lectures while working out in the gym.  It's pretty impressive stuff.

"MITx" as a non-profit entity established inside the university that will offer an "MIT-sanctioned certificate" for completing various courses or, perhaps eventually, whole course sequences — though MIT emphasized full degrees will not be in the offing.

How exactly will it work? On a conference call Friday, university officials were short on many details — how many courses would eventually be offered, how much it would cost, even the name of the first course for the experiment in spring.

They did say they would focus, at least initially, on science and engineering, where assessment is fairly objective and easily scaled up. Users might include a high school senior who wants to take an early freshman class at MIT, or college students at overseas universities where a particular course isn't offered.

One day I'll let the cat out of the bag with regard to my other vision for the future of higher education but I think there is a business model there that could be worth some coin so I'm going to refrain from giving that one away for free :)


Tuesday, December 13, 2011

Low volume grind

Markets have been spinning their wheels this week in the wake of the "big bailout" last week.  A bunch of factors are probably contributing to the current malaise.

1) Confidence is fading fast that this deal can ever receive full acceptance in the EU.

2) The uncertainty has really caused a spike in the US dollar relative to Euro and other currencies.

This last point is particularly important to watch.  It now takes just $1.30 to buy 1 Euro which is the best exchange for the dollar in nearly a year.   The dollar has only been stronger on 2 occasions in the past 3 years.  This will mean lower gas/oil prices as the dollar strengthens (yeah!) but it could make it more difficult for US companies looking to sell in Europe (see Intel's comments yesterday about European demand falling off a cliff in the past few weeks).

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Photo of the day:


This is the view from inside a "fake" Disneyland style resort that was being built in China about ten years ago when construction suddenly stopped.

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Chart of the day:
While you'll hear lots of breathless debate over taxes in the coming year note this chart which shows the top US tax bracket over the past 30 years and the actual effective tax rate paid by the highest 1% of earners.


Note that while the top statutory rate bounces around the effective rate has remained fairly stable.  The 1% should thank their friendly neighborhood tax professional for achieving this lofty goal :)



Friday, December 09, 2011

When a bad deal is better than no deal

European leaders seemed to have cobbled together some outline of a plan but the wording remains very loose.  In general, this seems like another attempt to kick the can further down the road and we will be discussing the same issue - European debt levels - over and over again in 2012.

The markets seem to like it (but oddly it's just Europe and N. America - the rest of the world was fairly weak on this news), but I sense it's just a relief rally at the prospect of not having to watch N. Sarkozy on TV 25 times a day.

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This is the most amazing/scary stat I've seen in some time - From 1990 to 2000 there were 29 market trading days where at least 400 of the 500 stocks in the S&P 500 moved in the same direction.  This means that on roughly 1% of the trading days or 3 times a year you would get a day where every stock moved in unison. 

Since, July of this year there have been 34 such days!!  On 30% of the trading days since July stocks have moved has one unit either up or down.

It's hard to call this a trend, but I think it is a trend and I'll extrapolate it bit further to show how it may impact you.  NY State has benefited for an extended period by being the financial capital of the world.  Everyone has to have an office in NY in order to gain edge, meet clients, etc, etc.  Well, in an increasingly automated world, where stocks trade less and less on their individual merits and more and more on what's happening to the "market" there will be less of a need to operate in NY.  I don't have to meet with the CEO of GE if I can just gauge the direction of the market and trade accordingly.  This offers a great deal of career flexibility to people like myself but it also means that that the best days of Wall Street are in the rear view mirror. 

So what, you might be saying?  Well, it's worth noting that Wall Street activities account for roughly 20% of NYS tax revenues.  As Wall Street shrinks it will have a direct impact on NY State budgets, schools, government employees, etc. 

It's too early to confirm that this what is happening but let's look back 5 years from now and if NYC starts to get a Detroit feel, we'll remember when it started.

Cheers!.

Thursday, December 08, 2011

If we can't have snocones the terrorists have won

#Facepalm - So to say the government wastes money from time to time is like saying water is wet.  However, even for a jaded person like myself this story from Michigan was a bit "chilling".





















"The West Michigan Shoreline Regional Development Commission, which manages homeland security operations along the western Michigan shoreline, recently gave snow cone machines costing $11,700 to 13 counties under its jurisdiction."

However, before you lose all faith in government take heart in knowing that "one county's request for a popcorn machine "was denied."  YES!! USA! USA! 

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I haven't revisited the SNAP or food stamp numbers in awhile because frankly there has been no change in their trajectory which has been straight up.  If, as we are told, the recession ended 2 years ago we should see some leveling off of the food stamp participation but in fact in continues to spike higher. 

This bolsters the argument that I make that we are in fact dealing with 2 increasingly separate economies.  We have a US corporate economy that emerged from the recession in 2009 and is slowly trying to recover lost ground.  We also have a US consumer economy that is still reeling and I believe is still mired in a recession.  When you factor in the shifting job landscape in America where we are losing high end jobs at Citibank -4500 announced yesterday - and AstraZeneca - 1500 announced yesterday - and replacing them with retail and food service jobs you get a chart that looks like this....




What's interesting to note is that even in the middle of the housing bubble (2002-2007) food stamp usage was growing and nearing record levels.  I suspect that some of the increased usage can be attributed to the fact that we switched to electronic benefits which has removed some of the stigma associated with Food Stamps.

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The rumors out of  Europe will drive the market today.  I'll wait to comment until we hear something official but my best guess is that the leaders will all say the right things on Friday.  However, actually cobbling together this coalition seems to be increasingly unlikely and I expect we could get some fairly nasty surprises next week.  However, I'd be happy to be wrong on this one :)

Tuesday, December 06, 2011

Ah, Politicians...

So @NYgovcuomo announced the best of all worlds today - no increase in taxes and a magic $1.9 billion in extra revenue!!! Yippee!!!

Well, here's where you have to step back and ask how can tax rates go down and revenues go up?  Well, it's a little slight of hand: take the truth, sprinkle in some favorable facts and withhold other information that you'd rather people ignore and you get the desired result :)

The NYS budget was built on the following premise for next year - that the millionaire's tax would expire.  The expiration of this tax would have cost the state some $5 billion in potential tax revenues as state income tax rates would have rolled back to pre-millionaire tax levels.

The proposed deal will allow income rates in NY to drop for all taxpayers (this is the truth) from the elevated levels during the period when the millionaire's tax was in place.  However, if you compare next year's proposed rates to the rates that would be in place if the Governor did nothing, the rates are going UP for many taxpayers.

So, it really depends on your point of view:  is the compromise a $1.9 billion tax hike on the wealthy or is it a $3 billion tax cut for the wealthy?

Consider this example based on rates proposed - a NYS resident making $40,000 will pay $160 less in NYS taxes next yr (compared to 2011 rates) while someone making $1.95 million will pay $41,000 less in NYS taxes next yr.

Again, the spin from the Governor has been that people making $2 million + will pay more in taxes but that's not the complete truth.  Those taxpayers will pay more in 2012 than they would have if the millionaire's tax expired as expected, however, they will still pay less in total taxes in 2012 than they do in 2011.  A taxpayer earning $10,000,000 in 2011 would have a NYS tax bill of $897,000 and, all other things equal, their tax bill will fall to $882,000 in 2012.  However, the Governor claims that he's HIKING TAXES on these people (despite the facts) because their tax bill could have plummeted as the millionaire's tax expired in 2012.

Is your head spinning yet? Welcome to the world of politics.

Cheers!

Monday, December 05, 2011

To paraphrase Crocodile Dundee

That's not a bug...







THAT.........is a bug.





The Chan's mega-stick from Borneo or if weight is more your game...




the Goliath beetle weighing in at 45 grams and nearly 5 inches long.


Sleep tight and don't let the Goliath beetle in your house.

