Tuesday, February 22, 2011

Only Second Revisit to 20 Day Moving Average Since Thanksgiving

Finally an exciting day.... this is only the second episode (Egypt being the other) where the S&P 500 has retraced to the 20 day moving average since Thanksgiving.  Let's see what the dip buyers do.

Bears will want at minimum a close below the 20 day, and to stay there for a few days.  If that happens, a good chance like in November a move to the 50 day (which of *course* would be the buying opportunity of the decade) ;)  But the bears mortal enemy - the first day of the month - is next week so let's see what is in store... 

Dip Buyers Feel Pain for First time in.... a While

After this morning's buy the dip knee jerk reaction, for the first time in a long while some dip buyers find themselves underwater.   Until a pattern breaks, traders will repeat it indefinitely - the fad since QE2 was hinted was buy every dip.  What has changed nowadays is these patterns don't reverse for a very long time.  Aside from some trouble in November due to Ireland, this has been the only trade in the market.

Still nowhere near the 20 day moving average - much like a month ago when I mentioned this was my line in the sand, we are nearing it close to the end of the month.  But with the first of the day month effect almost always leading to big up days, that was reversed quickly and it's been non stop upside since.

Pavlov Dogs

After gapping down to SP 1325 or a loss of 18 points the frenzied dip buyers are rejoicing at a chance to buy into a market where the only losers are bears.  We have already surged 9 points from the open, erasing half the losses in some 40 minutes.  Buy the dip has become ingrained because dips only come once every 3 weeks.  And usually they are of the 0.3% variety.  We have become Pavlov dogs and my earlier question about how soon the dip buyers would show up has become rhetorical.

Now we see if we can go green by end of day.

Lots of damage in some individual stocks under the surface however...

Tuesday Morning Surprise

Markets are putting investors in unfamiliar territory this morning, an actual down open of note.  The market has been so teflon coated it feels foreign.  Aside from the Friday morning when the Egyptian riots actually affected the psyche this appears to be only the 2nd serious selling pressure day of the year...

Obviously the events in Libya weigh as the country carries 2% of the world's oil production.  Unlike Egypt the head honcho is not a U.S. ally and at least in this moment is acting far more brutal towards his people so the questions are a bit broader.

Taking away the truly horrid things happening on the ground, the larger issue is uncertainty and if this regional unrest gets to larger oil producing countries (larger in terms of production).  Most have a different leadership situation and have been acting ahead of the curve... for example immediate raises for workers, and in Kuwait's case for example paying for a year's supplies of food for its citizens.  These countries obviously have the means to do so, due to oil.

So the next question is how soon does the dip get bought? will buyers show up within milliseconds? The POMO operation? Or heck, not until tomorrow?  Because after all..markets cant go down anymore....

Oil. Rice. Remember these are the 2 key levers to watch in the world economy.

Friday, February 18, 2011

Rare Stocks/ETFs that Fell the Past Half Year aka "72 Losers"

If you are at least an average dart thrower you could have made mad money blind folded the past half year.  With the S&P 500, NASDAQ, and Russell 2000 up between 30-35% in that time frame, it would have taken a very specialized skill set to pick losers since Bernanke declared war on bears at Jackson Hole, Wyoming.  But it was possible.... here are the unsavory stocks/ETFs that some unlucky souls may have embraced, missing out on the party. 

My target pool is some 2020 stocks/ETFs, with market cap over $300M, stock price over $10, and trading at least 200,000 shares a day.   Of that, only 3.5% of the entire market lost at least 5%...  72 shameful actors.  (to put it in perspective the best 72 stocks/ETFs in the same time frame gained between 113-400%)

Ticker Company Loss Industry
TZA Direxion Daily Small Cap Bear 3X Shares -66.2% Exchange Traded Fund
ENOC EnerNOC, Inc. -41.6% Business Services
SKF ProShares UltraShort Financials -38.8% Exchange Traded Fund
SDS ProShares UltraShort S&P500 -38.6% Exchange Traded Fund
AMAG AMAG Pharmaceuticals, Inc. -38.1% Diagnostic Substances
ACOR Acorda Therapeutics, Inc. -30.7% Biotechnology
ALNY Alnylam Pharmaceuticals, Inc. -27.9% Biotechnology
UEPS Net 1 Ueps Technologies Inc. -27.3% Business Services
SCO ProShares UltraShort DJ-UBS Crude Oil -24.4% Exchange Traded Fund
NKTR Nektar Therapeutics -24.3% Biotechnology
CISG Cninsure Inc. -24.1% Insurance Brokers
AUTC AutoChina International Ltd. -23.3% Diversified Investments
SKX Skechers USA Inc. -22.4% Textile - Apparel Footwear & Accessories
MSI Motorola Solutions Inc. -21.6% Communication Equipment
CLNE Clean Energy Fuels Corp. -21.2% Gas Utilities
HMIN Home Inns & Hotels Management Inc. -21.0% Lodging
GNK Genco Shipping & Trading Ltd. -21.0% Shipping
HGG hhgregg, Inc. -18.8% Electronics Stores
STRA Strayer Education Inc. -18.4% Education & Training Services
THOR Thoratec Corp. -17.7% Medical Instruments & Supplies
AMLN Amylin Pharmaceuticals, Inc. -17.2% Biotechnology
JNY Jones Apparel Group, Inc. -16.9% Apparel Stores
HTHT China Lodging Group, Limited -16.5% Lodging
RSH RadioShack Corp. -16.1% Electronics Stores
CSCO Cisco Systems, Inc. -15.9% Networking & Communication Devices
CPLA Capella Education Co. -15.6% Education & Training Services
FSYS Fuel Systems Solutions, Inc. -15.5% Auto Parts
PWRD Perfect World Co., Ltd. -15.0% Application Software
EIM Eaton Vance Municipal Bond Fund -14.6% Closed-End Fund - Debt
GOLD Randgold Resources Ltd. -14.0% Gold
TLK Perusahaan Perseroan (Persero) PT  -13.8% Telecom Services - Foreign
TLT iShares Barclays 20+ Year Treas Bond -13.7% Exchange Traded Fund
EJ E-House (China) Holdings Limited -13.6% Property Management
MNTA Momenta Pharmaceuticals Inc. -13.4% Biotechnology
STRI STR Holdings, Inc. -12.0% Specialty Chemicals
AUXL Auxilium Pharmaceuticals Inc. -11.7% Drug Related Products
LFT Longtop Financial Technologies Limited -11.3% Business Software & Services
CETV Central European Media Enterprises Ltd. -11.1% Broadcasting - TV
NAT Nordic American Tanker Shipping Ltd. -10.9% Shipping
MBT Mobile Telesystems OJSC -10.6% Wireless Communications
EXPE Expedia Inc. -10.3% Lodging
WPRT Westport Innovations Inc. -10.1% Pollution & Treatment Controls
DLB Dolby Laboratories Inc. -9.9% Diversified Electronics
HDB HDFC Bank Ltd. -9.9% Foreign Regional Banks
DNDN Dendreon Corp. -9.4% Biotechnology
GFA Gafisa S.A. -9.3% Residential Construction
LFC China Life Insurance Co. Ltd. -9.2% Life Insurance
PML PIMCO Municipal Income Fund II -9.2% Closed-End Fund - Debt
DWA DreamWorks Animation SKG Inc. -8.9% Movie Production, Theaters
TNK Teekay Tankers Ltd. -8.7% Shipping
CHL China Mobile Limited -8.1% Wireless Communications
AGO Assured Guaranty Ltd. -8.0% Surety & Title Insurance
HBI Hanesbrands Inc. -8.0% Textile - Apparel Clothing
EGO Eldorado Gold Corp. -7.8% Gold
WWE World Wrestling Entertainment Inc. -7.7% General Entertainment
VGR Vector Group Ltd. -7.6% Cigarettes
AB AllianceBernstein Holding L.P. -7.5% Asset Management
MMYT MakeMyTrip Limited -7.4% General Entertainment
MPWR Monolithic Power Systems Inc. -7.1% Semiconductor - Specialized
NPM Nuveen Premium Income Municipal Fund 2 -7.0% Closed-End Fund - Debt
FBR Fibria Celulose SA -6.8% Paper & Paper Products
DFT DuPont Fabros Technology, Inc. -6.6% Property Management
LNCE Lance, Inc. -6.5% Processed & Packaged Goods
ENI Enersis S.A. -6.5% Foreign Utilities
NUVA NuVasive, Inc. -6.1% Medical Instruments & Supplies
CEDC Central European Distribution Corp. -5.8% Beverages - Wineries & Distillers
ETR Entergy Corporation -5.7% Electric Utilities
NIO Nuveen Insured Municipal Opportunity Fund -5.3% Closed-End Fund - Debt
FRO Frontline Ltd. -5.3% Shipping
AKAM Akamai Technologies Inc. -5.2% Internet Information Providers
IEF iShares Barclays 7-10 Year Treasury -5.1% Exchange Traded Fund
CREE Cree Inc. -5.0% Semiconductor Equipment & Materials

