March 31, 2011
March 30, 2011
March 29, 2011
March 28, 2011
March 25, 2011
Asia was higher overnight as is
Europe at midday. Gold is $1433 and Oil has a $105 handle in early trading.
U.S. futures indicate a mildly positive opening.
added shares of Intel and initiated a position in Best Buy as it hit two years
lows on analyst downgrades on earnings news. We’d rather buy on the lows and
sell the highs.
(WSJ) Best Buy
Co. reported a 16% quarterly profit drop and warned that an ongoing
sales slump could continue through this fiscal year as the world's largest
electronics chain continued to struggle amid stepped-up competition from Wal-Mart Stores
Inc. and Amazon.com Inc.
The Richfield, Minn., retailer said sales at stores open at least 14 months
declined 4.6% during the three months ending Feb. 26, due largely to
disappointing demand for flat-screen televisions. Revenue was also hurt by a
sharp drop in demand for new computers compared to 2009, when Microsoft Corp.
released its Windows 7 operating system.
Still, Best Buy managed to eke
out higher gross profit margins of 24.3%, up from 24% a year earlier, thanks in
large part to an increased emphasis on more profitable smart phones.
Excluding a bevy of one-time
charges tied to Best Buy's recent decision to shutter operations in Turkey and
close its namesake stores in China, the earnings of $1.98 per share were better
than Wall Street braced for. But factoring them in, net income dropped to $651
million or $1.62 a share, from $779 million in 2009.
Best Buy shares dropped 4.4%
to $30.46 early Thursday afternoon following the lackluster news.
"We are never 100%
satisfied with our customer experience and we intend to make it better,"
Best Buy Chief Executive Brian Dunn said
in a conference call with investors, vowing to retool the company's big-box
stores to separate the retailer from discount stores and online merchants.
With online sales growing far
faster than those of physical stores, and customers growing increasingly
comfortable comparing online and in-store prices with their mobile phones,
analysts are growing increasingly concerned that Best Buy's business model will
be under pressure.
Best Buy acknowledged that its
U.S. share of the electronics market dropped more than one percentage point for
the full year to roughly 22%. But Mr. Dunn and other executives played down the
threat, saying that they were boosting online TV assortments to better compete
with competitors such as Amazon, and evolving to emphasize appliances and used
videogames in stores.
Still, company executives
acknowledged they have begun considering ways to downsize the company's aging
fleet of big-box stores, which have reduced selections of former hot sellers
such as compact discs as digital music downloads have become dominant. Craig Johnson,
president of retail consultancy Customer Growth Partners, estimated Best Buy's
operating earnings per square foot dropped 8% to $36.52 over 2009, highlighting
an excess of store space.
For the current fiscal year,
Best Buy cautioned that comparable store sales would range from flat to down
3%, and that revenue would range from $51 billion to $52.5 billion, a modest
rise of 1% to 4%.
If you paid $1 in federal
taxes you paid more taxes this year than did GE: General Electric CEO
Jeffrey Immelt was hired this year by President Obama to advise on future
corporate tax changes.
General Electric paid no
tax at all in America last year and even managed to get a
$3.2 billion ‘rebate’ from the government.
The utilities giant allocated
just 7.4 per cent of its $5.1 billion U.S. profits in tax - around a third of
what others companies its size are paying.
But through a complex series
of measures GE, which is America's largest company, will not even have to hand
Making money: General
Electric, whose CEO is Jeffrey Immelt,
avoided paying tax in the U.S. at all last year
Instead it will get
$3.2 billion back from the U.S. government after paying top tax lawyers and
lobbyists to work the system on its behalf.
The disclosure by the New York
Times will enrage small business owners and taxpayers who are struggling to get
on their feet after the recession.
They end up paying their fair
share - or being clobbered by red tape - simply because they do not have the
money to hire expensive lawyers to help them avoid paying up.
Across the whole of America
such strategies have pushed the corporate share of the nation’s tax receipts
down from 30 per cent in the mid 1950s to just 6.6 per cent today.
GE has emerged as one of the
most skilled practitioners of tax avoidance. Last year it set aside a mere 7.4
per cent of its $5.1billion U.S. profits for tax.
But according to the New York
Times, this percentage will only be paid if GE brings overseas profits back to
If it does not do so the
company effectively gets money back from the IRS.
Working together: General
Electric’s chief executive Jeffrey Immelt was hired by President Barack Obama
to advise him on future corporate tax changes
GE has hired a string of
lobbyists to ensure it pays as little tax as possible including one law firm
made up of former officials from the IRS, the Treasury and almost all the tax
committees in Congress. Over the last five years records show that the firm has
chalked up $26 billion profits - but received a net benefit from the IRS to the
tune of $4.1billion.
Worldwide GE made $14.2 billion
last year alone.
‘In a rational system, a
corporation’s tax department would be there to make sure a company complied
with the law,’ said Len Burman of the Tax Policy Center.
‘But in our system, there are
corporations that view their tax departments as a profit centre, and the
effects on public policy can be negative.’
GE claims its tax strategy is
necessary to help it survive in a competitive global environment but critics
say the loopholes are little more than ‘corporate welfare’. General Electric
allocated just 7.4 per cent of its $5.1 billion U.S. profits in tax last year,
but it will not even have to hand that over. The money GE is saving should be
used to help small firms and entrepreneurs to create jobs and boost the
economy, they say.
President Barack Obama shows
no sign of clamping down on corporate tax and even hired GE’s chief executive
Jeffrey Immelt to advise him on future changes.
‘He understands what it takes
for America to compete in the global economy,’ M. Obama said after his
appointment. Company spokeswoman Anne Eisele said: ‘GE is committed to acting
with integrity in relation to our tax obligations. ‘We are committed to
complying with tax rules and paying all legally obliged taxes. At the same
time, we have a responsibility to our shareholders to legally minimize our
Diane Swonk, Chief Economist
Mesirow Financial: Books Close on Fourth Quarter
Real GDP rose a revised 3.1%
in the fourth quarter, up from the revised estimate of 2.8%, and largely in
line with most economist expectations. The increases showed up as a
smaller-than-previously-reported slowdown in inventory accumulation and
somewhat better investment numbers. Business spending on computers alone added
almost 0.1% to fourth quarter growth.
Today's figures close the
books on revisions to 2010 for the moment. We still have the benchmark
revisions and changes to the inflation basis, however, which could dramatically
alter how we view this period in the years to come. Indeed, the GDP data is one
of the many places in life where hindsight is not 20/20; instead it is
miserably distorted by the limits to information we have while actually living
More importantly, preliminary
data on the first quarter of 2011 is shaping up to be significantly below most
initial estimates. The housing market remains particularly dismal, a sector I
will be focusing on in the next edition of Themes on the Economy. Indeed, it
now appears that growth decelerated rather than accelerated from the end of
2010 into the start of 2011. Everything, from unusually inclement weather to
political instability in oil-producing regions of the world (and surging oil
prices) and the disruptions to economic activity associated with Japan's
devastating earthquake and tsunamis, accounted for the slowdown in growth.
Bottom Line: The
key issue is whether we can regain momentum during the remainder of the year.
The answer is yes, but not enough, especially for the ranks of long-term
unemployed who are now turning to welfare rolls and disability insurance to try
to keep food on the table in the absence of more robust job growth.
Gold dropped $7 during the day
to end at $1426. Oil closed at $105.30 and European bourses ended higher.
major market measures closed higher in light trading. Breadth was positive.
March 24, 2011
Asia was higher as is Europe at
midday. Gold is $1441 and Oil has a $106 handle as the trading day begins.
Nvdia is higher.
(Schaeffer reports) NVDA has
tacked on more than 4% this morning, after announcing the launch of its GeForce
GTX 590 -- which it describes as the world's quietest and fastest dual graphics
card. Thanks to today's surge, NVDA is extending a recent rebound from support
at the $17 level and its 120-day moving average.
If the stock continues to trek
higher, NVDA could catch a lift from short-covering support. Following a 6.3%
increase during the most recent reporting period, nearly 4% of NVDA's float is
dedicated to short interest.
doubled our BP holdings and added Sprint, Medtronic and Coldwater
Creek. Sprint is the odd telephone company out in the merger game and even
though Verizon said it has no interest in Sprint is a logical acquisition for
Verizon at double the current share price. 50 million users is the bait.
Medtronic is losing share to St. Jude in defibrillators and is unloved-- as is
Coldwater which is priced as if it is going out of business. CWTR is a
Matt Taibbi on the effect of
speculation on Oil prices:
In other news, Goldman has
done an analysis of the 2008 commodities spike and concluded
that speculators added some $9.50 to oil prices on average during the 2008
bubble (when Oil jumped to $150). This is interesting and very telling because
Goldman's analysis excludes so-called "passive" index speculators --
i.e. pension funds who buy commodity futures as investments. Since there was
nearly $300 billion of this sort of passive "long-only" money
(meaning that all of this was money betting on prices to rise) in the
commodities markets in 2008, it stands to reason that Goldman is wildly
underestimating the effect of commodities speculation.
Piggybacking on Goldman's
math, Energy Intelligence Finance did its own analysis and concluded that
speculation more likely added a $60 premium to oil prices in 2008. With oil
prices again soaring well past $100 a barrel, we appear to be in a virtual
repeat of the 2008 scenario, although there are obviously other factors
involved this time around. But be prepared for all sorts of
"analysis" papers of this sort that underestimate the effect of
speculation on the current food and energy price spikes -- I will be shocked if
they don't manage to keep commodity speculation from being an issue in the next
presidential campaign, no matter how high gas prices end up going
— Women’s clothing retailer Talbots Inc., which has underperformed the
broader market, saw its shares surge 28%, their biggest percentage gain in more
than two years, after the company reported a fourth-quarter loss less than it
had previously expected. Acknowledging a fashion mistake that hurt Talbots
holiday sales, Chief Executive Trudy Sullivan also laid out plans to help turn around
the retailer’s business. The company used actress Julianne Moore in its
March catalog and featured a more traditional and classic assortment after it
said its January issue was perceived by its customers as too “fashion-forward.”
It’s also using more models to appeal to a wider age, diversity and size
spectrum. The company also is expanding its plus-size concept. “Although
fourth-quarter bottom line results were slightly above our revised
expectations, as we previously noted on January 11th, we are disappointed with
our performance,” Sullivan said. “Weaker than anticipated customer response to
our merchandise assortment and high levels of competitive promotional activity
were key factors impacting our results.”
