Monday, February 28, 2011

Oil, bailouts and inflation

I don't even pretend to play an oil analyst on TV. The oil industry is a vast, complex business with too many moving parts for the casual observer to add much value.

However, I do remember one my first lessons on the oil industry where I learned there were over 130 different varieties of crude. Ranging from the "light, sweet" (ie, low sulfur content) oil put out by countries like Libya and pulled from the North Sea to the "heavy, sour" (high sulfur content) pumped by other countries including Saudi Arabia.

What I found very interesting yesterday was that while the world learned of Libya's production issues and Saudi Arabia stepped up to fill that demand no one questioned if the products where the same or if there was adequate capacity to refine the heavy sour crude from Saudi.

Oil slid a bit today despite more turmoil as Saudi Arabia offered to offset any market losses, but this will remain a story as long as gas in the US is over $3.30/gal.

Okay, so here's a story that is certain to get everyone's blood boiling regardless of your political leanings.

Time for another bank bailout -- this time in Afghanistan!

"Afghanistan is rated by Transparency International as the third most corrupt country in the world. But that does not seem to be affecting U.S. aid to Afghanistan, which continues to grow.

The white whale of graft is Kabul Bank, which needs a bailout that may top $900 million because of bad loans made to friends and relatives of high-ranking Afghan government officials.

Soon after, stories about who had received the loans trickled out — some of them in U.S. Embassy cables released by WikiLeaks. Shareholders — including the brother of Afghan Vice President Mohammad Fahim and President Hamid Karzai's own brother Mahmood — appear to have lent themselves huge amounts.

The question is how to get them to pay it back. A number of corruption probes are under way, including a grand jury investigation in the United States of Karzai's brother.

Analysts in Kabul doubt Karzai will allow any of his few remaining political allies to be taken down, but they also wonder whether the U.S. Congress can stomach a billion-dollar bailout for Karzai's friends and relatives.

It may have little choice if it wants to save the Afghan state, says Mustafa Kazem, a Kabul businessman.

"As an Afghan-American and a U.S. taxpayer, my immediate response is: 'Where are my taxpayer dollars going to?' " he says. "But just as we did, I think, with the banking or the financial sector in America, I think decisions were made on who you bail out and how you intervene, to make sure something greater doesn't happen."

Watch for fireworks tomorrow as the global markets are shaken by events in the Middle East, but it's also the first of the month when the last 34 humans trading in the market put their money to work (remember about 80% of the returns of the market last year occurred on the first day of the month).

Sunday, February 27, 2011

Middle East Update and random facts

So you remember how Tunisia sparked the Middle East revolutions back in January? Well, it seems like they weren't so fond of their new Prime Minister either.

"Mohammed Ghannouchi, Tunisia's interim prime minister, has resigned, as security forces clashed with protesters in Tunis, the capital, who were demanding some of his minsters be removed."

If you're looking to start your own Middle East death pool now that Tunisia, Egypt and (probably by the end of this week) Libya have switched leaders consider this chart from the Economist that shows the countries in the Middle East with the lowest rankings for Democracy, press freedom and highest levels of corruption.

Iraq (huh? Didn't we spend $800 billion fixing them?)
Saudi Arabia

The upcoming week will be dominated by global revolution news (talk that it's spreading to Asia?), more clashes at statehouses around the US and the jobs report which everyone is expecting to show a sharp rebound since it stopped snowing in February.


The list of most livable cities seems to be dominated by Australian and Canadian cities.

1. Vancouver, Canada
2. Melbourne, Australia
3. Vienna, Austria
4. Toronto, Canada
5. Calgary, Canada
6. Helsinki, Finland
7. Sydney, Australia
8. (equal) Perth, Australia
8. (equal) Adelaide, Australia
10. Auckland, New Zealand


Here is your water cooler worthy Stat of the Day:

Global Box Office Receipts for all movies - $31.8 billion in 2010 ($10.6 billion in the US).

Exxon's 2010 Revenues: $383 BILLION!!

Exxon's 2010 Profits: $31 BILLION

Maybe we should start having a red carpet show for Exxon, Royal Dutch Shell, and Gazprom?


Weird news of the weekend

Canada might have been spraying agent orange along it's highways in Ontario as late as the 1980's?

