Monday, December 22, 2014

Observations pt 2

I came across this summary the other day when reading the "smartest twitter feeds" on www.hotchatr.com.

I think it was a great set of guidelines for success in life in the late 1980's and I think many of them still ring true, however, I worry that as a society we are losing the ability to collectively value these ideas.  My thoughts are in italics....


1) “Treat your vocabulary the way you would your checking account.” Expression often lags behind experience, and one should learn to articulate what would otherwise get pent up psychologically. Learn to express yourself. Get a dictionary.

In today's era of tweets, hashtags, and emojii the ability to articulate a thought is becoming increasingly rare.  Strike one.

2) Be generous with your family. Even if your convictions clash with theirs, don’t reject them—your skepticism of your infallibility can only benefit you. It will also save you a good deal of grief when they are gone.

Despite concerns about the failing American family, the divorce rate appears to be falling for those married in the 1990's and 2000's (however, you could argue that the number of people getting married is also falling, but I digress), so I think this is one area where we're doing okay as a society.

3) “You ought to rely on your own home cooking.” Do not expect society to arrange itself to your benefit—there are too many people whose desires conflict for that to happen. Learn to rely on yourself, and help those who cannot.

I believe the author was speaking metaphorically here - basically, saying take care of yourself.  This is one area where we are really off the rails - 6 years into the great recovery and EBT participation is at record levels, worker's compensation claims are soaring, etc.  Strike two.

4) “Try to not to stand out.” Do not covet money or fame for their own sake. It is best to be modest.

Every new "innovation" coming out of silicon valley seems to be at the other end of this statement.  Facebook, Twitter, Instagram, Youtube, etc are creating a "look at me" culture that is neither healthy nor sustainable. However, I am hopeful that some youth see the folly of this existence and are already abandoning these platforms. Foul Tip!!

5) Do not indulge in victimhood. By blaming others, you undermine your determination to change your circumstances. When life confronts you with hardships, remember that they are no less an intrinsic part of existence. If you must struggle, do so with dignity.
Scroll through the evening news or social media on any given day and you'll see the degree to which victimhood has overtaken our society.  Strike Three!!

Now seriously GET OFF MY LAWN!

Cheers!

Observations pt 1

Okay, I'm going to turn into the grumpy old man yelling at kids to get off his lawn today.

This chart lists the most frequently occurring song lyrics by decade in popular songs.

The shift in the past 50-60 years really demonstrates some kind of lost innocence in the US.

From the 1950's when Christmas was the most popular phrase to the current decade where 40% of the most frequently used lyrics are traditional curse words.  #SMH at you 'murica.

And what was the obsession with "Old Uncle Casey" songs back in the 1890's ?  :)
Chart and backstory at proofreader

Friday, December 19, 2014

How the markets are like Kohl's Stores...

When I first started hearing about Kohl's stores from our retail analyst it was in the late 1990's and they were still primarily a midwest retail chain.

I vividly remember the first description of the stores as something along the lines of "it's like Macy's but without name brands".  I remember thinking that was a strange concept, but whatever, to each his own.

Yesterday I was discussing the Kohl's concept with my better half and admitted that it is just one of those successes that I have to admit I'll never understand.  There is always a steady flow of customers marching through their doors to buy a $12 shirt that was marked up to $90, so they could put it on the 70% OFF rack (now $27) and you can use your extra 30% off coupon to yield a final price of $18.90.
In the end, you end up paying 50% more than what the shirt is worth, but they tell you "You SAVED $71,10 on this shirt!!!" and for some reason this strategy continues to work. 

So what does this have to do with the markets?

I think we're seeing the last glimmers of human influence over the markets vaporize in front of us.  In 15 or 20 years, we may look back on this time and wonder why we didn't change the markets when we had a chance.

Yesterday, all I heard during the day was "well, oil has stabilized and that has caused a massive stock market rally." The only problem was oil was falling throughout the afternoon and set new 5 1/2 year lows by the close.

It doesn't matter, though.  Once the computers take hold of the market they no longer needed a "reason" to buy, simply having stocks be higher was reason to buy more.  At the end of the day a crazy buy program bought everything in sight and took stocks back to within a whisper of all-time highs.  This won't cause any Congressional inquiries when stocks are going up, but these program trades can work in the opposite direction as well.  Yesterday's panic buying was so rapid and lacked any rational explanation so it left all of the humans standing on the sideline.  When the markets finally unravel, the declines will be so rapid that no one will have a chance to react.

So, after dealing with the markets for nearly 20 years I think I've come to the realization that these are no longer markets.  They are like Kohl's - maybe I'll just never understand them :)

Cheers!

** Oil has bounced again this morning, so if the pattern holds, this means higher stocks (maybe all-time highs again?) and a late day sell-off in oil that no one will notice.  However, today is an option expiration day which means it can be very volatile.

Wednesday, December 17, 2014

The markets are like a Rube Goldberg machine



Yes, the markets are not reacting well to falling oil prices, but it's important to note that they are only off about 4% from the record highs they were setting 10 days ago.

So, the question everyone (even my kid in the car this morning) is asking - why?

We know that gas falling $0.75-$1.00/gallon is putting more money in the hands of consumers.  Admittedly, it is a small sum, but it's better than nothing.  However, as the picture above represents the global financial system is incredibly complicated and very interwoven.

* Russia's collapsing Ruble is having major implications around the globe and banks with large exposure are starting to shake just a bit.

* A number of global economic indicators that I follow are flashing "worst since 2008".  Well, we all remember what happened right after that, right (Lehman/Bear Sterns and the Great Recession).

* At this point, I'm most concerned about several European banks being the catalyst for something significant.

* I've said it a hundred times, but it's worth repeating - technical analysis of charts is equivalent to horoscope reading in my book, but the computers don't care.  High frequency trading dominates the market now (see yesterday's wild swings) and we are only about 1% above major support for all of the US markets.  IF (and it's a big if), we break through those levels the downside is probably another 5-10% very quickly.  However, markets historically struggle to move much in December as people are locking in gains/losses for the year.  I think I could predict the way this market might have moved in 2003, but the rise of electronic trading makes the end of this month a wild card.

Despite all of the talk of "Record highs for stocks" did you know that as of today the Dow is up 3% for the year (Nasdaq is up a more respectable 9% and the S&P is up 5%)?

Since stocks have fallen 5% in the past 10 days, I think it's worth watching the action over the next few days because a major pullback could lead to more selling as managers try to hold onto a positive performance for 2014.

Things to have on your radar this week - Russia, Venezuela, FOMC meeting, the FedEx earnings (they missed despite lower fuel costs - sign of a slowing economy?).  At this moment (Wed morning) - oil is down again and Europe is off close to 1%, but US stocks are looking up a bit on the back of a strong dollar.  We'll see if it holds today.

Cheers!

UPDATE: The markets showed early gains thanks to stabilization of oil prices which led to massive rallies in Oil stocks and frankly, anything remotely tied to the energy industry.

