Morning Report

Posted on October 19, 2011 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1222.9 -0.2 -0.02%
Eurostoxx Index 2333.1 26.250 1.14%
Oil (WTI) 88.73 0.390 0.44%
US Dollar Index (DXY) 76.61 -0.538 -0.70%
10 Year Govt Bond Yield 2.21% 0.04%

Happy 24th anniversary to the Crash of 1987.

The S&P rallied in the last hour of trading last night on a story in the Guardian that France and Germany have come to an agreement on a Greece bailout. Officials later denied that there was a deal.

AAPL posted lower than expected earnings last night due to lower IPhone sales. While there probably isn’t too much you can read into this (people were delaying IPhone purchases in order to get the new one), the law of large numbers may be catching up with them. Other companies reporting last night / this morning: INTC. YHOO, ISRG, MS, ONNN.

In economic news this morning, the CPI came in more or less in line with expectations – an increase of 3.9% YOY / 2.0% ex food and energy. Housing starts jumped 15% MOM to 658k. While there are some one-time factors that explain the jump, it confirms the increase in the home builder sentiment index yesterday. Of course we were talking about this a month ago after the KB Homes 3Q conference call. The homebuilder ETF (XHB) is up 14% since then.

Does this increase in homebuilding herald a nascent recovery? Well, the increase is huge, but is coming from very depressed levels. 1500k is more of a normal number. Still, earnings season has started off well. If this continues, and we get some sort of resolution on Europe, we could be in for a Santa Claus rally.

Based on this verdict for $144 million, maybe Michigan’s tort reform system needs a little tweaking. It was a “birth trauma” case so the amount probably isn’t quite so crazy as it seems at first blush, but it’s still pretty crazy. It is expensive to take care of someone with severe cerebral palsy but I never worked on any birth trauma cases where the damage projects were near $100 million.

–ashot

Filed under: Morning Report, tort reform | 11 Comments »

Bits & Pieces (Tuesday Night Open Mic)

Posted on October 18, 2011 by Kevin S. Willis
Speaking of Calvin and Hobbes:

Other than that, I got nothing. Floor’s yours.  — KW

Filed under: Uncategorized | 15 Comments »

GOP Politicians vs GOP Voters

Posted on October 18, 2011 by Michigoose

One of the continuing disconnects for me–since about 2004 or so–is what I hear from my Republican relatives and what I hear from the national Republican party and politicians. It turns out that I’m not alone, and while Steve Benen and Greg Sargent have both posted on this before, now I’m an administrator and can write my own post about it! Plus, while we don’t always agree, I do have respect for the opinions–and how they’ve been formed–of the folks on the other side of the aisle from me who post on this blog. So I’d like you to try to help me understand why the GOP seems to not be listening to their voters.

Here is the post from Benen on Political Animal this morning, and this is the pdf of the CNN/ORC poll he’s talking about. Four out of the five components of the American Jobs Act that were broken out and asked about individually were supported by Republicans (note: my wording, not exactly how it was asked in the poll. Favor cutting the payroll tax 58% – 40% opposed, favor providing federal money to states to hire teachers and first responders 63% – 36% opposed, favor increasing federal money for some infrastructure projects 54% – 46% opposed, and favor increasing taxes paid by millionaires 56% – 43% opposed). So why then, when Mitch McConnell or Eric Cantor or John Boehner, for example, talk about their opposition to these components do they always start their sentence with “the American people oppose X, Y and Z”? Do they not read the polls? Do they not believe the polls? Do they not care what their constituents think? Do they not know about crosstabs and think that it’s just generic Americans saying these things and not their fellow party members (and if they think that, shouldn’t they wonder about why they’re in the minority when it comes to those opinions)?

To quote Benen:

I mention this in part to show just how mainstream the American Jobs Act is, but also to note the chasm between Republican voters and Republican policymakers. With 63% of the GOP’s rank-and-file supporting, for example, aid to states to protect teachers’ and first responders’ jobs, it’s tempting to think at least some GOP lawmakers in Washington would support the idea. But in reality, that’s just not the case — literally zero Republicans on Capitol Hill are willing to even allow a vote on a popular jobs idea, during a jobs crisis, that even their own party’s voters strongly support.


Why? Is it Greg’s dreaded Beltway Feedback Loop? And why do they keep saying “the American people oppose” when that’s demonstrably not true?