A provincial New Democrat says former officials with the Ontario Ministry of Transportation have told him that Agent Orange was sprayed near highways across the province until the 1980s.

Gilles Bisson, the member for Timmins-James Bay, said during question period at Queen's Park in Toronto that an email sent to him by the officials indicates the substance was sprayed along the side of the highways to curb the growth of grass and shrubs.

"It would appear that there was a good chance that if you were an employee, you were exposed," said Bisson. "And if you were the travelling public walking along the roads — blueberry picking, doing whatever — you might have been exposed to these chemicals."

Probably worthwhile following this story since we share many waterways with Ontario.

Having just finished watching the PBS cartoon series "Liberty Kids" on netflix (recommended viewing for introducing the concept of the American Revolution to your 6-8 year olds) so this poll is particularly timely.

"Influential Harvard and Stanford law professor Lawrence Lessig noted in a must-watch speech last week that polls show that only 11% of the American people have confidence in Congress.

He notes that more people believed in King George at the time of the Revolutionary War than believe in congress today.

Historians have estimated that between 15 and 20% of the white population of the colonies were Loyalists."


Friday, February 25, 2011

New York's Pensions

I love data and while I've played around on this site - -before, I really enjoy their sortable pension data.

In my opinion, the biggest factors impacting all pension plans are longer life expectancy and poor investment returns (although hopefully investment returns have been improving thanks to the "Never see red Fed" policies that are in place).

However, a quick look at some of the NYS pension plans is very eye opening. I excluded NYC's pensions because they have little impact on NNY.

NYS Police and Fire Retirement System:

* 28,948 total participants

* 922 participants receive over $100,000 in annual pension payments (3.2% of all participants).

* 3,473 participants receive over $70,000 in annual pension payments (12% of all participants).

* The top 20 payouts totaled $3.4 million and averaged $170k/year.

NYS Employees Retirement System:

* 313,595 total participants

* 456 participants receive over $100,000 in annual pension payments (0.1% of all participants).

* 4,350 participants receive over $70,000 in annual pension payments (1.4% of all participants).
* The top 20 payouts totaled $3.7 million and averaged $186k/year.

NYS Teachers Retirement System*:

* 133,633 total participants

* 950 participants receive $100,000+ in annual pension payments (0.7% of all participants)

* 10,575 participants receive over $70,000 in annual pension payments (8% of all participants)

* The top 20 payouts totaled $4.4 million and averaged $220k/year.

(*I adjusted the teacher data, because it appears as though there are 2 records for each person in the system)

Follow-up on NY's Medicaid woes:

The Medicaid issue caused the biggest spike on my blog in over a year so I thought I'd follow up. I was encouraged by Governor Cuomo's press release yesterday seeking action on the Medicaid issue. At this point, it's just a press release but if implemented, this would be a step in the right direction.

"The recommendations submitted today to Governor Cuomo meets the Governor's budget target by introducing a global cap on State Medicaid expenditures of $15.109 billion."

Currently, NY is spending over $30 billion annually, with another $30 billion from the Federal Government, on Medicaid. Cutting this program's cost in half is an aggressive goal.


Thursday, February 24, 2011


Wow, just when you thought it was safe to go back in the markets....


So we get 2 down days in the stock market and the Fed start talking about further easing? I was convinced that talk of QE3 was just tinfoil hat territory, but this definitely opens the possibility of more easing, more inflation, higher assets prices (ie, stock prices), higher food prices, higher commodity prices (oil, gas, copper, gold, etc).

Interesting to say the least.

Thanks to a reader that pointed out that I slipped into a little bit of a financial coma and started speaking in Wall Street lingo.

QE3 is the rumored continuation of the Federal Reserves quantitative easing policies that have been in place since November's QE2 kicked off.

Through quantitative easing, the Federal Reserve creates money and buys government debt with the new money. The greatest risk of this easing is timing it's end so you don't kill a recovery or let it run too long to spark inflation. It's a tricky balancing act.

Time to get your Schwinn out of the garage?