This oil/gas rally was further "ignited" by the Fed's comments at 2pm.  The ironic thing is that by the end of the day oil was back where it started but by that point the stocks had created their own momentum and the program trades ignored the catalysts and focused on the event.  Net/net stocks jump the most in almost 2 years and no one knows why.  The Fed went out of their way to tell us that they weren't really saying anything new, but the program trading pools can't interpret nuance.  When "Janet Yellen says....." hits the bloomberg terminals the computers just buy 'em all.

We are now back above those technical levels I mentioned earlier in the day so let's see if this is a one day wonder of if it has some staying power.  For most of the last two months the cycle has been:

* US stocks are up because X, Y or Z.

* Asian stocks are up because US stocks are up.

* European stocks are up because Asian stocks are up.

* US stocks open up because European stocks are up.....

You get the idea......

Cheers pt2!

Monday, December 08, 2014

An Oily Black Swan?

A "Black Swan" in economic terms is an outlier event that is large and unexpected enough to shake the markets.

In June if I told you oil would be under $65/barrel by December you would have laughed, yet here we are.  The impact of this move is starting to spread as I hinted last night.  The increased amount of leverage and use of exotic financial instruments in the commodity markets means that we are setting the stage for some rough days in the oil patch.

* Venezuela is the third largest exporter to the US of crude oil and 9th largest overall and Venezuela could be the first domino of this black swan event.  This is a chart showing the cost of insurance on Venezuelan 5 year debt.  Note that the last time insurance was this expensive was when Lehman collapsed and oil plunged to $30/barrel.  If you were a holder of Venezuelan debt you might buy this insurance in case you felt there was a risk they could not repay you.  It seems like a lot of people are questioning their ability to meet their obligations.




* I read today that the slide in oil prices has caused Canadian Energy companies to lose a combined  $100 Billion in market capitalization.  That's a lot of Timbits.

* Finally, the good old Baltic Dry Index (loosely defined as an index measuring the cost to ship things around the world) is back to its lowest level since.... yep, you guessed it, Lehman in 2008.

This is unrelated to the topic oil but it speaks to the issue of the recovery in the US and how it has been largely a stock market and corporate recovery.  The sarcastic tone in the chart was not inserted by me but the original poster (@rudyhavenstein).  This chart shows the number of individuals enrolled in food stamps in the US.  With 316 million people in the US and close to 45 million on food stamps I think it is clear that the recovery has not been widespread.



Cheers!


Sunday, December 07, 2014

Did you ever think you'd be thrilled with $3.00/gal gas?

There are so many things to talk about it's hard to chose a subject --

* Stocks surging to more record highs despite global economic contraction

* The Bank of Int'l Settlements comments over the weekend that basically confirm that markets have become so addicted to Central Bank movements that they are no longer functioning normally.

* A Barron's cover comes right out and says "This time it is different" which almost certainly means that this time will not be different.

* A $40 billion valuation for a startup taxi app that most people outside of major cities have never heard of, let alone used.

* Gas prices finally retreating

I'll start with an interesting map that shows just how much it hurts to drive in Upstate NY.


I know we tax gasoline heavily in NYS ($0.68/gallon vs a national average of $0.50/gallon) but it pays for all of those sweet, pothole-free 10 lane superhighwa........ oh, yeah, wait, what do we get for those taxes?  That will have to be a story for another day I guess.

The good: On the margin with the average US driver logging 14,000 miles per year and average car getting 25 mpg means the "average" driver (using very broad generalities) burns about 560 gallons/year.  With gas prices down $0.70/gallon on average around the country that's an extra $400/year in your pocket (or roughly $8/week - don't spend it all on one Mocha Latte).

The bad: The US economy is no longer just impacted on the consumption side of the oil equation.  As a major producer of crude our economy is negatively impacted by falling oil.  This will likely be the first real test of our economy as a major oil producer.

The known unknowns: The oil industry has become one of the most heavily influenced by financial products since the housing boom of 2006-07.  Not only have major producers leveraged themselves to the gills, but every tiny producer with a pulse has worked with two assumptions when building forecasts and borrowing money --- interest rates will never rise and oil will always be over $100/barrel.  Well, at some point in the next 2-3 months the rate of bankruptcies in the oil fields of North America could be staggering.  Most of these companies are private so the extent of this risk is "unknown" but the risk is "known".

Cheers.



Tuesday, November 18, 2014

Time Lapse from Buffalo Lake Effect

This is an embedded video so if you subscribe via email you may have to go to www.grindstonefinancial.com to see the clip (it's only 6 seconds long) but it really highlights how crazy lake effect can be (50+ inches today in some areas outside of Buffalo, while the airport only got 3").

The US Consumer to the Save the World.

I sort of hinted at this theme last week and it's becoming a common thread in many mainstream publications this week.

If the big 4 engines of global growth are the US, Emerging Mkts, Europe and Japan, well, Houston we have a problem.

The US consumer keeps getting dinged at every turn, but stocks continue to crank out record highs every day (more on that in a moment).  Grade B.

Emerging markets are really falling off the rails starting with China's credit crunch but I'd give them a grade of B-.

Europe is about one major issue away from a real return to recession.  When France and Greece are your economic strong points you know have a problem.  Grade C-.

Japan.  Oh, Japan.  Things seems to be going from bad to worse and it's clear the policy makers have little clue as to what approach might change the tide.  They've now entered their third recession since 2008.  Grade D-.

So, it's all about how many $200 TVs we buy from Best Buy next Friday.  If you don't do your civic duty and "rain blows upon thy neighbor for the last doll in the store" (obscure Festivus reference) next week the whole global economy might collapse.  Go forth and charge (please understand that is sarcasm.  Thx).

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This is the world that is driving stocks to more all time highs daily.....

"Japanese recession triggers hopes for more BOJ easing".

Now replace Japanese recession with Eurozone, Asian, US, Chinese and replace BOJ easing with BOE, ECB, Fed, etc., and you have a recipe for headlines for the next 2 months at Bloomberg.  Every day there is more signs of economic weakness met with more pleas for central bank management.  The fundamentals have left the building.  We are in unchartered waters my friends.

Cheers!

Monday, November 17, 2014

I'm not a weatherman, but I play one on the interweb

This is a very local story but if you live north of I-90 and near I-81 you know that we're in for some snow tomorrow.

Despite the fact that 74% of on air time is dedicated to talking about the weather on the local news, they don't bother to actually tell you where it might snow.

I made this chart up in 3 minutes on the National Weather Service site.  As you can see, where you are makes a huge difference in snow total projections.  Pass this around to anyone you think might not have accurate info re: the storm totals.

Tonight Tuesday  Tuesday Night Total
Clayton Little to none 1-2" 1/2" 1-2.5"
Depauville 1/2"  4-6" 1/2"  5-7"
Dexter 1-3" 13-19" 1-2" 15-24"
Lyme 1" 7-11" 1" 9-13"
Brownville 2-4" 15-21" 1-2" 18-27"
Watertown 3-5" 14-20" 2-4" 19-29"
Sackets Harbor 2-4" 13-18" 1-3" 16-25"
Belleville 4-6" 7-11" 7-11" 18-28"
Adams 4-7" 9-13" 8-12" 22-32"

We'll now return to our regularly scheduled market commentary. :)

Like News? Hate reading the same headlines for 6 hours a day?

