Tuesday, November 1, 2011

OpenTable (OPEN) Misses on Revenue, but Hits Target on Bottom Line

It's been a very tough earnings season for many of the high fliers of the previous 12-24 months.  OpenTable (OPEN) however, much like Netflix (NFLX), had been struggling well in advance of today's earnings report.  The company has missed on the top line ($34.4M v $35.9M), but reached analysts' estimates on the bottom line of 30 cents.  Investors are not liking it, and the stock is down an additional 5-6% in after hours.  The chart was horrible even before today's report.

Full report here.  Revenue is slowing pretty dramatically in North America (only 26% growth) but obviously off a much smaller base is growing much stronger overseas.

  • OpenTable reported consolidated net revenues for Q3 2011 of $34.4 million, a 40% increase over Q3 2010. Consolidated net income for Q3 2011 was $4.1 million, or $0.17 per diluted share. Non-GAAP consolidated net income for Q3 2011, which excludes tax-affected stock-based compensation expense and tax-affected amortization of acquired intangibles, was $7.4 million, or $0.30 per diluted share
OpenTable provides operating results by geography as the Company is at different stages of development in itsNorth America and International operations. International operations include the operating results of toptable.com, an acquisition which closed on October 1, 2010.

North America Results
  • Installed restaurant base as of September 30, 2011, totaled 16,237, a 25% increase over September 30, 2010.
  • Seated diners totaled 21.8 million, a 42% increase over Q3 2010.
  • Revenues totaled $29.1 million, a 26% increase over Q3 2010
  • Non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and stock-based compensation) totaled $13.6 million, or 47% of North America revenues, a 33% increase over Q3 2010.
International Results
  • Installed restaurant base as of September 30, 2011, totaled 7,629, a 243% increase over September 30, 2010.
  • Seated diners totaled 1.8 million, a 233% increase over Q3 2010. 
  • Revenues totaled $5.3 million, a 254% increase over Q3 2010
  • Non-GAAP adjusted EBITDA totaled a loss of $0.7 million compared to a loss of $1.2 million in Q3 2010. 
  • In Q3 2011, toptable.com contributed approximately 665,000 seated diners, $2.9 million of revenue and loss of approximately $0.1 million of non-GAAP adjusted EBITDA to the Company’s results.

[Video] Alan Simpson Gets Real

I have no idea what Alan Simpson accomplished while in the Senate but the Simpson-Bowles commission seemed to actually do a fair share of bipartisan sacrifice.  I have heard some of his interviews over the past year or so - some very extended ones, and the guy speaks his mind and has a sharp wit.  Below we have a 6 minute interview where he testifies in front of the "Super Committee" and has some serious zingers - i.e. this is a funny town, one minute your on the cover of Time and 6 months later you're doing it.   He goes off on the AARP but I am curious what ad he is referencing when he says it's the most disgusting ad he has ever seen.

6 minutes - email readers will need to come to site to view

Here is another short interview with both Simpson & Bowles earlier in the day - 5 minutes

A Mess of a Market

Really it has become nearly impossible to manage individual positions for long periods of the past 3 years.  The S&P 500 just came off a 210 point rally from early October, and in the span of two one and a half sessions has given back 70 - a full third of the move.  Sheesh.

I won't even bother with technicals because they are not meaning much at this moment.

October's Winners - 71 Stocks that Returned at least 40%!

Despite the selloff on the first day and last day of the month, October was a historic month - one of the best in our lifetimes.  I always like to run a bevy of screens whenever there are extremes to the upside or the downside to see where the money flows.  In this case, I've pulled the best performers out of the pool of stocks in my universe (>$300M market cap, >200K a day shares traded, >$7 stock price) and we have 71 stocks that returned at least 40% in 1 month alone.  Quite amazing.

I don't see a big trend among these names, but there were a lot of natural resource plays - especially oil and gas types which had been hit hard the previous few months.   Technology also had a lot of the big winners - no surprise there as that is the go to spot for beta.