Facts of the day

The US has roughly the same number of kids pursuing "Parks, Recreation, Leisure and Fitness" undergrad degrees (2%) as we do taking Computer Science (2.37%). 

Perhaps equally disturbing: We have more Psychology majors (5.9%) than Engineering (4.3%) and Math (1%) combined.

:(

Groundhog Day!

* For an update on the world's biggest bugs (#weta) see my next post....

Well, here we go again.  I often wonder if reporters just like having the same story to report every day because they are allowed to cut and paste 90% of an article.  This week it will be all about Europe again as a series of meetings leads up to the big 12/9 get together.

* Today's headline: "Leaders Piece Together an Effort to Keep the Euro Intact", sounds an awful lot like the stories from 10/5, 10/12, 10/19, 10/26, etc, etc.  We'll look to hear something from a German/French meeting today as they try to align their positions in front of Friday's meeting.

* Italy looks like they will announce some austerity measures including tax increase, pension reductions and spending cuts.  This will likely go over as well as Hawaiian pizza in Rome.

* How is this for ironic? China may channel part of its huge pool of foreign-exchange reserves into investment in U.S. infrastructure, including rail and transportation networks.  “China is unwilling to take on too much U.S. government debt. We are willing to turn that money into investment.”

So our country to too broke to invest in roads, bridges and rails but China can take all of your Black Friday dollars and use them to fix up America.  I get the sense that they would consider this not as a form of new investment but as a way of protecting the investments they've already made.  Interesting nonetheless.

Quote of the weekend: "We have markets in which the various vested interests are almost completely aligned, we have a brand new Coalition of The Willing  which involves the vast majority of investors, governments, Central Banks and regulatory bodies the world over and, amongst that coalition, we have a common willingness to turn a blind eye to the realities facing the world; namely, too much debt and too few ways to pay it off."

Cheers!

Friday, December 02, 2011

Unemployment fell?

Well, as you know the devil is always in the details and there are plenty of issues to look at in this month's jobs data.

** First, could Google or Facebook or Twitter lend the government some servers?  The Bureau of Labor Statistics publishes their monthly jobs report on the first Friday of every month and every month their website goes down for extended periods of time as every analyst from London to Singapore tries to pour through the data.  Bear with me, much of the info I have rec'd so far is second hand.

Again, the headline that every news outlet seems to be running with is: "JOBLESS RATE FALLS TO 8.6%".  While this is in fact true, it's more a function of math than of an improving jobs outlook.

The unemployment rate is a fairly complex calculation but for our purposes let's say simplify it.  Imagine a country with 100 people and 10 of them our out of work.  In this simple example our unemployment rate is 10/100 = or 10%.  Now, imagine that 5 of the unemployed just get tired of looking for work so they are no longer classified as "unemployed" or part of the the labor pool.  This means they vanish from the calculation and next month you have 5 unemployed / 95 people in the labor force = 5.3% unemployment !!!  Hurray, we're all saved!

Of course, those 5 people still don't have jobs, but why muddy the waters with facts.

So now, let's come back to the real world.  In the US, last month the civilian labor force fell by 315k people that disappeared - basically they stopped looking.  Removing them from both the numerator and denominator of the unemployment calculation drove the steep drop in unemployment.  Eventually, people will figure this out but it may take a day or so.

Our total labor force participation dipped back to 64% which is dismal and the average term for the long-term unemployed is now 40 weeks. 

The market seems to be happy with this data but I'm not sold on it. 

Picture of the week

I know a certain member of my family that might never sleep again after seeing this photo of a Giant Weta from Little Barrier Island off the coast of New Zealand.





















Well, for all of our issues in the US at least we don't have those things crawling around :)

Wednesday, November 30, 2011

Just your run of the mill 7% jump in 3 days...

This morning I had a sense that something could be coming.  I didn't know what but there was plenty of chatter around the intertubes that something was in the works.  Well, this morning stocks were doused in fuel and lit aflame on news that the Fed was joining forces with the ECB, the Bank of Canada, the Bank of Switzerland, etc to manage the currency markets.  The goal seems to be to strengthen the Euro, and weaken the $. 

There are many different takes on this action but the consensus seems to be that this will buy Europe some time but it doesn't change the fundamental debt situation for Europe.  There was a fairly strong rumor that a major European bank almost pulled a Lehman last night (possibly French?) but they were potentially saved at the last moment.  Perhaps the most interesting bit of information was that the Fed actually voted on this plan on Monday.  So while the major news channels reported that stocks surged on Monday because of some vague shopping traffic stats perhaps someone leaked information regarding this vote to a few key players?  That's a little tinfoil hat for my taste but the move has been so violent that it feels like something was off.

The best rally in years, follows the worst Thanksgiving week for stocks in 80 years, which followed the best October in years, which.....well, you get the point.  Healthy markets don't act like this...

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Cheers!

Talk about timing

So earlier this morning I said it looked like Europe was broken again but we could see another Mother of all bailouts proposed at any time.

Well, about 15 minutes later the Fed basically announced that they are willing to bailout the world and stock markets have rocketed higher as a result (Europe is up 3-4% as I write this).  I'm oversimplifying the situation but you get the point.

In essence, this latest effort is designed to weaken the US dollar relative to the Euro.  They'll say that they have other motives, but at it's core this is a currency move.  The problem with this is that most people think the Euro needs to move much lower (not higher as the central banks are moving it now) in order to stabilize the Eurozone.

So, in the interim this means more of the same for those of us in the US -  weaker $ = higher commodity prices (stocks are up, oil is over $101).

Remember when the Fed just dealt with inflation and employment?  Yeah, neither do I.  I think they've become addicted to seeing green on their Bloomberg terminals.

Cheers!

Wash, Rinse, Repeat

We continue to oscillate between Europe is saved and Europe is broke.  Today feels like a Europe is broken day after details started to emerge around their latest funding efforts.  I'm not convinced anything will change in the near-term but I've been surprised by monster bailouts in the past so we'll see if the pattern changes.

What is particularly disconcerting is the impact that all of these sovereign debt issues are having on real companies.  From yesterday's Washington Post "there are signs that manufacturing in Europe is imploding — new industrial orders plunged 6.4 percent in September — and it’s unlikely that the U.S. can escape the downward drag."  This dovetails with reports from Germany, France and Spain that seem to indicate businesses are really tightening their belts.

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S&P cut the ratings on 37 banks last night after applying new ratings criteria to the banks.  This has cast a pretty dark cloud over an already weak sector.  Take note of Bank of America which is now struggling to keep it's head above $5 a share.  The current price is roughly 15% below where the Warren Buffett made his latest investment which is interesting to watch.

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Another interesting data point came from Corning which indicated that while consumers still seem to be buying LCDs the price points have fallen so far it's increasingly difficult to make money.  Thus, their customers are cutting back on glass orders which led Corning to idle ~25% of total capacity.

And people wonder why the economy is sluggish.  You can't have $200 LCDs AND jobs --- you get to have one or the other :(

Cheers!

Sunday, November 27, 2011

Did I miss anything last week?

Well, it was just the worst Thanksgiving week for markets in 80 years but all is forgiven now because...stop me if you've heard this one before "Hopes that European Leaders will do more to stop the debt crisis."

There's no real new plan, it's just hopes that Europe will get it's act together.  I'm in the camp that says Europe has crossed their event horizon and it's just a matter of time until we see some more real fireworks.

There were plenty of stories on the madness that was Black Friday.  The ESTIMATES indicate that this was the biggest Black Friday since 2008 to which I'll say 2 things:

1) These estimates are based on foot traffic not transactions (in the next few day's you'll hear better estimates from Visa or Mastercard which should be more accurate).