S&P 500 gained 1%; the NAZZ gained 2% and the DJIA was up .75% in light
trading. Breadth was 2/1 to the good. Europe closed on the upside. Oil gave ground in the afternoon to close with a $104
handle and Gold was also lower at $1426 after touching the new high early on.
March 23, 2011
Asia was lower; Europe is higher;
Oil has a $105 handle; Gold is $1433 and Elizabeth Taylor died at 79. She got
her money’s worth from life.
We are not surprised. Good luck on getting any money.
(WSJ) Federal regulators are blaming Wall Street's biggest firms for the
collapse of five institutions at the heart of the nation's credit-union
industry and are seeking to recoup tens of billions of dollars in losses on
securities that doomed the five. In one of the broadest accusations that Wall
Street helped cripple financial institutions during the crisis, the National
Credit Union Administration, or NCUA, has threatened to sue several investment
banks unless they refund over $50 billion of mortgage-backed securities sold to
the five institutions, called wholesale credit unions. The NCUA is accusing Goldman Sachs Group Inc., Bank of America
Corp.'s Merrill Lynch unit, Citigroup
Inc. and J.P. Morgan Chase & Co. of misrepresenting the risks of the
bonds to wholesale credit unions, which loaded up on the bonds in their role of
investing on behalf of retail credit unions, according to people familiar with
(Huffington Post) Portugal's government could collapse
Wednesday after opposition parties withdrew their support for another round of
austerity policies aimed at averting a financial bailout. The expected defeat
of the minority government's latest spending plans in a parliamentary vote will
likely force its resignation and could stall national and European efforts to
deal with the continent's protracted debt crisis. The vote comes on the eve of
a two-day European Union summit where policymakers are hoping to take new steps
to restore investor faith in the fiscal soundness of the 17-nation Eurozone,
Diane Swonk, Chief Economist, Mesirow Fianancial: New Home Sales
Plummet Along with Prices
New home sales fell almost 17% to a 250,000 unit annual rate in
February, after being revised up slightly for January. Every region but the
West posted record lows.
Moreover, prices for new homes took a nosedive and plummeted almost 14%
between January and February alone. This reflects a confluence of events,
including the surge in foreclosures, which banks are finally putting on the
market. Not only do foreclosed properties suppress the prices on all homes in
their general vicinity, they offer first-time buyers an extraordinary
opportunity to buy cheaply and renovate the property into a much larger home
than they could afford in the market for new houses. Indeed, some estimate the
premium to build a new house over buying an existing one to be more than 30%
Separately, inventories of unsold new homes expanded again; this will
continue to put downward pressure on prices in the months ahead. It's
significant for several reasons: it makes both buyers and sellers more leery of
entering the market, lenders more conservative in their underwriting standards,
and last, but by no means least, creates even greater headwinds for employment
growth. We have lost some two million jobs in construction since the start of
the housing market bust, and have little hope of regaining those jobs until the
vicious cycle we are seeing in housing reverses itself.
Bottom Line: The housing market is expected to regain
some momentum later this year, but even that forecast may be optimistic.
Housing appears to be entering a double dip, and is likely over-correcting.
That creates an opportunity for cash-rich, savvy investors, but it's a loss for
everyone else. The sheer volume of homeowners whose mortgages are at, or close
to being, underwater (i.e., they owe more than the market value of the home) is
already staggering, and clearly on the rise.
2011 Mesirow Financial Holdings, Inc. ("Mesirow Financial"). All
information in Diane Swonk's Fed Flash is the proprietary and copyrighted
material (the "Copyrighted Material") of Mesirow Financial. The
Copyrighted Material, or any portion thereof, may not be reproduced,
retransmitted, altered or submitted to any media outlet, or posted on any
website aside from mesirowfinancial.com without the express written consent of
Mesirow Financial. This information provided here in is believed to be obtained
from sources deemed to be accurate, timely and reliable. However, no assurance
is given in that respect. The reader should not rely on this information in
making economic or other decisions. The views expressed herein are those of the
author and may not necessarily represent the views of Mesirow Financial, its
operating businesses or other of its employees. This communication does not
constitute an offer or solicitation, or solicitation of any offer to buy or
sell any security, investment or other product. Likewise, this communication
serves to provide certain opinions on current market conditions, economic
policy or trends and is not a recommendation to engage in, or refrain from
engaging, in a particular course of action.
We doubled our GE
holdings and added BankAmerica to accounts that own Fifth Third.
Barnes & Noble Said to Be Likely to End Search for Buyer Without a
(Bloomberg) Barnes &
Noble Inc. (BKS), the largest U.S. bookstore chain, is
likely to end its months-long search for a buyer without a sale of the company,
said five people with knowledge
of the bidding process.
Private-equity firms and strategic bidders have backed away from the
auction, said the people, who asked not to be identified because negotiations
aren’t public. Interest from at least seven potential buyers waned after the
first round of bidding, the people said.
The auction isn’t over and will probably last a few more weeks before
the company officially calls off the search, one person said. Mary
Ellen Keating, a spokeswoman
York- based Barnes &
Noble, said the process is still ongoing and declined to comment further.
The chain, facing increasing competition as more people buy electronic
readers such as Amazon.com Inc. (AMZN)’s Kindle, hired Lazard Ltd. last year to
explore a possible sale. Barnes & Noble makes the Nook e-reader, and some
potential bidders balked at a purchase because of how long it may take the
chain to generate more digital sales, two of the people said.
A few private-equity funds determined Barnes & Noble is relatively
unproven in digital sales and would have to compete in that area with companies
such as Apple Inc., Amazon.com and Google Inc., said the two people.
Barnes & Noble Chairman and founder Leonard
Riggio has sought to
improve results after three years of profit declines, hurt by consumers’ switch
to digital content. The chain, which suspended its dividend in February and has
sacrificed profit to invest in its e-reader, saw its closest rival, Borders Group Inc. (BGP), file for bankruptcy this year.
Remaining public may put more pressure on Barnes & Noble shares as
the company tries to transform itself, Michael
Souers, an analyst for Standard
& Poor’s in New
York, said earlier this
“Investors don’t have the most patience in the world,” Souers said. He
recommends holding Barnes & Noble shares.
Barnes & Noble fell 16 cents, or 1.7 percent, to $9.09 at 9:40 a.m.
in New York Stock Exchange composite trading, giving the company a market
capitalization of about $550 million. The shares had plunged 50 percent from
Feb. 18, the last trading day before the company eliminated its $1 annual
dividend, through yesterday.
Riggio, the largest shareholder, and the rest of the board began
examining a possible sale under pressure from Ron
Burkle, who began building
a stake in the company in late 2008.
The board responded to Burkle’s stock purchases by introducing a
so-called poison pill in November 2009 to limit his ownership to 20 percent.
Yucaipa Cos., Burkle’s Los Angeles- based investment fund, sued to overturn the
pill and lost.
Yucaipa then waged a proxy contest last year to add Burkle and two
other candidates to the board, losing to Riggio’s slate. Yucaipa held almost 19
percent of Barnes & Noble as of October, compared with about 30 percent for
Riggio, according to data compiled by Bloomberg.
Riggio’s empire began in 1965 with a college bookstore in
Manhattan’s Greenwich Village. In 1971, he bought the Barnes & Noble name and its flagship store
in Manhattan. The company expanded through acquisitions,
buying B. Dalton Bookseller and Doubleday Bookshops.
The chain shifted from mall-based locations to superstores in the early
1990s. An initial public offering in 1993 provided the capital to expand across
the U.S., and by 1996 the company had more than 400 of these locations. The
company now has more than 700 superstores and has closed its mall sites.
Barnes & Noble added to its retail locations in August 2009 after
buying Barnes & Noble College Booksellers Inc. from Riggio for more than
More recently, the company’s investment in developing its Nook digital
reader and creating an e-book library have fueled revenue gains. Sales at
Barnes & Noble stores open at least a year rose 7.3 percent in the quarter
ended Jan. 29, the first gain since 2007. Online revenue, where all digital
content purchases are recorded, surged 52 percent to $319.4 million last
The spending has helped Barnes & Noble narrow the gap with market
leader Amazon, which released its Kindle digital book reader in 2007, two years
before the Nook’s debut.
The Kindle has 67 percent of the e-reader market in the U.S., followed
by the Nook at 22 percent, according to a February
report from Goldman Sachs Group Inc.
(GS) Amazon also generates
58 percent of e-book sales, followed by Barnes & Noble’s 27 percent and
Apple at 9 percent.
The retailer may also receive a boost from the bankruptcy filing of Ann
Borders, the second-largest U.S. book chain, in February. Borders plans to
close at least 200 of its superstores as part of its restructuring. Barnes
& Noble may take over some of those locations, Chief Executive Officer
William Lynch said in February.
The major market
measures closed higher in light trading. Breadth was positive.
March 22, 2011
Spring and Turnaround Tuesday are
here. Overnight Asia was higher with Japan up 5% while Europe is mixed and U.S.
futures indicate a flat opening. Oil has a $92 handle and Gold is $1427.
States selling future revenue
streams is nuts.
Profits on liquor sales
generate $228 million for the state of Ohio every year. JobsOhio is set to take
over liquor sales oversight and own that revenue stream. They, in turn, will
sell 30 years worth of that revenue — worth around $6.8 billion — to a group of
investors (recruited by a Wall Street firm, who will of course take a cut) in
return for a lump sum payment to the state. According to the administration, they expect to
receive about $1.5 billion in return for this $6+ billion in state revenue.
And now there will be three.
Back in 1983 AT&T broke up
into what eventually became 10 different entities. There were also MCI and GTE
and a bunch of regional telephone companies. After all the investment banking
fees involved in the break ups and now re-combinations we are back to Verizon,
AT&T and Sprint.
1983 AT&T Breakup: Lots
of Stocks, Subpar Returns
Recently we were asked by the
Wall Street Journal how an investor would have fared if they had 500 shares of
AT&T prior to its 1983 breakup and held it through today. As the table
below details, it is not such a simple calculation. But we thought the results
provide an interesting timeline of the evolution of the telecom industry over
the last 20+ years. What was once a dominant American long distance telephone
company now spans a panoply of wire line, wireless, domestic, international,
and cable businesses.