Ticker Company 1 mo Gain Industry
LNG Cheniere Energy, Inc. 122.5% Oil & Gas Drilling & Exploration
CPX Complete Production Services, Inc. 74.0% Oil & Gas Equipment & Services
VIT VanceInfo Technologies Inc. 72.5% Information Technology Services
CVGI Commercial Vehicle Group Inc. 67.9% Auto Parts
REDF Rediff.com India Ltd. 66.4% Internet Information Providers
UIS Unisys Corporation 65.7% Information Technology Services
ISS Isoftstone Holdings Limited 65.2% Information Technology Services
MTW Manitowoc Co. Inc. 65.1% Farm & Construction Machinery
FIO Fusion-io, Inc. 63.3% Data Storage Devices
TKLC Tekelec 62.6% Processing Systems & Products
JRCC James River Coal Co. 62.5% Industrial Metals & Minerals
TEX Terex Corp. 62.2% Farm & Construction Machinery
FMCN Focus Media Holding Ltd. 61.4% Advertising Agencies
IO ION Geophysical Corporation 61.1% Scientific & Technical Instruments
VDSI VASCO Data Security International Inc. 60.9% Security Software & Services
LIZ Liz Claiborne Inc. 60.2% Textile - Apparel Clothing
GBX Greenbrier Companies 59.7% Railroads
FTK Flotek Industries Inc. 59.3% Specialty Chemicals
STMP Stamps.com Inc. 59.3% Catalog & Mail Order Houses
STX Seagate Technology PLC 57.1% Data Storage Devices
NAK Northern Dynasty Minerals Ltd. 53.2% Industrial Metals & Minerals
ASGN On Assignment Inc. 52.1% Staffing & Outsourcing Services
ALGN Align Technology Inc. 51.8% Medical Appliances & Equipment
HAR Harman International Industries Inc. 51.3% Electronic Equipment
SSYS Stratasys Inc. 51.2% Computer Based Systems
TWI Titan International Inc. 50.0% Auto Parts
SGY Stone Energy Corp. 49.9% Independent Oil & Gas
IVN Ivanhoe Mines Ltd. 49.7% Industrial Metals & Minerals
NBR Nabors Industries Ltd. 49.5% Oil & Gas Drilling & Exploration
GEOI GeoResources, Inc. 49.2% Independent Oil & Gas
QCOR Questcor Pharmaceuticals, Inc. 49.0% Biotechnology
HOLI Hollysys Automation Technologies, Ltd 49.0% Industrial Electrical Equipment
SCSS Select Comfort Corporation 48.7% Home Furnishings & Fixtures
PCX Patriot Coal Corporation 48.5% Industrial Metals & Minerals
SPRD Spreadtrum Communications Inc. 48.4% Semiconductor - Broad Line
HS HealthSpring Inc. 47.9% Health Care Plans
XXIA Ixia 47.7% Scientific & Technical Instruments
XRTX Xyratex Ltd. 47.1% Data Storage Devices
NR Newpark Resources Inc. 46.6% Oil & Gas Equipment & Services
FFIV F5 Networks, Inc. 46.3% Application Software
ETH Ethan Allen Interiors Inc. 46.2% Home Furnishings & Fixtures
KNXA Kenexa Corp. 46.2% Business Software & Services
CAR Avis Budget Group, Inc. 45.8% Rental & Leasing Services
OCZ Ocz Technology Group Inc. 45.4% Data Storage Devices
SPPI Spectrum Pharmaceuticals, Inc. 45.4% Biotechnology
SIMO Silicon Motion Technology Corp. 45.2% Diversified Electronics
PVTB Privatebancorp Inc. 45.0% Regional - Midwest Banks
TZOO Travelzoo Inc. 44.9% Internet Information Providers
WCC WESCO International Inc. 44.4% Industrial Equipment Wholesale
GOL GOL Linhas A 44.2% Regional Airlines
BEXP Brigham Exploration Co. 44.1% Independent Oil & Gas
VHC VirnetX Holding Corp 43.8% Internet Software & Services
AREX Approach Resources, Inc. 43.7% Oil & Gas Drilling & Exploration
NTCT NetScout Systems, Inc. 43.5% Business Software & Services
KELYA Kelly Services, Inc. 43.4% Staffing & Outsourcing Services
NG NovaGold Resources Inc. 43.1% Gold
WTI W&T Offshore Inc. 43.1% Oil & Gas Drilling & Exploration
EP El Paso Corp. 43.1% Oil & Gas Pipelines
LAD Lithia Motors Inc. 43.1% Auto Dealerships
AGP AMERIGROUP Corporation 42.6% Health Care Plans
GT Goodyear Tire & Rubber Co. 42.3% Rubber & Plastics
JNPR Juniper Networks, Inc. 41.8% Networking & Communication Devices
CNH CNH Global NV 41.7% Farm & Construction Machinery
EXEL Exelixis, Inc. 41.6% Biotechnology
SYNA Synaptics Inc. 41.4% Computer Peripherals
CETV Central European Media Enterprises Ltd. 41.4% Broadcasting - TV
PGI Premiere Global Services, Inc. 41.1% Diversified Communication Services
HSFT hiSoft Technology International Ltd. 40.8% Business Software & Services
N NetSuite Inc. 40.8% Business Software & Services
ENTG Entegris, Inc. 40.4% Semiconductor Equipment & Materials
SEMG SemGroup Corporation 40.2% Oil & Gas Pipelines

ISM Manufacturing Falls to 50.8 Reading for October

While the ISM Non Manufacturing report to be released later this week represents far more of he economy, the ISM Manufacturing seems to get the lion's share of the attention.  We are still over 50 on this one, but not by much - so it's slightly expansionary, but below expectations.  Not sure if it will mean much on a day like today when Europe is dominating the news.  Full report here.