Filed under: GOP, Polling | Tagged: | 36 Comments »

Morning Report

Posted on October 18, 2011 by Brent Nyitray

Vital Statistics:

S&P Futures 1196.9 3 0.25%
Eurostoxx Index 2295 -20.890 -0.90%
Oil (WTI) 86.71 0.330 0.38%
US Dollar Index (DXY) 77.271 0.073 0.09%
10 Year Govt Bond Yield 2.15% -0.01%

The earnings parade continues. Bank of America (BAC) posted 3Q income of 56 cents a share, mainly on one-time items and accounting gains. They continue to deleverage – they shrunk the balance sheet $42B QOQ and have increased Tier 1 capital to 8.65%. I don’t see any mention of Durbin and the dreaded $5.00 debit card fee in the press releases. Maybe they will talk about it on the conference call. The stock is up a couple of percent pre-market.

Goldman reported a loss for the quarter. Writedowns on investments drove a lot of the losses. Sales and Trading revenues were lower as well as investment banking. Given that the stock market rolled over early in the quarter, these numbers should not have been a surprise. GS is up a buck pre-open.

Other companies reporting today: JNJ, KO, MRO, UNH, EMC, CROX

In economic data, the Producer Price Index came in higher than expected. China’s GDP came in slightly lower than estimates.

The WSJ has a story this morning talking about the lack of liquidity in the equity and bond markets. Decreased liquidity is a bear-market phenomenon, as lower prices beget lower activity. Hedge funds are sitting on their hands waiting for redemption notices at the end of the month. The overall decrease in sales and trading commissions means that banks aren’t going to take risk to facilitate customer orders for all but their best customers. Perhaps we are seeing the downside of the changes made in the late 90s – the balkanization of stock exchanges, the reduction of bid/ask spreads to pennies, and the decrease in commissions. In bull markets, people can move in and out of the market with ease, and these liquidity providers (market makers, the NYSE specialist) are viewed as unnecessary costs of trading. However, in a bear market people start to miss them. IMO, the flash crash would have been an unlikely phenomenon under the old regime. Is there any chance that we go back to the days of 1/16 bid – ask spreads, 3 cent commissions, and the NYSE specialist? Probably not. But it is becoming clearer that we gave up something in order to get penny spreads and sub-penny commissions.

What is the new battleground stock these days? Green Mountain Coffee Roasters. David Einhorn (who got it right about Lehman Brothers) was at the Value Investing Congress with a 110 page presentation ripping GMCR. This is one of those classic big battles in the markets – the value-driven hedge fund manager vs mutual fund managers starved for a growth story. We have seen this battle before in major flame-outs like Krispy Kreme and Enron. I don’t have the slides, but here is the WSJ story.

Further to yesterday’s energy discussion: WSJ It’s Official: ‘Age of Shale’ Has Arrived Money quote:

“You certainly have to record the discovery and the exploitation of resources from both oil and gas shales as one of the great wealth creators in American history,” said Ralph Eads, vice-chairman of investment bank Jefferies & Co., which has advised on more than $75 billion worth of shale deals over the last three years. “It looks to be the economic equivalent to any of the big technology innovations.”

Could be. And as more and more countries eschew coal and nuclear for electricity generation, the US could be shipping LNG all over the world and not only become energy independent, but a net energy exporter. Middle East geopolitics are going to change in a big way.

Filed under: Uncategorized | 3 Comments »

Would This Be Acceptable?

Posted on October 18, 2011 by Kevin S. Willis

Miss Jane Doe recently decided her fat ass wouldn’t fit into the Whitehouse . . .

Or, Miss Jane Doe has thrust her impressively large bosoms into the campaign for governor . . .

From mycentraljersey.com comes this observation:

“Last week, Christie (dramatically) took his big body out of the chase for the GOP presidential nomination.”

Okay, enough of that. The article is interesting, asserting that due to a new redistricting plan authored by state Democrats, the Legislature will be controlled by the Democrats in four weeks and Christie will be hobbled. Could be. If Christie has a number of losses in New Jersey over the next several years, that might not be the most auspicious background from which to start a 2016 presidential campaign.

…

The most exciting news in electric cars ever in the history of the world has been announced.

The guy who current owns the DeLorean Motor Company (and all the old inventory) has been servicing and rebuilding DeLorean’s for years. But now he might actually be making brand new DeLoreans (the photos are are of the prototype, which uses existing Delorean components for the body and interior, but the actual production cars will supposedly be all new fabrication).