Oil has stabilized briefly this morning after spiking overnight. The Saudi's have assured the world that they can make up for any lost supply from Libya. This assumes that the March 20th revolution in Saudi Arabia doesn't come to pass and that their people will be happy with the $37billion gift to citizens announced yesterday :)

My biggest concern about the oil complex is not necessarily total supplies but rather the increased levels of speculation that could take place in the oil markets. As money chases oil, the price could continue to escalate despite improvements in supply.

Good news:

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 3.8 percent in January. The latest jump put the SA index at 117.1 (2000=100) in January, which was the highest level since January 2008.

Initial Unemployment Claims dipped to 391k.

LA couple living the American dream

Lisa and Stephen Furry have hit financial rock bottom, even though they're not acting like it.

The couple filed for bankruptcy a little more than a year ago, wiping out $50,000 in credit card debt, yet their household spending outstrips their income. They shop at Whole Foods, spend freely on beauty products and splurged on a wedding anniversary getaway to Santa Barbara — at a four-star hotel.

They haven't paid the mortgage on their North Hollywood home since September, and a default notice could come at any time.

So, how did the Furrys get to this point?

Stephen, 32, earned $62,000 last year working as a grip and lighting technician on film and TV crews, but the work is sporadic. It came to a near-halt during the 2007-08 writers' strike, not long after the Furrys bought the house with a high-risk mortgage.

Currently, the Furrys have just $900 in checking and savings accounts and $4,300 in retirement savings. They have a $440,000 mortgage, a $40,000 home equity line and a $3,000 car loan.

The house, purchased in 2005 for $575,000, was a financial stretch, to say the least. The Furrys took out a negative-amortization loan that had an initial low monthly mortgage payment. The payment rose over time, and deferred interest was tacked on to the principal.

"I don't quite understand why they bought the house," Hartman said.

Yep, earn $62k = buy a $575k house. Sounds about right.

Tuesday, February 22, 2011

It's all good

* Libya is firing on it's citizens and seems to be heading toward civil war.

* Oil jumps 9% in a day (expect gas prices to jump 20% just because you can afford it).

* Italy loses control of it's stock market and 10% of it's natural gas imports from Libya.

* Housing prices continue to fall and are back to their lowest level since June of 2009.

* The riots won't come to the US though until this story gets traction......

McDonald's seems to be skimping on the Supersize fries

"University student and McDonald's regular Allen Hsu wanted to find out if he was getting value for money when he up-sized his medium McDonald's combo to the large size after he became concerned at the similarity between the two sizes.

The 18-year-old counted the number of french fries in three packs of medium McDonald's fries and three packs of large fries and found his initial suspicions proved right - there were only 14 more french fries in a large size of McDonald's fries compared with the medium size.
Mr Hsu also found one pack of large fries had only one more chip than one of the medium servings.

"It's 70 cents extra to upgrade the fries so my friends and I decided to see if it was worth it. I don't think it's worth it any more for an extra three or four fries," said Mr Hsu.

Independent tests conducted by the Herald yielded similar results to Mr Hsu's experiment, finding there was only a 12 french fry difference between the medium and large sizes at McDonald's and, in terms of weight, only a 13g difference.

However, the market mavens are back from the long weekend and telling everyone it's all good on Wall Street.

Well, just when you assume that the buyers would blindly buy the dip, they don't look to be ready to come to the market's rescue today.

This is one of the problems with the "market must always go up" mentality. We have chased the shorts (those betting on stock declines) from the market. Today's short interest is back at it's lowest level in 4 years. In a normal market when stocks start to decline the shorts will take some of their profits by buying back stock. However, in a market that is devoid of serious short interest when stocks start to decline there is no one to step in and provide support to the market.

I think it's important to note that while our markets are down, the middle east is in turmoil (protesters are massing in Bahrain again), and oil is spiking, but the second most viewed story on is about Justin Beiber's haircut. As long as we have our priorities straight.

Thursday, February 17, 2011

Medicaid Data

Today's "Holy #*!$" piece of data comes from Newshour that broke down the Medicaid spending issues facing the states.

While we're going to hear a great deal about spending cuts in education and infrastructure it's important to realize how the healthcare monster is destroying our ability to compete in the global economy (in my opinion).

Consider this data on NY State (please excuse the lack of table spacing).....

