Tuesday, February 8, 2011

Behold the 79.9% APR Credit Card

I originally read this story about the 79.9% APR credit card, wondering what suckers would actually use such a card.  Then I realize the American people have figured out the system as currently structured.  Those who run up debt (helping GDP surge, and the 70% of the American economy hum) and then walk away from the debt are modern society's winners.  [Jun 15, 2010: WSJ - Default, not Thrift Pares U.S. Debt] They've learned the past few years how losing a few hundred points in FICO score for a few years is just a short term impediment.  When 1 in 10 home "owners" in the country can live in homes for 2 years without paying the mortgage, and save tens of thousands of dollars they can then use to "shop".... who are we to judge those who just run up a few thousand on their 79.9% card?  Indeed, I don't believe they are fulfilling their full potential in the "debt is just a figure on a piece of paper" culture we are creating.

  • ....about six months after opening the card -- at the end of 2009 -- she received an unwelcome surprise in the mail.  "I about had a heart attack when I got a disclosure notice saying that my starting rate of 29.9% was going up to 79.9%," said Riss. "It was ludicrous. Talk about a highway robbery."
  • At that same time, First Premier Bank launched a new credit card with the sky-high 79.9% rateThe card proved popular with consumers, said First Premier Bankcard CEO Miles Beacom, but the performance was bad: "A lot of the people ran up the card, defaulted and went directly to charge off."
The lab rates of America have learned to game the system after much training.  Paying debt obligations is for the remaining suckers! (hand raised)  I'll give you 170 FICO points in return for the goodies I do so deserve.  Hey, if the banks can do it - I can do it!  Then in 2 years you'll give me a new card.  We all win here. 

Unfortunately there are still some suckers remaining in the system, who believe they need to pay back debt.  Indeed Frontier Bank went to 59.9% and actually has some who carry a balance.  Some proportion even (don't snicker) send money to the bank in return for their charged goodies.
  • As a result, they dropped the rate to 59.9%.  Since then, nearly 700,000 people have signed up for the card -- and more than half of them carry a monthly balance.  
  • And yes, that rate is completely legal. The Card Act, which was passed in late 2009 to protect consumers from predatory lenders, only prevents issuers from raising rates retroactively. Credit card issuers are free to charge whatever rate they want at the front end.
Some amazing statistics, 3M people is 1% of the entire U.S. population, including babies.
  • The company said it serves nearly 3 million customers nationwide and receives anywhere from 200,000 to 300,000 applications a month.

Bloomberg Markets Magazine: Rich Take from Poor as U.S. Subsidy Law Funds Luxury Hotels

I could not resist clicking on this story over at Bloomberg based on title alone, and I am glad I did.  It is always a 'fun' time reading how our best and brightest, rather than working on future innovations to create industry and jobs, have been incented to work inside our banking oligarchy finding ways to pilfer the American taxpayer and get around any regulation known to man.  I do have to admit being very impressed by the tactics in this story - it is comforting to know our top B-Schools are churning out such financial innovation aka "God's work".  I'd leave the story to anyone interested but here are some of the highlights:
  • The landmark Blackstone Hotel in downtown Chicago, which has hosted 12 U.S. presidents, opened in 2008 after a two-year, $116 million renovation. Inside the Beaux Arts structure, built in 1910, buffed marble staircases greet guests spending up to $699 a night for rooms with views of Lake Michigan.  What’s surprising isn’t the opulent makeover: It’s how the project was financed. The work was subsidized by a federal development program intended to help poor communities
  • The biggest beneficiary of taxpayer help for the Blackstone revamp was Prudential Financial, the second-largest U.S. life insurer. The company got $15.6 million in tax credits from the U.S. Department of the Treasury for helping to fund the project.  JP Morgan Chase the second-largest U.S. bank by assets, also took in money by serving as a lender and the monitor of Blackstone construction financing.
  • Since 2003, some of the world’s biggest financial companies, including Goldman Sachs Group, U.S. Bancorp, JPMorgan Chase and Prudential, have taken advantage of a federal subsidy that will cost taxpayers $10.1 billion -- and most of the public has never heard of it. 

Essentially, a program was devised late in the 90s that was supposed to help poor communities.  The guideline was individual poverty of 20% or greater, based on census tracts.   But the 'best and brightest' we have to offer figured out incredibly shrewd ways to develop luxury developments by (for example) finding census tracts where say many college aged kids live because after all, many have poverty wages (or none at all).  This is "God's work" as I understand it.
  • Investors have used the program, called New Markets Tax Credits, to help build more than 300 upscale projects, including hotels, condominiums, office buildings and a car museum, on streets far from poverty, according to Treasury Department records released through a federal Freedom of Information Act request. The program, endorsed by Republican Senator Rick Santorum and House Speaker Dennis Hastert and adopted by Congress, was signed into law by President Bill Clinton in 2000. 
  • The agency bases decisions on census tracts, which are supposed to have common economic standards. Only tracts with at least a 20 percent poverty rate or with a population earning 20 percent less than the median family income of the surrounding metropolitan area qualify for subsidized projects.  The numbers are from the 2000 census.
  • Building high-end commercial projects goes against the intent of the New Markets program, says Cliff Kellogg, a former senior policy adviser at the Treasury Department who helped design New Markets.    “Things like luxury hotels are entirely contrary to what we set out to do,” says Kellogg, who’s now a bank consultant. “Some hotels may create jobs and spur other nearby investment, but you have to ask if these projects prevent worthwhile ones from getting done.” 

It's not about "intent" Mr. Kellogg - it is about loopholes baby.   Please notice where Mr. Kellogg landed after doing "God's work" inside the Treasury. 
  • The 15-block tract that’s home to the renovated Blackstone -- census No. 3206 -- qualifies because it had an individual poverty rate of 26 percent in 2000. A closer look at the demographics tells a different story and shows how investors can game the system.  The poverty profile reflects the large number of students who attend two schools -- Columbia College Chicago and Roosevelt University -- in the area. Among families, the poverty rate is just 3.9 percent, according to the census
  • Three miles (5 kilometers) west of the Blackstone, there are no hotels, banks or supermarkets in a census tract in the Kendrie Avenue neighborhood on Chicago’s West Side. Area unemployment there was 35 percent in 2000. The neighborhood, dotted with abandoned homes and trash-strewn lots, languishes without money from New Markets.  (I assume no one in this tract could afford $699 a night hotel rates?  If not - JPMorgan and Prudential cannot be bothered with taking taxpayer's money)
  • The program’s standards open up some of the nation’s wealthiest areas to development, according to Treasury records. Taxpayers have subsidized projects in tracts with median family incomes as high as $200,000, records show. 
  • “The way the rules are written, it’s allowing a kind of cherry-picking by financial institutions to find favorable census tracts,” says Virginia Parks, a social services professor at the University of Chicago. “It’s so easy to qualify that all you need to do is hire a good demographer. It’s not rocket science.”