2) The last time Black Friday peaked was in 2008 at the HEIGHT of the economic crisis so US consumers tend to be pretty terrible indicators of the health of the economy. 

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Just in case you were starting to develop a soft spot in your heart for the big banks consider this story from Bloomberg that highlights how little the US public and Congress knew about the bailouts in 2008.  I'm sure the next time around they'll tell us the whole truth....

"The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he“wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed“one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day."

A smart politician (is that an oxymoron?) could utilize news like this to work toward unifying the tea party and occupy movements.

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FACT OF THE DAY:  Apple's new $1 Billion data facility in Maiden, NC will have just 50 full-time employees.  To get those 50 jobs local authorities cut Apple's property tax bill by 50% and personal income tax bill by 85%.

Monday, November 21, 2011

Sea of Red

This should be a relatively uneventful week in the US given the light data docket but Europe continues to stir the pot.  Talk of a Moody's downgrade of France spooked much of Europe and when coupled with the failure of the US Super committee has taken roughly 2-3% out of most European markets.

The market will get fairly interesting again at these levels as the chart readers will be dismayed by the failure of stocks to break through previous trading range highs. 

The failure of the Super committee is not really surprising but the ramifications could be huge (particularly for our local economy which is so tied to Federal spending). 

Sorry for the sporadic posting lately.  Lots of irons in the fire....

Thursday, November 17, 2011

Have you ever played Jenga?

You know when you take out that one piece that really destabilizes the whole tower?  Well, right now it feels like there are about 15 different pieces of the global economy that could be pulled out and destabilize us at any moment.

Ever since 2008, the best predictor of economic events has been the debt markets and their related instruments (CDS, etc).  Thus, when Italian debt suddenly shot over 7% last week it was clear that change was coming.  Well, today's French and Spanish bond auctions seem to signal things could be dicey in Europe again.  As a reminder, we're talking about FRANCE AND SPAIN.  These are major components of the EU economy and if things start to unwind in Spain the EU's life span could be shortened considerably.

Also, consider these headlines from the two countries that were "fixed" in the past 2 weeks -

* Greek police fired tear gas at black-clad youths on Thursday as thousands marched through Athens chanting "EU, IMF out" in the first public test for a new national unity government charged with imposing painful tax rises and spending cuts to avert bankruptcy.

* Italian students also threw eggs and fake dollar banknotes at the building of the Italian banking association. "We don't want the banks to rule" and "Monti's government is not the solution," the students chanted."

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But, just in case you thought it was just an "over there" issue, remember Detroit?

"Mayor Bing is expected to discuss a confidential Ernst & Young report obtained by the Detroit Free Press that suggests Detroit could run out of cash by April without steep cuts to staff and public services.

That's a grim prognosis, but according to Brown, the city actually could be unable to make payroll "as early as December."

"I know the report says April, but there are certain risk assumptions that when you take those into consideration, worst case scenario you could run out (of cash) in December," Brown said this morning on WJR-AM 760."


But, but I thought all of those funky Chrysler ads said that Detroit was back?

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Fact of the day:  1 out of every 5 Americans is taking a prescription for a mental disorder!

The spread among the sexes is pretty eye popping as well. 






Sunday, November 13, 2011

Just a few thoughts...

* There's some interesting talk re: the Chinese Yuan.  It appears that as growth has begun to slow in China there is money flowing out of the Yuan and toward the dollar.  For all of the table pounding in Washington, imagine the reaction if China allowed its currency to float versus the $ and it FELL in value rather than rose.  Something to ponder.

* Stat of the week - It currently takes Groupon $1.43 to make $1.00.  BRILLIANT!!  Why isn't that company worth $100 Trillion?!?!

* Eric Sprott, who has a reputation as a bit of Nervous Nellie, made some news over the weekend predicting governments will "break their promises to their citizens".  This obviously is a reference to future pension obligations but I think that's a bit alarmist.

* Oil and gas prices are at their highest prices EVER in October and November.  Will $3.65 gas finally curb the holiday shopping in the US?

* California said revenues in October came in about $810 million below projections.  If that trend continues it's going to mean steeper cuts in state and local governments.  These comments mirrored what we are hearing in NY about missing our budget goals.  This will be something to watch.

Cheers!

Wednesday, November 09, 2011

From Euphoria to Panic in 1 easy step

It always amazes me how the markets can go from perfect rally mode to full on panic in a heartbeat.  The situation in Italy is very fluid but suffice to say that this is not Greece and the bailout funds aren't prepared to deal with an Italian crisis.  If we get a full Eurozone meltdown the impacts could be far reaching as the US would appreciate - cheaper gas, lower stock prices - but we're getting ahead of ourselves.

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Weird news of the week (and it's only Wednesday) ---

1) Fake Weapons Parts are a Ticking Time Bomb - I'll give you three guesses where the fake parts might be coming from but I bet you'll only need one guess.

Re: sprinkling - "It's a process of mixing authentic electronic parts with fake ones in hopes that the counterfeits will not be detected when companies test the components for multimillion-dollar missile systems, helicopters and aircraft. It was just one of the brazen steps described Tuesday at a Senate Armed Services Committee hearing examining the national security and economic implications of suspect counterfeit electronics — mostly from China — inundating the Pentagon's supply chain."

"Counterfeiting performed in Shantou (a Chinese city) was not regarded as IP theft or improper in any way," Sharpe said. "It was seen as a positive 'green initiative' for the repurposing of discarded electronic component material."

2) Fact of the day:  Take note of the increased volatility of the stock market lately.  From 1947 to 1972 - 25 years - the stock market had 15 days where it swung up or down 3% in a day.  This year we've had 8 such days.

3) College Grads say salary is less important than Facebook Freedom at work?  Okay, this is a survey of 2,800 global college grads by Cisco and I'm just stunned by the results.

* More than 40% went so far as to say that they would accept less money for a job that was down with social media at work on a device of their choosing if it also included telework.
* Not surprisingly, they overwhelmingly wanted flexible work hours and remote access, with about one-third of college students saying that once they begin working, it will be their right – not a privilege – to be able to work remotely with a flexible schedule.
* Over half of college students globally (56%) said that if they were offered a job at a company that banned access to social media, they would either turn it down, or ignore it.

* Two-thirds said they will ask about social media usage policies during job interviews.

4) What happens when you flush a toilet in the world's tallest building?  This is so typical of Dubai - build it fast, coat it in gold and forget to install the plumbing.

"A variety of buildings there, some can access a municipal system but many of them actually use trucks to take the sewage out of individual buildings and then they wait on a queue to put it into a waste water treatment plant. So it's a fairly primitive system.  I'm told they can wait up to 24 hours before they get to the head of the queue."

Cheers!

It's a busy day....

So I don't have much to offer but here's the quick and dirty:

Overnight someone decided that the collapse of the Italian government may not be good thing (remember that was the rationale for the end of the day rally yesterday) and Italy is rumored to be at a point of no return. 

Okay, Greece, Ireland, Iceland, etc.  These were troublesome but in the global market they played a very minor role.  Italy on the other hand represents the world 3rd largest bond market and the ramifications are very broad if things go sour in Italy.

Rumors are now floating of an emergency ECB meeting to stop the free fall of the Euro.  Stop me if you've heard this one before :)

I'll try to provide a more comprehensive update later today.

Saturday, November 05, 2011

Weekend follies

First, thanks to all of those that have passed along info re: propane suppliers in NNY.  I think my days of living in the "Suburbs" are numbered :)

1) I am a sucker for cool design and innovative architecture.  Well, this new building in Belgium has both design and unique architecture in spades.

  
You'll really have to check out the website where this was originally posted - here - to get a feel for different perspectives the building offers from different angles.  I'm not sure this would meet code in the US :)

2) Today's overreaction brought to you by W. Virginia - OMG! A light bulb blew!  EVERYBODY PANIC!!