After all is said and done
however (and with the help of our Bloomberg terminal), we calculate that the
investment which was worth $30,750 then would now be worth around $123,000
spanning a portfolio of 10 different stocks. Over the same period the
investment in the S&P 500 would now be worth $239,000.
major market measures closed slightly lower in desultory trading. Breadth was
March 21, 2011
This is one of our favorite days
since it is the Feast of St. Benedict and was a holiday when we were in high
school. Markets around the world are/were higher on news that Japan may be
getting the nuclear reactor under control. Unfortunately the death toll
continues to rise. The actions in Libya suggest the Western World is interested
in keeping the oil supplies flowing.
The markets are also celebrating
the news that AT&T is going to acquire T Mobile from Duetsch Telecom for
$39 billion. Citigroup is also going to reverse split 1 for 10 so it will get
the price of its shares in the $40s.
Gold is $1441 and Oil is $104 as
the trading day begins.
Krugman on Greenspan: Rantings
of an Ex-Maestro
Some people have asked me for
reactions to this piece by Alan Greenspan
on how Obama’s activism is preventing economic recovery. I could go through the
weak reasoning, the shoddy econometrics that ignores a large literature on
business investment and ignores simultaneity problems, etc., etc...
But never mind; just consider
Greenspan writes in
characteristic form: other people may have their models, but he’s the wise
oracle who knows the deep mysteries of human behavior, who can discern patterns
based on his ineffable knowledge of economic psychology and history.
Sorry, but he doesn’t get to
do that any more. 2011 is not 2006. Greenspan is an ex-Maestro; his reputation
is pushing up the daisies, it’s gone to meet its maker, it’s joined the choir
He’s no longer the Man Who
Knows; he’s the man who presided over an economy careening to the worst
economic crisis since the Great Depression — and who saw no evil, heard no
evil, refused to do anything about subprime, insisted that derivatives made the
financial system more stable, denied not only that there was a national housing
bubble but that such a bubble was even possible.
If he wants to redeem himself
through hard and serious reflection about how he got it so wrong, fine — and
I’d be interested in listening. If he thinks he can still lecture us from his pedestal
of wisdom, he’s wasting our time.
Diane Swonk, Chief Economist
Mesirow Financial: Home Sales Take a Nose Dive in February
Existing home sales plummeted
almost 10% to a 4.88 million annualized rate in February, after being revised
up in January. First-time buyers, who are best suited to take advantage of
record affordability, surged as a share of buyers during the month, along with
all-cash buyers. The proportion of investors fell slightly but remains at
The composition of sales
underscores several disturbing trends: the difficulty in gaining financing, the
number of contracts that are canceled once appraisals fall short of the agreed
price, and how difficult it remains for existing-home buyers to trade up when
they are stuck carrying mortgages that are close to, or actually underwater.
Moreover, home prices continued
to fall - more than 5% from a year ago - as the number of distressed sales rose
to almost 40% of the market. The economics of the market have now made it more attractive
for investors to snap up foreclosed and distressed sales to renovate and try
for a resale or rental. Indeed, rents exceed the marginal cost of ownership in
most markets, especially in the multifamily market, which will eventually play
a key role in alleviating inventories.
Bottom Line: The housing
market remains the Achilles' heel of the recovery. The lack of home
construction is particularly troubling for job creation, as construction is
where the bulk of the jobs were lost in the housing market in recent years. The
good news is that the economics are shifting in favor of investment in housing,
particularly in the multifamily market. Look for apartments that had been
condominiums being converted back into apartments in the year ahead. We don't expect
to see much of a boost from housing, however, until credit market conditions
ease a little further, which is not likely to occur until 2012.
Europe closed higher; Gold at
$1426 and Oil at $102.
major market measures ended on their highs up over 1.5% in light trading.
Breadth was 3/1 positive.
March 18, 2011
March 17, 2011
March 16, 2011
Japan regained 5% of its 15% two
day drop and Asian and European markets also rose overnight. Gold is back to
$1400 and Oil has a $99 handle as the trading day begins.
Investors Intelligence had 52%
Bulls: 22% Bears; and 25% Correction in the latest week but that was before the
Diane Swonk, Chief Economist
Mesirow Financial: Ben Maintains Control over FOMC; Housing Starts Plummet,
Producer Prices Soar
The Federal Open Market
Committee (FOMC) voted unanimously to continue the $600 billion bond buying
program and to hold rates down for an "extended period." The FOMC
statement acknowledged both the firming of economic conditions and the recent
spike in oil prices, in a nod to hawks among the regional Federal Reserve bank
The economic gains that we are
seeing, however, are still not enough to fulfill the Fed's dual mandate of
achieving full employment and long-term price stability. Unemployment remains
too high, and any inflation we see with regard to the recent spike in oil
prices is expected to be transitory. Indeed, higher oil prices still represent
more of a threat to demand than to long-term inflation trends, given the pace
of economic growth we are seeing.
Moreover, the Fed is likely to
finish its buying program as planned in June. Members will have little
new data, particularly about the labor market, prior to their next meeting in
April. The next debate will be whether the Fed sticks with the decision it made
last August to continue offsetting the runoff of its maturing portfolio of
mortgage-backed securities. The best bet is that hawks will prevail on the
latter point, and that the Fed's balance sheet will be allowed to shrink
naturally during the second half of the year. That would represent a first step
by the Fed toward normalizing monetary policy in the aftermath of the
recession. The first rate hike by the Fed is still forecast to occur in January
Separately, the Fed
deliberately shied away from addressing the tragic events in Japan. Frankly,
there are too many unknowns to comment; it would be imprudent for the U.S.
central bank to attempt to sway market sentiment one way or the other.
Housing starts dropped to a
479,000 annualized level, off more than 22% after increasing a revised 18%
during January. That upward revision to January was a bit of a
surprise. We knew there was a rush by builders to secure permits in December
and start building in January to escape new zoning laws. But lackluster demand
and intense competition from the existing market set the stage for a near
collapse in February. Housing permits, which precede starts, improved slightly
but were still off substantially from January's abysmal level. The course of
housing construction is particularly important for employment, as the biggest
bang for the buck in job creation comes from starts.
Separately, the producer
price index (PPI) surged at a much faster than expected 1.6% rate in February,
fueled by sharp increases in food and energy prices. Indeed, this was the first
month that the effects of oil associated with political instability in North
Africa and the Middle East were included in the data. Moreover, wealthier
countries increased subsidies for both food and energy prices to prevent civil
unrest. Those subsidies, however, will ultimately blunt market reaction to
higher food and energy prices, keeping them artificially elevated for some time
Core PPI (excluding the more
volatile food and energy categories) edged up a more modest 0.2%, which underscores
the Federal Reserve's position about how difficult it is for higher energy
prices to be passed along to other prices. Indeed, the Fed remains extremely
concerned that higher energy prices represent more of a threat to demand, than
to overall inflation in the longer term.
Recent blows to confidence combined with the ongoing weakness in housing
illustrate how vulnerable the U.S. economy remains to external shocks such as
the recent energy price spike. This has allowed the Fed some credence in its
view that the current spike in energy price will be transitory. The economy is
improving, but against a backdrop of greater uncertainty than just a month ago.
That uncertainty is not likely to clear, prior to the next FOMC meeting. I have
given up guessing where the next downside or upside shock to the economy may
There is an American talking head
on CNBC currently who is standing outside in Tokyo reporting that many
people in Tokyo are staying inside because of fear of radiation poisoning.
(Wikipedia) On June 2, 2008
NVIDIA officially announced its new Tegra product
The Tegra, a system-on-a-chip
(SoC), integrates an ARM CPU, GPU, northbridge and
southbridge onto a single chip. Commentators[who?] opine that NVIDIA will target this product at the smartphone and mobile Internet device
On January 5, 2011 NVIDIA
announced at CES 2011 a "full custom processor" ARM core called Project Denver which
is targeted at the high performance computing market.
On February 15, 2011, Nvidia
announced and demonstrated the first quad-core processor for mobile devices at
the at the Mobile World Congress in Barcelona. This chip is expected to ship
with many tablets to be released in the second
half of 2011. 
The existence of Project
Denver was revealed at the 2011 Consumer Electronics Show.
Microsoft also announced that the upcoming Microsoft Windows 8 operating system
will be able to run on ARM architecture CPUs such as Project Denver.
In a March 4th 2011 Q&A article CEO Jen-Hsun Huang
revealed that Project Denver is a five year 64-bit ARM architecture
on which hundreds of engineers had already worked on for three and half years
and which also has 32-bit
In 2005, about 98 percent of
the more than one billion mobile
phones sold each year used at least one ARM processor.
As of 2009[update],
ARM processors account for approximately 90% of all embedded 32-bit RISC
processors. ARM processors are used extensively in consumer electronics,
including PDAs, mobile phones, digital media and
music players, hand-held game consoles, calculators
and computer peripherals such as hard
drives and routers.
The ARM architecture is
licensable. Companies that are current or former ARM licensees include Alcatel-Lucent,
Apple Inc., Atmel, Broadcom, Cirrus Logic, Digital
Equipment Corporation, Freescale, Intel (through
DEC), LG, Marvell Technology Group,
Microsoft, NEC, Nuvoton, Nvidia, NXP (previously Philips), Oki, Qualcomm,
Symbios Logic, Texas Instruments,
Yamaha and ZiiLABS.
is a computer processor architecture that is an alternative to the X86 (Intel)
architecture. ARM uses less power. I don’t have any real experience with
these processers. However, it all seems like good stuff. Nvidia is
now making CPU chips (ARM Processor chips) packages with their GPU (graphics
chips) that are/can be used in smartphones and tablets (they can be used in
PC’s also, but there Intel dominates). The advantage of ARM is that it
has lower power usage than X86 (Intel); which is good for battery operated
devices. However, Intel is improving and when you add a big screen it
takes more power anyway. Note that ARM will be able to run Windows
8. It seems like Nvidia is positioned in the right places going forward.
This Just In: Wall Street Offers
People Unlimited Chances to (Mess) Up
Three years after the collapse
of Bear Stearns Cos., which helped fuel the worst financial crisis since the
Great Depression, former bond executives of the firm are running businesses at
one-time rivals, including Bank of America and Goldman Sachs… http://dealbreaker.com/2011/03
Now it can be told: The bank
that exposed the federal government to the greatest potential loss during the
government bailout was Citigroup,
which received a grand total of $476.2 billion in cash and guarantees,
according to a new report of the Congressional Oversight Panel which oversees
the TARP program. For more: http://www.cnbc.com/id/42099554
Warren Buffett Cancels Trip To Japan
Buffett had been scheduled to
attend a Tungaloy Corp. plant opening in Fukushima prefecture on Tuesday, March
22. Tungaloy is owned by Berkshire subsidiary Iscar, a toolmaker headquartered
in Israel. He had hoped to make the trip, but canceled after authorities in
Japan suggested it would not be the best time to visit.