The rest of the story goes through various examples of projects "to help poor communities".  They are all quite enlightening but please don't read it on a full stomach - some of it might regurgitate.  Here is one I particularly liked since it showed the type of thinking that we do not need in our math and sciences, and instead is fantastically located in our high finance oligarchy.
  • In Tacoma, Washington, investors found a way to get New Markets handouts in an area with just a 1 percent family poverty rate. U.S. Bancorp and two other investors used a $34 million Treasury authorization in 2010 to finance construction of an antique car museum. The museum, which will house the private collection of Harold E. LeMay, a deceased trash-hauling tycoon, needed creative financing to fit New Markets rules. 
  • Companies that operate mostly by exhibiting art or other items don’t qualify for New Markets.   To get around the restriction, Minneapolis-based U.S. Bancorp and its partners set up a related company in 2010 to acquire the assets from the museum and then lease back the property. The new company, America’s Car Museum, qualified because a loophole in the rules allows galleries to get New Markets money by using affiliated corporations.  (now that's innovation!)  The maneuver allowed U.S. Bancorp, which invested a total of $34 million in cash or loans with development partners, to win $13.3 million in tax credits
  • As a result of the deal, federal taxpayers will pick up 39 percent of the cost of erecting a $34 million shrine housing 500 of LeMay’s cars in a mostly commercial tract with a 24 percent individual poverty rate.   (you're welcome! I assume I still have to pay full price to get in? Or do I get 39% off since I helped pay for it?)

I love reading stories like these - good ole investigative journalism.  And for every one the press uncovers we can imagine there are 100s more very much the same that will never see the day of light.  

Indian Stocks Falter Again, Dropping 1.5% to 7 Month Low as Chinese Raise Interest Rates and Brazilian Monthly Inflation has Highest Spike in 6 Years

In the "nothing matters until it matters" category a cacophony of news overnight from the BRIC countries.   Inflation fears continue to fan the flames overseas and the global hot money is on the move. 
  • For the week to Feb. 2, BRIC equity funds had net outflows of $316 million, a 10th consecutive week of redemptions.
With institutional speculators utilizing easy money continuing to surge into commodities.... until some sort of blow off top occurs, I am not sure that any of the actions by Asian central bankers are going to succeed in stopping politically sensitive food inflation.

First from India, the Sensex has fallen 1.5% overnight to a 7 month low @ 17,775.  This brings it almost exactly in line with the late August 2010 low - most likely hours before Ben Bernanke sounded the all clear on world wide speculation in anything that moves at Jackson Hole, Wyoming.  Technically this is a very key level, because if it breaks you could be looking at another 500 points down easily before the next light support.  This chart is one day delayed.
  • Analysts said with foreign funds pulling out more than $1 billion from Indian equities since the start of January, the outlook for the near term remained subdued.

India is the worst of the BRIC's this year, already dropping 13.3% in just some 6 weeks.  Ouch.   For all of 2010, the index was up 17% so much of that has now been erased.  Aside from inflation fears, there is a drama over a bribery scam in relation to telecom spectrum licenses.
  • “Cost pressures remain a key risk to earnings and market momentum. Although top-line growth has kept pace with inflation in nominal terms, pressure on bottom lines from rising raw-material prices, wages and interest costs are intensifying across sectors,” Nomura analysts led by Prabhat Awasthi wrote in a report Tuesday. 
  • A recent monthly release from HSBC showed India’s composite purchasing managers’ index climbed to 59.6 in January from 58.9 in December, but with “input-price inflation rising at the strongest rate in the history of the series.”

Brazil has not been a party either, with a loss of just under 6%.  The country reported that it's monthly inflation gauge jumped the most in 6 years.
  • Brazilian officials say inflation in January was the highest monthly jump in almost six years. That increases worries Brazil's economy is overheating.  The government's IBGE statistics bureau says Tuesday that January inflation was 0.83%. That's the biggest monthly jump since April 2005.
The monthly inflation pace increase in Brazil is pretty dramatic - in December it was +0.63%, in January +0.75% and now it has jumped to +0.83%.  February's figure would be 10% annualized versus the official target of 4.5% inflation.

China raised interest rates overnight as investors return from Lunar New Year as it tries to deal with its own banking sins, plus the ultra easy money moving around the globe.  Shanghai is slightly negative for the year.
  • China's central bank raised interest rates for the second time in just over a month in a bid to dampen high inflation and guide blistering economic growth to a sustainable level. The People's Bank of China announced Tuesday on its website that the benchmark 1-year deposit rate would rise by a quarter percentage point to 3% and the 1-year lending rate would increase by the same amount to 6.06%. The increases are effective Wednesday.
  • Its last rate hike came on Christmas Day, when the bank raised both benchmark rates by a quarter point. 
  • China's leaders have sought to cool surging inflation that could pose a threat to political stability.  Rising prices are especially sensitive in a country where poor families can spend up to half their incomes on food. Higher incomes have helped to offset price hikes, but inflation undercuts economic gains that help support the ruling Communist Party's claim to power. 
  • China's battle with inflation marks a sharp contrast with the United States, Europe and Japan, where growth has been muted in the aftermath of the financial crisis.
  • Chinese leaders ordered a shift from easy credit to a "prudent monetary policy" in 2011 in a planning report issued in December.  Last year's rapid growth was driven by a flood of investment in property and other areas. Analysts have urged Chinese authorities to do more to rein in the lavish lending by state-run banks that is driving investment, a large chunk of which is believed to be in speculative property deals.  Authorities are also considering ways to penalize banks for flouting orders to cut back lending.
  • Borrowing for real estate development and other projects is the lifeblood for the sales by local governments of land use rights that provide a huge share of their revenues. Such sales rose 70 percent in 2010, helping push property prices 6.4% higher compared with a year earlier.
  • A huge pool of nonbank financing nearly doubled the amount of money available for investment last year, much of it "off balance sheet" lending whose exact scale is unknown.  (hmmm.... more "off balance sheet" accounting ala Citigroup, Enron and the like - sounds vaguely familiarI am sure it will end well.)

Last but not least, on the plus side Russia aka "the country which institutional investors treat as an oil ETF" is up 8.7% for the year.

Credit Card Usage Expands for the First Time in 28 Months

Some interesting data out of the Federal Reserve yesterday; while not a number that moves Wall Street consumer credit is interesting for economic wonks.  For the first time in 28 months, credit card debt increased in December - which can be seen as either a positive or a negative depending on your outlook.  One could argue this is due to an increase in confidence, or a return to old bad habits.  The latter would be a concern, specially considering aggregate debt levels in the country have not fallen that much from the peak a few years ago.  It could be a host of unemployed turning to their last source of funds as their 99 weeks of unemployment run out.  Or, since it happened in December, credit cards could just be a way more people funded their gift shopping.  Whatever the case, shorter term it is a boost to an economy that is 70% dependent on consumption - longer term, we'll have to see a few quarters from now if default rates begin to jump again.