Federal Share NY State's Share
2005 $22,141,962,444 $21,910,065,831
2006 $22,497,323,342 $22,285,330,029
2007 $22,514,613,640 $22,306,020,782
2008 $23,889,330,132 $23,643,919,498
2009 $29,004,506,802 $20,026,711,833
2010 $31,434,531,113 $20,356,185,342
2011 $33,715,356,000 $26,032,352,000
2012 $30,877,828,000 $30,623,921,000

Between 2010 and 2012 the NYS Medicaid budget is projected to explode from $51.8 billion to $61.5 billion. That means we saw a $10 billion jump in 2 years in total costs of the program.

Much of this spike was covered by Federal Stimulus money that flowed to NYS from 2009 to 2011 so while the total cost of Medicaid was growing in NYS we didn't feel the pain because our share of the bill shrank while the program was expanding.

Now the Federal government would like to go back to a more traditional 50/50 split on Medicaid costs and we've discovered that the programs has grown by 20% in the last 2 years.

Coincidentally, NY State's budget deficit in 2011-12 is projected to be just over $10 billion (roughly equivalent to the jump in Medicaid spending over the past 2 years).

Almost every state has seen similar growth, but one interesting side note would be looking at the "BIG" state data. NYS has been passed in recent years on the population charts by Florida and Texas. Take a look at their medicaid costs compared to ours in 2012.

NYS - $30.6 billion

California - $25.8 billion

Florida - $9.2 billion

Texas - $13.2 billion

NY is by far the leading spender on Medicaid despite having the 4th largest population (NY State's Medicaid budget is 38% larger than Texas and Florida COMBINED!!!!).

I'm not a Medicaid expert, but if you want to help restore funding for your favorite pet project like infrastructure or education I think we might want to look at ways to reign in medical costs in NY State.


Wednesday, February 16, 2011

The best cycling related photo you'll see today....

A bike shop owner in Atlandsberg, Germany nailed 120 bikes to the side of his shop to drum up business. Brilliant!
In the US, he'd need 18 code variances and he'd have to build a 24' wide protective shield over the sidewalk to protect us from the prospect of falling debris.

The best lies, darn lies and statistics

While this is clearly a story today, the fact that "curveball" has admitted to making up stories about Saddam Hussein's alleged Weapons of Mass Destruction deserves more attention. It barely registers in the US newspapers as a lead story and that's disappointing.

"Politicians in Iraq have called for the permanent exile of the Iraqi defector, codenamed Curveball by his US and German handlers, who admitted to the Guardian he lied about Iraq having weapons of mass destruction (WMD).

Rafid Ahmed Alwan al-Janabi said he invented stories about Saddam Hussein's non-existent bioweapons programme in order to "liberate" Iraq."

Do you think we could get our $775,000,000,000 back now? Or justice for our 4,000+ service personnel that made the ultimate sacrifice? How about the thousands of injured service men and women in Iraq? Not to mention, the thousands of civilian casualties in Iraq all because of an individual source that lied. Just terrible.

Oh, remember the story of the FBI investigation that seemed to finger an anthrax research, Dr. Ivins which ultimately led to him taking his own life? Well, about that........

" The National Academy of Sciences has reviewed the FBI's scientific work on the anthrax, and today, Dr. David A. Relman, the vice chair of the NAS panel, said, "One cannot arrive at a definitive conclusion about the origins of the anthrax."

The review by the NAS concludes that while the anthrax in the letters was "consistent with" the RMR-1029 flask, that flask was not the "immediate source" of the spores used in the letters.

The NAS found that one or more growth steps would have been required to produce the spores used in the letters. The NAS found that "the data did not rule out other possible sources" of the anthrax."

I continue to act surprised by such admissions but like my friend says "You have to realize that everyone lies all of the time."

Here's one of the better lies circulating now "Fannie and Freddie caused the financial crisis!!!!".

That fits the political leanings of some in the US, but the problem is that it doesn't match the data. Courtesy of the Big Picture this chart shows the % of the mortgage backed security market owned by Fannie/Freddie, private issuers, and the gov't.

So, private issuers (those with loose lending standards, etc) saw their proportion of the market jump from 20% to 55% at the height of the boom. Hmm, I wonder if there if there is a connection between that and the housing bust?

This is kind of sports specific comment, but while reading a dated version of Sports Illustrated at the gym yesterday I was struck by what a remarkably bad prediction this was.....