New orders improved which is a welcome change from the past few months.  Employment was essentially flat but the big news was the huge drop in prices.  This is the first reading below 50 on prices since May 2009.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 50.8 percent, a decrease of 0.8 percentage point from September's reading of 51.6 percent, indicating expansion in the manufacturing sector for the 27th consecutive month. The New Orders Index increased 2.8 percentage points from September to 52.4 percent, indicating a return to growth after three months of contraction. The Prices Index, at 41 percent, dropped 15 percentage points, and is below the 50 percent mark for the first time since May 2009 when it registered 43.5 percent. Inventories decreased to 46.7 percent, which is 5.3 percentage points below the September reading of 52 percent. Comments from respondents are mixed, indicating positive relief from raw materials pricing and continuing strength in a few industries, but there is also more concern and caution about growth in this uncertain economy."
Of the 18 manufacturing industries, eight are reporting growth in October, in the following order: Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Paper Products; and Machinery. The six industries reporting contraction in October — listed in order — are: Plastics & Rubber Products; Chemical Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing.


  • "Starting to see some deflation on raw materials." (Chemical Products)
  • "Overall industry volumes remain flat vs. previous month. Uncertainty in supply chain is increasing due to lower volumes vs. historical." (Electrical Equipment, Appliances & Components)
  • "International: contraction in demand for our products is driving mitigation of excess material on order. Contract manufacturers are adjusting their resources accordingly." (Machinery)
  • "Business is very strong, both domestically and internationally." (Fabricated Metal Products)
  • "With metal prices declining, we are seeing some short-term forecast strength. If metal pricing increases again, this strength is expected to disappear again." (Primary Metals)
  • "Auto industry still strong." (Transportation Equipment)
  • "Business is slowing — not crashing — but uncertainty and caution is the order of the day." (Plastics & Rubber Products)
  • "Retail branded business is slower than expected due to consumers continuing to move to private label- and store-brand products for price advantage. Raw material supplies are in good shape, but prices are staying stubbornly higher than expected." (Food, Beverage & Tobacco Products)



New Orders52.449.6+2.8GrowingFrom Contacting1
Supplier Deliveries51.351.4-0.1SlowingSlower29
Inventories46.752.0-5.3ContractingFrom Growing1
Customers' Inventories43.549.0-5.5Too LowFaster31
Prices41.056.0-15.0DecreasingFrom Increasing1
Backlog of Orders47.541.5+6.0ContractingSlower5
Exports50.053.5-3.5UnchangedFrom Growing1
Imports49.554.5-5.0ContractingFrom Growing1
Manufacturing SectorGrowingSlower27
*Number of months moving in current direction.

"Risk Off!" as Student Body Left Returns to Selling as Focus Returns to Italy

$1.4 Trillion of bailouts does not buy what it used to. 

We are stuck in this tiring world of "risk on" or "risk off" trading where everything must go up or down en masse.  A world full of ADHD traders who grew up on Ritalin.  After nearly a month of "risk on" markets are headed for the second day of "risk off".... with bells on.  S&P futures are being crushed, with prints down to the mid 1220s, which would be a clear break of the 200 day exponential moving average, but frankly as of late technical support and resistance has meant little as news flow means everything. 

The past 48 hours has seen a sharp focus on the woes in Italy as even the slightest reform is like pulling teeth, and despite ECB buying yields on debt continue to jump.  If not for the European central bank, we'd already have a mega mess in that country.  European markets are getting blitzed as expected (Germany down over 4%, Italy over 5%) as the world is all now one correlated trade.  Also of note is the Greeks going to vote later in the year on whether they actually want to be rescued.  It's all sort of funny at this point.

  • Greek Prime Minister George Papandreou called a referendum on the euro area’s latest bailout package, saying voters will give him support to proceed with economic reforms.  Papandreou’s gambit risks pushing the country into default if voters reject the financial accord. An opinion poll published on Oct. 29 showed most Greeks believe the euro area’s expanded bailout package and debt writedown are negative.


Meanwhile back on the economic front, we reported the official Chinese PMI last night - later in the day the HSBC report came in slightly firmer at 51.1.  While the rest of Asia got hit overnight, as I mentioned last night, the easy money lovers could find solace in the figures since it might mean (wait for it) more intervention, and the Shanghai index actually closed with a slight gain. 

Speaking of intervention, the Australian central bank lowered rates for the first time in 2 years. 

We also do have PMI's being released in Europe - the UK figure is very ugly at 47.4 vs 50.8 the previous month, and expectations of 50.2.  This is the worst reading in two years.  The new orders sub index came in at 44.1.  (for those unfamiliar with how these work, 50 is the line that separates expansion from contraction)

U.S. Manufacturing ISM is on tap at 10 AM - expectation is for a reading of 52.