Solar's Turn

Usually I'd say you know you are late in the rally when the solars start taking off, but since every other historical indicator I use has become moot under The Bernank, I'll just pass this along as information and sit back as Groundhog Day happens for the upteempth time since late August.   Looks like Yingli Green Energy (YGE) and Sunpower (SPRWA) earning reports are the drivers today, but these already had started to move en masse late last week.  I don't follow this sector closely anymore as it is a heartbreaker (after dry bulk shipping, probably the worst sector the past few years) ... heck even Solarfun (SOLF) has gotten serious and changed its name to Hanwha SolarOne (HSOL) after the Korean company took a major stake.  (what fun is that?)

At this point just change the name of the laggard sector, and repeat the parabolic moves.  Refiners, solars, you name it - we can Bernank it upward.

A sampling of names in this group...

No positions

Aruba Networks (ARUN) Scorches Upward, Despite CFO Departure

Aruba Networks (ARUN) is a name I've been watching for half a year or so, but have not mentioned in the blog.  This company is part of the 'mobile internet' tsunami if you will, and has had quite a year - hence showed up on quite a few of my screens. 

Last evening the company reported a solid quarter - very good growth but not far much above expectations (beat by 1 cent), WITH the CFO resigning.  Now there appears to be a good reason for the CFO leaving (venture capital) but that usually adds at least some questions to shareholders.  Not in the current environment.  Further, I can't recall many times when a 1 cent beat led to a 15% surge in shares.  Guidance was "fine" but nothing special versus expectation.  This is ebullient action, and showcases this market is a death trap for anyone daring to bet against it.

Revenue was a solid beat at $93.9M vs analysts $87.9M, while non GAAP EPS came in at .14 v .13.   (full report here)  The forward PE is now well above 50, but valuation is only a state of mind in the current frenzy.

Via IBD:
  • Aruba Networks (ARUN) late Thursday announced the surprise resignation of its CFO, but reported second-quarter results that beat analysts' views and maintained its triple-digit profit growth pace.  The maker of products that help workers link securely into computer networks with mobile devices also beat views with its Q3 outlook.
  • Aruba said per-share profit minus special items soared 133% to 14 cents from 6 cents a year ago. Sales for the quarter ended Jan. 31 jumped 50% to $93.9 million.  Analysts polled by Thomson Reuters had expected 13 cents on sales of $87.9 million.
  • For the current quarter, it sees EPS minus items of 14-15 cents on sales of $95 million-$98 million, where analysts were expecting 14 cents and $92.2 million.
  • "The phenomenon we are seeing is BYOD, or bring your own device," Aruba CEO Dominic Orr said on a conference call with analysts. "Employees expect to use their smart phones securely and immediately."
  • But the company also said that, after six years at Aruba, CFO Steffan Tomlinson would leave for an unnamed venture capital post on March 31. 
  • The stock has jumped 167% since early May.
  • "We believe that the enterprise network is transitioning from a wired-centric to a mobility-centric architecture and the market is recognizing Aruba's unique ability to address the requirements of this new architecture," CEO Orr said in a statement.
  • Aruba specializes in enterprise wireless access gear that securely controls mobile data for companies and other enterprises. It calls the much larger, broader-based Cisco Systems (NMS:CSCO) its top rival. Aruba says its focus helps it compete in its niche.  Aruba's access controllers aim to securely manage wireless communications going in and out of local area networks. Software systems in the data center filter the traffic to detect intrusions.
  • "As more mobile devices get used, they'll need to access the network locally," said UBS analyst Jack Monti. "Aruba plays an important role in filling that demand."  
  • Also, most of Aruba's clients run on the older 11g Wi-Fi wireless standard. Many are now converting to a faster 11n standard. This upgrade cycle should create "a multiyear tail wind for Aruba," said Gleacher & Co. analyst Stephen Patel.
  • Lately, Aruba's gross profit margins had been above its average 67%-70%, says Blaine Carroll of Hudson Securities, but the Q2 margin was 67.6%.
No position

Silver (SLV) Broke Out Yesterday

While gold has been a bit of a laggard, silver has broken to yearly highs (and I believe all time highs as well - don't quote me).  Look for trend type traders such as myself to pile in here, now that a 'double top breakout' has ensued.