"A reported exploding package and spray of white powder that sent emergency units rushing to a small-town post office turned out to be just the pop of a malfunctioning fluorescent light bulb, authorities said Friday.
The scare Friday morning triggered an evacuation of the building and the temporary quarantine of 15 people inside a school bus. Hazardous materials and bomb experts, State Police units, fire crews and more responded to the scene at a strip mall.

The Berkeley County Sheriff's Department sent a robot into the building to test the air. It found no chemical agents or evidence of an explosion."

Am I the only one struck by the fact that Berkeley County West Virginia has a bomb robot?  Did I miss the day when we were handing those things out to everyone with a pulse?

3) I'll present the following information without comment but I think you know where I stand on this....

Last year's Healthy Hunger-Free Kids' Act required changes to the school lunch program to make it healthier (and to lessen the overall federal subsidy). What it didn't do was define exactly what changes would achieve the goal of better nutrition. The Department of Agriculture created a proposal that fit within its budget and pleased nutritionists, public health experts and many school lunch officials, but it didn't please the American Frozen Food Institute or the companies that provide much of the food served to kids at lunch—companies like Coca-Cola, Del Monte, and the makers of frozen pizza. According to the NYT, those companies have spent $5.6 million in successfully lobbying their congress members to object to the guidelines.

Cheers!

Friday, November 04, 2011

That will teach me to complain

I got a little taste of karma today after my rant on propane prices.  My first propane bill came in at a tidy $4.42/gallon!!! More than 30% higher than what NYSERDA says the average price in actually is in Northern NY and the highest price I've ever seen on a bill in 8 years living in NNY.

My supplier is "outside of the city" and will have one chance to make that right or I'll be shopping for a new propane supplier.  Anyone have any suggestions?

Do you think I can sell my 400 gallons back to them at $4.42/gallon :)

I'm working a little commodity arbitrage in Clayton.....


Thursday, November 03, 2011

Powerball Players LOSE $780 MILLION last night!

You are going to see lots of headlines taunting you because you didn't win the $235 million powerball lottery last night.  However, while one winning ticket was sold, the reality is that since the last jackpot roughly 780 million ticket were bought that turned out to be losers. 

The best stat of the day regarding the powerball drawing: If you have to drive 1 mile to get to the store to buy your ticket you are 4 times more likely to be killed in a car accident in that 2 mile round trip than you are to win the powerball jackpot.

However, states know a good tax when they see it - it's voluntary and the poor (a politically weak group) participate at a disproportionate level - so it's game on for lotteries.  In fact, while pulling some powerball stats I saw they are raising the price of a ticket to $2 in Jan 2012.  This will mean more GIANT jackpots and more GIANT losses for the bulk of the public.

Cheers!

Would you buy Groupon if you could?

If you're unfamiliar with groupon you're going to get a full rundown of the company over the next 24 hours.  Here's the concept: Joe's coffee shop wants to drum up business so they sell a $10 gift certificate to customers for $5 through Groupon.  Groupon gets to keep about 30-40% of the $5 (so call it $1.50) and the other $3.50 goes to Joe's coffee shop.  Now Joe has to sell $10 of his coffee for $3.50 which is basically his cost, but if 200 new customers make Joe's part of their morning routine it was a smart piece of marketing.

Well, that's when everything goes right.  The more likely scenario is that Joe is swamped with 1,000 coupon users on the week after his Groupon but most of those customers never come back because the next week they bought a $10 gift certificate for coffee from Jan's Coffee down the street.  The problems with this company are so numerous that I'm stunned that they are bothering to go public when they should be focused on trying to stay in business.

Groupon has a chance to be the pets.com of the Web 2.0 era in my opinion.

Now, with all of that said, there is a chance that the financial media will lose their minds talking about this stock tomorrow. You see Groupon is offering less than 5% of the company for sale so there will be some demand for the stock and with everyone chasing those scarce shares there could be a bit of a feeding frenzy. I liken this to the frenzy that breaks out in clubs when a DJ tosses a t-shirt into the crowd.  Everyone in the club could afford 1,000 cheap t-shirts but people would practically kill themselves to get $5 shirt. It makes little sense to chase Groupon tomorrow, but people will clearly try to get that t-shirt.

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It's that time of year again to start complaining about home heating costs and the penalty we pay for living off the natural gas grid.  New discoveries of natural gas and advanced recovery techniques have held the price of natural gas in check in recent years.

However, the price of propane is tied directly to the cost of its inputs - namely crude.  Thus, the average price of propane is up 14% in NYS vs. this time last year.  However, we get the ultimate raw deal in the North Country where the average cost per gallon was $3.32 last week (up 19.8% from last year!!).  It's also interesting to note the wide spread in propane prices across the state.  The low is just $2.69/gallon in Western New York to a high of $3.40/gallon in Long Island (just slightly above our $3.32 price).  In the North Country we're paying 23% more than the current price of propane in Western NY. 

I'll be glad today when I walk by my giant pile of pellets in the garage :)

Wednesday, November 02, 2011

Busy day...

The market started off on the upside after it seemed like Europe had stabilized their Greek situation (more on that in a moment).  Throughout the day the bulk of the news flow was what one would consider to be negative for stocks - the FOMC minutes didn't save the day and Chairman Bernanke's outlook continues to deteriorate.

Consider that in January of this year, the Fed was predicting US GDP growth of 3.75% for 2011 and 3.95% for next year.  Well, today that prediction was lowered to 1.65% for 2011 and just 2.75% in 2012.  This is why I always say long-term economic projections are so difficult.  The Federal Reserve has access to more data than any other institution in the world and yet they missed their GDP prediction by a huge margin for the current year.  If this is the variability in current year predictions how can you place any weight on forecasts for GDP and budgets that go out 15-20 years.

The Fed also offered their first outlook for 2014 unemployment - 7.25% in 2014.  If this holds true it will make for a very difficult stretch for American employees.

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I was going to post a series of photos detailing this man's conversion of a 4 wheel bike into a crazy, human powered Porsche look-a-like, but there were just too many pictures.  Do yourself a favor and click through to check out this project.  I can picture a couple of design geeks building one of those over the weekend :)

Cheers!

Tuesday, November 01, 2011

Things going bump in the night...

Greece remains a very fluid situation tonight as it seems the Prime Minister is moving forward with the idea of having a referendum on the bailout.  There may be additional fireworks on Friday when a confidence vote is planned.  If the government should fail it would lead to further uncertainty because 1) a new pro-bailout government could emerge or 2) a more hardline government could take charge.

But, you're saying - why is one tiny economy holding the world's equity markets hostage?  Well, it's less about Greece and more about the Euro.  When the deal looked like it was good to go the Euro surged, rising about 8% in a month.  Well, as confidence in the deal has been shaken it's lead to a 3.5% decline in the Euro (relative to the $).  Remember a falling $ = higher stocks and a rising $ = falling stocks in the US. 

I can't imagine the pain these currency swings are causing for Global CFOs trying to source materials around the world with currencies that are swinging 5-10% every month.

US markets might try to get a little bounce in front of the Fed's minutes tomorrow but it's hard to remember what their mindset was like when minutes where written :)

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It's interesting to see that the little spike in new car registrations we saw in the North Country last month was not just a local trend but part of a larger national trend. 

"Based on an estimate from Autodata Corp, light vehicle sales were at a 13.26 million SAAR in October. That is up 9.2% from October 2010, and up 1.7% from the sales rate last month (13.04 million SAAR in Sept 2011)."

"This was just above the February sales and the highest sales rate since August 2009 ("Cash-for-clunkers")."

I'm not really sure how to read this data - buyers buying at the end of the model year?  Loose financing? Or a real increase in demand?  It's hard to process auto sales hitting post-recession peaks, while the number of individuals on food stamps continues to set all-time records.