Close-up picture of damage at
nuclear reactors: http://www.dailymail.co.uk/news/article-1366670/
There is no constitutional
right to local self-government in the United States. In 1907, the Supreme Court
decided, in Hunter v. Pittsburgh, that under the
Constitution local governments are nothing more than "convenient agencies
for exercising … such powers as may be entrusted to them" by the state. As
a result, "the state may modify or withdraw all such power, may take
without compensation such property, hold it for itself, or vest it with other
agencies, expand or contract the territorial area, unite the whole or part of
it with another municipality, repeal the charter and destroy the corporation …
with or without the consent of the citizens, or even against their
On the other hand: http://thinkprogress.org/2011/03/16/snyder-power-grab/
Yesterday, the Michigan
legislature passed a “financial martial law”
bill that allows Snyder to appoint “emergency financial managers” with the
power to terminate collective bargaining agreements:
Contracts & Collective
Bargaining Agreements. The bill would authorize the emergency manager to
reject, modify, or terminate one or more terms and conditions
of an existing contract.
After meeting and conferring
with the appropriate bargaining representative and, if in the emergency
manager’s sole discretion, a prompt and satisfactory resolution were unlikely
to be obtained, the
emergency manager could reject, modify, or terminate one or more terms and
conditions of an existing collective bargaining agreement.
There’s a pretty serious
problem with this power grab, however — invoking it would violate the Constitution.
The Constitution forbids state laws “impairing the Obligation of Contracts.”
This provision provides a robust limit on a state’s ability to dissolve
contracts between the government and a private party. As the Supreme Court
explained in United States Trust Co. v. New Jersey, state laws
impairing such contracts must be “reasonable and necessary to serve an
important public purpose.”
The bill does
contain some language requiring the emergency manager and the state treasurer
to determine that they are not violating this constitutional limit before a
collective bargaining agreement can be blown up, but Snyder’s own budget gives
the lie to any claim that an assault on working Americans is “necessary” to
ensure that Michigan governments can pay their bills. Snyder proposed a massive $1.73 billion business
tax cut even as he was arguing that his anti-union power grab
was necessary to restore the state’s fiscal balance.
This news is from November 2010:
Dresden, Germany - Germany is
to drastically cut its armed forces, abolish conscription and prune its
military bureaucracy, Defence Minister Karl-Theodor zu Guttenberg announced to
senior officers in Dresden on Monday. He said his target for the army, navy,
air force and their joint forces corps was 180,000 to 185,000 personnel.
Currently the forces, known collectively as the Bundeswehr, have 240,000 to
250,000 people in uniform, so the cut would be about one quarter. (That’s
a cut of 50,000.)
The U.S. has 52,000 service
people in Germany. Why?
added shares to our Nvdia and Barnes & Noble positions, and Ford warrants
in tax free accounts. We also initiated Boston Scientific and AT&T.
Oil settled with a $97 handle;
Gold at $1395. European bourses closed lower on the day.
Quadruple Witching and March
31 Quarter end are in play. Money managers are getting nervous as the major
stock measures turn negative on the year. The happy quarterly report that would
have made clients content is slowly evaporating.
DJIA and NAZZ were down 2% at the close and the S&P 500 dropped 1.6% and is
now flat on the year and right at support at 1260. Volume
was active and Breadth 3/1 negative.
The Ides of March 2011
The Ides of March have arrived
with a vengeance as markets around the world are lower because of the nuclear
problems Japan. Gold is down $33 and Oil off $3 in early U.S. trading. But it
also Turnaround Tuesday so maybe the magic wand will wave and buying will
arrive. This is also a Quadruple Witching Week and so there are myriad cross
currents as the HFT boys and girls lick their chops.
It’s always something but we
never know when and what until… Who would of guessed?
The Nikkei was down 10% this
morning before rallying back to close at 8781. The Nikkei made its
all-time high of 40,000 in 1989 when Japan could do no wrong and the
property in Tokyo was worth more than the property in the entire United States.
That was a bubble.
Diane Swonk, Chief Economist
Mesirow Financial: Japan Faces Worst-Case Scenario
Radioactive leakage from the
Fukushima Daiichi nuclear plant would be disastrous, second only to an actual
meltdown. For the moment, the hope is that winds will shift and Tokyo will be
spared, but frankly no one knows the true outcome of such a catastrophe.
The Bank of Japan is now
widely expected to ease. Markets around the world are tanking, and I would not
be surprised if the Federal Reserve's most vocal hawks are reined in a bit, at
least for today's Federal Open Market Committee (FOMC) meeting. We could very
well get another unanimous vote for maintaining this second round of
quantitative easing (known as QE2). The Fed's terminology for assessing events
as they unfold could also take on a whole new meaning.
Note: Japan is a major
supplier to China, so it is unclear how China's economy will be affected in the
short term. There are clearly going to be some offsets in the global economy,
as both the U.S. and Europe move in to fill any gaps caused by interruptions
Pity the poor banksters; the
Congress comes to their rescue again, and again and again.
(Bloomberg) U.S. Senate and
House lawmakers will propose legislation to delay proposed debit-card “swipe” fee
caps that have been challenged by financial companies and questioned by bank
regulators. Senators worked to complete their bill late yesterday as House Republicans
got a first look at language that would put a hold on Federal Reserve rules
aimed at making fees paid by retailers “reasonable and proportional” to
processing costs, as required by the Dodd-Frank Act.
A proposal by Senator Jon
Tester, a Montana Democrat, could be introduced as soon as today, according to
his spokesman Andrea Heller. Tester’s bill may seek a two-year delay. House
Republicans are planning a bill that would impose a shorter hold,
Representative Randy Neugebauer said yesterday. “In the House bill you’re going
to see a one-year delay and a study of what should be the composition of an
interchange fee,” Neugebauer, a Texas Republican who leads a Financial Services
subcommittee, said in an interview. Complete story: http://www.bloomberg.com/news/2011-03-15/lawmakers-preparing-bills-to-delay-debit-card-swipe-fee-caps.html
If there is a nuclear meltdown
in the U.S. don’t worry about the utility stocks because as with the banksters
the utilities get the profits and the taxpayers assume the risk.
(Wikipedia) The Price-Anderson
Nuclear Industries Indemnity Act
(commonly called the Price-Anderson Act) is a United States federal law, first passed in 1957 and
since renewed several times, which governs liability-related issues for all
nuclear facilities constructed in the United States before 2026. The main
purpose of the Act is to partially indemnify the
nuclear industry against liability claims arising from nuclear incidents
while still ensuring compensation coverage for the general public. The Act
establishes a no fault insurance-type system in which the first
approximately $12.6 billion (as of 2011) is industry-funded as described in the
Act. Any claims above the $12.6 billion would be covered by a Congressional
mandate to retroactively increase nuclear utility liability or would be covered
by the federal government. At the time of the Act's passing, it was
considered necessary as an incentive for the private production of nuclear power — this was because
electric utilities viewed the available liability coverage (only $60 million)
as inadequate. 
In 1978, the Act survived a
constitutional challenge in the Supreme Court case Duke Power Co. v. Carolina
Environmental Study Group (see below). The Act
was last renewed in 2005 for a 20-year period. http://en.wikipedia.org/wiki/Price%E2%80%93Anderson_Nuclear_Industries_Indemnity_Act
This time it will be
(Bloomberg) Vikram Pandit, who
Inc. (C) through a $45 billion government bailout, has
staked his bank’s future on emerging markets -- just as investors
are pulling back. Citigroup, the third-largest U.S. lender by assets, now earns
more than half its profit from developing countries, Chief Executive Officer
Pandit said at a March 9 conference in New York. The bank increased assets in
Latin America and Asia by 16 percent to more than $470 billion last year,
adding customers in countries such as Brazil, Mexico and India.
Pandit, 54, predicted in June
2009 that Citigroup would become the “largest emerging-markets
financial-services company,” a long-term bet that could pay off if growth rates
keep soaring. The expansion, which coincides with two regulatory reports
questioning the firm’s ability to manage risk, could also make it more
vulnerable than other U.S. lenders.
“If it grows like a weed,
maybe it is a weed,” said Mike Mayo, an analyst at Credit Agricole SA in New York who recommends investors sell
Citigroup shares. “They’ve had risk- management mishaps. We’re not convinced
the culture has changed enough to prevent similar mishaps from occurring.” Full
added British Petroleum to larger accounts. With the Republican Congress
and President Obama afraid to make waves, BP is going to skate free of the Gulf
imbroglio-well relatively free. We also added shares in small percentages of Aéropostale,
Yahoo, Nvdia, Hewlett Packard, Merck, Intel and Nokia to accounts
and repurchased Ford warrants in tax free accounts. We will be able to
buy Ford warrants in taxable accounts next week. Ford should benefit
from Toyota’s supply problems.
(WSJ) The Fed kept its
easy-money policies intact as markets reeled from a series of global shocks
that could upset a firming U.S. recovery. The Fed noted a strong rise in
international commodity prices was putting upward pressure on prices. But
officials said that, while they would monitor the evolution of inflation
closely, they expect the effects of higher oil prices to be transitory. There
was no direct mention of developments in Japan.
European bourses closed 1% to
greater than 2% lower. Oil ended at $97.80 down over $3 and Gold lost $30 to
major market measures moved over 2% lower in early trading but rallied a bit
towards session end to close about 1% lower. Breadth was 3/1 negative and
volume was active.
March 14, 2011
mourn the passing of a very dear client who trusted us through the ups and
downs of thirty five years of market action and was a constant and valued
friend. She enjoyed life and now has passed to a better place.
The Ides of March came early in
Japan this year. Over the weekend Japanese markets dropped 6% and Asia, Europe
and U.S. futures are trading mildly lower this morning. Oil has a $99 handle
and Gold is flat.
When severe earthquakes have
occurred in Asia they sometimes continue around the Pacific Rim eventually occurring
in North and South America.
Here is a concise explanation of
the reactor problems:
added a few shares of GE to accounts and also Aéropostale to some large
closed lower. Oil closed at $101.25. The major market
measures recovered half their early losses to close 0.5% lower. Breadth was 2/1
negative and volume light.
March 11, 2011
The earthquake in Japan looked
big time bad. Overnight markets were lower following the drop in U.S. markets
yesterday and the knee jerk but probably quickly dissipated reaction to the
earthquake. Oil has a $99 handle and gold is $1408 as the trading day begins.