I am using the ETF for charting purposes rather than the metal itself....

No position

BW: A Twitter Knockoff has China Talking

Looks like Sina (SINA) is starting to get some mainstream financial press - no longer our secret.  I think in the long run it would be smart for Sina to do an IPO just for Weibo.  If Twitter is valued at $10B for 175M users, you can imagine the feeding frenzy for Weibo by American investors. 

Via BusinessWeek:

  • Ye Fangzhao, a 25-year-old freelance brochure editor for auto companies, abandoned Twitter a year ago to start using Sina Weibo, China's homegrown equivalent. Now he's on the micro-blogging service 10 hours a day, using it to connect with motoring experts and keep up on trends. "I don't need to go to bookstores or buy magazines," says Ye, who lives in Xiamen, on China's east coast. "It saves me time and money."
  • Sina Weibo has become China's leading site for micro-blogging, the Twitter-inspired phenomenon focused on extremely short messages. The site is responsible for 87 percent of the time spent on micro-blogging services in China, says Eric Wen, an analyst at Mirae Asset Securities in Hong Kong.
  • In the lead-up to the 20th anniversary of the Tiananmen Square protests in June 2009, the Chinese government blocked Twitter. Shortly after, during ethnic riots in Xinjiang, Facebook went dark, too. The ensuing social media vacuum left an opening for Sina Weibo, which appeared in August of that year. Rivals such as Tencent, Sohu, and NetEase (NTES) didn't begin rolling out their own micro-blogging services until early 2010. That gave Sina Weibo a head start, and it is now a top information source for many Chinese—and often an outlet for the controversial topics avoided by state-controlled media.
  • Weibo is a division of Sina Corp. (SINA), which operates China's third-most-visited website. Sina's shares, traded in the U.S. on the Nasdaq exchange, have almost tripled in price since Weibo's launch, and the company has a $5.7 billion market capitalization. 
  • Although Weibo does not yet make money, it is at the forefront of Sina Chief Executive Officer Charles Chao's effort to turn the company's sites into the premier destination for China's 450 million Internet users. He hopes Weibo's popularity will help Sina evolve from a Yahoo! (YHOO)-like portal that creates content internally to a Facebook-like site that attracts outside developers. "Our strategy is to build a platform that is open to everybody," he says.
  • Weibo mimics the format of Silicon Valley's micro-blogging pioneer. "We learned much from Twitter," says Chao. Weibo limits posts to 140 characters—though in Chinese, in which many words are just two or three characters, a lot more can be expressed under that constraint than in English. Weibo users follow and comment on updates from other members and can post photos and videos.
  • Celebrities are a big part of Weibo's appeal. The most popular accounts belong to entertainers such as actress Yao Chen, who has 5 million-plus followers. Just as "tweet" has become a verb in English, "zhi weibo"—literally "to knit a scarf"—has entered the lexicon in China. ("Weibo" means "micro-blog" but sounds like Mandarin for scarf.)
  • Like other Internet services in China, Weibo deletes or limits sensitive posts as required by the government. Nicholas Kristof, the New York Times columnist who often writes about human-rights issues in China and elsewhere, opened an account late last year. Kristof, who can write in Chinese, says censors deleted his account after five posts, one of which mentioned the 1989 Tiananmen Square crackdown. During the recent anti-Mubarak protests in Cairo, a search for "Egypt" returned only an explanation that legal restrictions prevented Weibo from displaying the results.
  • Despite censorship, Weibo is "by far the best platform for free speech" in China, says Lee Kai-fu, Google's (GOOG) former China head and one of Sina Weibo's most popular users. Although the search term for Egypt was restricted, many Weibo posts mentioned the protests, and at least one account offered a live webcast from Tahrir Square.
  • Weibo hasn't released user figures since October, when it had 50 million members, but analysts at investment firm Susequehanna International predict it will have 120 million members by 2012. Twitter had 175 million as of September. Says Ma Yuan, an analyst with investment bank Bocom International Holdings in Beijing: Weibo "is becoming the next killer application on the Internet and mobile phones."
[Feb 16, 2011: Goldman Sachs - Sina Cut to Neutral; Says Weibo Fully Valued]
[Jan 31, 2011: Sohu.com Results Should Bode Well for Sina,com]
[Jan 11, 2011: Word is Getting Out on Sina's Secret - Weibo]
[Dec 9, 2010: The Twitter of China - Weibo]
    No position

    Thursday, February 17, 2011

    Refiners are the New Cloud Computing or Social Networking Stocks

    It is interesting how the overall market is not going parabolic (instead she is slow and steady as she goes) but different sectors within the market are going parabolic.  I have not seen a move like this in the refiners since perhaps late 07 or early 08.  There is something called a crack spread which is essentially the different between inputs (crude oil) and outputs (refined petroleum) and based on how these stocks are moving, I assume it must be blowing out.  The red line below is the 20 day moving average - these are acting like Netflix or JDS Uniphase.... 30% over the 20 day for a refiner?  Holy Bernank.

    No positions

    [Video] CBS News - NOAA Crushes Commercial Fishermen

    This story is ridiculous on so many levels.  A level of paperwork that is beyond the pale; a fishermen being fined $19,000 for catching 20 extra codfish, government workers taking the bevy of fines to buy cars and fund junkets.... and to top it off, when it came time to investigate the mess, a 'shredding party' where the official admitted up to 80% of the paperwork went bye bye. Grounds for prosecution? Nope. No one was found to obstruct justice.  Indeed, said top official moved to another six figure job in NOAA.  Ah, the good life in government; I am pleased to pay for his/her (I'm sure) 6 figure pension the next 30 years.

     4 minute video

    • ... dozens of New England fishermen charge their livelihood is at risk. Sinking under the weight of 700 pages of confusing federal regulations.
    • An investigation by the Commerce Department's Inspector General found the regulations were "unduly complicated." Federal agents "overzealous" and "abusive." Excessive fines including one for $270,000 for "administrative errors."
    • The inspector general found the $30 million the fishermen paid in fines went to a NOAA fund with no oversight. The fund was used by regulators to buy more cars (202) than agents (172,) and for trips to fishing conferences in exotic locales such as Australia, Malaysia and Norway. It was also used to purchase a $300,000 "luxury vessel" used by government employees for "fishing trips." 
    • And according to this memo obtained by CBS News while under investigation NOAA officials in Washington had a "shredding party" destroying garbage bags full of documents.  The shredding truck pulled up right outside NOAA's enforcement headquarters, where the agency's top cop later admitted he destroyed 75 percent to 80 percent of his total files. 
    • An investigation found the shredding violated five federal regulations but found no evidence of obstructing justice. The man was later removed from his job but remains at NOAA as an analyst, still making a six figure salary.