Linkfest websites like The Drudge Report, Business Insider, Buzzfeed, Vice, etc, have changed the way we consume news for better or worse.

Locally, there is the ubiquitous Newzjunky which pulls the vast majority of their news from Drudge, the Daily Mirror, the NY Post, and local sites like the Watertown Daily Times, WWNY and Syracuse.com

There are three problems with this model:

1) You are being served their version of the news with their editorial biases.

2) The news remains fairly static. Once it's updated in the AM it doesn't change very much.

3) Finally, there is the overabundance of ads that you are served because you keep clicking refresh.

To counter this I mocked up a new way of consuming news last week and you can check it out at www.hotchatr.com

A) I'm no coder, so please accept the bare bones look.
B) I modeled it after the original 1998 Google website that was ad-free and uncluttered.
C) It takes a couple of minutes to get used to the format (it's a twitter timeline) but if you are a true news junkie you'll get high quality news as it happens from around the globe.

Understand, that it's not a tabloid like Daily Mirror/NYPost, so there won't be a lot of "Woman robs Walmart for 3 boxes of Twinkies while in a bikini" headlines.  But if you really miss that kind of stuff, click the "celebrity" or "tabloid" tab.  I've been using it for awhile and it's becoming my go to website for general news.

If you're unfamiliar with how twitter works just click the link and scroll through the news.  As you're reading you'll see things like "View 3 new tweets" show up in blue at the top of the page.  Hit refresh or click the words "View 3 new tweets" and you'll see the newest stories.  You don't need a twitter account to use this tool which is one of the perks.

I suspect twitter is working on something like this internally, but I can't confirm it.  Until then enjoy an ad-free source of real-time news at hotchatr.

If you like it share the link on Facebook or bookmark it.  If you have suggestions to make it better let me know (I know there may be a problem view it on mobile devices - I'm looking into that).

Try it out for a day and see if you find it to be a useful tool for providing up-to-the-minute news.

Cheers!

Sunday, November 16, 2014

Japan - Would you like sprinkles with your triple dip (recession)?


The consensus forecast for was for the latest Japanese GDP to come in around 2-2.5%.  Instead they posted a NEGATIVE 1.6% and marks the third time since 2008 that the Japanese economy has entered a technical recession.

When you combine this with the fact that Germany just barely avoided slipping into recession (0.1% growth) and China's credit crunch, you have the makings of something brewing.

It's too early to say what this means but if the tapped out US consumer is what the entire world is relying to save the day,.... well, let me tell you a story about a time way, way back in 2008......... :)

Cheers!


Thankfully, the US GDP isn't dependent on the snowbelt of NYS



This is the latest forecast out of Buffalo and it's subject to change based on wind direction.  While totals are substantial - 2 ft + over 60 hrs isn't really unheard of for these areas at this time of year.

You'll see a lot of this map in coming days.

Saturday, November 15, 2014

Keystone XL Quiz

I really don't like tackling subjects like the Keystone XL pipeline because it so drenched in political misinformation that no matter how honest you are about the issue you'll be labeled a partisan hack by someone.

Since, my posts at NY21Poli are already gaining traction I guess my readers are smart enough to understand when I'm trying to just shine some light on an issue.

So here goes:

1) How many permanent jobs will be created by Keystone XL?

A) 120,000
B) 42,000
C) 1,900-9,000
D) 50-100

Answer: Okay, it's a bit of a trick question.  We'll start with the agreed upon information: The State Department and Transcanada say that there will be somewhere between 1,900 (State Dept's number) and 9,000 construction jobs tied to the 1 year construction of the pipeline.  These are long-term, temporary jobs that will begin and end with this job.  Is it better than a sharp stick in the eye? Yes, but would it even register as anything other than a rounding error in an economy with 150 million jobs, probably not.

The 42,000 jobs number includes the high estimate of construction jobs (9,000) plus and assumption that these jobs will create more demand at local coffee shops, hotel, etc.  This is a very big stretch and most people think this is a wild overestimate of jobs created.  The 120,000 jobs number is one tossed around by House Republicans and the pipeline builder doesn't support this estimate.

The real answer is D.

Yup, everyone from the White House to the company building the pipeline all agree that the supposed grand savior of our economy that we need to bring jobs back to America will yield a grand total of 50 to 100 permanent jobs.

Unfortunately, that's not a popular part of the story so you NEVER hear anyone say this.  50-100 jobs, that's what all of this clamor is about.

2) US Energy Independence will increase as a result of Keystone XL

True or False?

Answer: Well, this is clearly the claim but is it true?  Occasionally, you'll hear the more accurate North American Energy Independence, but over time some people get lazy with their bullet points and North American becomes American which becomes US :).

This is Canadian Tar Sands oil that we're talking about and the honest truth is that most of this is making it to the US as it stands today.  Most of this oil travels by rail car and is currently being refined in the US so we're really talking about the transportation of the same oil.

In theory, if more oil is able to be moved to US refineries we could reduce imports from the Middle East and oil from Venezuela. Since Canada is obviously a more stable trading partner, I'd say that this is about 60% true.

3) Keystone XL will lower the price I pay at the pump

True or False?

Answer: Again, since much of this oil is already processed in the US there would not be a material impact on prices.  Two different reviews of the pipeline came to the same conclusion that if there were any cost savings as a result of the pipeline they would benefit the refiners not consumers.

So, False.

4) Keystone XL will destroy the environment

True or False?

I hate to keep coming back to this point but this oil is already in the system so the pipeline won't put more or less of it in the system.  While it is true that tar sand oil contains 15-20% more greenhouse gases than other sources, the reality is that we are already refining this oil in the US and Canada so the method by which it gets to the refinery doesn't add any additional greenhouse gases to the atmosphere.  There is some concern about the pressures needed to run the oil through the pipeline and the risk of ruptures, but when compared to shipping this oil by rail (remember the Quebec town leveled last year in railcar explosion?) pipelines are considered to be safer.

So, mostly false.

If you read this before the Sunday talk shows keep this guide handy and listen to how many times you'll hear a Senator or Congressman talking about all of the jobs it would create (false), how it will lower gas prices (false) or how it will increase our energy independence (like 60% true).  Also, listen for people claiming that it's environmentally unsound to build this pipeline (mostly, false).

Cheers!





Friday, November 14, 2014

Interesting charts...

I don't have a specific oil discussion queued up but I thought I'd share this chart as oil is in apparent free fall and there is nothing OPEC, Russia or the US shale companies can do to stop it right now.

The three major contributors to the decline:

1) Oversupply via Saudi Arabia - This is a strategic geopolitical move to impact Russia, Iran and I think to a lesser extent US shale companies.  Our best friends, the Saudis, don't love the fact that we've figured out how to pull carbon out of the ground.

2) Weakening demand - China is the main culprit here.  Despite all of the rosy chit-chat, if you talk to people on the ground in China you'll hear that things are really slowing over there.

3) Strengthening dollar - much like in 2008 during the global financial crisis, the US dollar is being bid up as things are weakening around the globe.  Since most oil is still priced in US $, a $ buys more oil as it goes up in value.