Via Reuters:

  • Consumer credit surged in December as shoppers boosted their credit-card debt for the first time in more than two years, supporting views economic activity was gathering momentum.  Total credit outstanding climbed $6.1 billion, the Federal Reserve said on Monday, more than twice the $2.3 billion that Wall Street economists surveyed by Reuters had forecast. 
  • "It's encouraging that lenders are at least allowing credit card spending to go up, but also it's not great that the only way that extra consumption can be financed is through credit cards rather than hiring income," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.
  • December marks the culmination of the Thanksgiving-through-Christmas shopping season when consumers are more likely to turn to their credit cards for purchases.
  • December marked the third successive month in which consumer credit outstanding grew. It had risen by a steep $7.7 billion in October before the November and December gains. Prior to those three increases, consumer credit had contracted for 20 months in a row.
  • Strikingly in December, revolving or credit-card debt climbed by $3.5 billion -- the first month in which this category of debt had risen since August 2008.
  • Borrowing on auto loans increased 2.8 percent.
  • Even with the December gains, consumer borrowing is just 0.7 percent higher than the more than three-year low hit in September. It is 6.6 percent below the high set in July 2008. 
  • Even if borrowing rises this year, many economists don't expect Americans will borrow at the pace seen in the middle of the last decade. During that period, soaring home prices made households feel wealthier than they were, and that encouraged them to borrow and spend more.

Monday, February 7, 2011

BW: The Youth Unemployment Bomb

Below are some snippets from a highly recommended cover story in BusinessWeek entitled 'The Youth Unemployment BombFrom Cairo to London to Brooklyn, too many young people are jobless and disaffected. Inside the global effort to put the next generation to work

If you are in a plane, train, or automobile here is a 8 minute audio clip discussing the same topic.

In the Middle East alone (since this is the world's current focus, there are upwards of 100M youth who are soon going to be need to find work).  But this is a global phenomena - Spain has a 40% youth unemployment rate, and we've covered the herbivore men in Japan [Jul 29, 2009: Japan's "Herbivore" Men - Young American Men's Future?] and the 'ant tribe' in China. [Nov 18, 2010: [Video] ABC News on China Part 2]  The larger question is, with hundreds of millions entering the global job force - is there enough work to go around long term?  Quite a few of the Egyptian youth actually have college degrees - but nowhere to go with them.  In the older generation, you hear stories of Egyptian adults trained in law and medicine - driving taxis ...

  • In Tunisia, the young people who helped bring down a dictator are called hittistes—French-Arabic slang for those who lean against the wall. Their counterparts in Egypt, who on Feb. 1 forced President Hosni Mubarak to say he won't seek reelection, are the shabab atileen, unemployed youths. The hittistes and shabab have brothers and sisters across the globe. 
  • In Britain, they are NEETs—"not in education, employment, or training." In Japan, they are freeters: an amalgam of the English word freelance and the German word Arbeiter, or worker. Spaniards call them mileuristas, meaning they earn no more than 1,000 euros a month. In the U.S., they're "boomerang" kids who move back home after college because they can't find work. Even fast-growing China, where labor shortages are more common than surpluses, has its "ant tribe"—recent college graduates who crowd together in cheap flats on the fringes of big cities because they can't find well-paying work. 
  • In each of these nations, an economy that can't generate enough jobs to absorb its young people has created a lost generation of the disaffected, unemployed, or underemployed—including growing numbers of recent college graduates for whom the post-crash economy has little to offer.
  • More common is the quiet desperation of a generation in "waithood," suspended short of fully employed adulthood. At 26, Sandy Brown of Brooklyn, N.Y., is a college graduate and a mother of two who hasn't worked in seven months. "I used to be a manager at a Duane Reade [drugstore] in Manhattan, but they laid me off. I've looked for work everywhere and I can't find nothing," she says. "It's like I got my diploma for nothing." 
  • While the details differ from one nation to the next, the common element is failure—not just of young people to find a place in society, but of society itself to harness the energy, intelligence, and enthusiasm of the next generation. Here's what makes it extra-worrisome: The world is aging. In many countries the young are being crushed by a gerontocracy of older workers who appear determined to cling to the better jobs as long as possible and then, when they do retire, demand impossibly rich private and public pensions that the younger generation will be forced to shoulder
  • In short, the fissure between young and old is deepening. "The older generations have eaten the future of the younger ones," former Italian Prime Minister Giuliano Amato told Corriere della Sera. In Britain, Employment Minister Chris Grayling has called chronic unemployment a "ticking time bomb." Jeffrey A. Joerres, chief executive officer of Manpower, a temporary-services firm with offices in 82 countries and territories, adds, "Youth unemployment will clearly be the epidemic of this next decade unless we get on it right away. You can't throw in the towel on this." 
  • The highest rates of youth unemployment are found in the Middle East and North Africa, at roughly 24% each, according to the International Labor Organization. Most of the rest of the world is in the high teens—except for South and East Asia, the only regions with single-­digit youth unemployment.
  • Rich democracies ignore youth unemployment at their peril. In the 34 industrialized nations in the Organization for Economic Cooperation and Development, at least 16.7 million young people are not employed, in school, or in training, and about 10 million of those aren't even looking, the OECD said in December 2010. In the most-developed nations, the job market has split between high-paying jobs that many workers aren't qualified for and low-paying jobs that they can't live on, says Harry J. Holzer, a public policy professor at Georgetown University and co-author of a new book, Where Are All the Good Jobs Going? Many of the jobs that once paid good wages to high school graduates have been automated or outsourced
  • In the U.S., 18 percent of 16- to 24-year-olds were unemployed in December 2010, according to the Labor Dept., a year and a half after the recession technically ended. For blacks of the same age it was 27 percent. What keeps the numbers from being even higher is that many teens have simply given up. Some are sitting on couches. Others are in school, which can be a dead end itself. The percentage of American 16- to 19-year-olds who are employed has fallen to below 26 percent, a record low.

Obviously in the U.S. it is not so much about future social strife (that's why we have 44M on food stamps) since there is a relative affluence and social programs in place, along with parents.  But there are still consequences....this next subject is interesting - we touched on it a few years ago in  [May 9, 2009: The Curse of the Class of 2009 - Lower Wages for Up to a Decade
  • What's more, when jobs do come back, employers might choose to reach past today's unemployed, who may appear to be damaged goods, and pick from the next crop of fresh-faced grads. Starting one's career during a recession can have long-term negative consequences.
  • There's a psychological impact as well. "Individuals growing up during recessions tend to believe that success in life depends more on luck than on effort, support more government redistribution, but are less confident in public institutions," conclude Paola Giuliano of UCLA's Anderson School of Management and Antonio Spilimbergo of the International Monetary Fund in a 2009 study. 

Then again, our university system in the aggregate does not seem to be teaching much, but just a weigh station to take government loan money and churn kids out.  [Jan 18, 2011: Report - First 2 Years of College Show Small Academic Gains]  Difficult to compete on a global playing field that way.

Even in South and East Asia (ex Japan) where  many of the jobs are migrating too - there appear to be too many workers for the amount of jobs.  And they have the best situation on a relative basis.
  • China, too, has produced more college diplomas than it can make use of. The number of graduates has quintupled in the past decade, and "the Chinese economy has just not been able to create that many jobs for high-skilled labor," says Anke Schrader, a researcher in Beijing at The Conference Board's China Center for Economics and Business. 