    57% of Americans Still Think We are in Recession

    We have quite an amazing disconnect between what is happening on Wall Street vs Main Street (although we were told in 2008 during the bailouts that of course Wall Street = Main Street).  In a poll just released, an astounding 57% of Americans still believe we are in recession.  This despite the official end point of the recession being some 1.5 years ago.   And a stock market up 100% from the bottom ... but as we've discussed, the stock market - despite the dogma - is basically a tool that benefits the upper tranche of society.   The housing market has a much more broad psychological impact, as it touches a lot more people's lives - and we're still years away from recovery excluding certain locales like Manhattan, Washington D.C., agricultural country, et al.

    There is a litany of reasons both for the unease on the ground outside of the upper 10-15%, and for the stock market action - we've discussed them both at nauseam so I won't rehash here, but one tiny example of "what is good for Wall Street is not necessarily good for Main Street" is the news from Fair Isaac last evening.  The company announced a "restructuring" (Wall Street term for mass firing) of 200 people, plus facility consolidation (hurting small business around any location that is soon to be closed).  This 200 people is out of a workforce of just over 2000, or 10% of the company.  Of course this is great for profits - 2 firms rushed in this morning to upgrade the stock and FICO is booming 10% today.  Great for Wall Street.  Not so much for 200 families.  Or whatever area where a facility will be consolidated.  Of course as you follow the stock market, you see these announcements each month, year after year.
    • FICO the leading provider of analytics and decision management technology, today announced cost reductions as part of its ongoing reengineering program designed to concentrate resources in areas with the greatest potential for growth and profitability.
    • The company expects to reduce operating expenses through staffing reductions, facility consolidations, and reductions in discretionary spending. In connection with these actions, the company expects to eliminate approximately 200 positions and record a pre-tax restructuring charge of approximately $10 million in the second quarter of fiscal 2011, or $0.18 per share.

    The story is more intricate than this simple connection between jobs and stock price, and in no way should we be looking for companies to not be efficient or strive for profits.  But at this moment U.S. corporations are paying the lowest taxes as a % of GDP in our history (mostly due to the intricate tax maneuvers by our large multinationals), while deriving a maximum amount of profit per labor unit (humanoid).  [Of course small business is usually paying the most usurious of tax rates without offshore tax havens to arbitrage taxes down]  So it is the best of times... (if you own the capital) or the worst of times (if you are much of the labor).    And without large scale (non government. not building houses.) innovation and new productive ability in the U.S. that lead to jobs here in large scale - rather in Chindia, it is tough to make a case against those who believe the recession never really ended.

    • Over half of Americans, are of the opinion that the US is still in an economic recession, and expressed little confidence that it would improve over the next few months, a new CBS News poll has revealed.  The poll said that although the National Bureau of Economic Research has claimed that the most recent economic recession had ended in June 2009, 57 percent of the respondents do not think that way. Only 37 percent of Americans think the recession is nearly over. 
    • Nearly a third of all Americans think the national economy is getting better, while 22 percent think it is getting worse and 45 percent think it is staying the same.  
    • Three in four Americans continue to view the condition of the national economy as at least somewhat bad - about the same as last month - while over six in 10 say the same about their local job market.
    • Overall, nearly six in 10 Americans are at least somewhat concerned that they or someone else in their household will be out of work and looking for a job within the next 12 months, including a third who are very concerned.  

    Despite gasoline being a 'relatively' small expenditure it is amazing how much of an effect is is having as well.  Which is why the best thing the economy has going for it right now, is crude oil not spiking like foodstuffs.  Half of Americans are reporting financial hardships from $3 gas - that is astounding.
    • With the price of gasoline higher than it has been at any time over the past two years, 59 percent of Americans say that higher gas prices personally affect them a lot, while just 17 percent say higher gas prices don't affect them much or at all.
    • Most Americans, 52 percent, say that recent gas price increases have caused financial hardship for their household, including 29 percent who say this financial hardship is serious

      Cliffs Natural Resources (CLF) Spikes in Premarket on Earnings Beat

      I still call this company Cleveland Cliffs, but whatever the name investors still seem 'surprised' by earnings despite a rally in every commodity (save natural gas) on Earth by the results reported last evening.  The stock is up 11% in premarket.

      Via Reuters:

      • Cliffs Natural Resources Inc  reported a better-than-expected surge in quarterly profit as demand and prices for its iron ore and steel-making coal soared, and its shares rose nearly 10 percent.
      • Chief Executive Joseph Carrabba said the growth stemmed from the mining company's move to increase exposure to global pricing for its output, which was a big part of the strategy behind its pending $4 billion acquisition of Canada's Consolidated Thompson Iron Mines. 
      • Cliffs said its fourth-quarter net earnings were $384 million, or $2.82 per share, compared with $108 million, or 82 cents per share, in the quarter a year earlier.  That fourth-quarter EPS was well above analysts' estimate of $2.16, according to Thomson Reuters I/B/E/S.  Revenue rose 73 percent to $1.42 billion from $821 million, the Cleveland-based company said on Wednesday.
      • The price of iron ore, a key ingredient for steelmaking, soared over 40 percent in 2010, due to tight Indian supplies and firm demand from top importer China. The acquisition of Consolidated could give Cliffs a foot in the door with Chinese buyers as it looks to boost its Asian business.  Prices of coking coal, another steelmaking ingredient, have also surged after massive flooding disrupted shipments and production in Australia.
      • The Cliffs share price had already more than doubled since hitting a 52-week low of $44.38 last July.

      No position

      Wednesday, February 16, 2011

      China, Unhappy with Reaction to its Property Prices Data, Decides to Make it Disappear

      Before ZeroHedge there was this renegade blog called Fund My Mutual Fund. ;)  One of my oldest stories was about the disappearance of the broadest figure of money supply called M3.  [Sep 19, 2007: What is M3 and Why Do You Care?]  This figure was helpful for us armchair economists to figure out what is going on in the inflation world, but within 2 months of Bernanke's appointment to the Federal Reserve head, this figure was discontinued.  (insert grassy knoll here)  Even more bemusing was the reason - cost.  (seriously)  This from a government that runs trillion+ deficits, and a Fed with (literally) unlimited pockets (as they have shown the past few years).  This is not the only thing that has disappeared [Apr 23, 2008: Barry Ritholtz on Disappearing Economic Indicators] ... and we won't even get into all the 'adjustments' our official government statistics have absorbed over the years, to make sure they end up more sunny side up.    [May 10, 2008: Finally Some Mainstream Reports are Figuring Out the Spin from Government]   Look the bottom line is, information that is not convenient tends to go away or get "adjusted" until it burps correctly in the U.S. 