Here's where things get interesting - check out this chart via Goldman Sachs.


Most of the major shale production in the US loses money below $80/barrel.  If this remains a prolonged slump (and Russia seems to be planning for a 2-3 year slump), then the US Shale miracle is going to become a nightmare.  Most of these companies carry massive debt loads and if they aren't making money, the entire shale boom in the US could go bust very quickly (anyone remember Houston/Dallas in the mid-80's?).

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I don't have anything to add here other than to say "Party like it's 1999".

Embedded image permalink

Stocks were probably overvalued in 2008, undervalued in 2009, fairly valued in late 2009, I'll let you make your own determination on what the $@$% is going on in 2014.

* Reminder that I'm still talking politics over at NY21poli - I linked to a great story of what it's like to run for office today which is worth a look.

Cheers!

Wednesday, November 12, 2014

Foreign Exchange Rigging and QE by Any Other Name

The details of the bank price rigging of foreign currency markets are a bit too complex to go over here but I'll give an example that explains the concept.

A gas station receives an order to buy 10 gallons of gas at the market price (currently $3.29).

The station contacts their neighboring stations that they have a standing order for 10 gallons of gas and they'd like to see the price a little higher.

The banks slow buy gas in one ounce increments moving the price of gas up to $3.35/gallon.  The station then fills the original order with gas they bought at $3.29-$3.34 for the current market price of $3.35.

Now imagine doing this in a market that trades $5.3 trillion per DAY and you can see how the banks were ripping everyone off.

Lay on top of this that many of the most active stock trading programs are triggered by moves in the foreign exchange markets and you begin to understand why people might question the validity of current stock prices.

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Again, this is a little wonky but bear with me.

As QE has wound down the concern has been, what happens when the Fed backs away from the Treasury market?  Will US Treasury prices fall and interest rates rise if no one is there to keep buying?

Well, guess who has ridden to the rescue?  The same big banks that are in no way trying to manipulate the market (sarcasm, see above).

"Last quarter, US Treasuries were the fastest growing form of security bought by banks, increasing by 26.3% or $72 billion over the prior quarter. As the Fed tapered, banks stepped in to do their part in the coordinated Fed-private bank QE game. In the past year, banks have added $185.8 billion of US Treasuries to their books, more than doubling their share of government debt."

So, there you have it, the bailed out banks have decided all on their own to act in a coordinated manner (but it definitely isn't coordinated, wink, wink) and provide their own version of QE for the markets.

Awesome.

Cheers!

Fact of the Day - Alibaba (basically, China's Ebay) is now worth more than General Electric or Walmart.  Nope, there is definitely no bubble going on here.

Tuesday, November 11, 2014

I've got 99 problems but finding an iPhone 6 ain't one

Stocks had little direction today because the bond market was closed and without someone financing their purchases there was little appetite to buy, but stocks did manage modest gains because it wouldn't be normal to not have more record high stock prices every.... single.... day.

Markets like these require a little humor to get through day so hopefully these stories will bring a smirk to your face (apologies if the local linkfest has already shared these - calling that site a news website is an insult to news operations everywhere).

1) Guy buys 99 iPhones to propose & gets turned down - via The Independent


A young Chinese man has attempted to celebrate China’s Singles Day by proposing to his girlfriend, except it didn’t all quite go according to plan.

The programmer, from Guangzhou province, spent the equivalent of two years salary on buying 99 iPhone 6s in order to – presumably – impress his girlfriend.

Unfortunately, the man’s girlfriend was less than impressed and turned him down in front of friends and colleagues

2) This video was online for about 15 minutes late last week before Universal pulled the rights to the song.  You may have seen it already but if you were alive in 1988 and remember the Aerobics craze of the 80's you'll appreciate it.

It's worth noting to any youngsters in your household that this was the height of cool in 1988, so whatever they view as cool today will be just as painful to watch in 2040. If you get the email version of the blog - just visit www.grindstonefinancial.com to view the video it's worth the click :)




Taylor Swift - "Shake it Off" to 1989 Aerobic Championship dancing from moreClaremore on Vimeo.

Sunday, November 09, 2014

Oh the Humanity!!! Alaskan Bomb/Polar Vortex will hit us all next week!

So to be clear, I get it....winter weather is serious and you need to treat it with respect.  However, the hype that is likely to build in the coming week around next weekend is possibly going to reach last January's Polar Vortex hype despite the fact that this a fairly normal occurrence.

Occasionally, the cold air over the north pole is influenced by storms around globe which move the jet stream.  We used to call this November in the Northeast but since everything needs a hashtag to get clicks and eyeballs these days the hype around this might get truly silly.

There is an outside chance (I'll have a better idea by tomorrow) that a low pressure systems kicks up off the coast of NYC next weekend while the temps are below 32 and if NYC gets snow before Thanksgiving we'll be in full-blown panic mode on The Weather Channel.

Models are predicting that highs next week in much of the Northeast will be 10-20 degrees below normal which is meaningful but not unheard of.  In the far extremes (NNY and the Adirondacks) it is possible that we could be below 40 for up to a week.

Of course, the record low for our area is -3 F for November and I think it's safe to say that record is not jeopardy.  I was chatting with a fellow ice fisherman the other day who showed me that according to his records he was on the ice on Nov 15th in 1985.  I guess maybe I'll have to dust off those tip-ups :)

Cheers!


Friday, November 07, 2014

The most important jobs report ever (until next month)...

Basically, the jobs report has become a guaranteed news filler for the cable news channels and it's value as an economic indicator has diminished over time given the shifting nature of the job market in the US.

While the headlines will focus on 214,000 jobs and the 5.8% unemployment rate it's worth noting the composition of these jobs.  When 20% of the jobs created last month were in the food and beverage retail you have to question the quality of those jobs.  

I suspect that there are enough mixed signals in this report to keep the markets afloat.  As a reminder stocks have had their biggest 12 day move EVER in the past 2.5 weeks since the Fed hinted at the possibility of maybe, sort of, kinda, considering QE4ever.  The markets disconnect from fundamentals and reality has never been greater, but stocks remain at record highs fueled by hopes of more Fed support.  You have to ask yourself, do you feel lucky?  Well, do you........punk?

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I hope to separate politics from posts on the economy so I started a little political blog since there appears to be an appetite for political blogs.  If you'd like to check it out you can click here.

Bookmark it for now and spread the word if you find it interesting.   If the traffic supports it, I'll add a feedburner button so you can subscribe.  Thanks.

Wednesday, November 05, 2014

Well, we won't have to deal with political phone calls for another 24 months :)

Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other.
Oscar Ameringer

I tweeted this yesterday but I thought it would be appropriate to wrap up any coverage of the midterm elections with that quote because it perfectly sums up our political system today despite coming from a socialist nearly 100 years ago.

I'm contemplating starting a political blog so that I can keep the two issues separate and if i do,I'll add a link here sometime to give you the option of listening to my political ramblings.
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Stocks are looking up this am and many are pointing to the elections as a catalyst but frankly, that's 1990's thinking.  All moves today in the markets are driven by currencies and right now the computers are destroying the Japanese Yen which is causing stocks to rise. Like every other "fundamental" catalyst before it, this will burn itself out eventually and we'll be forced to talk about actual sales and profits at some point.