On the "plus" side, since Bernanke seems to think the stock market is the economy, maybe this new turmoil will increase the chances of QE3 announced tomorrow rather than at the next meeting!

Monday, October 31, 2011

Chinese PMI Falls to 50.4 vs 51.2 - Back Near the Expansion / Contraction Line

As always there are two Chinese Purchasing Manager Index reports - the government which focuses on larger, state controlled companies, and the HSBC report which focuses on smaller companies.  The Government report is out and we have a reading of 50.4 versus the 51.2 in September.  The estimate was 51.7 so this was a bit of a disappointment.   That said, for those who love easy money this heartens their case for China to re-engage in easy money policies sooner rather than later; even as the country is dealing with the havoc of many bad loans from their last round of easy money.

  • The manufacturing index from the logistics federation and National Bureau of Statistics is based on a survey of purchasing managers in more than 820 companies in 20 industries. The gauge hasn’t fallen below 50, the level dividing expansion from contraction, since February 2009.
  • The new orders index fell to 50.5 from 51.3 in September and a measure of output dropped to 52.3 from 52.7. New export orders contracted, declining to 48.6 from 50.9 the previous month, the logistics federation said.
The prices index dropped dramatically....
  • ...the input prices subindex, an indicator of inflationary pressure, declined to 46.2 from 56.6 in September.

The HSBC report comes out later in the day (night) but the two are generally within a point of each other.

Bloomberg: Bonds Beat Stocks Over Past 30 Years, First Time That's Happened Since Civil War

If we need any evidence the past thirty years, especially the past twelve or so, have been horrid for investors, this Bloomberg article notes that (government) bond returns have actually beaten stock returns over thirty years.  Ouch.  They say stocks win out in the 'long run' but for the average person's life span, you don't want to go out forty years to get a superior return.  Obviously this is very atypical - it's the first time it has happened since the Civil War time frame! 

To be fair, yields were very high on government bonds in the early 80s/late 70s as Paul Volcker was fighting off inflation so the starting point for prices was quite low in a relative sense (prices low, yields high), but it's still an amazing statistic.

Just more evidence we should never stop QE'ing - QE for 30 years and more artificial returns will make us all mad money!

  • The biggest bond gains in almost a decade have pushed returns on Treasuries above stocks over the past 30 years, the first time that’s happened since before the Civil War.
  • Fixed-income investments advanced 6.25 percent this year, almost triple the 2.18 percent rise in the Standard & Poor’s 500 Index through last week, according to Bank of America Merrill Lynch indexes. Debt markets are on track to return 7.63 percent this year, the most since 2002, the data show. Long-term government bonds have gained 11.5 percent a year on average over the past three decades, beating the 10.8 percent increase in the S&P 500, said Jim Bianco, president of Bianco Research in Chicago.
  • The combination of a core U.S. inflation rate that has averaged 1.5 percent this year, the Federal Reserve’s decision to keep its target interest rate for overnight loans between banks near zero through 2013, slower economic growth and the highest savings rate since the global credit crisis have made bonds the best assets to own this year. Not only have bonds knocked stocks from their perch as the dominant long-term investment, their returns proved everyone from Bill Gross to Meredith Whitney and Nassim Nicholas Taleb wrong.
  • The generation-long outperformance of bonds over stocks has been the biggest investment theme that everyone has just gotten plain wrong,” Bianco said in an Oct. 26 telephone interview. “It’s such an ingrained idea in everyone’s head that such low yields should be shunned in favor of stocks, that no one wants to disrupt the idea, never mind the fact that it has been off.”
  • Stocks had risen more than bonds over every 30-year period from 1861, according to Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School in Philadelphia, until the period ending in Sept 30.   The last time was in 1861, leading into the Civil War, when the U.S was moving from farm to factory, according to Siegel, author of the 1994 book “Stocks for the Long Run,” in a telephone interview Oct. 25.
  • U.S. government debt is up 7.23 percent this year, according to Bank of America Merrill Lynch’s U.S Master Treasury index. Municipal securities have returned 8.17 percent, corporate notes have gained 6.24 percent and mortgage bonds have risen 5.11 percent. The S&P GSCI index of 24 commodities has returned 0.25 percent.

Spiegel: Has America Become an Oligarchy?

Thanks for Barry R. for flagging this artickle over at Spiegel Online: The Second Gilded Age - Has America Become an Oligarchy.  I've been arguing this point for many years, especially in our corporate sector where many industries are dominated by a handful of names.  That dominance feeds into the political system, and self reinforces.  True "free market capitalism" might be seen in the restaurant business and a few others, but a lot of sectors (telecom, defense, banking, retail etc) are dominated by the few and mighty.   Spiegel uses a good term "The winner take all economy". 