From Sports Illustrated July 2011 "The relative quiet of Vick's comeback was shattered around 2am on June 25 outside a Virginia Beach nightclub, where he'd been celebrating his 30th birthday, and where his codefendant in his dogfighting case, Quanis Phillips, was shot. Vick's role that night is so far unclear at best (surveillance video has demonstrated inconsistencies in his story) and his career in the NFL appears near its end."

Mike Vick only went on to lead his team to the playoffs, become an MVP candidate and secure a franchise tag (ensuring a $20 million salary next year).

I guess sports writers can be as wrong as equity analysts and weather forecasters :)

Monday, February 14, 2011

Tax issues, Egypt and Jobs

A couple of interesting tax stories that have hit my desk over the past week. States are looking for every source of revenue that they can find and that is forcing them to get a little more aggressive when interpreting their tax code.

The best example of this comes from the great state of NY where we are now looking to tax people that don't live in NY but work in NY and own a vacation home in NY. If this tax ruling holds it could be a devastating to wealthy suburbs like the Hamptons or the midtown pied-a-terre market.

"A New York court ruled last month that all income earned by a New Canaan, Conn., couple is subject to New York state taxes because they own a summer home on Long Island they used only a few times a year. They have been hit with an additional tax bill of $1.06 million.

Tax experts and real estate brokers say this ruling could boost the tax bill for thousands of business executives who own New York City apartments they use only occasionally. It could also hurt sales in the Hamptons and New York's other vacation-home communities.

"People will think twice about spending any summer time in New York," says Robert Willens, a New York-based tax consultant. "The amount of tax they could be subjected to is likely to outweigh the benefit."

"We imagine this decision will have a chilling effect on New Your tourism and real estate values among other second and third order effects."

The confusion around this case could really hamper real estate sales in fringe vacation markets like the Catskills, Finger Lakes and even the 1000 Islands.

Amazon takes their ball and goes home said Thursday that it would shutter its Irving distribution facility on April 12 and cancel plans to hire as many as 1,000 additional workers because of its dispute with Texas over sales tax owed.

Texas wants $269 million from Seattle-based Amazon in past due sales tax, sending the bill to the company last October.

"We regret losing any business in the state of Texas," said Alan Spelce, spokesman for the state's comptroller's office. "But our position hasn't changed; if you have a physical business presence in the state of Texas, you owe sales tax."

Finally a thought on the democratic revolution in Egypt:

I love the way this has been characterized as a peaceful transition. You can search the web for some of the videos but there was a disturbing level of mob violence in Cairo over the past week. Also, for all of the talk of democracy, let's make sure that we don't lose sight of the fact that this was a military coup. Egypt may eventually transform itself into a strong Middle Eastern democracy (however, those tend to not work out really well), but right now it is a military leadership that is armed to the teeth with the best of US military technology.

I'm reminded of the Gen. Petraeus mantra that it's not reality on the ground that matters but what people in Washington DC perceive as reality (if you have a free 15 minutes today you should read the Rolling Stone article on Gen. Petraeus, it's an interesting read re: our strategy in Afghanistan).

Finally, I'm working with a new start-up that is need of a talented local sales ad sales rep. Anyone that's looking for an exciting opportunity with a start-up in NNY that has a background in media sales (TV, Radio, Newspaper) shoot me a message and I'll make the connection.


Thursday, February 10, 2011

Snow jobs

You see last week when the jobs data was bad it was all the snow's fault. However, when this week's initial claims number came in better than expected (even though the nation was covered by a blizzard during the week in question) not one mention of snow. I guess everyone got jobs shoveling or plowing last week.

Cisco was the latest in a string of tech giants to disappoint this month (joining Apple and Intel), but like every other day people (and by people I mean the computerized traders) have come to realize that you can't fight the market and good news is great news and bad news is great news, so it's 1999 all over again and stocks are about to go green again.

Speaking of 1999, it must feel that way at Twitter. In December - roughly 2 months ago - they took additional funding that valued the company at $3.7 billion. Today's talk is that they are looking for $8-10 billion just 2 months later.