I'll point out that economists are already starting to temper expectations for Q4 GDP in the US.  I actually think they will have to cut those forecasts even further when the unexpected happens in Nov/Dec in the Northeast - snow.

I follow a number of great weather blogs that are much more accurate than the weather channel b/c the weather really does impact the economy, crop production, etc. These guys have all come to one conclusion recently - winter will be here in the Northeast in the next 2 weeks.  The good news is that they also forecast an early Spring, but the setup for most of the winter is one that will deliver a number of coastal storms from DC to Boston and despite prospects for a MUCH warmer winter on the West coast, economists will be able to easily blame any economic weakness on winter weather hitting the Northeast in WINTER (who could have predicted that?).

Oil is still in free fall and the price at the pump is steadily declining however, the impact on the US shale industry is going to be significant.  Most shale producers will be losing money on every barrel of oil they pull out of the ground at this point.  The companies are some of the most speculative players in the industry with massive amounts of debt and limited rainy day funds.  The Saudis claim to be pumping extra supply only to impact Russia and Iran, but they are not thrilled with the US production and the prospect of the Keystone pipeline becoming a reality will probably make them dig in their heels even more.  It probably means cheaper gas for a bit, but the job losses in ND and Texas are going to start adding up REALLY fast if this continues.

Cheers!


Tuesday, November 04, 2014

Notice how Ebola went away overnight?

Last week most of the media was obsessed with every person with a fever over 100 degrees Fahrenheit in the western hemisphere and then this week....poof. It's like it was cured overnight.

You can see on this chart that after peaking in mid-October Google searches for Ebola have fallen off a cliff and are barely even registering anymore.

1) This is a good thing because it means the hysteria around Ebola in the US is fading.

2) However, stories like Ebola tend to drive clicks and eyeballs so the decline in the number of reported stories and search queries is odd over such a short timeline.

That is until you see this quote buried in a Forbes story yesterday,
"The Associated Press and other press outlets have agreed not to report on suspected cases of Ebola in the United States until a positive viral RNA test is completed."

Now, I think this is the responsible thing to do but it speaks to the power the media has in stirring up and calming the US populace.

Cheers!

Write-In a Candidate! Send a message that #myvoteisnotforsale in #NY21



A reminder to vote today in the midterms even though it seems as though the die has been cast.  A Republican majority in the Senate and a 10+ seat gain in the house seems a certainty.

However, by writing in a candidate you'll be telling the money behind the two major candidates that your vote does not merely go to the highest bidder.  #myvoteisnotforsale.

Perhaps this movement will gain ground in 2015 as ads start earlier and more often and we'll have a real chance to impact the 2016 election.

Then again I still believe in unrigged equity markets and unicorns so I'm a bit of a dreamer :)


Monday, November 03, 2014

#Myvoteisnotforsale Pt. 2

The point of this conversation is to address the influence of money flooding our political system.

Case in point - North Carolina's $100 million Senate race.  Imagine if the parties (and outsiders) spending that money had directed it toward one or two really important causes in North Carolina rather throw it away on consultants, attack ads and billboards?

Everyone says that the system we have today - countless ads (mostly negative) - is unlikely to change because it works and it only works, because you and I have bought into a system which allows the powers that be to buy our votes.

Well, 2014 can mark the beginning of the end of this process because we are saying #myvoteisnoteforsale.


To that end please consider writing in a candidate for Congress this year.  The process could not be easier as I describe here this youtube clip.




Consider sharing this post with others to spread the word that #myvoteisnotforsale.



Friday, October 31, 2014

The cycle is complete - #QE4EVER pushes stocks to record highs.

This is really pretty self explanatory but remember that in the last 2 weeks as stocks have surged 10-12% - IBM and Walmart missed, Retail Sales missed, Durable Goods missed, and QE3 ended.  However, the promise of more QE is always just around the corner and thus, stocks continue to surge.

Fundamentals need not apply.


This was put together by someone else but note that when the Fed said it was time to remove accommodation stocks crashed.  When the Fed hinted at QE4 stocks started bouncing and with today's further Japanese easing the risk on rally remains intact.  

I suspect this hold through the election but after that your guess is as good as mine.

Thursday, October 30, 2014

Gas, gas everywhere but is it really "cheap"?

A couple of thoughts on "plunging" gas prices and what it really means to consumers and the US economy.

1) So we have to use some generalizations when talking about the issues like national averages, but it is widely reported that the "average 35-54 American" drives about 14,000 miles per year which works out to about 270 miles/week.

The average miles per gallons achieved by new cars in the US is around 25 mpg, but we know there are many older cars out there as well so let's assume 22 mpg is a national average.  Thus, the average American would use about 12 gallons of gas/week.

Now if we look at the change in the retail cost of gasoline over the past six months we see that it has fallen sharply - almost $0.70/gallon.  Take $0.70/gallon x 12 gallons per week and you are saving almost $8.40 per week!  Over the course of a month you could save enough to take your family to the fast food restaurant of your choice!

6 month chart 

source: gasbuddy.com

2) Then we have to look at the recent decline as it compares to the longer trend.  Here is the 11 yr price chart (with Syracuse prices in Red).

source: gasbuddy.com

On this chart the recent "plunge" in gas prices doesn't really show up does it?  You can also see that since 2005 and hurricane Katrina caused a spike in prices to $3.00/gallon, gas has pretty much been in the $2.50-$3.50 range for most of the country.

3) Finally, here's the thing that is catching some people off guard - yes, lower gas prices puts a few more dollar bills in your pocket but remember all of the joyful proclamations about all of that oil the US produces?  Well, lower crude prices means weaker corporate results for many large oil and gas companies.  Also, a prolonged period of weakness could really impact some regions that have been booming (like Houston) and just today we saw Goldman start to pull back growth expectations for the US because of lower oil prices.

The drag on major oil and gas companies is now so substantial and they've become such an enormous part of the US economy that it now outweighs the possible benefits that consumers may see from lower prices.

Cheers!


Hey, buddy do you want to take this house off my hands?

If you live in NYS you can't escape a certain car dealership and their relentless ads.  Even if I'm just turning on my TV to get to Netflix or Amazon there is a 82.4% chance I'll see one of his ads.

We discussed previously this dealer's penchant for hype with his "buy a car, get a cruise" promotion, but the latest promo - Come into our dealership and get a chance to win a HOUSE - will thankfully come to a conclusion later this week.

I thought I'd write a note on this because many people don't understand the way contests work and at the end of the day I'm 75% sure that Mr. Huge won't be giving away that house after all .... unless a reader wins :)

First, if you read through the mouse type on the commercial (which is so absurdly small that no human could read it in real time) you'll see that the grand prize does include....

1) a vacation house in Cape Coral, Florida - a lovely town apparently but one that seems to have a bit of a foreclosure issue.

2) A choice of a new car

3) $10,000 in cash

and

4) a trip on the $300 cruise that was earlier advertised.