Of course the Occupy Wall Street movement has broadened the discussion to the citizenry of America as well as thirty years of 'trickle down economics' and free trade has created a massive gain for the 'capital class' while the labor class has suffered (sans 'lower prices' at their local Walmart).   Citigroup famously wrote about it mid decade so it's no secret - just obvious now with all the extra blood squeezed out of the stone (women entering the workforce, the house ATM, et al)  [Sep 7, 2009: Citigroup - A Modern Day Plutonomy] These trends did not happen overnight, and one really does not see any of it changing as the genie is out of the bottle.  With hundreds of millions of laborers across the globe in the workforce, I've long argued that the middle class in developed countries would 'revert' to the mean (i.e. downward).  [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?]  That said public policy to address these issues in the U.S. is non existent (one must admit the problem before even trying any solutions) and in many cases accelerating this fall.  One just wonders how far the envelope can be pushed before OWS one day morphs into something far more revolutionary - maybe a decade or two.  It is possible that other developed countries will feel their "Egypt/Tunisia" moment earlier as this is not just happening in the U.S.

p.s. I think the 1%, 99% divide is far too "simple".

  • The Occupy Wall Street movement is just one example of the sudden outbreak of tension between America's super-rich and the "other 99 percent." Experts now say the US has entered a second Gilded Age, but one in which hedge fund managers have replaced oil barons -- and are killing the American dream.
  • At first, the outraged members of the Occupy Wall Street movement in New York were mainly met with ridicule. They didn't seem to stand a chance and were judged incapable of going up against their adversaries, Wall Street's bankers and financial managers, either intellectually or in terms of economic knowledge.
  • "We are the 99 percent," is the continuing chant of the protestors, who are now in their seventh week of marching through the streets of Manhattan. And, surprisingly, they have hit upon the crux of America's problems with precisely this sentence. Indeed, they have given shape to a development in the country that has been growing more acute for decades, one that numerous academics and experts have tried to analyze elsewhere in lengthy books and essays. It's a development so profound and revolutionary that it has shaken the world's most powerful nation to its core.
  • Inequality in America is greater than it has been in almost a century. Those fortunate enough to belong to the 1 percent, made up of the super-rich, stand on one side of the divide; the remaining 99 percent on the other. Even for a country that has always accepted opposite extremes as part of its identity, the chasm has simply grown too vast.
  • Statistics indicate that the growing disparity is genuinely overwhelming. In fact, the 400 wealthiest Americans now own more than the "lower" 150 million Americans put together.
  • Nearly two-thirds of net private assets are concentrated in the hands of 5 percent of Americans. In comparison, the upper 5 percent of Germany hold less than half of net assets. In 2009 alone, at the same time as the US was being convulsed by mass layoffs, the number of millionaires in the country skyrocketed.  Indeed, if you look at the reports it compiles on every country in the world, even the CIA has concluded that wealth disparity is greater in the US than in Tunisia or Egypt.
  • In a book published in 2010, American political scientists Jacob Hacker and Paul Pierson discuss how this "hyperconcentration of economic gains at the top" also existed in the United States in the early 20th century, when industrial magnates -- such as John D. Rockefeller, Andrew Carnegie and J. P. Morgan -- dominated the upper stratum of society and held the country firmly in their grip for years.
  • Writer Mark Twain coined the phrase "the Gilded Age" to describe that period of rapid growth, a time when the dazzling exterior of American life actually concealed mass unemployment, poverty and a society ripped in two.  Economists and political scientists believe the US has entered a new Gilded Age, a period of systematic inequality dominated by a new class of super-rich. .
  • The academics fear this change could have serious consequences for the country's economic future. As they see it, this extreme inequality threatens to dramatically slow growth in the world's largest economy. This is part of a development, they argue, that has been under way for years but remained largely hidden in the years of cheap credit, rising real estate prices and excessive consumption -- when it seemed everyone was on the way up. And the problems only came to light with the arrival of the financial crisis.
  • Through the 1970s, income for Americans across all social classes rose nearly in lockstep, by an annual average of roughly 3 percent. Starting in the 1980s, however, this trend underwent a fundamental transformation. Granted, the economy continued to grow -- but almost exclusively to the benefit of the country's top earners.
  • At least since the beginning of the millennium, it has no longer been a simple matter of two societal extremes drifting further apart. Instead, the development is also accelerating. In the years of economic growth between 2002 and 2007, 65 percent of the income gains went to the top 1 percent of taxpayers. Likewise, although the productivity of the US economy has increased considerably since the beginning of the millennium, most Americans haven't benefited from it, with average annual incomes falling by more than 10 percent, to $49,909 (€35,184).