Tough dilemmas globally, certainly no easy answers.  But once again, Germany seems to be leading the charge on solutions - using an old method.
  • These days there's a newfound appreciation for an ancient work arrangement, the apprenticeship, because it greases the transition from learning to doing. Germany and Austria experienced milder youth unemployment in the global downturn partly because of blue-collar apprenticeship programs, says Stefano Scarpetta, deputy director of the directorate of ­employment, labor, and social affairs at the OECD in Paris. Last year, the International Labor Organization says, Germany's youth unemployment rate was 13.9%, compared with a Europe-wide average of 21.2% and 21% in the U.S
  • In an update on the apprentice idea, countries such as the Netherlands encourage university students to gain work experience while enrolled. Scarpetta says 70% of Dutch youth ages 20-24 are getting some work experience. By contrast in Italy and Portugal only about 10% work while in school. The Netherlands' youth unemployment rate is just 11.2%.

Irony in Indonesia

Much like India (and to a lesser degree China and Brazil) Indonesia has been hurt by the fact it is growing "too fast".  Last week the country's central bank raised rates for the first time, and overnight we got word that the economy is expanding at a near 7% clip, or the fastest in 6 years.   Unlike the Indian indexes there has been a much better bounce in the Indonesian market from lows of 2 weeks ago, but still quite a ways off highs in December 2010 and very early January 2011.  I continue to be a big fan of this resource rich country, which I think will be hitting the mainstream investment world in the coming few years.

Now that we have had some time to evaluate how iShares MSCI Indonesia (EIDO) versus the older Market Vectors Indonesia (IDX) it appears they are tracking quite similarly, indeed both are priced almost idenitcally as well which is another irony. 

Via Bloomberg:

  • Indonesia's economy grew at the fastest annual pace in six years last quarter, adding to the case for the central bank to raise interest rates further as inflation accelerates.  Gross domestic product increased 6.9% in the three months through December from a year earlier. That was higher than the 6.3% median estimate of 13 economists surveyed by Bloomberg News. GDP increased 6.1% in 2010.
  • Private consumption contributed 2.7% points to GDP growth last year, while investment accounted for about 2% points, the government said. The absence of a harvest led to a 1.4% economic contraction in the final three months of 2010 from the previous quarter. 
  • Rising consumer spending is driving the expansion in the world’s fourth-most populous nation, increasing pressure on the central bank to restrain price gains and protect purchasing power. Indonesia joins counterparts from China to Singapore in reporting accelerating growth in the fourth quarter as Asia weathers risks including elevated U.S. unemployment.
  • “The central bank clearly needs to stay hawkish with the economy growing at this pace and they have to be vigilant on inflation,” said Lim Su Sian, a Singapore-based economist at Royal Bank of Scotland Group Plc.  
  • The Jarkata Composite index had tumbled approximately 8 percent from its Dec. 9 record high on concern the central bank has fallen behind regional peers in boosting rates to cool inflation.
  • “Inflation clearly outweighs growth risks,” Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch, said before the report. “Indonesia’s strong export growth is being supported by surging commodity prices, including on oil and coal prices. We expect growth to remain resilient.”
  • Bank of Indonesia had previously resisted higher rates to avoid attracting more foreign capital inflows, while opting to increase lenders’ reserve requirements and tighten rules on banks’ foreign-exchange holdings to help curb price advances.
  • Consumer-price growth accelerated to a 21-month high of 7.02% in January, from 6.96% in December. (India is about twice as high)  Higher borrowing costs may help anchor inflation expectations and support the rupiah and longer-term bonds, according to Citigroup Inc.
  • President Susilo Bambang Yudhoyono seeks to expand the economy at an annual average rate of 6.6% and create 10.7 million jobs by the end of his second term in 2014, including through attempts to boost investment in the country’s infrastructure.
  • Indian and Indonesian companies last month signed accords worth about $15 billion to build airports, steel plants, a railway line and ports in the Southeast Asian nation. Indonesia will seek bids for 50 new oil and gas blocks in 2011 through tenders and direct offers to help boost output, the Energy and Minerals Resources Ministry said last year.
  • Moody’s Investors Service upgraded the credit rating of Southeast Asia's largest economy on Jan. 17 to the highest level since the 1997 Asian financial crisis, citing the nation’s “economic resilience” and improving public debt position.
  • Indonesia, the third-biggest rice importer in Asia, is seeking to “strengthen” its stockpiles to protect the poor against rising costs, Bayu Krisnamurthi, Deputy Minister of Agriculture, told Bloomberg News on Feb. 4.
  • The government’s target to lift more people out of poverty in a country where the World Bank estimates 29% of the population earn less than $2 a day has boosted consumer spending and imports. The central bank had refrained from raising rates since 2008 to support the growth push.

[May 22, 2009: Indonesia: A Must Own Emerging Market]
[Jul 9, 2009: Indonesia's Star Continues to Rise on Back of Yudhoyono's Re-election]  
[Aug 10, 2009: Indonesia Expands at Fastest Pace in Southeast Asia]
[Jan 22, 2010: FT.com - How the BRIC was Born]
[Apr 1, 2010: Indonesian Market Continues to Star in 2010 - Market at All Time Highs as Country Opens Itself Up Further to Foreign Investment]
[Aug 8, 2010: NYT: After Years of Inefficiency, Indonesia Emerges as an Economic Model]
[Oct 9, 2010: [Video]  CNBC's Tim Seymour & Team - The Prospects of Indonesia]
[Jan 11, 2011: BW - The BRIC Debate, Drop Russia, Add Indonesia?]

No position

Pride International (PDE) Gets Bought Out - I Missed it by *That* Much

I saw this morning driller Pride International (PDE) has a bid from Ensco (ESV).  Very long time readers might remember Pride as I was touting it was a takeover play..... 2 years ago.  [May 2, 2008: Restarting Pride International as Takeover Bait]  As Maxwell Smart would say, I missed it by that much!  I believe the way Wall Street works, I can still claim credit for "nailing it" even though I've been nowhere near the stock in ages.  hah.

Via AP:

  • Oil rig company Ensco PLC said Monday it has agreed to buy U.S. rival Pride International Inc. in a $7.3 billion cash and stock deal that will create the world's second largest off-shore drilling company.  The combined group will be valued at $16 billion and have a total of 74 rigs, including 21 ultra-deepwater and deepwater platforms, in key locations around the world.
  • The deal, valued at a total of $41.60 per share, is a 21 percent premium to the Houston-based Pride's closing price on Friday. In the shares and stock split offer, Pride stockholders will receive 0.4778 newly issued shares of London-based Ensco, plus $15.60 in cash for each share of Pride common stock. That will leave Ensco stockholders holding around 62 percent and Pride stockholders owning about 38 percent of the combined company when the deal closes, anticipated as early as the second quarter.
  • Ensco expects the combined company to realize pretax expense synergies of at least $50 million in 2012 and beyond. The total estimated revenue backlog for the combined company is around $10 billion, which Ensco plans to use to support further growth.
  • The deal is also expected to boost estimated earnings per share of $5.11 in 2012 by more than 10 percent.
  • Sterne Agee analyst David Havens said the combination of the two oil service firms will provide a “good strategic fit” by giving Ensco an “immediate high-spec drillship fleet with good cash flow generating semis.” The price paid by Ensco is, “not cheap, but solid usage of excess cash on balance sheet,” Havens said in a note to clients.