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The worst story of the night comes out of Japan where Xenon was detected at the crippled Fukishima plant.  So what, you might say.  Well, Xenon is a bi-product of nuclear fission and indicates that a new meltdown could be occurring right now.  The plant operator - who has been nothing but upfront with all of the details surrounding the plant (sarcasm - off) - has said it was a relatively small amount of Xenon detected but still they were flooding the plant with boric acid in an effort to suppress any further reactions.  Stay tuned.

Cheers!






Greek's pull the rug out from under the rally

Well, the market's don't know what to think.  Talk that the Greek parliament is going to hold a referendum on the latest European bailout sent markets into a tailspin this morning.  There has been some discussion the the referendum is DOA and if that turns out to be the case the snap back could be violent (as I write this the markets are back to their highs of the day based on rumors coming out of Greece).  I don't think any of us have ever dedicated so much time to analyzing the political leanings of the Greek parliament. 

This news prompted the Royal Bank of Scotland to issue the following note to clients that included one classic typo: ""...major negative for Greece and the rest of the momentary union".  Renaming the European Union a Momentary Union is good work even if it was unintentional.

Stay tuned....



Thursday, October 27, 2011

Egg on my face

I'd like to claim that I've perfectly timed every market move over the past 10 years but if that were true I'd be living on a boat off the coast of Argentina instead of ordering more pellets for another winter in the North Country.

Today's European debt deal was roughly inline with all of the expectations and I think will eventually prove to be another disappointing failure.  However, that was not the reaction of the market today.  It opened up and never looked back (well, there was a little rebalancing dip at 3:50 but for the most part it was up, up and away).  So, I missed this last 5% of the move up and that's a mistake, but the risk of a downside surprise outweighed the potential upside in my opinion.

The markets continue to operate in ways that defy logic.  There was a 15% rally on the HOPE of a deal and then when we get a deal the markets keep chugging another 5%.  We'll see how it plays out over the long run.

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Quote of the day:

"Ignoring the fact that the EU Summit conclusions leave more questions than answers, it may allow us to focus once again on the fundamentals and those fundamentals are not a rosy as many would have us believe."


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I read an interesting review of India's new Aakash tablet computer that has created a bit of a stir in the tablet world given its price of $35.  To be clear, that's a subsidized price - the retail price will be more like $60.  Also, $35 in the US is a far cry from $35 in India which would probably equate to about a week's gross wages (so a comparable price in the US might be $600).  Finally, the reviews of the tablet are that it's kind of clunky but serviceable.  Here's the issue, India is going to put millions of these tablets in the hands of kids who might have never had indoor plumbing or a landline.  These kids might use the tablet to watch Big Brother, a Bollywood music video or learn how to code at www.codeacademy.com.
 
Just to have some fun playing with numbers, I wondered what it would cost us to do the same thing here in the US.  First we'd have to build a tablet for around $100.  That would be a challenge but since many low budget brands already sell 7" tablets for $80-$100 retail running android I think that is reasonable.  There are 42 million school age kids in the US --- 42 million*$100= $4.2 billion.  It's sad that $4.2 billion seems like a laughably small number in today's budget environment.  We spend about $300 million a day in Afghanistan.  Do you think we'd get a better return on our investment by spending the next 2 weeks in Afghanistan or giving 42 million kids a leg up on their global competition?
 
Cheers!

Monster melt-up

Well, October 2011 is going to be one for the record books.  Stocks have gone vertical on the hopes of a debt deal in Europe since the 10/4 bottom and now that we have a deal we aren't getting the normal sell the news reaction, it's a full 5% jump across most European indexes. 

It seems strange that the solution to Europe's crushing debt load is.... $1.4 trillion of new debt, but hey who am I to question their plan?

While I think there are many questions to be settled - particularly regarding the Greek bond haircut which everyone said had "it has to be 70% or more", yet it settled at 50%.

As I said earlier this week this had the potential to be an explosive week and that's exactly how it has played out. 

BTW: the best tweet of the day - Hmmm, protesters massing in the streets are fired upon with rubber bullets and flash grenades but it's not on the cover of @NYTIMES?  Oh, that's right it's happening here and not in the Middle East.

The Occupy Oakland story was way under reported yesterday - so I'll do my part to spread the word.

Occupy Oakland - Iraq War Vet critically injured by police projectile.

Cheers!

Tuesday, October 25, 2011

Netflix, First Solar and Amazon, oh my...

I jumped off the Netflix bandwagon in July when the stock was around $290 and I felt that I'd seen just about every show worth watching.  I mentioned in passing that I was canceling my service and should probably go short the stock.  Well, I never expected the absolute demolition of the stock to take place this fast. The stock fell over $40 today to just about $77/share.  Eventually, there will be plenty of rumors circulating around the company if it stays at this level because Google or Apple could now buy Netflix with the loose change in their lobby couches.

The solar industry can't catch a break as the industry leader - First Solar - was pummeled today on news that their CEO was stepping down and tonight Amazon shocked everyone by issuing a weak outlook for the Christmas quarter which included the possibility they may lose money in the fourth quarter even though sales are expected to be in the $16.5-$18.5 billion range..

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On to more pleasant thoughts - I read this article yesterday that includes quotes from the author "Brainwashed" on the way companies market to us.  The specific comments on Whole Foods cracked me up....

"If you pay attention as you walk into the produce department, Lindstrom says you will notice the boxes holding the apples and bananas seem to have been delivered by something called "Patty's Farm."



"The story is probably very different," Lindstrom says. " In the backside of the store, they're offloading all those bananas from huge plastic containers, most likely flown in the day before, into those individual-looking cardboard boxes, which by the way is not 'Patty's Farm.'


"It's actually been designed by a graphic design company in New York City to make us feel this is nostalgia at its peak."

This reminded me of scene I saw unfold at the farmer's market in Ottawa this summer before most customers arrived.  A "farmer" was opening up large 2lb containers of blueberries that were clearly marked "Costco" and dumping the berries into those small green pressed cardboard containers that gave the berries a "fresh picked" look.  Those Costco berries went from about $3/pound to about $8/pound in the blink of an eye.  Ah, behold the power of marketing :)

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I really couldn't believe that this story wasn't from The Onion - Wisconsin town considers bike ban.  Well, on the surface that isn't that surprising -- there are lots of car vs. bike disputes around the US.  However, this line defies all logic....

"The Stevens Point Journal reports that the proposed law would require biking, running or walking groups to register their travel plans with the town or bans them from using roads outright."
What the what?
So, I want to put in a quick 25 miles after work with my buddies and I have to register my "travel plans" before heading or face an outright ban?  Wow.  Hopefully, cooler heads will prevail.

Cheers!

Monday, October 24, 2011

The Epic Ride Continues

It's been some wild ride since October 4th.  Since that date the Dow is up about 14%, while both the S&P 500 and the Nasdaq have jumped is up 16%.  That is a remarkable run but this is the market we live in now, where things jump 20% and fall 20% in the span of weeks.

We have seen similar rallies around quarter ends (the June 2011 rally rings a bell) and there is some chatter that this sort of rally becomes self-fulfilling because it helps to prevent hedge fund redemptions.  However, the greatest factor remains - the Euro's strength (for some unknown reason) and the corresponding dollar weakness.

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I find all of the uproar about the Canadian entry fee to be a little disingenuous.  First of all, the $5.50 fee wouldn't be charged to visitors entering via car, so frankly the economic impact would be minimal.  Second, the same people that are clamoring to secure our borders with more and more and more border security seem to be the first to complain about this fee.  Yesterday, as I drove home I saw 5, count them, 5 brand news Border Patrol SUVs pass me on Rt 12.