  • Even for a country that loves extremes, this is a new and unprecedented development. Indeed, as Hacker and Pierson see it, the United States has developed into a "winner-take-all economy."  The political scientists analyzed statistics and studies concerning income development and other economic data from the last decades. They conclude that: "A generation ago, the United States was a recognizable, if somewhat more unequal, member of the cluster of affluent democracies known as mixed economies, where fast growth was widely shared. No more. Since around 1980, we have drifted away from that mixed-economy cluster, and traveled a considerable distance toward another: the capitalist oligarchies, like Brazil, Mexico, and Russia, with their much greater concentration of economic bounty."
  • This 1 percent of American society now controls more than half of the country's stocks and securities. [Nov 10, 2010: Who Will Any Form of Intermediate Wealth Effect Really Help? Not the Masses] And while the middle class is once again grappling with a lost decade that failed to bring increases in income, the high earners in the financial industry have raked in sometimes breathtaking sums. For example, the average income for securities traders has steadily climbed to $360,000 a year.
  • Still, that's nothing compared to the trend in executives' salaries. In 1980, American CEOs earned 42 times more than the average employee. Today, that figure has skyrocketed to more than 300 times. Last year, 25 of the country's highest-paid CEOs earned more than their companies paid in taxes.
  • By way of comparison, top executives at the 30 blue-chip companies making up Germany's DAX stock market index rarely earn over 100 times the salaries of their low-level employees, and that figure is often around 30 or 40 times.
  • Larry Bartels, one of America's leading political scientists, also believes America has entered a new Gilded Age. Bartels' 2008 book on the subject, "Unequal Democracy: The Political Economy of the New Gilded Age," has drawn a great deal of attention and even been quoted by President Barack Obama.
  • "The really dramatic economic gains over the past 30 years have been concentrated among the extremely rich," Bartels writes, "largely bypassing even the vast majority of ordinary rich people in the top 5 percent of income distribution." He doesn't see this fundamental shift in the distribution of wealth as having resulted from market forces or drastic events, such as the financial crisis. Instead, he believes they are "the result of policy choices."
  • As Bartels explains, much as the economic giants of the Gilded Age developed such enormous influence that they could dictate basic political conditions, today's Wall Street bosses and CEOs have successfully arranged extensive deregulation for their industries.  Former Citigroup CEO Sanford Weill, for example, kept a framed pen in his office as a symbol of his influence. It was the pen President Bill Clinton -- at Weill's instigation -- used in 1999 to sign into law legislation repealing the provisions in the Glass-Steagall Act of 1933 that separated the transactions of investment and commercial banks.
  • At the same time, Bartels writes, the wealthy receive enormous tax breaks worth hundreds of billions of dollars. In the 1970s, capital gains tax was 40 percent, and the highest income tax bracket paid a rate of 70 percent. Under George W. Bush, these rates dropped to 15 percent and 35 percent, respectively. For example, it emerged a few weeks ago that legendary investor Warren Buffett earned $63 million last year but was only required to pay 17 percent in taxes.
  • In a medium-term, the consequences of this societal divide threaten the productivity of the entire economy. Granted, American economists in particular have long espoused the view that inequality is simply a necessary side effect of above-average growth. But that position is now being called into question.
  • In fact, recent research indicates that the economies of countries experiencing periods of pronounced inequality often show considerably less growth and more instability. On the other hand, it also finds that economies grow faster when income is more evenly distributed.
  • In a study published in September, the International Monetary Fund (IMF) also concluded that: "The recent global economic crisis, with its roots in US financial markets, may have resulted, in part at least, from the increase in inequality" in the country.
  • Cornell Univesity economist Robert Frank analyzes this development in his recently published book "The Darwin Economy." In it, he concludes that financial realities are best described not by Adam Smith's economic models but, rather, by Charles Darwin's thoughts on competition. Frank writes that, with its often extreme deregulation, today's financial and economic system makes it impossible for individuals' self-serving behavior to ultimately contribute to the prosperity of society as a whole, as Smith had envisioned it. Instead, it leads to an economy in which only the fittest survive -- and the general public is left behind.
This is a key point.  While still "possible" for anyone to rise from nothing to something, economic mobility in the U.S. has fallen below even that of some of the "socialist" European countries.  (I've read this as long ago as three years ago)  That should be a damning blow.  In the past, the inequalities were looked over because 'anyone could make it' - but when it's easier to move up the economic ladder in countries often looked down upon in the U.S., than it is here - one really has to question the system.
  • Differences between rich and poor are tolerated as long as the rags-to-riches story of the dishwasher-turned-millionaire remains theoretically possible. But studies show that increasing inequality and political control concentrated in the hands of the wealthy elite have drastically reduced economic mobility and that the US has long since fallen far behind Europe on this issue. Indeed, only 4 percent of less-well-off Americans ever successfully make the leap into the upper-middle class.
  • "The major difference between this Gilded Age and the last one is the relative absence of protest," historian Gary Gerstle told the online magazine Salon in October. "In the first Gilded Age, the streets were flooded with protest movements." Manhattan hasn't yet quite reached that point.
I don't think American Idol or the NFL were as popular in the 20s and 30s.... nor was 1 in 4 American children on food stamps   [Nov 29, 2009: 1 in 4 Children, and 1 in 8 Americans Now on Food Stamps]  - so the "circus and bread" strategy is working much better nowadays.