U.S. markets opened slightly
lower but are trying to rally after fifteen minutes of trading. The 1280-1300
range on the S&P 500 which is where it is currently trading is important
support according to some tech gurus.
Swonk, Chief Economist Mesirow Financial: Retail Sales Rebound with Better
Weather; Consumer Sentiment Sours as Oil Prices Surge.
Retail sales jumped 1.0% in
February compared to January, the eighth consecutive gain but much less than
many expected. Better weather allowed consumers to get out and back to the
stores, particularly on the East Coast. Spending on vehicle sales was
especially strong, rising 2.3% from the previous month, and more than 20% from
the year prior, in response to pent-up demand and easier financing. We have
been scrapping vehicles faster than we have been buying them for almost three
Gains in spending at gasoline
stations were also fairly large, reflecting higher prices at the pump. This
could be the fly in the ointment going forward as consumers, particularly
middle- and low-income consumers, are forced to make trade-offs in their
still-constrained budgets. Credit remains particularly tight for all but the
most credit-worthy of households, while much of the recent rise in employment
is occurring among the most educated. The only bright spot is the payroll tax
cut, which lifted incomes across the board in January. It appears that much of
that increase in spending will be used to fill our tanks, however, rather than
broaden our purchases. This is to say nothing of the fiscal drag happening at
the state and local levels, which in some cases, Illinois for one, wipes out
any of the benefits associated with the payroll tax cut.
The Thomson Reuters/University of
Michigan preliminary read of consumer sentiment plummeted from 77.5 to 68.2 in
early March, in response to increased turmoil in the Middle East and soaring
oil prices. Low-income households are having a particularly hard time balancing
their budgets with no increase in their wages, limited (if any) access to
credit and surging prices at the pump.
It is worth noting that recent
market volatility has taken a toll on confidence in high- as well as low-income
households. This contrasts the break between the views of the "haves and
have-nots" in February, and is consistent with other measures of
confidence that we have seen in recent weeks.
Bottom Line: High-income
households are generally expected to do and feel significantly better than
middle- and low-income households when gas prices soar. There is no place for
the consumer to hide; even the top tier feels it when stock prices get hit as
well, which is the case today. Like it or not, we are all in the same
leaky boat together, when it comes to riding out the recovery. Everything from
the recent instability in the Middle East and resulting spike in oil prices, to
the renewed pressure to make cuts on both federal and state budgets, has forced
us to reassess our forecast for 2011. As a result, we are still forecasting
growth this year, but it's not looking as bright as it did just a few weeks
Europe closed lower and Oil
recovered to $101 while Gold also rose to $1425.
major market measures regained almost half their losses of the previous session
in trading 75% of yesterday’s volume. Breadth was 2/1 positive.
March 10, 2011
Who is it in the press that calls
I hear a tongue, shriller than
all the music,
Cry 'Caesar!' Speak; Caesar is
turn'd to hear.
Beware the ides of March.
What man is that?
A soothsayer bids you beware the ides of March.
Set him before me; let me see his face.
Fellow, come from the throng; look upon Caesar.
What say'st thou to me now? speak once again.
Beware the ides of March.
He is a dreamer; let us leave him: pass.
The major market measures are down
1.5% and more in the first few minutes of trading. Libya fighting and higher
than expected Jobless claims are given as the reasons. But Oil is lower at $102
and Gold is down to $1412 so maybe it is just a tired market giving back some
of its gains.
GM is lower this morning because
the markets are lower but also because it’s Chief Financial Officer has
resigned. Since we didn’t know who the CFO is we aren’t worried but in today’s
market any news is bad news.
Diane Swonk, Chief Economist
Mesirow Financial: Jobless Claims Rise, Trade Deteriorates
Jobless claims rose to 397,000 in
the most recent week, up 26,000 from the previous week. The four-week, moving
average edged up slightly, but the trend is still down sharply from the second
half of 2010. More worrisome is the trade deficit, which widened by six billion
dollars to $46.3 billion on a sharp increase in imports for January. Oil played
a role in the rise in imports, but was not the only factor; much of the
increase came from industrial equipment, reflecting demand in manufacturing.
The only good news is that preliminary data from China for February suggests
that we could see some narrowing of the deficit again over the quarter.
Bottom Line: A combination
of unusually bad winter weather and higher oil prices shaved some growth from
the first quarter. This, coupled with the trade data for January, suggests that
growth in the first quarter will be much weaker than many had forecast. Indeed,
we could actually see real GDP dip below the 3% threshold, a full percentage
point below the consensus just a month ago.
Europe was lower; Gold lost to
$102.55 and Gold dropped to $1416.
major stock measures ended 2% lower in more active trading. Breadth was 6/1
negative at the close. New 12 month lows exceeded new highs for the first time
March 9, 2011
We are in the middle of a Spring
snow storm and our entire world is bright with light. Asia and Europe were
slightly higher overnight and Oil has a $104 handle while Gold is $1434 as the
trading day begins. Investors’ Intelligence has Bulls 52%; Bears 21%; and Fence
reduced our Ford position. It was outsized and we expected it to act better in
a downturn. We take the blame for not realizing that on a
short term basis all stocks are commodities to the hedge funds and HFT folks.
We now have room to add more at lower prices and with our recently added GM
holdings maintain exposure to the continuing auto rebound.
A bullish view from a person
(Bloomberg) -- The money
managers who picked the global stock market bottom say now is no time to sell
as the biggest equity rally since 1955 starts its third year.
Laszlo Birinyi, who told
clients to buy as the Standard & Poor’s 500 Index fell to a 12-year low of
676.53 on March 9, 2009, says gains that added about $28 trillion to global
share values will outlast previous increases as investors who missed the first
phase play catch-up. Valuations are still below historical averages, said
Barton Biggs, the hedge-fund manager who purchased stocks before the S&P
500’s 95 percent advance.
Rallies in equities, corporate
debt and commodities illustrate how the more than $12 trillion pumped into the
financial system by governments and central banks is spurring a recovery from
the worst global recession since the 1930s. While bears say prices will fall
once stimulus ends, billionaire Kenneth Fisher and Byron Wien of Blackstone
Group LP are betting on stocks whose profits are most tied to economic growth.
“These kinds of strong
beginnings lead to long and durable bull markets,” Birinyi, who founded
Westport, Connecticut-based research and money management firm Birinyi
Associates Inc. in 1989 after a decade on the trading desk at Salomon Brothers,
said in a March 7 phone interview. “While there will be corrections and while
there will be pauses, we’re still of the view that this is a bull market that
we expect to go on for several years.”
For complete story:
Move to ‘synthetic’ US junk
Demand is growing for
“synthetic” financial instruments that enable investors to take positions in
the US junk bond market without
owning the underlying securities.
The instruments, created by
using credit derivatives on junk bond or high-yield indices, resemble transactions linked to
US mortgages that proliferated before the financial crisis.
The full story:
Europe closed lower while Gold
ended at $1429 and Oil was $104.06.
major market measures see sawed all day width IBM up $4-$5 keeping the DJIA in
positive territory most of the trading session and weakness in tech keeping the
NAZZ lower for the session. Volume was light and Breadth flat.
March 8, 2011
Asia and Europe were higher
overnight and Gold is unchanged while Oil has a $105 handle. U.S futures
indicate a flat opening.
Editor’s Note: This article
was written by Richard Suttmeier, chief market strategist at ValuEngine.com,
which is a fundamentally based quant research firm in Princeton, New Jersey,
that covers more than 5,000 stocks every day.
The first quarter of 2011
could turn out to be a multi-year selling opportunity, just as March 2009 was a
multi-year buying opportunity. On March 5, 2009 91% of all stocks were
undervalued and all 11 sectors were undervalued by more than 30%. Wall Street
and hence Main Street missed this golden opportunity to buy stocks. In early
March 2009 I made the call that stocks would rally 40% to 50%. I proved to be
too pessimistic. Since then the Dow Industrial Average is up 86.9% with the
S&P 500 up 96.4% and the NASDAQ up 117.0%. With stocks overvalued and
weekly charts overbought with the exception of Transports, now is not the time
to increase allocation to stocks, it’s the time to decrease stock allocations.
The Housing Market was the
first to provide warnings as The Housing Index (HGX)
topped out in July 2005, and today is 62.0% below that high, with housing
currently at risk of renewed weakness.
The America’s Community
Bankers Index (ABAQ)
peaked in December 2006 and today is 49.0% below that high. The FDIC List of
Problem Banks rose by 24 in the fourth quarter to 884 from 860, which is 11.5%
of the 7,657 FDIC-insured financial institutions. When I drill down into the
FDIC data I find 2623, or 34.3% of all community banks overexposed to
commercial real estate loans, and 58.5% of all banks have a real estate loan
pipeline that’s 80% or more funded, which is continued stress.
The Regional Bankers Index (BKX)
peaked in March 2007 and today is 57.2% below that high. The “too big to fail”
banks are bigger and the BKX is down fractionally so far in 2011. Under
Dodd-Frank some of these banks will need to raise capital and face heavier FDIC
deposit insurance fund assessments beginning in April.
Total Assets in the banking
system declined $51.8 billion in the fourth quarter 2010 with C&D loans
down $32.5 billion. Even so C&D loans still total $321.6 billion with
non-farm, non-residential real estate loans at $1.07 trillion and problem loans
continue to clog bank balance sheets.
ValuEngine Valuation Warnings
on February 18 and March 3 marked tradable highs for stocks. To confirm a
market top all weekly charts must shift to negative. The major equity averages
remain below their February 18 highs when the Dow Industrial Average reached
12,391. My proprietary analytics still show weekly and monthly resistances, to
limit the upside even if some of the averages continue to new highs. Market
weakness on Friday and Monday resulted in a reduction of overvalued stocks to
60.5%, below 65%. We show 15 of 16 sectors overvalued, six by double-digit
Super Moon: 'lunar perigee'
Earth will next week be at its
closest point to the moon since 1992. The March 19 event - known as a 'lunar
perigee' - will see the moon pass just 221,567miles away from our planet. The
Internet is awash with conspiracy-minded amateur scientists warning that such a
'super moon' could disrupt Earth's climate patterns and may even cause
earthquakes and volcanic activity. Previous super moons took place in 1955,
1974, 1992 and 2005 - all years that had extreme weather events. Whatever does
or doesn't happen, we are still learning about the moon all the time. In
January, it emerged that signals from seismic sensors left on the lunar surface
by Apollo astronauts in 1971 have revealed that the moon has a liquid core
similar to Earth's. Scientists at NASA applied contemporary seismological
techniques to the data being emitted from sensors placed by their colleagues
during the U.S. space program's heyday. The research suggested the moon
possesses a solid, iron-rich inner core with a radius of nearly 150 miles and a
fluid, primarily liquid-iron outer core with a radius of roughly 205 miles.