So, if you want all of this enhanced security - which I argue is overkill and provides little incremental value for every dollar spent - you have to pay for it.  Well, you could levy a tax on jurisdictions that are benefiting from all of the increased Canadian visitors - say a 1/4% regional security sales tax - or you can charge non-residents a small fee to help cover the soaring costs of protecting your border.  I don't like the idea of having this fee but if you strive to remove all risk from your world there is a price to pay and in this case that price is $5.50.

Cheers!

Sunday, October 23, 2011

Expect major fireworks this week

Sometimes I wonder if people ever actually read the news or, if in the ipad era, we've just become a world headline scanners.  The news out of the latest European has been decidedly negative yet the global reaction to this news has been a collective shrug of the shoulders.  Asian markets are actually soaring, while the US futures are a little off as the Euro has weakened a bit relative to the US dollar.  As has been the case for the past month - watch the US dollar/Euro because it will tell the story.

At some point people are going to realize that Europe does not have the political will to take the necessary steps to stabilize Greece and Italy.

While we're on the subject of political will, there are some interesting rumors dancing around the internet about the US housing market.  There is a rumor that the Federal government is readying some type of plan to create a pool of all Fannie/Freddie foreclosures that could be sold off in large blocks to investors.  This would help to eliminate some uncertainty in the housing market and probably strengthen the status of Fannie and Freddie.  However, if this is something that would require Congressional approval I think the originators of the rumor need to have their head examined.  In my opinion, anything that might help the President in the polls (regardless of its actual value to the country) has less than a 0% chance of passing in the midst of an election year.

Cheers!

Thursday, October 20, 2011

Just a quick suggestion

Maybe we should start having our leaders carry a pair of handcuffs when meeting with dictators that have terrorized their people for 40 years?







* In case you don't recognize everyone - it's former UK PM Tony Blair, Italian PM Berlusconi, French President Sarkozy and former Secretary of State Rice.

Wednesday, October 19, 2011

Have we gone soft?

Hat tip to my cousin Jeff, who is doing his best to prepare the next generation of math geniuses just outside of Boston, for passing along this great post from Fareed Zakaria from Time.


The entire post is worth reading but the data focused paragraphs really grabbed my attention. Anyone running for public office needs to think long and hard about these numbers.

"Perhaps the most crucial measure of our ability to compete in a global economy is our educational attainment, especially in science, math and engineering. A generation ago, America had the highest percentage of college graduates in the world. Today we’re ninth and falling. The WEF report ranks the U.S. a stunning 51st in science and math education. If a willingness to study science, math and engineering is an indication of being willing to work at hard stuff, there is no question that we are going soft. In 2004 only 6% of U.S. degrees were awarded in engineering, half the average for rich countries. In Japan it’s 20%, and in Germany it’s 16%. In 2008–09 there were more psychology majors than engineering majors in America and more fitness-studies majors than physical-sciences majors.

The great scholar Daniel Bell once summed up the essence of the Protestant ethic that had spawned industrial civilization: delayed gratification. The ability to save and invest today for a better tomorrow has been at the heart of every society’s leap from poverty to plenty. The U.S. was a country marked by this ethic. In the 1950s, household debt was just 34% of disposable income; today it is 115%. Then, the government made massive investments in research, development, infrastructure and education. Today, spending in all those areas is declining. Infrastructure and R&D spending are each down by a full percentage point of GDP. Federal funding for the physical sciences fell 54% over the 25 years since 1970 and has continued to fall. Tom Friedman and Michael Mandelbaum point out in their new book that 30 years ago, 10% of California’s general revenue went to higher education—and the result was the crown jewel of American public education, the University of California system. Just 3% went to prisons. Today, 11% goes to prisons and 8% to higher education, a number that is dropping fast. There are now about as many Americans who work in the prison business as in auto manufacturing.

Federal, state and local governments now spend less of their money investing for the future. Health care and pensions are devouring budgets everywhere, and whatever their virtues, it is difficult to mark them as producing a more competitive society. The federal government spends $4 on every adult over 65, compared with $1 on every child under 18."

Let some of those facts sink in. More prison employees than auto workers? More psychology majors than engineering majors? $4 for every senior for ever $1 on children? These are the canaries in the coal mine.  It's clearly easier for politicians to promise the world - it's tax cuts, free healthcare 'til your 120, and rainbow unicorns for everyone!! - but someone needs to grow up and start making the hard decisions that the public can't make for themselves.

Too big to miss

That's my take on the market's reaction to Apple's results.  Yes, it's likely a timing issue and yes, the iphone 4s will sell 14 quadrillion units, but the reality is that android is cutting into their market share pretty substantially and the lack of a stunning upgrade with an iphone 5 or something equally compelling has further slowed their growth.

However, remember when the banks were too big to fail?  Well, Apple is too big to miss.  Practically, EVERY hedge fund, mutual fund and pension has Apple as one of their top 10 holdings and for many it is their largest holding.  It's simply inconceivable to the herd that Apple can do anything but go up in value, so despite the huge sell-off last night after earnings the stock has rebounded some this morning. 

To be clear, I kind of like Apple products but I just think their quality is more Walmart/Aldi than Gucci/Hermes.  I've owned 3 Apple products - 2 broke in the first year (I ran in the rain with them - they failed to mention in the owners manual that 8 drops of water fries the electronics) and my current ipod doesn't hold a charge for more than a few hours (it's 15 mths old).  I contacted Apple and they're response was basically, "yeah, they do that."  

To review here's the reality of what's happened in the last 24 hrs:

* The Greeks are back on strike and rioting (there are live webcams if you are so inclined).

* The Euro bailout was refuted by many sources yesterday.

* Spain was downgraded.

* Apple missed estimates for the first time in practically forever.

And the markets are set to continue marching upward...huh?

Well, despite the fact that everyone is trying to talk down expectations for the European bailout, the random rumor mill keeps pumping out stories.  These rumors are leading to Euro strength and dollar weakness (notice how gas prices have stopped dropping - also tied to $ weakness) which means higher stock prices until it changes course.

Tuesday, October 18, 2011

Oops, the world's broken again...

Last week when the market was racing upward every day on little news and less volume it seemed like we'd turned a corner.  Well, a new week has brought new concerns and the list of reasons for a dip, at least at the open, is long.

* Well, Goldman has reported just their second quarterly loss since going public in 1999.  The results were pretty weak across the board, but banking and trading had a pretty negative impact on results.  However, before you cry too hard for the Goldmanites consider that the bank has $10 billion set aside for compensation and benefits to be paid out this year.  With just over 30,000 employees the average employee will still get a comp package north of $300k this year.

* Both Citibank and Bank of America posted HUGE profits but the bulk of the profits were due to accounting shifts and I don't believe they reflect a core improvement in their businesses. 

* From the FT an article on the early bank results: "Wells "Fargo) said delinquencies of more than 90 days in its main portfolio of consumer loans – including mortgages and credit cards – rose 4 per cent to $1.5bn, the first increase since 2009. The bank increased its provision for consumer-banking losses for the first time in two years…


Citi said the percentage of mortgages that were 90 days delinquent rose for the first time in almost two years – from 3.87 per cent in the second quarter to 3.88 per cent in the third.

John Gerspach, chief financial officer, said the bank was seeing “re-defaults” on mortgages that had been modified to make them more affordable.

“The residential mortgage problems are unprecedented,” said Gerard Cassidy, analyst at RBC Capital…He said the problems were no longer in “subprime” but “prime” mortgages.


Capital One, among the top six US card issuers, reported rising 30-day delinquencies in June and July.

Coupled with efforts by some European leaders to talk down expectations of a new grand bailout plan, the markets may have a difficult week (however, Apple's earnings could easily change the mood because millions of people are lining up to buy basically the same phone they already have ;).