The total value of the package is $164,885.

Ok, I can hear you now - who wouldn't take that? Stop being such a grumpy old man shouting "get off my lawn" Mr. Grindstone Financial.

Well, further down in the mouse type is something that should tip you off to what is most likely going to happen.

"The Grand Prize Winner shall be responsible for the payment of any and all federal, state and local taxes."  Ding, ding, ding!  We have a winner.

You see, this  "prize" is actually INCOME.  So, if you make $50,000 and you win this prize you're income in 2014 will jump to $215,000 and you'll be asked to write a check in the neighborhood of probably $50-$60,000 to the IRS and NYS.  While, it's impossible to know exactly how much the tax burden for each individual would be, it is unlikely that the sort of person that goes to a car dealership to enter a contest to win a house has $50,000 in cash sitting in the bank to cover a sudden tax burden.

Ah, but never fear, the dealership has thought of a way to fix all of your problems!

"In the event that the Grand Prize Winner is unwilling to accept the Grand Prize, they may elect to take $50,000 in cash as an alternative prize".

Now, you still have to pay tax on that cash, so you'll probably clear $30,000 or so, but at least you would have cash to pay the taxes.  Still, $30,000 is a nice prize but not exactly enough to buy your dream vacation home.

Anyway, if anyone that reads the blog does win here is my advice and since this is free understand that you get what you pay for - take the house/car/cash package.

Then immediately upon closing, put the house/car package up for sale for $120,000 cash.  You'll probably get a bunch of bidders on a new car and house for $120,000 (heck, shoot me an email and we'll settle up quickly).

Sell the house/car ASAP and now you'd have $130,000 in the bank (adding in the $10,000 cash piece of the prize).  Take $50,000 (or whatever your tax attorney says you owe) and on April 15, 2015 write a big painful check to Uncle Sam and NYS.  Again, I'm not even allowed to do the taxes in my own home so understand that my tax knowledge is only slightly better than that of the average Congressman.

Sit back and realize you were still able to clear $80k which is far better than the "cash option" presented by the dealership which would have netted you only about $30k :)

Good luck!

Wednesday, October 29, 2014

Uh oh, we struck a nerve with #myvoteisnotforsale :)

Many thanks to readers that passed around my message last week to tell the special interests and national political parties that #myvoteisnotforsale!

* Hits to the blog were up 400% on that post!  Again many thanks for sharing and spreading the word!

* Many new visitors to the blog came from DC.  Interesting - I wonder what could have prompted their interest?

* More than a few people searched for the phrase "Grindstone Financial Political Affiliation".  That one cracks me up and anyone that knows me knows that I would never be affiliated with a single party.  Just to clear up any confusion - I'm not registered D or R or Ind.  It really cuts down on the random political robocalls at this time of the year if you don't align with one of the parties.  In the past I've voted for an (R) for president, 3 (D)'s for president and even a Ross Perot :)

This sort of gets back to an earlier conversation we had on data gathering.  If a lowly blogger in Upstate NY warmed solely by the glow of my CRT can gather that kind of info with two or three clicks of a mouse Imagine what Facebook knows about you and I?

I'm planning a second installment of #Myvoteisnotforsale now that the election is less than a week away.  :)

To the moon, Alice. To the moon....

I sort of half joked last week that if we had a few more false Fed rumors stocks could get back to all-time highs.  Little did I know at the time that things would play out that way.

In a Fed news vacuum stocks have continued to levitate like it's 2000 all over again.  For a little perspective, in late Sept-October stocks dipped 8-9% in a matter of days on concerns over the global economy.  Those concerns turned out to be valid when companies started reporting earnings and (with a few exceptions mostly caused by fancy footwork) the results indicated a slowing global economy.

However, a hint of a rumor of someone hearing something somewhere about the Fed sent the computers into overdrive and stocks have now jumped between 6-10% in 2 WEEKS!

As I've tried to explain before the stock market of today bears little resemblance to the stock market of ten years ago.  Prices are just something on a screen to be moved about and they bear little resemblance to what is actually going on at the companies they represent.

I'm currently of the opinion that we are in the midst of a modified version of June 2000.  If you remember back then stocks had taken a beating in March/April only to soar 25% in 5 weeks on little news.  Then, reality set in.

Today things are waffling a bit sort waiting on every word from the Fed.  I'll follow-up later if anything meaningful is said.

Wednesday, October 22, 2014

The most expensive midterm elections ever? #myvoteisnotforsale

Presented without comment via the NY Times. #myvoteisnotforsale

At Nearly $4 Billion, the Most Expensive Midterms Ever

The 2014 congressional contests are on track to be the most expensive midterm elections in history, according to a new report from the Center for Responsive Politics, which projects that nearly $4 billion will be spent by candidates, parties and outside groups by Election Day.
Candidates and parties are projected to spend about $2.7 billion, while outside spenders — chiefly “super PACs” and political nonprofit organizations — will spend about $900 million. In 2012, in the midst of President Obama’s re-election campaign, total outside spending reached $1.3 billion.
The total does not include additional money spent on so-called issue ads and get-out-the vote activities, which outside groups and labor unions are not required to report to the Federal Election Commission. All told, 2014 spending is projected to exceed by $333 million the amount spent in 2010, but will be roughly on par with the $3.6 billion spent on congressional races during the presidential election cycle in 2012.
Conservative and pro-Republican forces are on track to spend at least $1.92 billion, while liberal and pro-Democratic groups will spend somewhat less, about $1.76 billion. Those totals may significantly underestimate the gap, however: About three-quarters of all political advertising in this cycle benefiting Republicans has flowed through groups that are not required to disclose their finances, compared with about a quarter of all advertising benefiting Democrats.

Lighter side

In a day of heavy news, I thought I'd offer up some great little stories about the food adventures that seem to know no bounds.

1) So Deep Fried Candy Corn is now a thing. 

2) Korea took the KFC double down and put it on steroids - THE ZINGER DOUBLE DOWN KING.
Two chicken patties, a burger and bacon = road trip.

3) Photo of the day - behold the Tunacorn! That image should haunt you every time you open a can of chunk light tuna.

Cheers!

Disruption 3.0 - #myvoteisnotforsale

When a new idea or concept enters a static industry or profession, it is said to be "disruptive".  This is typically viewed as a positive because, while there will be some hiccups along the road, in the end we'll all be better off for it.

We had the dotcom bubble 1.0 which despite all of it's problems left us with a new way to buy everything via Amazon.

We're in the middle of dotcom bubble 2.0 and while I think most of these companies will fade into the background over time, the emergence of social media is not going away.

I'd like to take a moment to discuss an industry which is absolutely ripe for disruption - the US political system.  I will use the current Congressional race in NY-21 as the template but this is an issue across the nation.

Background: Our current Congressman - Rep. Bill Owens (D) - announced that he was not running for re-election earlier this year.  This caused quite a stir as both parties scrambled to find candidates to place on the ballot.