      As the world leaders, other countries look up to us.  We have taught them well... the Chinese are getting very inconvenienced by the data coming out of their property index reports.  Now let's be honest, just about anything coming out of China has to be taken with a dump truck worth of salt, unless you are a CNBC commentator.  Or HFT computer which must react to data in 1/4000th of a second.  So in no way am I implying this report was very accurate.... even with the best of intentions trying to measure a country so vast, with such variances in development would be difficult.  But it was watched by both the masses of people (who apparently were getting frustrated with what they saw) and outside observers, considering the genesis of the Chinese economy is "property building". 

      Solution to a report where you don't like the answers?

      No more report.   That will teach the statisticians to put out data the central command does not like. 

      Via WSJ:

      • China's statistics agency said it will stop publishing the country's much-watched official index of national property prices, scrapping a set of data whose accuracy was widely questioned but which also had become a rallying point for public anger over rapidly rising housing prices.  
      • The announcement Wednesday, part of a broader revision of property-price data by the National Bureau of Statistics, fueled already widespread frustration and skepticism about the quality and transparency of economic data in the world's second largest economy
      • It came just a day after the statistics bureau published a lower-than-expected inflation reading based on a revised formula for the consumer-price index that economists criticized as lacking transparency.
      • The move is likely to make it harder for executives and investors to gauge national trends in China's property sector, a huge driver of its economic growth and of global demand for steel, cement, and other inputs.
      • The national property-price index has been criticized for understating the severity of the country's property bubble by diluting the large rises in big cities with tamer changes in smaller ones. It will now publish only separate data for the 70 cities that made up the index, and it will use a new method of calculating property prices that only looks at housing, not commercial property.
      • The bureau's previous property data series relied on information from a survey of transactions, conducted at a local level. Those transactions were meant to be representative, but the series was widely criticized by analysts and the general public for failing to reflect the sharp increases in housing prices in recent years.
      • Analysts have long complained about flaws in China's official data—a problem common in developing countries—but the issue has taken on added global importance as the Chinese economy has become the world's most important engine of growth in recent years and a major factor in global markets. 
      • Last week, the International Energy Agency complained that it was unable to make a reliable forecast for China's oil demand this year because of what it called "huge uncertainties with respect to official data.
      • Chinese officials have acknowledged the need to improve. Indeed, according to a U.S. diplomatic cable published by WikiLeaks, Vice Premier Li Keqiang—widely expected to take over in two years as premier—told the U.S. ambassador in 2007 that China's GDP figures are "man-made" and therefore unreliable." (which is why it is laughable watching U.S. investors move trillions of market value based on all these figures, as if gospel ...)
      • This week's statistics changes, which come as Chinese consumer and property prices are under intense global scrutiny for signs of inflation and asset-bubble pressures, drew sharp criticism from some analysts.  "It's just like changing the scale of a thermometer, and then telling a patient they no longer need to take medicine for their fever, and the whole family cheers that the illness is cured," Xu Xiaonian, a professor of Economics and Finance at the China-Europe International Business School, said on his personal microblog Wednesday.
      • .........people don't trust the numbers because the National Bureau of Statistics "is extremely non-transparent when they make revisions...They just don't tell you what they are doing, or they tell you in a way that raises more questions than it answers." He said the lack of transparency reflects the political culture in China, which is still closed and secretive.
      • Under the new method, the bureau will instead rely on data from online property registries maintained by local authorities, initially in just 35 cities. The remaining cities will continue to use the survey method but will switch over as they develop their own online property registries.
      • Many local observers felt the timing of the changes was just too convenient for Beijing.

      [Aug 5, 2009: Chinese Provincial Figures Far Overstated Versus National Figures]
      [Dec 7, 2010: Wikileaks - Chinese GDP Figures, "Man Made"?]
      [Sep 13, 2010: What's China's Real Inflation Rate? (What's China's Real Anything?)]
      [Nov 12, 2010: Even China Accuses China of Fibbing about Inflation]

      [Video] Laszlo Birinyi - S&P Could Double to 2800 by 2013

      With the S&P 500 up on average over 5% every month since The Bernank told us at Jackson Hole, Wyo  the Fed's new 3rd mandate is managing the stock market.... and up 100% from the intraday low of S&P 666 in March 2009 - no prediction is now out of bounds.  (Old timers might remember the infamous Dow 36,000 book)  [Feb 2, 2011: Dow's Rally of 2009-2011 is Most Aggressive Since 1930s]  So if we did 100% in 2 years, why not another 100% in 2 years from now?  I think the NASDAQ would actually reach March 2000 highs if we can pull off the "double double" in 4 years.  Further, this sort of appreciation will fix many of those nasty pension underfunding problems, make us all rich so we can afford $6 bread, and let us watch the global food riots on HDTV paying the $402 monthly cable bill.  Works for me.

      Thus far in 2011 about 6.5 weeks in, we're on pace for a 50% year - which is exactly the type of pace we need to continue to get to S&P 2800 in 2013.  Laszlo Birinyi tells CNBC that might be a stretch goal but we should expect at least another 30% from here.   At 5% a month "Bernank guaranteed", Lazlo seems bearish with that last call. ;)

      • The S&P will more than double in the next two-and-a-half years in a best-case scenario, legendary investor Laszlo Birinyi Jr., president and founder of Birinyi Associates, told CNBC Wednesday.  “There was an extraordinary start to this bull market, and when you have starts similar to this, you end up with some very substantial moves,” added Birinyi, who was head of equities at Salomon Brothers during the go-go 80's. “We’re out there and very comfortable being bullish.”
      • Birinyi’s lowest prediction is that the S&P rise 31 percent by September of 2013. (Lazlo, we could get 31% by the time QE3 is whispered in the halls of the Fed)
      • The investor said that he and his associates use market activity and past patterns to assess market moves. “Looking at the market’s history, which we found to be a usefeul guide in the past and has been a useful guide for the last two years, we’re going to continue to dance with who ‘brung’ us,” he added.   (I was unable to find a photo of Bernanke doing the tango, otherwise that is the picture I'd be inserting here - please no Chuck "dance until the music stops" Prince jokes)

      5 minute video

      Position: Boo yah

      [Video] Kyle Bass Heads to CNBC's Strategy Session - Biggest Bombshell, He Talked to Congress and They Asked Sensible Questions

      Hot off yesterday's well regarded February investment letter, Hayman Capital's Kyle Bass made a visit to CNBC today.  During his comments the markets fell relatively substantially as if traders awoke from a coma realizing there might be 1-2 risks somewhere in the world....although to be fair, rumors of Iranian warships sniffing around the Suez Canal were circulating.  No worries though, the minute he left the air S&P futures were ram rodded right back up.  We already had one negative day this week (only the 3rd of the month) and that is all the juice bears get.