Where it differs from Earth is a partially molten boundary layer around the
core estimated to have a radius of nearly 300 miles. The data sheds light on
the evolution of a lunar dynamo - a natural process by which our moon may have
generated and maintained its own strong magnetic field.
(Bloomberg) ….. “The U.S.
government is not broke,” said Marc Chandler, global head of currency strategy
for Brown Brothers Harriman & Co. in New York. “There’s no evidence that
the market is treating the U.S. government like it’s broke.”
The U.S. today is able to borrow
at historically low interest rates, paying 0.68 percent on a two-year note that
it had to offer at 5.1 percent before the financial crisis began in 2007.
Financial products that pay off if Uncle Sam defaults aren’t attracting unusual
investor demand. And tax
revenue as a percentage of the economy is at a 60-year low, meaning
if the government needs to raise cash and can summon the political will, it
could do so.
To be sure, the U.S. confronts
long-term fiscal dangers. Over the past two years, federal debt measured
against total economic output has increased by more than 50 percent and the
White House projects annual budget deficits continuing indefinitely.
“If an American family is
spending more money than they’re making year after year after year, they’re broke,”
said Michael Steel, a
spokesman for Boehner.
The statement by Boehner’s
spokesperson is disingenuous (lacking in frankness, candor, or sincerity;
falsely or hypocritically ingenuous; insincere). First
of all many real estate moguls pay no income tax because they continually
borrow money to live on against the properties that they own with the idea that
they will eventually pay off that debt when they sell the property and/or the
property will appreciate in value over time and allow continued borrowing
against the appreciated value. More over the government is not an individual.
The U.S. Government has borrowing
power because it has the assets to back up the borrowing and it also has the
power to tax (increase its income). Eliminating all the Bush tax cuts;
withdrawing from Iraq and Afghanistan; taxiing ‘carried interest’ at regular
rates; and adding a 1% Medicare tax to all individual and corporate income
(before deductions) would eliminate the yearly deficit. No one likes to pay
taxes but everyone like government services. No one likes to pay interest on a
home mortgage, or the light bill and the heating bill but they do because they
need a home to live in. taxes are payment for government services i.e. fire,
police, school, health, and food.
deserves his pay; Ford doesn’t because he is the guy who led them down
the road of almost ruin.
(Bloomberg) Ford Motor awarded
Chief Executive Officer Alan Mulally
$56.5 million in stock, and Executive Chairman Bill Ford received in $42.4 million
shares as a reward for the automaker’s turnaround. Ford paid the unrestricted
stock to its top two executives as part of an incentive plan for 2009 and 2010,
according to filings with the U.S. Securities and Exchange Commission. Ford
earned $9.28 billion in the last two years after $30.1 billion in losses from
2006 through 2008. The shares, which traded as low as $1.01 on Nov. 20, 2008,
rose 8 cents to $14.09 at 9:46 a.m. in New York Stock Exchange composite
trading. The executives will receive other compensation for 2010, including
salary and benefits, which will be revealed in a proxy report in the coming
weeks, said John Stoll, a
company spokesman. Dearborn, Michigan-based Ford withheld some of the stock
awards to cover their income taxes. After taxes, Mulally received $33.4 million
and Bill Ford got $25.1 million. “This is an indication of the performance that
the company has experienced under Alan Mulally and Bill Ford’s leadership,”
Stoll said today in an interview. “Ford is committed to aligning executive
compensation to the company’s performance and long- term shareholder value.”
Mulally, 65, also received
884,433 stock options with a strike price of $14.76, which he can exercise
until 2021, and he was awarded 543,734 restricted stock units that can be
converted into shares in 2013. Bill Ford, 53, received 412,735 stock options with a strike price of
$14.76, which he can exercise until 2021, and he was awarded 253,742 restricted
stock units that can be converted into shares in 2013, according to the
In a 0% money market the only
way to make these returns is through leverage, a lot of leverage.
(Bloomberg) Bank of America’s
investment banking and trading division is seeking at least a 15 percent return
on tangible equity, a lower profitability target than the firm’s biggest rival,
Sachs, the Wall Street bank that makes the most revenue from
trading, has stood by its target of a 20 percent return on tangible equity. New
York-based JPMorgan, the second biggest U.S. bank by assets, is sticking to a
target of 17 percent return on equity at its investment bank. Credit Suisse
Group AG, based in Zurich, last month lowered its firm wide goal for return
on equity to more than 15 percent from more than 18 percent.
Nice non-financial story about
(Seattle Slew died May 7, 2002. This story was written in 2001)
Carl Icahn Returning Money To
Europe ended mixed to lower; Oils
had a $104 handle and Gold was $1430.
major market measures were higher all day and loosed up 1% as banks stocks
gained on BankAmerica’s investor day comments that all is well and they will be
making oodles of money in a few years after artificially low interest rates and
ridiculous leverage allow BAC to earn back the dollars it lost on dumb
mortgages and other foolish things.
was much lighter than the down days and Breadth 3/1 positive.
March 7, 2011
Oil is $106; Gold is $1442; Asian
markets were mostly lower overnight and Europe is mildly higher at midday. U.S.
futures indicate a slightly higher opening.
In the current rules of
discourse, $250,000 makes you poor when it comes to taxation and $50,000 makes
you absurdly rich with respect to everything else. No none of this makes any
following article was written by Raymond James Chief Investment Strategist Jeff
saying "a top is not in place yet." They persistently pointed to the
"normally reached" levels of this or that statistic that were not yet
there to reinforce their desire to remain bullish. Apart from statistical
measures of increasing blindness, this unwillingness to acknowledge what they
themselves were already feeling revealed a comfortableness, a confidence, a
conviction that whatever was happening -- short-term survivable dips -- would
continue until "the top," like a striptease artist of our youth would
with decorum appear on stage, bow, and then, accompanied by applause from all
the bulls eager to cash in on their excitement, would begin to twirl its
statistical tassels in front of everyone.
so old I can’t remember the names of those ladies at the Old Howard, but I can
remember that all you got was a flash of this or that, before they waltzed off.
Stock market tops are like that. You know it’s there somewhere if you squint
hard enough, but you never quite see it, so you keep waiting for more. And
then, in the end, as the curtain comes down on the bull market you realize that
the one rule about tops is not that they provide this or that signal, but that
they come before anyone is ready.
Mamis, Insights, 1987
He said, “We are getting a lot of
calls about why Jeff Saut has been so bearish the last few weeks.” I said, “I
am not bearish, I am cautious and have done what prudent portfolio management
calls for, I have sold partial positions, raised some cash and allowed
long-term capital gains to accrue to portfolios.” He said, “That is being
interpreted as bearish.” I said, “Not my problem.” In this case the “he” is
Harry Katica, director of Raymond James’ Retail Liaison Desk, which fields
questions from our financial advisors.
As for the aforementioned quote,
long-time stock market observers will remember Justin Mamis as one of the most
respected authors, philosophers, market pundits, and investment advisers of all
time. His “Mamis Letter” frequently appeared in Barron’s and The Wall Street
Journal, as well as many other publications. I was reminded of Mamis’s quote
while perusing various stock charts recently because I saw more “rounding top”
chart formations on individual companies’ stocks than I have encountered in
some time. In fact, the past few months remind me a lot of the “topping”
environment that took place between December 1968 and the first quarter of
1969. Back then, while the major indexes moved higher driven by a few favored
stocks, there were similar “rounding top” formations on the majority of stocks.
Verily, in early 1969 Wall Street was focused on but a few stocks that had
captured participants’ fantasies. Back then it was any technology stock with a
futuristic name: Xerox (XRX);
Telex; Itek; University Computing; Control Data, etc. Meanwhile, as these
fantasy stocks swirled higher, the broad base of stocks were traveling lower
(read: being distributed; aka, being sold by smart money).
Fast forward to the last few
months, Wall Street’s attention has again been captured by names like Apple
(AAPL), Netflix (NFLX), Baidu (BIDU),
First Solar (FSLR), etc., which were streaking higher while many other
stocks were being distributed beneath the headline excitement of the darlings
du jour. Indeed, since the first of the year I have felt like I was in the
trading “twilight zone” as the major indexes danced higher despite the numerous
cautionary signals often mentioned in these missives. Yet the “dance”
continued, that is until the past few weeks. Clearly, the last two weeks have
felt like a change in the market’s tone punctuated by February 22’s 90%
Downside Day (90% of total points lost and volume occurred on the downside)
with a near 90% Downside Day last Tuesday (-168 DJIA). It was the second
official 90% Downside Day of the year accompanied by the two nearly Downside
Days of March 1 and January 28. Counter-balancing Tuesday’s near Downside Day
was last Thursday’s nearly 90% Upside Day, but alas that was erased by Friday’s
Fade of 88 points (DJIA). Accordingly, I continue to think we are at/near a
“tipping point,” as highlighted by the always insightful GaveKal organization.
Now if the US$ bounces from here,
it is likely that oil will follow food prices into their recent consolidation,
allowing for equities to once again bounce back. However, if the US$ melts
down, or if oil shoots up on further Middle East unrest, then it is hard to see
how equities will maintain the past few months' uptrend. So it does seem that
we are at an important tipping point not just for the US$, but for most asset
prices as well, which should not come as such a surprise since most assets in
the world are priced off of the US$. [That] reality brings us back to a point
Charles has been very vocal about over the past couple of months: We are
rapidly reaching the stage in the cycle where the Fed needs to start tackling
the weakness of the US$, and the surge in commodities, or risk undermining the
very [economic] recovery it managed to jump-start. With that in mind, we would
not be surprised if, in the coming days and weeks, various Fed directors come
out to sound somewhat more hawkish in a bid to prevent commodities from further
undermining the current recovery. ... Anyway, with so many unanswered
questions, it is not surprising that equity markets are taking a breather.