I'm not a twitter hater - I let my posts flow to twitter, but I don't bother monitoring it anymore - but the heavy users have been reporting that twitter spam continues to spiral out of control and the growth rate has clearly slowed dramatically. I'm sure "this time it's different", but Twitter feels like myspace all over again, in my opinion.


Monday, February 07, 2011

Just when you thought it was safe to trust a bank

These two stories just reiterate how the banks operate in some sort parallel universe where they believe there is no consequences for their actions.

1) At this point, this is merely an allegation in a lawsuit but it's so blatant it feels like there may be some truth to the story. According to the WSJ when a pension fund needed to conduct a currency transaction they would contact their bank (in this case BNY Mellon) and place an order. BNY would complete the transaction but then create fake trades around the high prices of the day and then pocket the difference between the fake trade price which they would charge the pension fund and the real trade price. In the example from the WSJ:

Virginia needs to convert $12.5 million to Canadian dollars.

BNY Mellon buys turns $12.5 million US into $13.5 million Canadian at the going rate.

Later in the day when the Canadian dollar had appreciated slightly, the fake trade is booked which would have turned $12.5 million US into just $13.35 million.

Now they tell Virginia the trade netted $13.35 million and they take the difference ($13.5 million Canadian - $13.35 million Canadian = $115k Canadian) and put it into their Foreign Currency Trading Profits.

We'll see how this plays out.
This whole article over at Vanity Fair is worth a read but I'll give you the Cliff Notes version. Back in 2008 an analyst at Merrill Lynch seems to have a good feel that the Irish banks are acting out of their minds. Lending to anything with a pulse and he has a suspicion that it won't end well. After writing a report to this effect, Merrill makes him retract the report and subsequently fires him because they were making huge fees from the banks mentioned.

Merrill was a special kind of evil even on Wall Street.

The worst chart you'll see today

This chart comes to us courtesy of the St. Louis Federal Reserve Bank which has more data and charts than just about any other site on the web.

The percentage of the civilian population employed has plummeted in the last six months (despite the fact that the unemployment rate is still falling - I'll get to that in a minute) to levels last seen 25 years ago. At 58% of the population employed we are roughly where we were in the middle of the 1950's.

The more disturbing data to lay on top of this chart would be to include job type. I think while the employment ratio has been falling we're also shifting our jobs from high-end tech and manufacturing toward low-end service and retail. Ugh.

Regarding the falling unemployment rate from Friday, I really thought people would have caught on to this trick by now. Remember the unemployment rate is a fraction which has two components - a numerator and a denominator (number of unemployed divided by total population). If the unemployment rate falls many assume that the number of unemployed persons fell.

That's not necessarily true. Assume that 10 people are unemployed out of a population (employed + unemployed and looking people) of 100 people. Your unemployment rate is 10/100 = 10%. If next month 2 of these people just quit looking for work your fraction changes to 8/98 and tada! Your unemployment falls to 8.2%!!

This is what's happening in the US as hundreds of thousands of people are just disappearing from the employment data every month. There was likely a strong impact of weather in January, however, it should be noted that the data is strongly seasonally adjusted to take things like WEATHER into account and remember it only snowed in the Northeast. What about Seattle, Chicago, Dallas, San Franciso? We'll see some recovery in February as long as it doesn't snow again in the Northeast this winter :)


Friday, February 04, 2011

Government contracting ideas...

I think the last thing people think of when they think about India is government efficiency. However, I read an article the other day that seemed surprisingly well thought out for any entity but especially for a government.

India is trying to assign every citizen a personal ID number (similar to our Social Security numbers). In a nation the size of India and just a handful of surnames (Shah, Sharma, Patel, Gupta, Singh, etc) this is a huge challenge. They are also adding a layer of complexity by trying to assign biometric markers (iris scans or fingerprints) to each person.

Rather than simply giving a 10 year contract to the firm with the best lobbyists (the US model), the Indian government has taken this novel approach. The lowest cost bidder gets 50% of the business, the 2nd place bidder gets 30% of the business and the third best bid gets the remaining 20%.

After a set period - 3-6 months - the government will re-evaluate each provider and reassign contract proportions based on their performance. So if the fastest, cheapest contractor happens to be the 3rd place contractor, they'll be rewarded with a larger share of the contract.