      Bass touched on many topics... when asked why the market is up, he compared the U.S. (in relative terms) to Zimbabwe - i.e. if you print enough money you can make anything elevate, but probably the biggest bombshell from this seat was that he was asked to talk to a bipartisan group of people from Congress and they listened.  (gasp)  Not only that, they asked him sensible questions (double gasp).   Anyhow, as with everything nowadays this has no market impact, but strictly for mental exercise.

      2 videos below - email readers will need to come to site to view

      10 minutes

      8 minutes

      SEC Begins Sweep on Social Media and Networking

      I won't lie - this is probably my biggest worry go forward.  It's a fuzzy fuzzy world and I'd expect the SEC to want to make its "imprint" with someone as an example.

      Looking into non business use of social media?  Really?


      Via ACA Compliance Group

      SEC Begins Sweep on Social Media and Networking

      The SEC recently sent a document request list to investment advisers as part of an apparent sweep exam focused on social media and networking. A summary of the new requests are below:

      Involvement in Social Media - Documentation is requested in order to identify an adviser's level of involvement with or usage of social media websites. The requests have been seen to focus on social media websites such as Facebook, Twitter (and AdvisorTweets.com), LinkedIn, LinkedFa, YouTube, Flickr, MySpace, Digg, Redditt, as well as any blogs used by, or subscribed to, by the adviser.

      Communications - Documentation is requested for the communications made by, or received by an adviser on any social media website. These communications can include, among others, blog postings, messages, and/or tweets.

      Adviser's Use of Social Media - The adviser's policies and procedures relating to the use of social media websites are requested. Specifically, the requests include policies and procedures concerning communications and prospective communications posted on any social media website and policies and procedures regarding any ongoing monitoring or review processes related to social media communications.

      Third Party's Use of Social Media - Documentation is requested for any third-party use of social media that is maintained by the adviser. These requests address policies and procedures relating to communications posted by third parties on behalf of the adviser, as well as policies and procedures relating to the adviser's monitoring and review processes of these communications.

      Adviser's Non-Business Use of Social Media - The adviser's policies and procedures relating to the use of social media by employees for non-business purposes are requested.

      Social Media Training - Documentation is requested relating to an adviser's internal training and education programs for employees' use (both personal and business-related) of social media websites.

      Disciplinary Actions Related to Social Media - Documentation is requested regarding any disciplinary action taken against an employee based on their use of social media websites.

      Record Retention - The adviser's record retention policies and procedures concerning its involvement with or usage of social media are requested. The requests cover the record retention policies of the adviser, the adviser's employees, and any third-party utilized by the adviser to manage its use of social media websites.

      ACA believes that the sweep on advisers' use of social media has been undertaken as a means for the SEC to review this evolving area. As noted, the requests are broad, and will enable the SEC to evaluate how prevalent this activity is to registered investment advisers and whether it needs to dedicate further rulemaking and/or examination resources to complete a more regular and thorough evaluation of this activity. Given this focus, ACA advises firms to consider whether it may be appropriate to adopt a formal written policy and procedures on social media usage by employees in conjunction with a complete review of this activity focusing on reviewing posts on social media websites that may discuss the adviser and/or its employees.


      [Feb 7, 2011: Video - WSJ: Mutual Funds Get Hit to Social Media, Sort Of]
      [Dec 3, 2010: Bloomberg- Tweeting Restrictions Risk Leaving Brokers Without Saying Much]

      Larry Kudlow Can't Find a Bear

      I have to give Larry Kudlow of CNBC fame some credit - the tone of his show and his commentary in general is very different than it was pre crisis when almost everything was viewed through rose colored glasses.  (remember when everything - and I mean EVERYTHING, was "Goldilocks"?)  He seems far more analytical, sober, and open minded in his commentary, unlike Mr. Cramer who after being depanted (sp?) by Jon Stewart acts nowadays as if none of "it" happened. [Mar 13, 2009: Jon Stewart v Jim Cramer - The End]  As I sit here watching CNBC I am chuckling to myself as Kudlow is bringing guest after guest on, trying to find one to offer him a reason to sell this market.  The fact that not one can find a reason, would (in normal times) be a reason to run for the hills.  But (broken record) these are not normal times.

      This market continues to amaze - in his weekly letter strategist Jeff Saut says a normal buying stampede (by his strict definition) is 17-25 days.  He can count on one hand the number of times (in his 40 years) it had surpassed 30 days.  Of that handful, the longest he had ever seen was 53 days.  Until this one... which was at 113 days coming into the week.  (now 115 and counting).   We're in some sort of 4th standard deviation event.

      The market seems on some sort of automatic control - everyone is on the same side of the boat, yet the boat keeps steaming ahead.


      Goldman Sachs: Sina (SINA) Cut to Neutral - Says Weibo Fully Valued

      An interesting call by Goldman Sachs this morning on Sina (SINA).  I am not sure why you bother to downgrade anything nowadays since the market can only go up or sideways.  Plus with Twitter increasing by seemingly a billion a month in value, each time it jumps in value the Chinese version of it should be worth more, no? ;)  [Feb 10, 2011: Social Media Bubble Grows as Twitter Doubles in Value in 2 Months]

      Via Forbes:

      • Sina (SINA) shares are trading lower this morning after Goldman Sachs analyst Catherine Leung cut her rating on stock to Neutral from Buy, asserting that the implied valuation for Weibo, its Twitter-like mini-blog platform, has reached $2 billion, based on her estimate of the valuation of the rest of the company’s businesses. And that, she suggests, is plenty.
      • “Although we believe Sina has maintained Weibo’s solid user-growth momentum and encouraged its ecosystem development through apps and improved functionality, thereby also improving Sina’s portal properties, we see limited upside to Weibo’s valuation because monetization remains in an early, more exploratory stage,” she writes.  Adds Leung: “We see limited upside to the stock until Weibo is monetized more meaningfully.”
      [Jan 31, 2011: Sohu.com Results Should Bode Well for Sina,com]
      [Jan 11, 2011: Word is Getting Out on Sina's Secret - Weibo]
      [Dec 9, 2010: The Twitter of China - Weibo]
        No position