No position


Scores of Stocks Already Up 20%+ Year to Date

After today's gains the market is on pace for a +50% year.  I now know what it feels like to be made obsolete by innovation.  The Bernank is a mutual fund manager's worst nightmare - no expertise needed, everyone is a winner as long as they have $500 and an Etrade account.

To that end, we already have a list in excess of 125 stocks that are up 20% for the year, with nearly 50 up over 30%.  And these are not nonsense stocks - they are all over $300M market cap with at least 100K volume a day and over $10 in price.   A bunch of our old holdings are on this list....

Ticker Company Gain Industry
CLDA Clinical Data, Inc. 92.21% Biotechnology
NVDA NVIDIA Corporation 66.69% Semiconductor - Specialized
EXFO EXFO Inc 62.04% Communication Equipment
JDSU JDS Uniphase Corporation 57.18% Communication Equipment
CRUS Cirrus Logic Inc. 55.26% Semiconductor - Specialized
DEPO DepoMed Inc. 55.19% Drug Manufacturers - Other
SSCC Smurfit-Stone Container Corp. 50.66% Packaging & Containers
BSFT BroadSoft, Inc. 49.46% Communication Equipment
NAK Northern Dynasty Minerals Ltd. 47.10% Gold
SGI Silicon Graphics International Corp. 46.73% Diversified Computer Systems
OPLK Oplink Communications Inc. 46.51% Semiconductor - Integrated Circuits
TMRK Terremark Worldwide, Inc. 46.33% Telecom Services - Foreign
NANO Nanometrics Incorporated 45.28% Scientific & Technical Instruments
SANM Sanmina-SCI Corp. 42.68% Printed Circuit Boards
MTW Manitowoc Co. Inc. 42.33% Farm & Construction Machinery
ARMH ARM Holdings plc 41.93% Semiconductor - Specialized
WNR Western Refining Inc. 41.68% Oil & Gas Refining & Marketing
VRX Valeant Pharmaceuticals International 41.64% Drug Delivery
UIS Unisys Corporation 40.98% Information Technology Services
BRKS Brooks Automation Inc. 40.79% Semiconductor Equipment & Materials
CELL Brightpoint Inc. 39.63% Electronics Wholesale
TNAV TeleNav, Inc. 39.56% Communication Equipment
ARAY Accuray Incorporated 38.52% Medical Appliances & Equipment
MU Micron Technology Inc. 37.78% Semiconductor- Memory Chips
ININ Interactive Intelligence, Inc. 36.85% Business Software & Services
HF HFF Inc. 36.75% Mortgage Investment
ABMD Abiomed Inc. 36.73% Medical Instruments & Supplies
TITN Titan Machinery, Inc. 35.23% Specialty Retail, Other
SOHU Sohu.com Inc. 35.08% Internet Information Providers
JKS JinkoSolar Holding Co., Ltd. 34.94% Industrial Electrical Equipment
SODA SodaStream International Ltd. 34.55% Beverages - Soft Drinks
KLIC Kulicke & Soffa Industries Inc. 34.17% Semiconductor Equipment & Materials
URI United Rentals, Inc. 34.07% Rental & Leasing Services
SKH Skilled Healthcare Group, Inc. 33.41% Long-Term Care Facilities
SRX SRA International Inc. 32.47% Information Technology Services
CYOU Changyou.com Limited 32.37% Multimedia & Graphics Software
SINA Sina Corp. 32.36% Internet Software & Services
FN Fabrinet 32.28% Electronic Equipment
GRM Graham Packaging Company, Inc. 32.13% Packaging & Containers
APKT Acme Packet, Inc. 31.66% Communication Equipment
FNSR Finisar Corp. 31.26% Networking & Communication Devices
GXDX Genoptix, Inc. 31.07% Medical Laboratories & Research
STEC STEC, Inc. 31.05% Data Storage Devices
MSTR MicroStrategy Inc. 30.76% Business Software & Services
NXPI NXP Semiconductors NV 30.67% Semiconductor - Broad Line
SMCI Super Micro Computer, Inc. 30.24% Networking & Communication Devices
NETL NetLogic Microsystems Inc. 30.18% Semiconductor- Memory Chips
RRR RSC Holdings, Inc. 30.08% Rental & Leasing Services
PCX Patriot Coal Corporation 29.58% Industrial Metals & Minerals
HOC Holly Corporation 29.14% Oil & Gas Refining & Marketing
RTEC Rudolph Technologies Inc. 29.04% Scientific & Technical Instruments
GEOI GeoResources, Inc. 28.95% Independent Oil & Gas
SFN SFN Group, Inc. 28.79% Staffing & Outsourcing Services
GLF Gulfmark Offshore, Inc. 28.59% Oil & Gas Equipment & Services
ISRG Intuitive Surgical, Inc. 28.52% Medical Appliances & Equipment
ACOM Ancestry.com Inc. 28.50% Internet Information Providers
WY Weyerhaeuser Co. 28.37% REIT - Industrial
UTEK Ultratech, Inc. 28.17% Semiconductor Equipment & Materials
SOL ReneSola Ltd. 28.03% Semiconductor - Integrated Circuits
CIEN CIENA Corp. 27.79% Communication Equipment
MKSI MKS Instruments Inc. 27.31% Diversified Machinery
LDK LDK Solar Co., Ltd. 26.78% Semiconductor - Broad Line
TER Teradyne Inc. 26.71% Semiconductor Equipment & Materials
BITA Bitauto Holdings Limited Americ 26.47% Internet Information Providers
SPRD Spreadtrum Communications Inc. 26.35% Semiconductor - Broad Line
FTNT Fortinet Inc. 26.34% Computer Peripherals
DMAN DemandTec, Inc. 26.29% Business Software & Services
CY Cypress Semiconductor Corporation 25.57% Semiconductor - Broad Line
ARBA Ariba Inc. 25.46% Internet Software & Services
SVVS SAVVIS Inc. 25.35% Business Services
ASIA AsiaInfo-Linkage,Inc. 25.35% Security Software & Services
NFLX Netflix, Inc. 25.25% Music & Video Stores
TIVO TiVo Inc. 24.80% CATV Systems
FTO Frontier Oil Corp. 24.49% Oil & Gas Refining & Marketing
RKT Rock-Tenn Co. 24.37% Paper & Paper Products
ATHR Atheros Communications Inc. 24.08% Semiconductor - Integrated Circuits
IVN Ivanhoe Mines Ltd. 24.04% Industrial Metals & Minerals
JOE The St. Joe Company 23.89% Real Estate Development
MRO Marathon Oil Corporation 23.85% Oil & Gas Refining & Marketing
ZOLT Zoltek Companies Inc. 23.68% Industrial Electrical Equipment
DNBK Danvers Bancorp Inc. 23.49% Savings & Loans
CEVA CEVA Inc. 23.46% Semiconductor - Specialized
LXU LSB Industries Inc. 23.41% Electronic Equipment
FRG Fronteer Gold Inc 23.27% Gold
BORN China New Borun Corporation 23.17% Beverages - Brewers
TIBX Tibco Software, Inc. 23.08% Business Software & Services
PPO Polypore International Inc. 23.01% Industrial Equipment & Components
EP El Paso Corp. 22.97% Oil & Gas Pipelines
NATI National Instruments Corporation 22.93% Technical & System Software
ADTN ADTRAN Inc. 22.89% Communication Equipment
ING ING Groep NV 22.68% Life Insurance
AET Aetna Inc. 22.65% Health Care Plans
REN Resolute Energy Corporation 22.29% Independent Oil & Gas
CAB Cabela's Inc. 22.11% Sporting Goods Stores
SFLY Shutterfly, Inc. 22.10% Consumer Services
FEIC FEI Co. 22.04% Scientific & Technical Instruments
IDCC InterDigital, Inc. 22.02% Wireless Communications
SWKS Skyworks Solutions Inc. 21.97% Semiconductor - Integrated Circuits
BIDU Baidu, Inc. 21.91% Internet Information Providers
HP Helmerich & Payne Inc. 21.91% Oil & Gas Drilling & Exploration
VSEA Varian Semiconductor Equipment  21.88% Semiconductor Equipment & Materials
QNST QuinStreet, Inc. 21.76% Advertising Agencies
PANL Universal Display Corp. 21.73% Computer Peripherals
SOLR GT Solar International, Inc. 21.71% Semiconductor - Specialized
SYNT Syntel, Inc. 21.57% Information Technology Services
BX The Blackstone Group 21.55% Asset Management
FSLR First Solar, Inc. 21.36% Semiconductor - Specialized
ATI Allegheny Technologies Inc. 21.22% Industrial Metals & Minerals
ATML Atmel Corporation 21.10% Semiconductor - Broad Line
HSC Harsco Corporation 21.08% Steel & Iron
GDP Goodrich Petroleum Corp. 21.03% Independent Oil & Gas
ARW Arrow Electronics, Inc. 21.02% Electronics Wholesale
GLW Corning Inc. 20.96% Communication Equipment
OTEX Open Text Corp. 20.80% Application Software
OCLR Oclaro, Inc. 20.76% Semiconductor Equipment & Materials
DB Deutsche Bank AG 20.73% Foreign Money Center Banks
BBVA Banco Bilbao Vizcaya Argentaria, S.A. 20.70% Foreign Regional Banks
FMCN Focus Media Holding Ltd. 20.61% Advertising Agencies
GMCR Green Mountain Coffee Roasters Inc. 20.54% Processed & Packaged Goods
BCS Barclays PLC 20.40% Foreign Money Center Banks
KELYA Kelly Services, Inc. 20.37% Staffing & Outsourcing Services
COHR Coherent Inc. 20.31% Scientific & Technical Instruments
SSW Seaspan Corp. 20.31% Shipping
HS HealthSpring Inc. 20.28% Health Care Plans
NVLS Novellus Systems, Inc. 20.08% Semiconductor Equipment & Materials
OPEN OpenTable, Inc. 20.01% Business Services