Both parties are running candidates from outside of our district.  Okay, okay, I know you can argue they both "live" here but come on, we know they live in the North Country like I eat "healthy" :). However, the national and state parties believe that they are candidates who can raise lots of money and will vote the party line.  This is why the election process is ripe for disruption: your congressional representative is no longer seen by the national parties as representing you, but rather a permanent vote in their column on national issues.

There are enormous sums of money being spent to discourage you from voting one way or the other (very little of the advertising has focused on ideas).

But here's the secret that no one at the DNC or RNC wants you to know: They can spend millions and millions of dollars on ads to try and buy your vote, but if you won't sell ...it doesn't matter! 

Every election in America has become a battle of who can raise the most and spend the most in an effort to buy your vote.  A critical piece of this equation though is you and your vote - you have to be an willing participant in this process for that model to work.  If you walk into your voting cube and check (R) or (D) just because they told you to, then they win and the "spend, spend, spend" model remains legitimate.

However,if we can get enough Americans to say "my vote is not for sale" they can spend every dime in their pocket and it won't matter because you won't sell to the highest bidder.

Okay, I can see you nodding along - Great you say, let's be the change!! What are the alternatives? Well, there are the third parties, but as my Mom said, if you don't have anything nice to say, it is better not to say anything at all.

Here's where it gets really radical: write-in.  I know, I know the concept of a write-in feels like throwing away your vote, but hear me out.  You aren't going to get the 50,000 - 75,000 people to back one write-in candidate at this point that would be necessary to win an election.  Since this is an off year, turnout could be low so I expect the winner of NY-21 will get somewhere around 80,000 votes.  Who knows, maybe in today's Facebook era you could pull this off, but it's unlikely.  

However, the margin of victory in NY-21 district is likely to be far less than 10,000 votes (more likely +/- 5,000).

If we can start a #myvoteisnotforsale movement online, I think it is possible to get 1,000 people to write-in a candidate other than the two chosen by the state and national parties.

A thousand votes in a tight congressional race would be a catalyst for a conversation about the future of politics and the influence of money in our political system.

So every time you post a comment on facebook or mention tweet out your dinner plans use the hashtag #myvoteisnotforsale #NY21 and let's stake our claim to the seat in Congress which claims to represent us, okay?

Perhaps you are happy with the candidates that the two major parties have put forth.  However, if you think there has to be a better way:

* Go to www.grindstonefinancial.com (many of you only get my emails and never visit the site) - click the "share this on Facebook" button up on the right hand side.

* Post something on your Facebook wall, twitter feed about this post and link to it (go to your browser bar, click copy, then paste it in your Facebook wall).

* I joined the borg so I could create a new FB page: My Vote is Not For Sale. Like the page.

Cheers!

* markets are wobbling back and forth with little sense of direction today, so far :)

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Coming soon - Part 2 - Okay, you talked me into it now how do I write-in someone??




Tuesday, October 21, 2014

Best day for stocks in 2014 because Coke, IBM and McDonald's all whiffed on earnings

Wait, that doesn't sound right?

Maybe companies like Coke, IBM and McDonald's aren't representative enough to gauge what's going on in the global economy?  No, that's exactly why they represent 10% of the Dow Industrial Average.

So if America's largest industrial companies are showing signs of distress how do we explain today's buy everything strategy?

I alluded to the drivers in the morning but here's my summary:

* Stocks were weak after the release of questionable Chinese GDP data.

* Suddenly a rumor emerged in a Reuters story that the ECB could begin buying bonds again.

* This rumor was quickly refuted in the Financial Times but the damage was done as stocks were now above technically important levels.

* This led to further program buying throughout the day which never relented.

So to recap, stocks fell 9-10% to begin the month on fears that the global economy was faltering (seems to be evidenced in reports from IBM, Coke, McDonald's and others).  A steady stream of leaks and rumors from the Fed, and the ECB have sparked stocks and caused them to soar 7% not in a year, quarter or month but in the past 4.5 days.

As Goldman Sachs noted tonight - "has the market, like the hare in Alice in Wonderland, gone mad?"

We shall see.

Cheers.

And you get cheap gas and you get cheap gas....

Well, cheap is a relative term.  After three years of consistently high oil and retail gasoline prices (averaging between $90-$105/barrel for West Texas crude) oil has suddenly hit an air pocket and it is getting economists excited and worried all at once.

On the plus side, cheaper retail gas would be a nice bonus to consumers who have grown accustomed to paying $3.75/gallon for gas.

However, the concern has to be what's driving this decline?  Historically, a weaker global economy has led to lower prices and that is obviously not a good thing.

Here's what we know:

* oil is at about it's lowest level since 2011.
* the weakness in the global economy is real

What we don't know have a good handle on is the role geopolitical maneuvers are having on the price.  If the Saudis are trying to impact other major player through oversupply, we could be drawing conclusions from data that isn't representative of the facts.

Finally, just a little perspective on all of this "cheap" oil via the Fed Reserve of St. Louis.


Yes, oil is down to it's lowest levels in 3 years, but it's still 2-3 times higher than where it was for the previous 20 years.

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Overnight update: Global markets shrugged off the Chinese GDP data because we all know they are just making up the numbers at this point.  However, a Reuters story which said an anonymous source indicated the ECB (Europe's Fed) was looking at buying bonds (ie, their version of QE) has sparked another monster rally in stocks this morning.

To recap - stocks fell roughly 9% from their peak at the beginning of this month and have now jumped back up 5% in the last 4 days.  This is a sign of the kind of volatility that says something big is afoot (or someone is making up for lost time by trading like a madman .... or a madcomputer).

Cheers!

Monday, October 20, 2014

More of the same out there today...

Markets were weak when volume emerged this morning but slowly but steady volume disappeared and a few buyers were able to march the market straight up.

A couple of notes:

1) IBM's results should be something to watch.  They didn't miss their expectations by a couple of million dollars -- they missed by almost a billion dollars.

2) Apple's results were fine but we all knew they were going to sell a pile of shiny new ithingys.  I'm more concerned about their focus on buying their stock instead of innovating.

3) Stat of the day from the UK.  In 1964 the mode (most frequently occurring age) of death was 0 - meaning more people died between 0-1 than at any other age.  In 2013, the mode in the UK jumped to 87.  Wow.

4) Scientists demonstrate the world's smallest generator - 1 atom thick. Double Wow!

Cheers!

Sunday, October 19, 2014

What happened last week?

Futures and overseas markets are looking up again as the deep abyss of the crisis from way, way, way back on Wednesday continues to dissipate.

I guess the fact that only one school was shelled over the weekend in Ukraine, one nuclear sub did or did not go missing, ISIS is only "training" pilots with the help of the Iraqis, Hong Kong chaos has stabilized and no new cases of Ebola popped up in the US, so that has given everyone the green light to buy every stock that isn't nailed down.

However, insiders are still having hushed conversations about last Wednesday's market freak out.  This is pretty wonky stuff so I'll boil it down to the basics - someone was sufficiently scared to buy every US treasury future they could get their hands on.  This panicked buying pushed yields in the 10 year treasury below 2% and the volume of contracts was the stuff of legend.

As one Wall Street quote machine said last week "this is the stuff you'll be telling your grand kids about".