Despite Selling Today, S&P 500 on Track for 12th Best Month Ever

What a month.  Despite today's modest losses, the S&P 500 should finish with its 12th best showing ever in a month.  (This chart from Bespoke is from Thursday)  If you exclude the 1930s which saw massive crashes and rallies, it will be the 3rd best month ever.  History either way.

[To be around in July-August 1932 when the market did back to back mid to upper 30% gains?! Wow]


After a month of treats, global markets are in a bit of a trick today.  Obviously things are extremely overbought, and after busting through the 200 day 'simple' moving average as if it was not even there Thursday, we have pulled back slightly below it today on the S&P 500.  I'm posting a chart with both the 200 day simple and exponential moving averages to highlight the variance between the two.

Despite the now bullish setup in the market, I would find this week one to hold cards close to the vest as we have the potential to gap up or down each and every day with the bevy of economic data headed our way.   That said, it would seem likely that those who missed part or most of the move will be antsy to 'buy the dip' if there are any substantial ones, as performance anxiety hits them hard.  There has been a 180 degree change in attitude from fearing big losses, to fearing missing out on upside.

On an unrelated note, former Goldman head and ex NJ governor has in under a year run MF Global (MF) into the ground, and the company just filed for bankruptcy.  One wonders what sort of salary and bonus he is receiving for doing such wonders.  I assume the going rate for taking a viable company and in under 12 months destroying it, is $20-$30M.

Sunday, October 30, 2011

[Video] 60 Minutes - Ruth and Andrew Madoff

Here is a video tonight of an interview with wife Ruth and son Andrew, of Mr. Bernie Madoff

Part 1

Part 2

If you want the text, instead of video go here.

Happy 7th Billion Person Planet Earth

If the United Nations estimates are anywhere near correct, today marks the day the world's population hits 7 billion.  Could be off a few days one way or the other, but you get the gist.  I actually did a story about this in 2008 - looks like it came a few months earlier than predicted!  [Jun 20, 2008: World Population to Hit 7 Billion by 2012]

Obviously this is not a 'fast money' trading event, but considering it was just twelve years ago the planet hit 6 billion, it's a pretty amazing milestone.  Projections are for another two billion in about 2 generations (2050ish).  From an investing perspective the growth of the world's middle class is an important development, as is the wage/labor pressure from hundreds of millions continuing to flood the world's labor markets.  Tom Stevenson from Fidelity takes a look at three key outcomes from this, some of which we've discussed quite a bit a few years ago.  Note - Nebraska farmland is up 20-30% year over year, as the 'farmland' trade is one of the big long term winners.

  • It is just 12 years since we reached six billion and the growth is set to continue, to nine billion by 2050 it is estimated – that's around three times the number of people on Earth when I was born. These figures would be unimaginable to the pessimists, from Thomas Malthus onwards, who have consistently warned that the world cannot sustain any more people.
  • The challenges presented by such rapidly growing demands on the planet's water, energy resources and farmland are significant. Yet, human ingenuity has succeeded thus far in not just providing for a rising population but massively increasing the living standards of most people.
  • One of the curious paradoxes of population growth is that the more able people are to sustain large families, because they become wealthier, the less inclined they are to actually have more children.
  • So, while greater affluence is often blamed for increasing the strains on the world's finite resources, it is possible that a richer world may be a more sustainable one because it will cause a natural levelling off in population growth.

  • That is some way off, however. In the short term the number of people will continue to rise and this has a number of implications for investors. Three of the more important are related to food, urbanisation and growth in consumption.
  • It is estimated that food production will need to rise by 50pc by 2030. In part this is to do with more mouths to feed, but it is also a consequence of those mouths' changing appetites. As people grow wealthier their diets change and they consume more protein such as meat and dairy products.
  • With 7kg of grain required to produce just 1kg of meat, this puts an increasing strain on existing agricultural acreage. The solution cannot simply be to bring more land into cultivation because the most productive has already been used and industrialisation and urbanisation are eating into what is already under the plough.
  • The second consequence of the current rate of population growth is a rapid increase in the proportion of urban dwellers. In 1950, around one third of the world's people lived in cities but by 2025 it is forecast that 60pc will live in urban areas.
  • The biggest implication of this growth is for infrastructure spending and the raw materials that make that kind of development possible. One recent estimate by the OECD suggested that 3.5pc of the world's economic output needs to be channelled each year into building, or rebuilding, electricity, road, rail, water and telecoms networks.
  • The third big consequence of population growth is a rapid increase in the high-consuming middle class. This group of people, which has moved beyond subsistence to a life in which it can realistically aspire to own consumer goods and spend money on services such as health care, education and finance, is predicted to rise from around 400m to 1.2bn between 2000 and 2030. As the chart shows, much of this will be in just two countries, China and India.
  • Understanding changing consumption patterns is a key concern of investors today. For example, the growing female participation rate in the workforce in many developing markets is important because of women's differing spending patterns. Brazil is already the world's third largest market for cosmetics, fragrances and toiletries.
  • Other areas of growth include financial services – where mortgages and consumer loans are relatively undeveloped in emerging markets like Russia; beverages – Nigeria is now the world's biggest market for Guinness; and, inevitably, cars – the ultimate signifier of "arrival".