This is still open to fraud in a nation notorious for its bribery infrastructure, but I'd love to see us try this in the US with some of our contracts.

Stat of the day: A night in an American hospital typically costs 25 times as much as a night in an Indian, Brazilian or Chinese hospital.


With apologies to Milli Vanilli - "Blame it on the snow"

Again, ADP swings and misses wildly. ADP said 187k jobs were created in January on Wednesday, but the BLS data out today showed just 36k jobs. Lots of data to digest but here are the highlights:

* We'll blame it on the snow because it never snows in the Northeast in winter time.

* Change in Private Payrolls +50K (expectations were for +145k)

* Not-seasonally adjusted U-6 (unemployed, underemployed, part-time) jumped again from 16.6% to 17.3%.

* The civilian labor force declined from 153,690 to 153,186

* Labor force participation at 64.2%, the lowest since March March 1984

The declining participation rate is very disturbing. If the economy was turning, people would be coming back to look for work and participation should be increasing. The opposite seems to be true as more people seem to just be giving up.

We've already heard rumblings that the Fed is planning further actions if the economy weakens again. This number might further those thoughts and in the perverse world of Wall Street trading where Fed easing = weaker dollar = higher stock prices, this bad jobs number might actually boost stock prices today. Watch out for news on Egypt, Jordan, Saudi Arabia and Syria this weekend.

More to come....

Thursday, February 03, 2011

Stats of the day

The impact of rising gas and food prices on the poor in the US is dramatic and was pointed out to me a couple of days ago. I think that there are two factors in this chart that are not factored in:
1) The rural poor have a higher proportion of their income dedicated to gasoline because they have further driving.
2) The urban poor have few options for food purchases (there are not many SuperWalmart's in East Orange), so they tend to pay even more for their food products. It would be hard to demonstrate this data in a chart but it should be noted.
The Packers and Steelers have 26 players on their roster that weigh over 300lbs. In 1980 there were 3 guys over 300lbs in the entire NFL. Nope, no HGH here move along please.....
Remember there's plenty of deflation in Ithingy's and LCD TVs so feel free to ignore that inflation you see next time you hit the store.
"Here are the 6-month price percentage moves in some of the things people need to live with:
Cotton = +125.7%
Sugar = +82.6%
Corn = +59.0%
Coffee = +41.4%
Rice = +40.5%
Oats = +36.6%
Copper = +36.1%
Lumber = +33.8%
Oil = +25.1% "
Rice is up 11% in 4 days. Cotton jumped 5% yesterday. If you're a farmer with a field full of cotton, sugar cane, corn or rice it's time to sell and retire to Boca. If you need sugar, coffee or rice to live (like a few billion people in China/India/Bangladesh) you might want to mention to Chairman Bernanke that you're seeing a little inflation on the street.

Tuesday, February 01, 2011

Rally On!

Wow, what a difference a weekend makes. On Friday it didn't look like anyone want to touch the equity markets and today the computers are back large and in charge.

Clearly things in Egypt haven't settled down (I'm not sure El Baradei is the answer. He seems to be much more popular outside of Egypt than within its borders. I'd bet on some form of military rule over the next week or so). So what's changed?

Construction data was weak but the ISM manufacturing data was slightly ahead of expectations and that's all the headline reading computers cared about before buying everything in sight. Unfortunately, if they computers could have read the whole report like a human would have done way back in the good old days of 2004 they would have seen that the largest contributor to the ISM number was the huge jump in prices paid which hit a 2 year high. Inflation is hitting the supply chain and that will dramatically impact profitability in coming months but that's not the focus today.

Stats of the day:

"There were 18.4 million vacant homes in the U.S. in Q4 ’10 (11 percent of all housing units vacant all year round)."

"Nearly 20 percent of all homeowners who received permanent mortgage loan modifications through HAMP one year ago have fallen behind on their payments again, according to the latest figures from the Treasury Department."

Oh, and remember there is no inflation, there is no inflation so just grin and bear it when you go shopping next month ---

"Corn spot up 7.76%, wheat up 5.63%, Rice up 10.08%, Hogs up 10.16%, Sugar up 5.64%, Orange Juice up 3.33%, and cotton.... up 17.08%. That's in one month!"

The cost of everything is going up substantially as traders figure out that the real action is in commodities.