From GaveKal’s lips to God’s ears because late last week Fed Governor Thomas
Hoenig suggested just that when he opined that short-term interest rates should
To be sure, the stock market’s
changed tone over the past few weeks has been palpable, raising the question:
Does the recent sell-off, from S&P 500 (SPX)
1344 to 1294, represent the sum total of the long-anticipated correction? To
answer said question we turn to the excellent Lowry’s service:
Perhaps a better question to ask
is, did market conditions prior to the recent rebound suggest adequate preparation
for a renewed and sustainable rally? An examination of Lowry’s measures of the
forces of Supply and Demand suggests the answer to both questions is likely no.
... Strong rallies that experience weak and short-lived corrections are
typically characterized by expanding Demand and contracting Supply. However,
that has not been the recent pattern. . . . The market deals, however, in
probabilities, not certainties. Thus, while conditions over the last few weeks
were such that the probabilities suggested a correction longer than three days,
investors should still be alert for signs a new, sustained rally has begun. The
key element for any renewed rally is likely a pattern of strong, sustained
Demand. Probably the clearest indication of this strong buying would be
provided by two or more 90% Up Days, or a combination of a 90% Up Day and back
to back 80% Up Days. The near-90% Up Day on February 25 proved a one-day
wonder, so evidence of more sustained buying will likely be needed to indicate
the start of a new rally…..
…..The call for this week:
This week I am celebrating the two-year anniversary of the stock market’s
bottom by attending our institutional conference where more than 300 companies
will be presenting to nearly 600 portfolio managers. It’s a great conference,
as well as an appropriate time to reflect on the past 24 months. Recall, the
bottoming process began on October 10, 2008, when 93% of the stocks traded on
the NYSE recorded new annual low prices. It was then I declared, “The bottoming
process has begun.” However, some five months later, on March 2, 2009, I
stated, “The stock market bottoming process is complete and we are -- all in!”
Since then I have not really “backed up” on that call, although I have turned
cautious at times. My best cautionary call was in late March 2009. My worst has
been coming into this year for while my short-term caution on the emerging
markets proved correct (long-term I remain very bullish), my caution on the US
markets has been wrong-footed, at least up until the last few weeks.
have to head out to finish some business. As we leave at 2:15PM the major
measures are lower but better than their worst levels of the day with the
S&P 500 and NAZZ down 1% and the DJIA down half that. Oil ended at $105.60
and Gold at $1335. Breadth was 3/1 negative and volume light.
March 4, 2011
the view that there is no objective standard for evaluating some lines of
reasoning as better than others. Instead, the epistemic relativist holds that
what counts as a good reason for holding a view is relative to one’s situation
(WSJ) The U.S. economy added
192,000 jobs in February, the Labor Department reported Friday, with the
private sector adding 222,000 jobs -- the biggest jump since April 2010.
January payrolls were revised to show an increase of 63,000 jobs from a
previous estimate of 36,000. The unemployment rate, which is obtained from a
separate household survey, fell to 8.9% last month, the first time it dropped
below 9% since April 2009. About 13.67 million people who would like to work
can't get a job. Economists surveyed by Dow Jones Newswires had forecast
payrolls would rise by 200,000 and that the jobless rate would inch up to 9.1%
from the previous month's 9%.
Asia and Europe were higher overnight
and Oil has a $103 handle as the trading day begins. U.S. futures are flat
after trading higher overnight as the Employment Report met but did not exceed
(Bloomberg) Ford Accounting Move May Add $13 Billion to Profit,
Ford Motor Co. (F),
after earning $9.3 billion in the last two years, may make an accounting change
this year to reflect confidence in its recovery, a move one tax expert said
could boost its 2011 profit as much as $13 billion.
Ford in the second half may
eliminate from its balance sheet a valuation allowance held against deferred
tax assets, it said in a federal filing this week. The reserve was created in
2006 as Ford began four years of operating losses. Eliminating the allowance
may add $10 billion to $13 billion to Ford’s net income this year, said Robert Willens, president of Robert
Willens LLC of New York, a corporate tax specialist.
“This is a very positive
statement from Ford,” Willens said. “If you take the radical step of
eliminating your valuation allowance, then you’ve developed a high degree of
confidence in your future profit-making ability.” For more: http://www.bloomberg.com/news/print/2011-03-03/ford-s-accounting-revision-may-add-13-billion-to-profit-tax-expert-says.html
Matt Taibbi: Rajat Gupta
and Goldman Sachs: SEC After Big Fish?
I've been getting a lot of
calls about the recent decision by the
SEC to pursue insider trading charges against Rajat Gupta, a Goldman Sachs
board member who was also the former head of McKinsey, one of the most
important corporate consulting firms in the world.
It's been very interesting to
watch the media reaction to this case. The spin, overwhelmingly, has been that
this is proof that the SEC is more serious than ever. Business Week came
out with an article whose headline blared,
"The SEC Goes After Big Game." CNBC's take was "Rajat Gupta: Bigger than
Madoff?" I'm sure by the time this news cycle ends, Rajat Gupta will be
the single most important figure in the history of Wall Street.
There's no doubt that Gupta is
a big fish and this is a good case. The evidence is remarkable and is eerily
similar to the non-case that was non-made against Morgan Stanley chairman John
Mack years ago. In that case, a hedgie named Art Samberg bought the hell out of
a company called Heller Capital shortly after a call from Mack, who had just had
a meeting with CSFB, Heller's investment banker, which was in a position to
know that Heller was about the bought by GE.
In this case, Gupta, among
other things, telephoned his buddy Raj Rajaratnam less than one minute --
literally -- after learning in a Goldman board meeting that Goldman was about
to receive a $5 billion capital injection from Warren Buffet's
Berkshire-Hathaway company in 2008. In September 2008, Gupta disconnected
from a Board conference call, in which he learned about the Buffet deal, at
3:56 p.m. By 3:57, he was on the
phone with Rajaratnam, who in turn waited less than a minute
to buy 175,000 additional shares in Goldman.
It's great that the SEC is
moving against a figure like Gupta. But I'll be a little disappointed if he's
the top of the food chain here. If the Gupta/Hathaway case is the only one they
make with regard to the rampant insider trading that went on during that
critical bailout period, it won't be enough, unfortunately. How many of the
executives and officials involved with the various rescues and bailouts made
investment decisions based upon information they got during those negotiations?
My sense of what happened in
2008-2009 -- and many of the Wall Street people I talk to regularly say the
same thing -- is that all the big banks were trading massively on inside
information about bailouts, interest rate changes, and announcements about
government programs like the PPIP and the TALF. In a way, the whole rearranging
of the economy behind closed doors -- the backroom deals in which companies
like Merrill and AIG and Bear and Washington Mutual and so on were wedded to
buyers in taxpayer-aided shotgun weddings -- this was all one giant
insider trade. Clearly there were individuals who knew about these deals and
acted on them before the rest of the world's investors did. If you look at it
like that, one lonely Rajat Gupta isn't going to cut it, I don't think.
sold AT&T for a scratch.
(CNBC) BHUBANESHWAR, India -
Indian police detained two people after an angry mob of fired workers burned to
death a senior executive of a steel factory, an official said Friday.
After learning they were laid
off, about a dozen workers attacked a vehicle carrying Radhey Shyam Roy as he
was leaving the factory in eastern Orissa state on Thursday, dousing the Jeep
with gasoline and setting it on fire, said police Superintendent Ajay Kumar
Sarangi. Two other people in the vehicle were allowed to flee but Roy, 59, was
trapped inside and later died of severe burns, Sarangi said.
Sunday March 6 is the
anniversary of the 666 S&P 500 market low in 2009. Yesterday marked the
high point in the S&P 500 at 1331.27 since that low. 2 times 666 is 1332
or a double off the low.
Warning: Stocks, Bond
By Richard Suttmeier Mar 04, 2011 9:15 am
We begin Friday with a new
ValuEngine Valuation Warning which occurs when more than 65% of all stocks
become overvalued. Today 66.4% of all stocks are overvalued as the market
attempts to rebound back to the February 18 highs, when 68.6% of all stocks
were overvalued. A higher bond yield is an important factor that makes stocks more
overvalued. In addition to a new valuation warning all 16 sectors are
overvalued, 14 by double-digit percentages. For more http://www.minyanville.com/businessmarkets/articles/stocks-bond-yields-overvalued-valuation-warning/3/4/2011/id/33162
CNBC interviewed Alan Greenspan
this morning about the economy and what should be down. Why????
are ending early to watch NKU play. At 2:15PM the major measures are down 1%.
Breadth is 3/1 negative and volume is light. Gold finished at $1428 and Oil has
a $104 handle at the close.
March 3, 2011
Oil is down $1.50 in early trade
and Jobless Claims were better than at 368,000 with the prior week
revised down to 388,000. That is three weeks out of four that Jobless Claims
have been under 400,000. The markets seem to be anticipating a good Employment
Report tomorrow with the major stock measure futures all trading higher in the
pre-opening. Asia was strong as is Europe at midday.
sold the Motorola we bought
yesterday for a $1.20 loss. Ouch! Cowen- an influential analyst in this area
of tech- went from buy to neutral late yesterday and the shares are trading
lower while stocks are zooming higher. We own enough soap operas. As we write
the shares are $1.25 lower than the price at which we sold which is some small
consolation in that we were at least initially correct that the Cowen downgrade
would have a large negative effect on the share price. We have been following
the share price since it hit $36 a few months ago as we think the Droid,
which we have and use, is a good phone, and we thought yesterday’s $29 price
was attractive given the pullback. But with the intro of the iPad2 yesterday
and the Cowen downgrade plus the almost universal techy complaint that Motorola
Xoom’s (MMI’s iPad competitor) price is too high and the apps too
few we headed to the sidelines but may revisit later at lower levels
Diane Swonk, Mesirow Financial
Chief Economist: Jobless Claims Continue to Fall
Jobless claims dropped by
another 20,000 to 368,000 in the most recent week, and were revised down for
the previous week. The weekly claims number fell to the lowest level in nearly
three years, while the four-week moving average hit the lowest level since July
2008, when we were still in recession but prior to the sharp increases in
joblessness and claims that we saw in the wake of Lehman Brothers' failure in
September of that same year. This reinforces a flurry of incoming evidence that
the labor market is finally beginning to heal; we are beginning to crawl our
way out of the hole left by the recession, albeit at a slower pace than we
would like to see.
In terms of overall employment,
I am expecting to see job gains in the 200,000 range when the
"official" monthly data is released for February on Friday. We could
also see some upward revisions to January data as the Bureau of Labor
statistics tries to sort through distortions created by unusually bad winter
weather. The unemployment rate, on the other hand, is likely to rise, because
optimism over job creation has improved in recent months; that should pull some
of those who had given up looking for work, back into the market.