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I shared this stat yesterday with a friend and I have to be honest that this is the scariest stat I've ever seen when it comes to the future of our great nation.

86% of American workers are overweight, obese and/or have a chronic health issue (high blood pressure, cholesterol, diabetes, etc).  This was the result of a study using self-reported data which means that the results might even be worse in reality because people tend to overestimate their height and underestimate their weight.  Admittedly, this focuses on the flawed BMI chart but it's still a staggering piece of data.  How can we expect to compete as a nation in a global economy when we have this incredible health issue hanging around our neck?

Cheers! 

Sunday, October 16, 2011

Weekend Potpourri

Regardless of your political leanings, I hope that you can appreciate this chart for its pure simplicity. 


Without making this a political discussion consider that:

* 93% of our $14.3 trillion of debt has been accumulated in the past 30 years.

* 59.5% of our total debt has been accumulated in the past DECADE!!!

What do we have to show for this roughly $8 trillion of debt?  A new national electric grid?  A national air transportation system that is the envy of the world?  The best education system in the world?  Nope.  In many ways, it feels like Congress and our presidents have bought into the world's worst Columbia House CD club.

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I hate to keep harping on this issue, but the Fukushima story just isn't getting enough coverage here.  This weekend there was a story in the NYTimes that 20 radioactive hot spots are located around Tokyo.

"Takeo Hayashida signed on with a citizens’ group to test for radiation near his son’s baseball field in Tokyo after government officials told him they had no plans to check for fallout from the devastated Fukushima Daiichi nuclear plant. Like Japan’s central government, local officials said there was nothing to fear in the capital, 160 miles from the disaster zone.



Then came the test result: the level of radioactive cesium in a patch of dirt just yards from where his 11-year-old son, Koshiro, played baseball was equal to those in some contaminated areas around Chernobyl.



The patch of ground was one of more than 20 spots in and around the nation’s capital that the citizens’ group, and the respected nuclear research center they worked with, found were contaminated with potentially harmful levels of radioactive cesium."

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This story should get your attention if you're the parent of a US student with plans to attend college in the next 15 years.  The US Ivy league schools are becoming safety schools for the best and brightest from India. 

"Moulshri Mohan was an excellent student at one of the top private high schools in New Delhi. When she applied to colleges, she received scholarship offers of $20,000 from Dartmouth and $15,000 from Smith. Her pile of acceptance letters would have made any ambitious teenager smile: Cornell, Bryn Mawr, Duke, Wesleyan, Barnard and the University of Virginia.

But because of her 93.5 percent cumulative score on her final high school examinations, which are the sole criteria for admission to most colleges here, Ms. Mohan was rejected by the top colleges at Delhi University, better known as D.U., her family’s first choice and one of India’s top schools."

Just for giggles, I might apply for entrance to Delhi University's class of 2016 :)

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This is just a single data point but it's worth watching because it won't be long before we'll start hearing the "but, but, Christmas sales will save the stock market" stories.

"The five busiest container ports in the United States said that imports in August 2011 were lower than or even with 2010 volumes. In Long Beach, the second-busiest container port by volume, August imports fell by 14.2 percent from August 2010."

If that trend were to continue into September it would be a problem.

Cheers!













Thursday, October 13, 2011

What we can learn from Walmart

Walmart's reach into the US economy is so deep that at times I think they have better economic data than the random stats compiled in Washington.  Case in point comes from today's investor presentation which included the following chart....

We only see percentage shifts so it's unclear if the swaps are dollar for dollar but the trend is apparent.  People are swapping out of branded goods for Walmart's store brand - Great Value - and they are buying smaller unit sizes because the prices are lower (even though unit prices are likely higher).

As a data junkie with no fantasy football to occupy me this fall, I could spend hours pouring over Walmart's sales data to get my fix :)

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Google absolutely crushed their earnings this quarter again.  I remain continuously perplexed by the google phenomena.  I love Google and use their products throughout the day but I've never clicked a paid ad so they've never made a dime off me.  However, we can get a little clarity on how they are growing so fast by looking at some specifics from their press release:

Google's tax rate sits at just 19% now as they generate 55% of their revenues overseas.  They have implemented a fairly complex tax strategy that funnels revenues through Ireland and Netherlands to Bermuda which has cut their taxes by over $3 billion in recent years (and contributes to their continued expansion of their earnings).

The stock is up $35 or so right now so we'll see if it pulls the rest of the market along for the ride.  Everyone seems to have forgotten JP Morgan and Alcoa already :)

Cheers!

Tuesday, October 11, 2011

Crazy days...

Yesterday when I posted the video of a mountain biker getting whacked by a flying animal it had been viewed 374 times - today, it's been viewed over 3,000,000 times.  Wow.

This is clearly the craziest chart you'll see on the markets courtesy of alphatrends.



Over the last 3 months we've dipped 18%, jumped 10%, fallen 7%, jumped 10%, fallen 7%, etc, etc.  It's pretty clear that the chart readers are running the show right now.

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NY State's comptroller Tom DiNapoli garnered some headlines today regarding Wall Street's outlook.  There were a number of interesting tidbits in his statement including:

* Wall Street produces roughly 14% of the state's revenues (down from 20% a few years ago).

* The securities industry in NY has shed 4,100 jobs in the last 6 mths.

* The Governor is choosing to err on the side of hopium right now, but the Comptroller seems to be offering a more realistic view of the budget for next year.

Two things that I think are overlooked when talking about Wall Street's future are domestic competition and International competition.

1) NJ and Connecticut continue to pull jobs from Wall St.  The amount of construction along the NJ Gold Coast is truly staggering.  Like many things in my past, I was early to identify that trend.  My wife and I were residents #1 and #2 in the first new apartment complex constructed in Jersey City nearly a decade when we moved in 1996.  That area is now awash in new buildings for Goldman, JP Morgan, etc, etc. and I'm hearing talk of even more commercial space being planned (not good news for people looking to fill that growing building at 1 World Trade).

2) The bigger issue though may be the fact that NYC is simply losing its title as the world's marketplace.  Twenty years ago a hotshot analyst, trader or banker wouldn't dream of being anywhere but NYC.  Today, the bulk of the good jobs that I see are in Singapore and London.  Even if those cities eventually grow to share NY's title of financial capital of the world it probably means a permanent loss of jobs for NY state.

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Finally, from the land of snowflakes and lollipops comes my story of the night...

From Boston.com - Family gets lost in corn maze and calls 911

"One family got more mystery than they bargained for when they took an outing to a corn maze -- they got lost among the stalks as it got dark and needed the police to get them out, the owner said.



Around 6:35 p.m., Danvers police received a call from a family who couldn’t find their way out of the seven-acre corn maze at Connor’s Farm in Danvers, and were getting nervous because it was dark. A police officer and K-9 unit quickly located the family."

Cheers!

Monday, October 10, 2011

Market continues to soar

Another massive melt up today on very light volume.  Despite all of the theories you'll hear it really just boils down to the dollar.  The Germans and French have decided to plan to have a plan.  That announcement sparked a rally in the Euro and a sell-off of the dollar.  When the dollar goes down, stocks go up.  I wish it was more complicated but that explains the bulk of today's move.

More importantly, this is the craziest video I've seen in some time.  I'll never complain about a doe standing on my single track path again.

Friday, October 07, 2011

Jobs report better than expected....

As a reminder we should really be generating 250-300k jobs per month if we want to say the economy is recovering.  Keep that in mind as we discuss these numbers...

Jobs: +103k but 45k of those are due to striking Verizon workers returning to work.

So net jobs were +58k.  Expectations were 59k so this is about as "exactly in line" as it gets.

Unemployment was steady at 9.1% while participation rate improved a bit 64.2% (still way below historical averages of 66-67%).  We've now added about 70k jobs per month since April while 150k people enter the workforce each month.  The only reason the unemployment rate has not spiked higher is that discouraged workers continue to drop out of the workforce.

