Monday, July 22, 2013

Choose your data wisely

There has been a great deal of hand-wringing about the economy getting ready for takeoff and what that means for the Fed, the stock market and your retirement account in recent months.

The problem is that this story line has hit a bit of an air pocket over the past 2 weeks. If you are in the "things are getting better camp" you point to earnings for the S&P 500 still showing close to 10% growth vs. last year.  A deeper reading of that data though shows that almost all of that growth has come from financial firms (the banks - hmm, where have I seen this story before - 2007?).  Equally troubling is the lack of revenue growth.  Company after company is showing earnings growth through cost controls.  So far only 50% of companies have matched their revenue expectations.  This gives the "US growth is slowing" camp lots of ammunition.

Also, when my budding 10 yr old oil analyst notices that regular unleaded prices have nearly reached $4 again locally you know that gas prices are going to start impacting retail spending.  I've read article after speculating on what has caused this latest spike - summer driving, Egypt (btw: did that story fall off the map or what?**), and refinery outages but the reality is no one knows.  The price got a little juice from Egypt and a refinery that lost power and then the traders started bidding up the price and without any reason the price went higher because there were more buyers than sellers.  I wish there was a better explanation but there isn't.

So with higher gas prices and lower consumer spending, the current forecast is for US economic growth to be just under 1% in the second quarter.  That sounds a lot more like stall speed than it does a point of lift off for the US economy.  So, that begs the question can the Fed really start to "taper" their buying?  Probably not, which means stocks actually will have a bid underneath them despite weakening fundamentals.  The stock market has become the new home of the no money down mortgage - no perceived risk as long as things keep going up.

That's great until things change :)

** I should note that the story of Egypt remains on the front page of most major global news outlets.  In the US we are apparently obsessed with some British woman having a baby and where the President is vacationing.

Thursday, July 18, 2013

3 odd stories to start your day

1) UK family struggles with the ethical nightmare of dealing with the $2 million they've made off the sale of the paintings done by THEIR 10 YR OLD SON.  Clearly, my kids are slackers.

2) This company provides online/offline lying for a fee.  Ugh, is this really where we're at as a culture?

"Its name is Paladin Deception Services, and it advertises its services for $54 per month.
Green says customers run the gamut -- from cheating spouses in need of alibis to people playing hooky from work. But the real demand comes from job seekers, making up more than 60% of what he says are its 250 to 300 monthly clients.
"We can replace a supervisor with a fictitious one, alter your work history, provide you with a positive employment reputation, and give you the glowing reference that you need," Paladin's website states."

Perfect summer day

Well, it finally topped 100 in many East Coast cities today.  Now we know how you hardy souls in Texas, Arizona and Nevada survive -- namely locked in your house with the air conditioning running.

The markets continued to waffle around in the afternoon heat but in general the ended the day in positive territory due to the determination that the fire on that Boeing 787 dreamliner was not related to the battery system and the market's interpretation of Ben Bernanke's comments.  The market's reaction was hard to understand because Mr. Bernanke has basic said the same thing for the past 3 months.  However, the market's reaction has varied pretty much every time he's spoken.

I generally try to avoid commenting on specific stocks but the recent movement in Microsoft really sums of the entire stock market in one nice package.  Earlier this week Microsoft hit a 12 year high.  Grasp that - the last time it was at these levels was pre-9/11.  So that begs the question what's going so great?  Corporate upgrades? Nope.  Windows 8?  Try again.  Surface sales? The product they just cut prices on?  Not quite.

So when they announced earnings tonight and the stock dipped the most in 3 years it somehow caught people off guard.  Consider the companies that have disappointed in the past 24 hours - Microsoft, eBay, Google, Intel....

Yep, everything is going fine.  Just keep pushing stocks to new highs.  I'm not saying that the sky is falling but I think some of these recent events bear watching.

Oh, and yes, the Detroit bankruptcy is going to make headlines for the next few days.  The real story here is going to be the battle among the various creditors.  The secured creditors are going to (rightfully in my opinion) that they are senior to unsecured creditors (pension obligations, etc).  This could mean major pension adjustments but a judge has already denied the city's plan to apply haircuts to pensions.  This will be the major battle that may take time to play out in the courts.


Monday, July 15, 2013

3 things I learned this weekend

People have started to jump on the concept of low job quality when it comes to the jobs report.  I've been following this trend for years and it continues unabated.  During the recession we lost tech, financial service and manufacturing jobs while we've been replacing them with temporary jobs, low-end health care and restaurant jobs.

via BLS & Zerohedge

Not all jobs are created equal, but the algorithms reading headlines can't always determine the nuance of the jobs report.

This is a REALLY cool development.  The Oregon state legislature passed a bill last night that would make higher education FREE (well there's always a "but").

The model is loosely based on the Australian higher education model (which I like).  Under the proposal students would attend school for free with the understanding that they will pay 3% of their future earnings for the next 24 years back to the state to fund future opportunities for other kids.

Guess what? We don't have to worry if the student loan rate is 3.4% or 6.8% if kids have 0 debt when they graduate.

Kudos to Oregon for taking this bold step.  Your move SUNY :)

I really like this idea from Warren Buffett and his sister Dorothy.  They've run a class for the past few years at various universities that teaches how to give with your heart AND your brain when it comes to charities.  At the end of the course they fund a charity selected by the class with $10,000.  Now, they've taken that concept one step further and embraced the Massive Open Online Course model.  This means you or I can also take the class and have a chance nominate a charity for $100,000 in contributions.

The importance of being smart with your charitable dollars has never been more critical and raising a new generation of Americans with smart compassion is an idea that I can embrace.

You can see the details of the course here.