[Video] WSJ - Mutual Funds Get Hip to Social Media - Sort Of

The world of social media is a minefield with SEC and FINRA regulation, but a few of us are trying to push the envelope.  The bigger firms are still mostly resistant although I've seen some have joined twitter or created their own blog sites - but much of the information on it is relatively generic and more along the lines on how to plan for retirement and such.  It is going to be interesting to see how this develops over the next 5 years as the strict oversight of the industry overlaps with a quickly changing landscape.

2 reporters at the Wall Street Journal discuss the current environment - 4 minutes

[Dec 3, 2010: Bloomberg- Tweeting Restrictions Risk Leaving Brokers Without Saying Much]

Back to the Grind Up

Last week was a particularly debilitating one for the bearishly inclined.  Using old school technical analysis, the close below a key moving average - and on lows of the week - a week ago Friday should have thrown some caution into the wind.  The 20 day moving average was my line in the sand - any close below that level would have been the first such event since November 2010.  However, those who have been observing the market closely since 2009 realize almost every Monday starts with a morning gap up of 0.2-0.4%.  And the first day of the month has been a party of excess.  So while the S&P 500 finally broke key support on the Egypt news, bears were faced with the 1, 2 punch of a Monday morning gap up and a "always up" first day of the month combo the following day.  They were somewhat predictably punched out.

By Tuesday afternoon the discussion had taken a complete 180, and the technical analysis had turned from broken support levels to new yearly highs.  Closing on the week's lows meant nothing, as with just about any historical measure the bears once used - sentiment, overbought measures, consecutive days without a break of support, divergences - any of it, completely meaningless in the new paradigm market.

While the small caps (via Russell 2000) continue to lag, transports diverge, and emerging markets remain troubled as the fight to combat The Bernank's inflation continues, broader U.S. markets continue back on their grind up.  Interestingly, the year END target for most strategists coming into 2011 was 1400, and we're already at 1310.  That is only 6.8% away, and one must wonder how it will play out considering there are 10 more "first days of the month" (and each by definition must now lead to gains of 0.5 to 1.5%) what is left for all the other days of the year.  Then again, the S&P 500 is on a pace for 45%+ gains, so why settle for 1400 when 1800 will do?

10 year bonds did break out of a range, crossing over 3.5% for the first time in a long time - but until this gets over 4% I don't expect the market to worry much.  The 2 key levers of the globe, as I mentioned months ago, are rice and crude oil.  The former is breaking out which shall put more pressure on the 3B of the world who use it as a staple foodstuff, whereas the latter seems pretty constrained around $90.   If rice continues its move, I'd expect more aggressive measures out of Asian central banks and governments (price controls, stockpiling) in the months ahead.

With the first week of the month being the only one market participants seem to put any weight on economic news, the calender this week will be more or less meaningless.  The only exciting event is Wednesday's showdown between Bernanke and Ron Paul, but that is solely for entertainment purposes.  Other than that, it's just back to the grind up in the unshortable market.