More on the future awesomeness of the DMCEV. BTW, the batteries for the DMCEV are coming from a company called Flux Power. Could it be any more perfect?

Expect many updates from me as this story progresses. Suck it, Leaf.

The most. Exciting. And. Awesome. Electric. Car. Evah!


— KW

I think that somehow covers most of our feelings.

—ashotinthedark

Filed under: Uncategorized | Tagged: , , , , | 16 Comments »

Bits & Pieces (Monday Evening Open Mic)

Posted on October 17, 2011 by Kevin S. Willis

Turns out that Spock is gay. This news cannot surprise longtime fans of Star Trek, who frequently noticed the homosexual tensions between Kirk and Spock.

Not to mention the many writers of fan fiction out there. 
In another indicator of a tentatively improving economy, charitable giving was up in 2010. 
In Philadelphia, mentally handicapped adults were held captive in a basement while their captors collected their Social Security disability. And the captors clearly didn’t have it all together, mentally, either, which was the only reason they got caught. Makes me wonder how much this sort of fraud is going on. Not so much kidnapping and keeping prisoner in the basement, but handicapped folks getting government assistance where the assistance goes to the “caretaker” and their lifestyle, rather than to support the handicapped individual. 
It’s now well-established that the science is in, and Global Warming is an established fact like the 2nd law of thermodynamics, and taxes must be raised immediately to fund the green energy owned by personal friends of powerful politicians. Although it’s too late to do anything about global warming and we’re almost certainly doomed, it’s even worse than you thought. It’s not just the ice caps that are shrinking. Its the polar bears. 
Aside: I am vaguely irritated that Michael Crichton’s speeches on global warming and other issues have disappeared from his own website. I’m note sure he’d approve of that posthumous revisionary stewardship. 
This post brought to you by parenthood.

— KW

Filed under: Uncategorized | 26 Comments »

iPad or Light Bulb?

Posted on October 17, 2011 by novahockey

The Post this weekend looked at the light bulb issue and the phase out of incandescent bulbs. What was interesting to me was the marketing campaign that is going to be deployed: convincing Americans that light bulbs are durable goods and not disposable items:

Philips is hoping to persuade consumers to view the LED bulbs as a durable good like an iPad, a TV or a car rather than a disposable good such as Kleenex, pencils or toilet paper. That way, people might be more inclined to pay $300 for 10 to 15 LED bulbs for a house energy and lighting upgrade, instead of just grabbing incandescents at $2 a box as needed.

“We’re used to thinking of light bulbs as a replacement business,” Crawford said. “Transitioning our mind-set is absolutely a business challenge.”

Or, you can do what I’m planning on doing. Stockpiling. And then, when the time is right, profiteering.

KW, the first one will be free of course. I know you’re already hooked.

See more at The Washington Post

Filed under: Uncategorized | 13 Comments »

In the weeds

Posted on October 17, 2011 by Mike

I heartily admit that I am not the equal of most of you when it comes to posting. While I enjoy the back-and-forth, I often get lost in the weeds. So, I’ve pulled out the income inequality argument from the Sun. night comments and am posting the following IMF study entitled “Equality and Efficiency.”

An excerpt:

Do societies inevitably face an invidious choice between efficient production and equitable wealth and income distribution? Are social justice and social product at war with one another?

In a word, no.

In recent work (Berg, Ostry, and Zettelmeyer, 2011; and Berg and Ostry, 2011), we discovered that when growth is looked at over the long term, the trade-off between efficiency and equality may not exist. In fact equality appears to be an important ingredient in promoting and sustaining growth. The difference between countries that can sustain rapid growth for many years or even decades and the many others that see growth spurts fade quickly may be the level of inequality. Countries may find that improving equality may also improve efficiency, understood as more sustainable long-run growth.

Inequality matters for growth and other macroeconomic outcomes, in all corners of the globe. One need look no further than the role inequality is thought to have played in creating the disaffection that underlies much of the recent unrest in the Middle East. And, taking a historical perspective, the increase in U.S. income inequality in recent decades is strikingly similar to the increase that occurred in the 1920s. In both cases there was a boom in the financial sector, poor people borrowed a lot, and a huge financial crisis ensued (see “Leveraging Inequality,” F&D, December 2010 and “Inequality = Indebted” in this issue of F&D). The recent global economic crisis, with its roots in U.S. financial markets, may have resulted, in part at least, from the increase in inequality. With inequality growing in the United States and other important economies, the relationship between inequality and growth takes on more significance.