Separately, productivity grew
at a 2.6% pace in the fourth quarter of 2010, while unit labor costs dropped by
0.6%. These numbers confirm earlier reports, despite downward revisions to real
GDP growth over the period; that's one reason profit margins remained
exceptionally wide at the end of 2010. Productivity growth is expected to slow
as we move into 2011. The question is by how much. Productivity growth reached
the strongest pace in eight years in 2010, and is likely to remain robust, even
as it slows in 2011. This, coupled with persistently high unemployment, is
expected to dampen the pass-through of the recent surge in oil prices to other
Bottom Line: The
recovery appears to be regaining momentum, but not enough to help equally
across income strata. Middle- and low-income households continue to struggle,
while the wealthiest and most educated of households are finally seeing an
improvement in both their earnings and job prospects.
Daily Kos reports (http://www.dailykos.com/ ) http://www.nelp.org/page/-/Justice/2011/UnbalancedGrowthFeb2011.pdf?nocdn=1
A report by the National Employment
Law Project contains …. the news: Of the 8.84 million jobs
that were lost in the recession, 1.3 million have been regained. But what kind
of jobs? According to the NELP study, conducted by Annette Bernhardt and
In the private sector, there
is a striking imbalance between where the recession’s job losses occurred, and
where the growth of the past 12 months was concentrated:
• Lower-wage industries
constituted 23 percent of job loss, but fully 49 percent of recent growth
• Mid-wage industries
constituted 36 percent of job loss, and 37 percent of recent growth
industries constituted 40 percent of job loss, but only 14 percent of recent
The current recovery looks
worse than the “jobless” recovery of the 2001 recession, on several fronts:
• After a year of positive job
growth, the private sector after the 2001 recession had recovered almost
half (47 percent) of the jobs it had lost. By contrast, to date
the private sector has recovered only 14 percent of the jobs it lost during
2008 and 2009.
• The early job growth
following the 2001 recession was more balanced than the early job growth
following the 2008 recession, with significantly more growth in higher-wage
Some of these trends are
specific to the causes of the Great Recession (the collapse of the housing
bubble and the financial crash). Others reflect long-standing shifts in the
economy (such as the overall decline of manufacturing), as well as standard
cyclical behavior (such as the surge in temporary jobs early in recoveries).
A sustained analysis of the dynamics driving core sectors of the economy will
be critical in the months and years ahead.
More than three years since the
Great Recession began and 20 months after it ended — according to the arbiters
of such matters — the U.S. is still afflicted by all the chronic problems it
faced before the acute crisis struck, including wage stagnation and off-shoring
of jobs as well as still-growing inequalities of income and wealth. On the one
hand, government intervention saved the domestic car industry and hundreds of
thousands of jobs that would have been otherwise lost, but on the other hand,
new workers in that industry are being hired at far lower rates and receive far
lower benefits than their predecessors.
The questions raised by the
NELP report are crucial. Are the disturbing trends it has uncovered just blips
that will disappear in a year or two? Or are we seeing yet another element in a
race to the bottom that squeezes everybody but the top tiers of society ever
We wonder whether the markets
ramp higher today has placed undue expectations on tomorrow Monthly Employment
Europe closed higher; Oil
ended with a $101 handle and Gold was off $20 dollars at $1419.
major market measures closed almost 2% higher in light trading. Breadth was 4/1
to the good in NYSE stocks and 2/1 in NAZZ stocks.
March 2, 2011
CNBC has Warren Buffet as guest
this morning and he is not worried. All our clients who are 80 and have $10
billion in assets are not worried either.
Oil is $100 in the early trade,
Gold is $1433 and Asian and Europeans markets were and are lower overnight.
U.S. futures are flat as the trading day begins.
Investors’ Intelligence has 50%
Bulls; 20% Bears; and 30% Correction in their latest poll.
(Yahoo/Finance) The latest ADP
Employment Change said that in February private payrolls increased by 217,000,
which is much greater than what had been widely expected. The
better-than-expected reading supports expectations for a strong nonfarm
payrolls report this coming Friday.
Educational Race to the bottom:
added Fifth Third and Motorola Mobility to accounts. We have been
trading Fifth Third for the past few years. Motorola (MMI) is down 20% from its
12 month high and off today probably because of the introduction in the Apple
iPad2 this afternoon. Also this article and the downgrade didn’t help:
Analysts at Detwiler Fenton
this morning write that Motorola Mobility’s (MMI) “Xoom” tablet,
which went on sales last week at Verizon Communications’s (VZ) Verizon
Wireless, may be having a rough first go of it.
The tablet computer debuted
last week to fairly favorable reviews from, among others, The New York Times’s David Pogue,
with The Wall
Street Journal’s Walt Mossberg calling it the first real competitor
“After almost one week on the
market, it appears that the sell through of Motorola’s Xoom has been extremely
light,” reports the firm, without specifying sources for the information.
Detwiler attributes the apparent lackluster results to, “its high price, lack
of consumer applications and the anticipation for today’s expected Apple (AAPL) iPad 2 announcement,”
which is expected to be this afternoon.
Reports out of Asia,
moreover, that the Xoom might be coming out of factories at a rate of 700,000
to 800,000 units this quarter are “outrageous,” Detwiler asserts, given the
shortfall in this first week.
Moreover, Best Buy (BBY) having the
exclusive to retail the thing, combined with its high price, appears to have
been a mistake on Motorola’s part:
We believe that total channel
sell-in for Q1 will only amount to 150K-200K units, depending on how aggressive
Verizon (VZ) gets with inventory stocking. It appears that BBY is sitting on
enough inventory to get the retailer through the end of Q1 without problem at
this point. Note that VZ and Best Buy (BBY) have a 60 day exclusive on the
product in the US a major marketing mistake by MMI in our opinion. While MMI
launched the Xoom at $799 at retail (or $599 subsidized with 2-year contract at
VZ), retail contacts believe an unsubsidized price point of $649 and subsidized
price point of $499 is about the price ceiling for such a product. However we
don’t expect to see such a price point anytime soon unless MMI is willing to
sacrifice margins and/or VZ ramps up subsidy support.
Detwiler expects Best Buy will
“rethink” the pricing of the device to try and boost sales.
No wonder, then, that The Journal’s Ben Worthen today
writes of looming talk of a tablet price
Motorola shares today are down
53 cents, or $1.80, at $28.97.
(http://www.zerohedge.com/ )One of
the most critical questions that has to be asked in light of yesterday's revelation that
among the banks providing banking and asset management services for Libya were
Goldman Sachs, JP Morgan and Citigroup, is just how did Libya get an exemption
for anti-money laundering provisions both in Europe and the US.
Oddly enough, this future mainstream debate arises not in the US, where any
form of critical thinking appears to be immediately curbed by SEC Rule 201 (for all those calling for
a hike in the SEC's budget, we suggest the following contrarian thought
experiment: let's cut its budget to zero and see how long before anyone
notices) , but out of the UK, where a reader writes in to the FT (oddly enough,
partially owned by
the Libyan Investment Authority) with the following very simple question:
"It seems to me entirely implausible that Col Gaddafi could have earned
billions of dollars through legal means. And yet if the AML procedures, to
which we are all subjected, have not been applied rigorously to the likes of
Col Gaddafi and his family, one is forced to ask what purpose they really
serve." Or what purpose any regulation serves in general when fraud
results in surging stock prices, and companies that adhere to the rules are
promptly wiped out in this bizarro capitalist world. Read more at http://www.zerohedge.com/article/libyas-bankers-exposed-goldman-jp-morgan-and-citi
European bourse closed lower
as Oil closed above $101 and Gold gained to $1434.
Forgot to mention that yesterday
was the first day of the month and if the buying the day ahead of first day of
the month strategy been followed most of the gains of January’s first day and
February’s first day would have evaporated in the downdraft.
major market measures closed slightly higher in light trading and positive
March 1, 2011
The Saudi stock market (who knew?) was down 6.6 per cent overnight — its
lowest since September 2009 — on ongoing rumors that Saudi Arabia is sending
tanks to Bahrain to support its ruling regime. The story originated on Press
TV — a television network owned by Iran, the Saudi kingdom’s great rival,
so caveat emptor. Others voices in the market though contend the tanks may be
in the region due to a joint military exercise.
Asian markets were mostly higher
overnight as are European markets at midday. Gold is $1420 and Oil is back up
to a $97 handle.
China now owns/holds $1.16
trillion in U.S. debt. We should sell them the Grand Canyon for $2 Trillion.
(WSJ) General Motors
Co. Chairman and Chief Executive Daniel Akerson
said the U.S. auto industry isn't yet prepared to respond to a major surge in
gas prices, though car makers are in a better position than when prices spiked
in 2008. "I don't think the industry learned a lot of lessons from
2008—they will this time around," Mr. Akerson said Tuesday on the
sidelines of the Geneva motor show. "It would not be a good thing to see
$5-a-gallon gas right now.
(Yahoo/Finance) The ISM
Manufacturing Index for February came in at 61.4, which is not only
better than the 60.5 that had been expected, on average, among economists
polled by Briefing.com, but also the highest reading since 2004. Construction
spending for January fell 0.7%, which is a bit steeper than the 0.6%
decline that had been broadly anticipated.
In case you were holding your
A spokesman for Newt
Gingrich tells ABC News that the former Speaker of the House will announce
this week whether he intends to form a presidential exploratory
(AP) -- General Motors on
Tuesday said its sales rose 46 percent from February 2010. Two of its four
brands, Buick and Cadillac, reported gains of at least 70 percent, while its
largest brand, Chevrolet, had a 43 percent increase.
says its U.S. sales rose 10 percent in February, led by strong sales of the
new Ford Explorer (big profit). Explorer sales were double what they were
last February. Ford says it has only a two weeks' supply of the SUVs on hand. A
two-month supply is more typical. Ford Motor Co. said it saw more
individual buyers choosing subcompact and compact cars as gas prices rose. But pickup
sales also rose 14 percent as small businesses replaced their aging fleets.
The Lincoln luxury brand continues to struggle, with sales down 11 percent. Ford
has two fewer brands than it had last year. The company stopped producing its
Mercury brand last month and sold no Mercurys in February. It sold its Volvo
brand last summer.
Gold closed at a new high of
$1431 and Oil ended at $99.69. European bourses closed lower.
major market measures were lower out of the gate and trended lower all day
finishing down 1.5% and more. Breadth was 3/1 negative and volume light.
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Summary of Business Continuity Plan