Sunday, February 6, 2011

Oliver Wyman: The Financial Crisis of 2015

An interesting paper by international management consulting firm Oliver Wyman, on the potential for the next Financial Crisis to play out around 2015.  This is not necessarily a 'prediction' per se, but an outline of the next black swan.  At the heart of it is once more.... central bankers, especially those of an American kind.   I am 100% sure the central bankers will cause another crisis, but what year and via what instruments is a guess.  I proposed emerging markets and/or commodities in 2009 as the most likely outcome (the next crisis is never the same as the last crisis) and this is the same path Oliver Wyman also utilizes.   Frankly the global political upheaval of rising food prices (not to mention energy) has me finding it hard to believe the central bankers can just print to their heart contents for years more on end, so I am finding it difficult to figure how the end game looks.  Then again The Bernank says global food inflation is not due to his acts, only the ever rising stock market can he take credit for.  Either way, I continue to believe Bernanke today is Greenspan 1998 - a semi deity ("the Maestro") who can control the world and save us from everything; but Bernanke 2018 will be seen in the same light as Greenspan 2008.
  • The sub-prime crisis of 2007 will not be the last financial sector crisis.
    Even during the relative calm of the last 25 years, we witnessed the
    property crises of the early 90s, the Asia currency crisis, the LTCM/
    Russia crisis and a number of other smaller emerging markets-led
    financial crises
    . We are due another crisis soon.
  • Financial services executives and regulators have worked hard to
    design a safer and more stable financial system, but we will not know
    whether they have succeeded until it is tested by the next crisis. The
    first aim of our 2015 crisis scenario is to stress test the design of the
    new financial system, to consider how well it would stand up to this
    type of adverse scenario
  • The broader aim of the report is to encourage readers to think about
    the future financial system using several scenarios rather than basing
    decisions on a single predicted course of events
  • Our scenario is not a prediction. Our aim in describing it is to show
    that current efforts underway to create a better system should not
    be taken as an assurance that the system is now safe from future
    crises. Other plausible scenarios may show the same thing, though
    potentially with different strategic implications. We encourage you to
    use several such adverse scenarios in your planning, tailoring them to
    the risks facing your institution.
  • The financial crisis of 2008 shook politicians, bankers, regulators,
    commentators and ordinary citizens out of the complacency created
    by the 25 year “great moderation”. Yet, for all the rhetoric around a
    new financial order, and all the improvements made, many of the
    old risks remain.
    The basic regulatory framework – of bank debtor
    guarantees and regulatory bank capital and liquidity minima (that is,
    of risk subsidies and compensatory risk taxes) – has been maintained
    with tweaked parameters. And, within this system, bank shareholders,
    bondholders and executives still have incentives that might herd them
    towards excessive risk taking.

The full pdf is here, but the The Atlantic does a nice job describing the stress case as outlined in the pdf.  Again, this is but one scenario... 
  •  The world is slowly inflating a commodities bubble that could burst just like the housing market in 2008, creating an even more devastating worldwide recession.
  • Let's start in 2011. The world is in a three-speed recovery, with Europe at the bottom, the U.S. in the middle, and Asia growing between 6 and 10 percent. If you're an investment bank looking for high returns, where do you look? The fastest gains are in the hottest markets, and the hottest markets are in the developing world. In particular, commodities investments (gold, silver, platinum, rare earth metals, oil) have soaked up lots of excess global money supply and central banks have dropped their interest rates.  
  • In the U.S. housing bubble, over-valued homes encouraged families to go on a debt-fueled spending spree In the commodities run-up, emerging economies are on their own spending sprees, building up their cities and digging out more valuable metals. But just as the housing bubble was powered by a false faith that home prices would rise forever, it's wrong to believe that commodity prices have no ceiling due to insatiable demand from China, India and other developing countries.
  • The year is 2013. Western banks are investing heavily in new growth markets. Emerging economies are raking in investments to finance huge development projects and live outside their means (Real stat: in Brazil, public debt rose 13 percent in 2010 and household debt-to-income doubled in five years). Both sides are betting on the continued rise of commodity prices.
  • Now look at China, the world's largest commodities buyer. Prices for Chinese goods continue to rise dramatically in 2013 and the country's cheap currency isn't appreciating fast enough to offset rising food and metal prices. To fight back rampant inflation, China hikes up its interest rates and accelerates its currency appreciation. This has two side-effects. First, exports fall hurting the economy. Second, home values stop rising, hurting middle class Chinese families.
  • The Chinese economy, once an unstoppable commodity consumer, slows down. Investors freak out. Commodity prices collapse and the countries that export them (Russia, Brazil, Latin America, Africa) find themselves in the same position as an over-leveraged home owner in 2008. They've made promises based on the rising price of an asset whose price is suddenly collapsing. Everybody pulls back at once. It's another global recession.
  • The first wave hits international banks with direct exposure to Latin American development projects. The second wave hits U.S. insurers with indirect exposures through investments in infrastructure funds and bank debt. 
  • The third wave hits Western governments. A price crash in commodities along with a banking crisis could move developed countries dangerously close to deflation. Governments would respond the same way they responded to the Great Recession: by spending lots of money. But do we have the capacity to absorb another round of deficit spending? It's not clear.

To review how Great-Great Recession 2015 would affect the world:
  1. The commodity producers --  Latin America, Africa, Russia, Canada and Australia -- will have seen the price of their chief asset plummet overnight.
  2. China, the world's largest commodity importer, will have unwittingly created its own painful squeeze by getting trapped between inflation and an undervalued currency. 
  3. The developed world economies will have seen another round of foolish betting require yet another round of government bailiouts.

But in the meantime we party like it's 1999!

If Friday's Employment Data Confused You...

... this story via AP should help 'clear' it up.  There remains a lot of confusion even by economists who follow this stuff for a living.  Essentially the larger story is traditional businesses are not hiring at pace so large swathes of America are either (a) dropping out of the workforce or (b) becoming self employed.  Hence the new workers in category b respond affirmatively when the household survey calls and asks "are you working?".  Even if working means selling some of those old Beanie Babies on their new fangled Ebay store.  Of course calling 60,000 households and trying to extrapolate that over a 130M workforce is a bit aggressive but that is the survey that calculates the unemployment rate.

Further, please recall that if one is not actively seeking work for 4 weeks, they are no longer unemployed per American government statistics.
  • The Labor Department survey of company payrolls showed a net gain of 36,000 jobs in January. That's scarcely one-fourth the number needed to keep pace with population growth.  
  • The government uses a separate survey of households to calculate the unemployment rate. It calls 60,000 households and asks people if they're working or looking for a job.  This survey includes some people not counted in the payroll survey: the self-employed, farm workers and domestic help. It also includes those who work at small companies.  (this is the survey that calculates the unemployment rate)
  • By contrast, in the payroll survey, about 140,000 businesses and government agencies send forms to the Labor Department showing how many people are on the payroll and how many hours they worked. The payroll survey can be slower than the household survey to recognize startup companies. (this is the survey that shows jobs created or lost)

So as Americans cannot find work in traditional routes, they are turning to self employment:
  • The number of people who described themselves as self-employed rose by 165,000 to 9.7 million in January, the report said. 

The 0.8% drop in unemployment rate over the past 2 months is very rare - but a lot of this has happened since people are deserting the workforce altogether.   Another 200,000 seemed to disappear last month.
  • The last time the unemployment rate fell so far so fast was in 1958, when it dropped to 6.2 percent from 7.1 percent in two months. At the time, the economy was bouncing back from an eight-month recession.   The rate is falling now in part because some people without jobs have stopped looking. The number who have given up looking rose to 2.8 million last month, from 2.6 million in December.
"U-6" which is the broader measure of unemployment remains stubbornly over 16% but dropped last month; of course it is also affected by the issues above, and unfortunately appears to be understating the situation as well.
  • The number of people who are employed part-time but would rather be working full-time fell to 8.4 million from 8.9 million in December. Combined with the 13.9 million unemployed and people who have given up looking for work, roughly 25 million people were "underemployed" last month. They amounted to 16.1 of the labor force, down from 16.7 percent in November.