Equality and Efficiency

Filed under: Uncategorized | 14 Comments »

Morning Report

Posted on October 17, 2011 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1208.3 -10.9 -0.89%
Eurostoxx Index 2328.2 -27.3 -1.16%
Oil (WTI) 86.21 -0.59 -0.68%
US Dollar Index (DXY) 77.005 0.398 0.52%
10 Year Govt Bond Yield 2.18% -0.07%

After a lull in activity, Merger Monday is back upon us. Today’s activity is in the energy space as Kinder Morgan is buying El Paso for $38 billion in cash and stock, and Norwegian Oil company Statoil is buying E&P independent Brigham Exploration. The KMI / EP deal is a bet that natural gas will continue to grow its market share of energy in the US. Barclay’s will provide $11.5 billion in financing, which is a good sign for the credit markets.

Germany poured cold water on the idea of a complete sovereign debt crisis fix at the Oct 23 summit. G20 finance ministers met over the weekend. This has all the feelings of a negotiation, not a Lehman-esque crisis.

Citigroup posted better than expected earnings this morning, while Wells Fargo missed. Citi announced they have $32.4 billion in European exposure. Lowe’s announced they will close 20 stores and lay off 2000 workers.

Robert Sameulson has a piece in this morning’s Washington Post which discusses why our children’s future doesn’t look so bright. IMO, this sort of thinking is part and parcel of recessions. If anything, I think the national mood was worse during the late 70s / early 80s, where people thought that the US would be devoured by the two headed monster of OPEC and the Japanese. It turned out that oil demand was a lot more elastic than we thought, and the Japanese were in a bubble of their own. US manufacturing rebounded smartly as US companies adopted just-in-time and adopted Deming’s quality concepts.

I remember during the early 90s recession, we were supposedly heading for a generational war as the baby boom generation took all the job opportunities from Gen X-ers. Unemployed Gen X-ers would supposedly toil away forever at temp jobs while highly paid baby boomers bid up real estate prices to unreachable levels. Instead, we got the dot-com boom, which made many Gen X-ers extremely rich.

The point is that conventional wisdom, especially in the area of economics, is usually wrong because it overreacts to what is going on at the moment and extrapolates that forever. It accounts for the Business Week “Death of Equities” cover story in August 1979 as well as Dow 36,000 which was released in Oct 1999.

While I do believe that this recession is indeed different that past Fed-driven recessions, it isn’t a permanent state of affairs. This too shall pass. Booms don’t last forever, and neither do busts. My view has been that we are on a cusp of a revolution in energy which will collapse prices and turn the US from a net importer of energy to a net exporter. And that revolution will be a true elixir – it will go a long way towards fixing our budget problems and our trade deficit. It will also directly benefit the middle class the most by increasing disposable incomes and providing jobs.

We do have some more wood to chop economically – housing has to bottom, and the imbalances that stemmed from the real estate bubble have to be corrected. The debt that accrued during the last decade has to be worked off. Fortunately, while debt levels are quite high according to historical levels, debt service levels (principal and interest payments) are on the low side because interest rates are so low. Which means the debt will be worked off faster.

In economic data, Empire Manufacturing came in lower than expected. Industrial production was .2% and Capacity Utilization is slightly lower than expected at 77.4%. Below is a chart of capacity utilization. It shows that there still is a tremendous amount of slack in the economy, which bodes well for inflationary fears.

Filed under: Uncategorized | 11 Comments »

Dé-CLASS-é

Posted on October 17, 2011 by quarterback

The CLASS program has ended in failure even before beginning, with the administration finally admitting that it was unworkable, just as prophesied by Paul Ryan and other Republicans.

Somewhere there is a museum of perpetual motion inventions. Likewise, CLASS seems to me a perfect example of the quixotic liberal quest to invent the free lunch. Democrats fought with arithmetic to the bitter end, but in the end arithmetic won, and it was revealed that, as always with the free-lunch skunkworks, the real long game for CLASS was to raise more taxes and wrest more of our freedom and money away from us and into the hands of government. The promise, of course, was that this was a gift to us of super-competent technocrats who, now at last fully in charge, could fix things for “us” that only government could fix. Politics as usual.

What do you think?

Filed under: Affordable Care Act, PPACA | Tagged: | 147 Comments »

« Previous Page — Next Page »