The stock market has now soared about 6-8% in the last three days.  I'll take that and go home happy for the year.  The reason for the rally was principally technicals but it was sparked by concerns that the global economies were collapsing and more stimulus would save us all.  If you want to cheer this jobs report you have to realize it should mean less stimulus and in theory lower stock prices in the near term.

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From the files of "only in America"

"For an hour this morning, Portland police worried that a makeshift diorama containing a packet of tomato seeds, a flannel shirt and a computer mouse spotted along Southwest 14th Avenue at Taylor Street might be a bomb.



At 8:40 a.m., police were called to investigate a suspicious box near along 14th Avenue and above southbound I-405. Police quickly blocked traffic while officers in protective gear responded to examine the cardboard box perched atop a green utility box."

 So, now I know your dying to see this menacing "bomb-like" package that caused such a commotion, right?

Well, here you go....



Is it good art?  Well, it's not for me, but how can you look at that and say "yup, we better shutdown traffic here"?  Jack Bauer detective work strikes again.

The good news is that Portland will be able to parlay this "response" into a budget request for a dozen drones, 15 hazmat vehicles, and 1,200 new border patrol cars.
Cheers!

Wednesday, October 05, 2011

I know what I'll be doing this weekend

As a Dad with a daughter that considers popsicle sticks just about the coolest thing on earth, I think we'll be building one of these this weekend.

A cobra weave stick bomb! Cheers!

Explosive rally because...

To be honest your guess as to what triggered yesterday's 3:15 rally is as good as any that you'll hear today on TV. 

Let's go through the "reasons" you'll hear today:

1) The EU bailout rumor du jour - There was a 3:10 article posted at the Financial Times which hinted at a brand new expansion of the European bailout to save their bad banks.  That rumor seems to have been refuted today but it may have been a catalyst that at least contributed to the start of a turnaround.

2) Apple iPhone 4S - I've made it clear before that I'm no Apple fanboy, but I REALLY don't get the passion for this phone.  As far as I can tell, this isn't the phone everyone wanted, the biggest improvement is voice search that no one likes or uses and they improved the internal chipset a bit.  If Microsoft had an announcement like this they would have been ridiculed mercilessly in the media but Apple somehow gets a pass. I'm waiting for the day when they announce "We're not changing the iPhone but we are introducing a BRAND NEW BOX THAT CONVERTS INTO A PAPER AIRPLANE!!! That will be $599 with a 2 yr service contract, please pay the cashier at the front".  People would still be lined up around the block for it.
Apple is so widely held (for example it represents almost 2.5% of the equity assets of the ENTIRE NYS Teachers Retirement fund) that it can do no wrong until one day it does (see Netflix for past practice).

3) The market finally broke through various support barriers which seemed to open up the possibility of a true flush back to 2008 or 2009 lows.  This was very scary from a technical perspective and there was certainly a hope that we'd claw back above those levels before the end of the day.  I think when you combine the FT rumor, the Apple bounce and the market's need to get back above 1120 on the S&P 500, you have a recipe for 400 pt rally in the last half hour of a day which is what we got yesterday.

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This is lifted straight from the Big Picture and it's pretty "Inside Baseball" re: Wall St. trading but it speaks to how the game is rigged against the small investor.

"What does it say about the state of our exchanges that trader on proprietary and execution desks now can buy a software program to alert them to the activities of Co-Located Algo Servers?



“HFT Alert, the first real time software designed to detect high frequency and algorithmic trading systems. HFT Alert identifies when these trading systems are running and what stocks are being affected. HFT Alert can detect several types of algorithms as well as stocks experiencing elevated quote rates associated with algorithmic trading.”


We are now apparently in a silicon based arms race to learn when quotes are real and when they are spoofed faux quotes driven by HFT algos designed to increase volatility.


The exchanges once operated fro the greater good of the investing public, akin to nonprofit utilities. They are now hellbent on chasing away private investors who will eventually learn that this is a zero sum game, and co-located HFTs are a tax on saving and investments."

Cheers!

Monday, October 03, 2011

Now it gets interesting

* As I mentioned yesterday, the markets were right on the edge of a technical cliff and if things remained dicey in Europe it could spell trouble.  Well, Europe appears to be a complete mess and that led stocks sharply lower again in the US.  We've now closed below key technical levels for the first time.  In each of the previous sell-offs we've bounced off these levels intraday and closed around 1120 on the S&P 500.  Today was different because we never got that bounce and stocks have continued to sell-off after the close.

I'm a big believer in reviewing an investment's fundamentals and making decisions based on those fundamentals.  However, in Wall Street terms that makes me the guy doing math with an abacus and writing letters in script to be sent via pony express.  Today's market is all about the program traders and the programs are not going to react well to this new data. 

* Also, out tonight Goldman upped their prediction of US recession to 40% but that could have been skewed by the rumor that Goldman employees are going bonus-less this year.  They also predict MORE Fed easing (because clearly that has fixed everything so far) and recessions in both France and Germany.  Good times.

* One of my most visited posts back at the height of the meltdown dealt with the NYS Teachers' Retirement fund holdings that had taken a bath on certain positions.  I predicted at that time that the poor performance of the retirement fund would lead to increased contribution rates for local employers (schools) which would ultimately contribute to local budget crunches.

Well, here we go again.  I took a look at the TRS holdings as of 6/30/11 which included roughly 1,930 stocks in their equity portfolio valued at $41.4 billion.  While the fund has a wide range of holdings (close to 2,000 stocks) the top 25 holdings represent roughly 30% of the total equity holdings or $12.2 billion as of 6/30/11.  A couple of interesting facts assuming nothing has changed since June:

1) Apple is on the verge of becoming the fund's largest holding with a current value of $995 million UP $103 million over the past 3 months while the market has fallen 16%.  ExxonMobil is currently the largest holding in the fund at $1.01 billion but another down day in the market, coupled with the prospect of an Iphone5 launch tomorrow means it's likely Apple will be the top holding by the end of the week.

2) The fund's top 25 holdings have seen their values fall by $1.4 billion since June 30th.  The biggest losers include household names like ExxonMobil (down $145 million), General Electric (down $127 million), JP Morgan ($141 million), Citigroup ($152 million), and Bank of America ($158 million).

Again this is just a snapshot in time and it most likely doesn't represent the actual results (I expect the fund sold some of these shares during the sell-off) but if this trend doesn't reverse districts are likely to be facing rising pension contribution rates again this year which will make the budget process for school districts very challenging next year.

Cheers!

Sunday, October 02, 2011

Where have I heard this story before?

Asian markets are down about 2% across the board on fears that the latest Greek bailout efforts are starting to unwind.  There lots of unsettling rumors about European banks but until the sun rises in Europe they will likely remain just rumors. 

This story just keeps repeating as we grind along in the markets.  Unfortunately, we stand at a really tenuous spot for the chart readers.  Remember, we had a MONSTER stock market rally off the absolute bottom in March 2009.  Stocks soared from their March lows up about 72% by the end of 2009.  It was a rally of historic proportions but not without precedent.  At the time I pointed out that huge rallies also occurred in the midst of the Great Depression.

Well, from Jan 2010 to Oct 2011 we've gone effectively nowhere in the stock market (down roughly 1%) over that 22 month period.  If we break below 1120 for the S&P 500 the computers will go haywire trying to figure out the next move.  The charts might signal a new low, but we've bounced off those levels almost every time this year.

It should be a very fun week.  Oh, and #occupyWallStreet is probably not going anywhere as the weather improves in NY this week. 

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Keep circulating my contact info if you know someone with a good idea who'd like to discuss their business plan.  My info - nnyventures@gmail.com

Cheers!