Wednesday, July 10, 2013

Okay, this test I'd fail

There are plenty of those "Harvard Entrance Exams from 1908" floating around the interwebs (every time I type that I wonder if people realize it's incorrect on purpose - a little hipster irony).

However, this 8th grade test from KENTUCKY from 1912 is legit.  Seriously, if you haven't clicked the link you should go read the test first and then come back because all of the following isn't going to make much sense without reading the test.

The spelling test is a good challenge but I think most of us could figure out chandelier, circulate and synopsis.  The math is challenging but fair - although the "cord of wood" calculation might get the better of most city-dwellers.  Geography would be a great test for even the most talented map geeks, but again you really should be able to find Turkey, the Alps and the Andes on the map.  Physiology is roughly in line with high school Biology that I recall but I would be interested in knowing what the was answer to "Name 5 rules to be observed in maintaining good health".

However, it's all down hill from there.

Civil government
      - Name 5 county officers and their duties????
      - Copyright? Patent Right?

    - Hey, the St. Lawrence River gets a mention!! Keep in mind this is a test for 8th graders in Kentucky.  I would be curious to know the percent of our students who live, work and play in the St. Lawrence that could answer this question (who discovered the St. Lawrence) correctly.
     - Sketch Peter Stuyvesant?
     - Name the last battle and commander of each side in the major US wars?
     - Describe the battle of Quebec??

Wow, that is a challenging test.  If I were a college professor, I'd have fun with this.  When kids walk in to my class at the beginning of the semester I'd hand them this test as a "Test of General Knowledge" so I could gauge how much I'd have to teach them in the upcoming 4 months.  93% of the kids would probably drop the class before the end of the day :) 


Tuesday, July 09, 2013

The stupidity burns -- make it stop

On the surface when you hear the details of this story you have to think "No way, that's a story from the Onion, right?"

I only wish it was.

Apparently, the Economic Development Administration, a sub-agency of the Department of Commerce takes their role Developing the Economy VERY SERIOUSLY.  In December 2011, the Dept of Homeland Security told the EDA and the National Oceanic and Atmospheric Administration that their computers may have been infected by malware.

Now you and I might run spybot, AVG or adaware to make sure your system was okay.  That's what NOAA did things were back to normal in a DC minute (2 weeks).

However, the EDA really wanted to spur the economy with a little computer spending so.... the EDA insisted on a policy of PHYSICALLY DESTROYING all computers and basically anything that touched the computers (printers, cameras, keyboards, mice).

"The total cost to the taxpayer of this incident was $2.7 million: $823,000 went to the security contractor for its investigation and advice, $1,061,000 for the acquisition of temporary infrastructure (requisitioned from the Census Bureau), $4,300 to destroy $170,500 in IT equipment, and $688,000 paid to contractors to assist in development of a long-term response. Full recovery took close to a year."

You can read the whole sad story here.

Monday, July 08, 2013

The New ABC - Always Be Curious

I recently had a conversation with an old friend about the importance of constant learning and maintaining a constant state of curiosity.  Even at our advanced age, the ability to learn has never been greater.  As little as 20 years ago most of the world's collective insight and knowledge was locked up in libraries, monthly magazines and college lecture halls.

However, thanks to the advent of the Internet, the world is now awash in free education.  Consider this article on Marketing from the Harvard Business Review.

"Spoiler alert: I dropped out of university.
It's true. I entered university with the best of intentions. At the same time, I was already publishing a couple of music magazines that were becoming successful. As I ventured down the road of burnout by trying to be both a publisher and a full time college student, I had a heart-to-heart conversation with my parents. In a very non-traditional fashion, my mother said, "If the magazines don't work out you always go back to school, but if you stay in school and stop publishing those magazines, you will never know what could have been." While I dropped out of university (and never went back), I never let not being in school get in the way of a higher education."
He does a good job highlighting the world class marketing "education" that can be had by simply being well read on the Internet.  I'm clearly not a marketing guy, but I can see the value in this approach.

Wednesday, July 03, 2013

Ask your doctor what would they do?

There a fantastic infographic by Jess Bachmann that you should check out.  Here is the link.

He highlights some of the differences between what happens in real life when it comes down to our final days versus what Doctors would chose for their own demise.

* Faced with an irreversible brain injury but not terminally ill, 90% of doctors would chose NOT to be saved by CPR.

* The final year of life accounts for 25% of all Medicare spending with 1/3rd of that total occurring in just the last two months of life.

I found this last quote particularly good "But for most doctors, death is not the worst case scenario: the measures to prevent it are."

Have a happy and safe 4th!

Monday, July 01, 2013

This is why we can't have nice things...

First a little market wrap-up: it was a strong day that fizzled late in the day.  This is the second time the markets have attempted to regain an important technical level and failed.  Again, I'm not a fan of technical analysis but the markets undoubtedly follow these indicators so it's worth watching as this could be a negative in the near-term (however, the shortened week and jobs report on Friday will probably outweigh any near-term technical swings).

Two stories today caught my attention from the file of "you don't get what you pay for in US infrastructure spending."

1) "Caltrans has no evidence it verified the quality of the hundreds of irreplaceable rods needed to anchor the tower of the new Bay Bridge eastern span or made sure the manufacturer hadn't left them vulnerable to cracking, officials acknowledge."  Well, you know you can't expect documentation when you're only spending $6.5 billion.   

2) Oh, Florida.  We love your beaches, warm weather and overpriced theme parks.  But seriously, when the Florida DOT misspells the name FLORIDA not once but TWICE on the same sign -- well, that's some fine work there .  

** Thanks to the reader that suggested one add on to the advice to college grads - "develop an ability to think".  That's a great addition.