Of course all these numbers have been made 'sunny side up' versus how they were measured in the 80s and 90s - by both parties.  When I was reverse engineering current standards back to how things used to be measured it essentially added 3-4% to the unemployment rate so our 9% is closer to 13% in the 1980s methodology.  [Oct 2, 2009: True September Unemployment in America Reaches 14%; Our System is Broken] On top of that if we had a normal workforce participation rate we'd add another 2.5% or so on top of that.

Bigger picture, we continue to evolve into a bifurcated society, where frankly due to outsourcing and innovation, many people are no longer needed (until the next housing bubble of course).   [Sep 22, 2009: BusinessInsider - The Real Problem is the Economy Does Not Need you Anymore]  And of the jobs being created, many are a far cry from what create a middle class living, and often don't pay the ones that disappeared the past 10+ years, even before adjusting for inflation.  [Feb 3, 2011: CNNMoney - Jobs Coming Back, but the Pay Stinks!]


Meanwhile the "socialists" to the north, have now recovered all the jobs lost during the Great Recession and pathetically added more jobs than the U.S. did in January despite 1/10th of the population.  And no Canada did not blame snow for the inability to add jobs in January... apparently their firms still somehow hire people during snowstorms.
  • Canada's labor market generated a better-than-expected 69,200 new jobs in January, moving the country ahead of other developed nations in recovering all the jobs lost during the recession.  The January employment boost was about four times greater than economists had predicted and the largest since last April. Economists had expected 15,000 new jobs.
  • Statistics Canada said Friday that there are 327,000 more Canadians working since January 2010, and 467,000 more jobs since the downturn ended in July 2009. (in U.S. terms this would be equivalent to 4.5 million jobs added)
  • To weather the recession, the Conservative government created 222,000 jobs through a mix of tax cuts, unemployment benefits, infrastructure spending and industry support in the wake of the global financial crisis.  Since then, the Canadian economy has recovered at a faster pace than its G-7 counterparts.
  • With these economic gains, the country's finance minister Jim Flaherty has said the government is on its way to balance budgets by 2015 through planned spending freezes and the end of stimulus funding.

Friday, February 4, 2011

[Video] Marc Faber to Ben Bernanke - You Lie!

It is doubtful there is a better combination of colorful commentator + astute investor in the world, than Marc Faber.  I have not posted a video of his in a long while but earlier this week he was on CNBC Europe saying U.S. inflation data is essentially a big fib.  Among other things.  Granted Bill Gross and quite a few others have now come around to this viewpoint, but it is one thing to say it and quite another to say it with Faber's flair.  Enjoy

Email readers will need to come to site to view - 5 minutes

Global inflation is far higher than official statistics reveal, Marc Faber, editor and publisher of the “Gloom, Boom and Doom” report told CNBC on Wednesday, with increases in the cost of living amounting to between five and eight percent in the United States and just below that in Europe.

“I guarantee you … the annual cost of living increases are more than 5 percent, and the Bureau of Labor Statistics is lying,” Faber told CNBC at the Russia Forum in Moscow.

“Mr Bernanke is a liar; inflation is much higher than what they publish. I would imagine for most households it’s between five and eight percent per annum in the United States and in Western European countries maybe a little bit lower but also around four and five percent per annum,” he said.

In addition, Faber said high food prices, which have sparked political unrest in Egypt, would next cause turmoil in Pakistan.

“You may not have the problem in Saudi Arabia and the Emirates because there the governments can heavily subsidize food if they want to, but I’m particularly worried that what has happened in Egypt will happen in Pakistan,” he said.

Asked whether Pakistan would indeed see an Egypt-style uprising, he said: “I think that will be the case.”
“I think Egypt is a reminder to people that politics and social events and geopolitics have a meaningful impact on asset markets,” Faber said, adding that what the world was currently witnessing was “a wake up call where the US outperforms emerging markets for a while.”

“That doesn’t mean that the US goes up. It just may go down less than the others,” he said.

Turning to the global economic recovery, Faber said the West was bottoming out and recovering, which meant the global economy looked “OK” for the next six months.

But “we’re all doomed in the long run,” he said.

“We have to realize it’s an artificial recovery driven by ultra-expansionary, monetary policies and also ultra-expansionary fiscal policies. In other words, the deficits of governments are huge and that will lead down the road to renewed problems,” he said.

[Videos] Best Super Bowl Ads You'll See Sunday - You'll See Them Here uhhh... Second... maybe Third

Looks like it is going to be one of those days where trillions slush around and the market goes nowhere, expect maybe in the closing minutes as people front run "always up premarket Monday".  So for your mental stimulation here are a few of the ads to be shown this Sunday - courtesy of BusinessInsider

Being a Star Wars child, my pick for cutest: Volkswagen - The Force

I admit to being a huge fan of all the Careerbuilder.com chimpanzee commercials the past 5 years; here is the latest:  Parking Lot

Pretty amusing: Cars.com - Go First

Far and away the grossest: Doritos - Best Part


Also if you want to see 8 dot com era Super Bowl ads, from companies that ceased to exist follow this link for a trip down memory lane..... ah January 2000.

Looks like Groupon is going to be the big dot com splash of 2011.  I am going to be very interested what Salesforce.com (CRM) puts out - not exactly a product that applies to the average consumer.

Pregame Commercials

  • Ford
  • Groupon
  • GoDaddy.com
  • The Eagle [Focus Features]
  • Kung Fu Panda 2 [DreamWorks/Paramount]
  • Battle: Los Angeles [Sony]
  • Priest [Sony]
  • Just Go With It [Sony]

Game Commercials

  • Coca Cola (two 60 second slots)
  • Pepsi Brisk (30 seconds)
  • Pepsi Max (three 30 second slots)
  • Doritos (three 30 second slots)
  • Snickers (30 seconds)
  • Stella Artois (60 seconds)
  • Budweiser (60 seconds)
  • Bud Light (three 30 second slots)
  • Audi
  • Hyundai (three slots)
  • Kia (60 seconds)
  • Mercedes-Benz (60 seconds)
  • Chrysler
  • GM Chevy (five 30 second slots)
  • Volkswagen (two 30 second slots)
  • BMW
  • Suzuki
  • Careerbuilder (30 seconds)
  • GoDaddy.com (two 30 second slots)
  • E*Trade
  • Cars.com (two 30 second slots)
  • Salesforce.com (two slots, one 30 seconds and one 15)
  • Cowboys & Aliens [DreamWorks/Universal]
  • Limitless [Relativity Media]
  • Pirates of the Caribbean: On Stranger Tides [Disney]
  • Rango [Paramount]
  • Super 8 [Paramount]
  • Thor [Paramount]
  • Transformers: Dark of the Moon [Paramount]
  • Captain America: The First Avenger [Paramount]
  • HomeAway (30 seconds)
  • Bridgestone (two 30 second slots)
  • Skechers (30 seconds)
  • Teleflora (30 seconds)
  • CarMax (two 30 second slots)
  • Best Buy (30 seconds)
  • Groupon
  • Rio [20th Century Fox]

Postgame and Glee

  • Postgame show sponsored by GM Chevy
  • E*Trade
  • Justin Bieber: Never Say Never [Paramount](Glee)
  • Take Me Home Tonight [Relativity Media](Glee)

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