        WSJ: Midwest Farmland Surges Double Digits in Q4 2010 Alone

        Keeping on this morning's agriculture focus, as I said a few years ago, with all the mega trends happening in the world, if I could only have one investment over the next 40 years it would be arable farmland.   [Jun 20, 2008: World Population to Hit 7 Billion by 2012]  [Jun 18, 2008: The Ultimate Shortage ---> Water] [Mar 24, 2008: WSJ - New Limits to Growth Revive Malthusian Fears]

        The WSJ is reporting an astounding appreciation in values of farmland in the Midwest in the fourth quarter alone - between 12.9 and 14.8%.  I can't see this pace as being sustainable but impressive none the less.  Nebraska, the Dakotas, et al continue to be the nation's leaders in low unemployment, and are our version of "Australia". [Nov 15, 2010: Farm Economy Headed for Record]   With massive subsidies to boot.  [Mar 27, 2008: WSJ - Farm Lobby Beats Back Assault on Subsidies]  Ethanol anyone?

        • Farmland values in much of the Midwest are climbing at their fastest rates since the 2008 boom, the Federal Reserve Bank of Kansas City said Tuesday.  Fueled by rising crop prices, the value of irrigated and nonirrigated cropland across the region known as the 10th District jumped 14.8% and 12.9%, respectively, in the fourth quarter, compared with a year earlier.
        • The bank's quarterly survey of the region, which covers western Missouri, Nebraska, Kansas, Oklahoma, Wyoming, Colorado and northern New Mexico, found that farmland prices rose for the fifth consecutive quarter since a drop in the third quarter of 2009, when the livestock sector was contracting amid the recession.
        • The Federal Reserve Banks in Chicago and Minneapolis have yet to issue their quarterly surveys, but their reports are also expected to show that the farm belt is continuing to rebound from the recession more quickly than the general economy, which has been hobbled by high unemployment rates and weak home values.
        • Farmland prices in the 10th District are generating their biggest gains since the third quarter of 2008, when prices of irrigated farmland jumped 23.4% and prices of nonirrigated farmland rose 21.2%.
        • Still, it's not clear how long farmland prices can continue to climb so sharply. The Federal Deposit Insurance Corp. has already said it's watching for whether an asset bubble is building. One red flag in Tuesday's report is that cash rental rates for cropland across the 10th District rose only about 6% in the fourth quarter, far too little to justify such a big increase in land prices.
        • Farmland prices are heavily influenced by crop prices, which were climbing until the financial crisis and recession popped the commodity-price bubble in late 2008. Led by wheat, U.S. crop prices resumed their upward climb in June 2010 amid harvest problems in places such as Russia, and then the U.S. corn belt, as demand was recovering in the world's emerging economies.
        • The prices of corn and wheat grown in the Midwest are about double what they were a year ago, while cotton prices are up 155%. Soybean prices have climbed 50%. Those high commodity prices are giving farmers more money to spend on land, as well as attracting the interest of outside investors looking for an inflation hedge at a time when the cost of borrowing money for buying real estate is low.
        • The U.S. Agriculture Department said Monday that it expects net farm income, a widely followed barometer of the U.S. agriculture sector's profitability, to climb 19.8% this year to $94.7 billion, which would be the second-highest inflation-adjusted figure for net farm income in 35 years.

        [Jun 5, 2008: NYTimes: Food is Gold, So Billions Invested in Farming]
        [Jun 14, 2008: Bloomberg: Farmland Reaps Bonanza for TIAA]
        [Jun 2, 2009: The Economist - Outsourcing's 3rd Wave - Buying Farmland Abroad]
        [Dec 31, 2009: Bloomberg - Ethopian Farmers Lure Investor Funds as Workers Live in Poverty]
        [Jan 26, 2011: Soros Backed IPO Adecoagro Provides Hard to Find Access to Farmland]

        Deere (DE) Continues to Benefit from Agricultural Bull Market

        Agricultural equipment bellweather Deere (DE) posted earnings this morning of $1.20 versus the expectation of $0.99 as the secular bull market in this sector continues.  (Full report here) The stock is up some 50% since the QE2 rally began in Jackson Hole, Wyoming and currently sports a quite rich adjusted* forward PE of 16.5x the year end estimate of fiscal 2011 (October 2011).

        *$5.49 estimate + $0.21 beat from this quarter added to create $5.70.

        We'll have to see continued substantial beats to keep the valuation anywhere near historical norms, if the stock continues its 'bulletproof' rally.  Indeed, the chart of Deere is almost a carbon copy of the S&P 500 the past half year, except it has advanced at an accelerated pace.

        One area of concern go forward is commodity inflation - especially steel and plastics - which served to hurt margins in 2008. [May 14, 2008: Deere Earnings - Why I'm Avoiding Equipment Stocks]  Thus far price increases to alleviate such issues have been muted - about 2%.  An area to keep an eye out on.

        That said, since our multinationals have yet to figure out how to outsource Nebraska, Iowa (or indeed Saskatchewan) this is one of those rare stories where North American growth is surpassing Asian growth.
        • Equipment net sales in the United States and Canada increased 35 percent for the quarter. Outside the U.S. and Canada, net sales were up 22 percent for the quarter, with an unfavorable currency-translation effect of 1 percent.

        Via Reuters:

        • Farm equipment maker Deere & Co reported a doubling of quarterly profit on Wednesday amid strong North American sales of large, high-margin machines and price increases, and lifted its full-year profit forecast.
        • The world's largest maker of tractors and combines earned $513 million, or $1.20 per share, in the first quarter that ended Jan. 31, compared with $243.2 million, or 57 cents per share a year earlier.Deere said it expected a full-year profit of $2.5 billion. Its November forecast called for a 2011 profit of $2.1 billion.  
        • Revenue rose 27 percent to $6.12 billion, ahead of Wall Street forecasts for sales of $5.67 billion. 
        • Sales of large farm machinery, particularly in the United States and Canada, are continuing to make a major impact, while construction equipment shipments are experiencing some degree of recovery, Allen noted. "Our record first-quarter performance is especially gratifying in light of market conditions that remain below normal levels in certain key sectors."

        No position

        Tuesday, February 15, 2011

        [Video] CNBC - Nouriel Roubini & Ian Bremmer Discuss the New World Order of "G0"

        Nouriel Roubini and Eurasia Group's Ian Bremmer were on CNBC and actually were allowed to talk, rather than being interrupted every 23 second by Joe Kernen.  A fresh approach Joe!  The discussion centered mostly around the changing balance of power across the world as the G20, and G7 lose some relevance.   Some discussion (mostly from Roubini) about the joke that is the political process and "deficit reduction" (currently defined by increasing spending by 25% in a few years than freezing it) ... as we call it "kick the can". I am of course posting this because much of what these 2 say, reinforces topics I've been discussing for 3+ years.