For a little perspective the volume of contracts traded was roughly 5 times (!) the number of contracts traded during the previous peak of panic - when Lehman Brothers collapsed.

So, here's what we know - either someone is really, really in the know about something or some computer program ran wild and moved the biggest market in the world like it was the market for beanie babies.

I'm leaning toward this was a computer model run amok but hey, what do I know.

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From the "America's Ebola panic files" - via the dailymail

A Maine elementary school teacher has been barred from school after visiting Dallas, Texas, where Ebola patients have been treated - despite having no contact with any suspected sufferers.

* It comes after hundreds of parents removed their children from a middle school in Mississippi because the principal visited Zambia - 3,000 miles from any countries struck by the deadly disease.

#SMH at you 'murica :(

Cheers!



Friday, October 17, 2014

Stock market is all fixed. Return to your regularly scheduled Dancing with the Stars episode

The market has exploded higher today on hints, rumors and innuendo that the world's central banks were just kidding about that whole "ending QE" thing.

This is the quandary that the central banks have created.  Every time there is a hint of ending their low cost borrowing programs (QE) the markets throw a mini-temper tantrum until the Fed relents.  This time all it took was 2 weeks to get the Fed to calm everyone with rumors of QE4.

As a point of reference consider this chart from Goldman & The Federal Reserve.


5 yr chart of the S&P 500



The stock market has gone so long in this artificially supported mode that all of the "corrections" of the past 5 years barely even register.

However, look at these 2 charts - see that little dip in stocks (the blue line) in mid-2010?  That is when QE was supposed to end.  However, stocks dipped 10% and the Fed came to the rescue with QE2 at the end of 2011 (note stocks not only recovered from the dip but added another 15%).

Then in the end of 2011 stocks started to dive again - so Operation Twist was launched and stocks recovered in early 2012.  In late 2012, stocks just flat-lined and that was enough to garner QE3 which led to the 30% explosion in stocks over the past 18 months.

This brings us to the present day - the blue line shows the 5-8% decline we've seen in stocks this month.  The top chart shows what the Fed is supposed to do with QE.  However, now that is clear that the Fed really intends to take away the markets meth this month, the stock market freaked out again and that has caused many to say that QE4 is on the table.  We all joked about QE2, 3, 4.... when the original QE program was launched, but here we are.  Stocks have become fully dependent on central bank support.  Without this support I suspect stocks would be 30% lower than they are today however, there is no one willing to force them to pull the plug and thus it's rally on for today.

Buy the dips and sell the rips.......

Cheers!

Thursday, October 16, 2014

Making a living by 11am, Oils big reversal and EBOLA - EVERYBODY FREAK OUT!

For the second straight day stocks took a dive on the open only to sharply recover most of those gains by the end of the day.  I've been telling people that I talk to that October has felt like someone is desperately trying to make their entire bonus for the year in 2 weeks.

By moving the markets violently in one direction and then whipping them back in the course of an hour, active traders in options are making small (and not so small fortunes) as long as you are on the right side of the trade.

Today's recovery seemed to be driven by the sudden, and as of right now, unexplained spike in oil prices this afternoon.  As I mentioned earlier this week, oil prices have been tumbling on rumors that Saudi Arabia was going to sell oil below the market price to hurt the economies of two major producers (namely, Russia and Iran).  However, what the parties involved forgot was that the US Shale boom is premised on oil being at or above $100 (exploration and extraction of shale oil puts the cost per barrel at $65-$90/barrel for most locations).  With oil trading at $80 this morning, many of the US shale companies were starting to get crushed in the stock and bond market.  This is the funny thing that all of the "frack, baby, frack" people tend to forget.  We've known that this oil was in the ground for decades but it's only economically feasible to get it out at a certain price.  When oil is $100 and you're paying $3.85/gallon, they will keep fracking.  If oil fell to $50 per barrel (I know that seems crazy but oil spent most of the 90's and early 2000's between $18-$38/barrel), you'd see every domestic oil project come to a halt.

I hesitate to mention the ebola hysteria, but I will say that the most disconcerting fact to me is that of the 4,500 deaths 200 of those deaths (4.4%) have been health care workers.  I know that protocols weren't always followed perfectly but the fact that 4% of the deaths in this outbreak have been health care workers is troubling.

In my opinion, the greatest risk from ebola isn't catching the disease for the average American.  Rather the risk is that fear grips the nation to a point where people stop traveling, avoid going to work or school, etc.  This is a worst case scenario but today I read that 50% of Americans were re-evaluating plans to travel overseas (I'm not sure how they came up with that number b/c I'm pretty sure most Americans don't travel overseas to begin with but another story for another day).

If that became 50% of Americans cancelling Christmas ski trips or golf trips to Myrtle Beach our economy which is on shaky footing could tumble right back into a recession.  That is what you should fear when you hear ebola and that may explain why certain AM radio hosts are so worked up about it (they stoke the fear which leads to reduced economic activity in 2014-15, the economy slips into recession and BOOM Mitt/Jeb/Christie to the rescue :) )

Cheers!

PS - as election day draws near remember that your vote is not for sale.  I'm working on writing something on this subject but for now remember that if you don't fall for Party A or Party B's million $ ad campaigns, you can change course of history.

Tuesday, October 14, 2014

It's 1999 all over again!!

** Special note: for all of my Facebook bashing, note the new "Facebook share button" to the right of this post.  If you like what you see, share the post and I'll see if that works (I'm not on Facebook - yes apparently I'm THE ONE - so I have no way of testing the button).
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I wish that I had saved some of my old files from 1999 aka the dotcom bubble version 1.0.  I distinctly remember a pitch from a new cell phone concept (this was the pre-app era) that would "pitch you deals or coupons as you walked down Park Ave. in NYC".  For a number of reasons this concept died on the vine.

However, fast forward 15 years and what's old is new again....

"Facebook's location-based ads pitch you on the store you just walked by"

"On Tuesday, the company began rolling out a new feature for local advertising that lets businesses target users based on whether they’ve gone near the physical store that’s being advertised. The ad could pop up in your Facebook feed around the same time you walk by, or some time later.

The localized targeting could help smaller businesses on Facebook reach a larger number of would-be customers, giving Facebook a new revenue stream in the process. Over the past year or so, some smaller businesses have seen their exposure decline on the site as Facebook has tweaked its formulas for promoting their Pages."
Yeah, just what I want more Facebook ads!!!
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This is an interesting chart which got some coverage last week.
The red line represents the official "headline unemployment rate".  The grey line is U-6 which includes the short-term discouraged workers, marginally attached and part-time for economic reasons.  The Blue Line represents ShadowStats estimate of Unemployment if you take U-6 and the long-term discouraged that are no longer measured by the BLS.  I'm not sure I buy 23% unemployment, but if you've ever been out and about at 1pm on a Wednesday you might believe that unemployment is actually higher than the reported 5.9% number.
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Quick mkt commentary - markets were extremely volatile again today.  Despite finishing mixed, some markets were up nearly 1.5% earlier in the day so a flat day has to be discouraging.  The liquidity is so incredibly thin that I think some people are getting very rattled.  It's worth watching closely. 
Cheers!