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).

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.


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.


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......... :)


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).


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?).

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.


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.

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.



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 :)


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?

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.

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.


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.


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.