        2 videos - email readers will need to come to site to view

        11 minutes

        7 minutes

        Kyle Bass' Hayman Capital February 2011 Letter - The Cognitive Dissonance of it All

        13Ds of all the top managers are being analyzed today, and much of the clucking over the top managers' positions I find to be a bit bemusing.  How many times can I buy Citigroup (C) because Tepper and Paulson are in it?

        Instead of focusing on what Buffet sold last quarter (45 days after the fact), let's showcase the always insightful Kyle Bass, through the lens of his February 2011 investment letter.  I haven't had time to read the whole of this yet but since it is Kyle Bass I will assume it is enlightening.  There is also an attachment highlighting the professional backgrounds of the 11 Fed board of governors and based on the structure of the piece, I assume Bass is highlighting what little corporate experience most have (6 of the 11 appear to have never worked outside of academia).

        As always hit 'full screen' for the easier read

        First the letter -

        Kyle Bass - Hayman Investor Letter - February 2011                                                                

        Next the Fed Governor backgrounds -

        Kyle Bass - Hayman Investor Letter - February 2011 - Fed Governors Attachment                                                                

        Courtesy Absolute Return+Alpha

        [Oct 7, 2010: Kyle Bass of Hayman Capital at Barefoot Economic Summit - Part 1]
        [Aug 18, 2010: Kyle Bass on CNBC August 2010]
        [May 13, 2010: Kyle Bass of Haman Capital - The Pattern is Set, Betting the Bank on a Keynesian Free Lunch]
        [Jan 13, 2010: Kyle Bass of Haman Capital - Japan Defaults on Debt or Devalues in 3-4 Years; US in 10-12]
        [Oct 5, 2009: Kyle Bass Hayman Capital October Letter to Investors]

        Global Fund Managers Most Bullish in 10 Years

        Another sentiment gauge hitting an extreme - but as with everything else nowadays it will only matter when it matters.  It used to be when everyone was on the same side of the boat, the market went the opposite way....

        Via Reuters:

        • Investors were their most bullish on equities and commodities in nearly 10 years this month as optimism about growth surged, while inflation concerns led them to drastically sell down emerging stocks, a survey showed on Tuesday. 
        • The monthly global fund managers' survey from Bank of America-Merrill Lynch showed a net 67 percent of respondents were overweight equities in February, compared with 55 percent in January.  This month's reading means the difference between overweights and underweights is 67 percentage points -- a level seen for the first time since the poll started in April 2001.
        • The poll, which surveyed 188 participants who manage total assets of $569 billion, also showed a collapse in emerging markets allocations. A net 5 percent of respondents are overweight here -- the lowest since March 2009 -- compared with 43 percent in January and an average reading of 27 percent.  Inflation expectations hit a 6-year high, with a net 75 percent of respondents expecting higher inflation in the next 12 months.
        • "It's one of the most bullish surveys we've had in a long time. Basically the story is growth expectations keep going on higher... What we're seeing is fairly extreme asset allocation decisions," said Patrick Schowitz, equity strategist at BofA Merrill Lynch.
        • "Warning lamps are really flashing. But we've seen a ...shift out of fixed income and into equities. You would expect some extreme asset allocation into risky assets while that shift is going on," Schowitz said.
        • Commodities are the second most favored asset class after stocks, with a record net 28 percent of investors being overweight from 16 percent last month.
        • Cash underweight positions moved to a net 9 percent, levels not seen since January 2002, from 5 percent in January.
        • Hedge funds were also becoming bullish, raising their gearing levels. The ratio of gross assets held by hedge funds relative to their capital rose to 1.49, their highest since March 2008, from 1.26 last month.  (hedge funds are levering up, and in a substantial way between January and February)
        • Their net exposure to equity markets -- measured as long minus short as a percentage of capital -- rose to 39 percent, the highest since July 2007, from 31 percent in January.

        Temporary European Rescue Fund to be Replaced by (Bigger) Permanent European Rescue Fund

        This is getting little play in the U.S. but as moral hazard runs rampant the world over (make a mistake? run your government into the ground? banking sector gone wild? no worries - that is what taxpayers are for)..... the temporary European Rescue Fund (named European Financial Stability Facility - EFSF) is going to be replaced by a much larger permanent rescue fund in 2013.  Partially funded by my fellow Americans (via IMF).  To which we say - you're welcome.  The new rescue fund shall be named the European Stability Mechanism (ESM)... I love acronyms, they make bailouts sound so warm and cuddly.

        Per Spiegel Online

        • Euro-zone finance ministers have agreed to effectively double the volume of the euro rescue fund from 2013 when it becomes a permanent mechanism. The fund will have an effective lending capacity of 500 billion euros, said Luxembourg Prime Minister Jean-Claude Juncker. 
        • Euro-zone finance ministers meeting in Brussels on Monday agreed that a permanent rescue mechanism to be set up from 2013 would total €500 billion euros ($675 billion) -- significantly higher than the current rescue fund.
        • The new fund, the European Stability Mechanism (ESM), will be part of a package of measures European leaders are hoping to agree at two summits in March to resolve the debt crisis.  Apart from the euro zone, the ESM would also get cash from the International Monetary Fund ....
        • The ESM is intended to replace the temporary euro rescue fund, the European Financial Stability Facility (EFSF), which was hurriedly set up in May to avert a collapse of the single currency in the wake of the Greek debt crisis.

        • The EFSF currently has a volume of €440 billion but can only lend up to €250 billion to ailing euro member states because it has to keep a large cash buffer in order to maintain top credit ratings. Juncker said the ESM's €500 billion would be the "effective lending capacity" of the new rescue fund.

        But don't worry - it could get even bigger if need be.  No taxpayer must be spared if there is someone to bail out...
        • EU officials are worried that the current fund may not be big to cope if Portugal and Spain were to follow Greece and Ireland in needing a bailout.

        Germany of course is trying to preach responsibility but they might as well be from the planet Mars.  Fiscal sanity does not drive consumption or push stock markets up.
        • Germany is opposing an immediate increase in the EFSF unless other euro zone member states agree to cut public spending and make their economies more competitive.  
        • Germany's " competitiveness pact", supported by France, includes higher retirement ages, a German-style "debt brake" to limit government bond issuance, a common corporate tax base and an end to inflation-linked wages. But other euro-zone countries are resisting the proposal.

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