[Mar 24, 2008: WSJ - New Limits to Growth Revive Malthusian Fears]
[Jun 18, 2008: The Ultimate Shortage ->Water]

NYT: Who is Mario Draghi?

Readers who are interesting in central bank policies, probably want to familiarize themselves with the new ECB President, Mario Draghi.  This role was in theory going to go to fiscal hawk Axl Weber of Germany about a year ago at this time, but Mr. Weber was gently pushed out the door, Paul Volcker style as his policies did not make those who love easy money happy.  So as we say goodbye to Jean Claude Trichet, what is the background and philosophy of the new Italian head of the bank?  (hint: he is a Goldman man!) The New York Times takes an extended look.

  • One European central banker, for instance, predicted that Mr. Draghi would try to curtail a controversial central bank program intended to prop up financially weak nations like Greece, Ireland, Portugal, Spain and Italy — Mr. Draghi’s native country — by buying those nations’ government bonds on the open market.
  • The tactic, which in effect has turned the central bank into the lender of last resort from the Baltic to the Mediterranean, is deeply unpopular here in Germany, the Continent’s economic engine. Many here view the program as tantamount to a taxpayer-funded bailout of nations that should never have been let into the euro club to begin with.
  • But another high-ranking monetary official in Europe predicted just the opposite for Mr. Draghi: that he would be more willing to unleash the full power of the central bank. Both officials spoke on the condition they not be identified to avoid alienating him. Mr. Draghi declined to be interviewed for this article.
  • The question is whether Mr. Draghi, 63, can satisfy his competing constituencies as he confronts a euro-zone crisis that keeps testing the limits of policy-making.   “I can only guess where he will go with monetary policy,” says Carl B. Weinberg, the chief economist at High Frequency Economics in Valhalla, N.Y.
  • UNTIL last Thursday, when leaders outlined their latest plan, Mr. Trichet had long argued against a severe reduction in the value of Greece’s bonds. He had maintained that euro-zone economies must pay their debts, even if they are on the verge of insolvency, as Greece is.  
  • Last July, in one of his first big speeches after his appointment had become official, and just before Greece would need a second bailout, Mr. Draghi seemed to break with Mr. Trichet.   “The solvency of sovereign states has ceased to be a foregone conclusion,” Mr. Draghi told bankers in Rome. It is too soon to tell whether he will adopt a more pragmatic, flexible approach at the central bank, which under Mr. Trichet came to be seen as rigid. It is the only major central bank that has not reduced interest rates to near zero.
  • Those closest to Mr. Draghi say his economic views have been shaped by his challenges at the Italian finance ministry in the 1990s, when Italy was expelled from the euro zone’s predecessor, the European Exchange Rate Mechanism and, like Greece today, came close to bankruptcy.
  • His record is not without controversy. In Italy and later, as a vice chairman for Goldman Sachs in Europe, Mr. Draghi was a proponent of nations and other institutions like pension funds using derivatives to more efficiently manage their liabilities. In some cases, many experts now contend, these transactions helped mask the finances of Greece and Italy before those nations were allowed into the euro.
  • People who know Mr. Draghi point to his time at the Massachusetts Institute of Technology in the late 1970s, when economists there emphasized taking a practical approach to solving economic problems, rather than hewing to a particular ideology.   “He is a pragmatist,” says Olivier J. Blanchard, the director of research at the International Monetary Fund who received his economic doctorate from M.I.T. in 1977, a year after Mr. Draghi.
  • Even so, Mr. Draghi is unlikely to challenge the founding dogma of the European Central Bank, which demands that it adhere to its German-inspired mandate to fight inflation. That he has been endorsed by Germany’s political and economic establishment suggests that he will be constrained from taking an unorthodox approach.
  • But central bank watchers worry how Mr. Draghi might be perceived if Italy experiences its own financial crisis — a prospect he himself has not discounted.   “Mr. Draghi knows that he will be in a very exposed position if he is president and the bank has to keep buying more Italian bonds,” says David Marsh, a former journalist at The Financial Times and the author of “The Euro: The Battle for the New Global Currency.”
  • There is a glide and panache to Mr. Draghi, who favors hand-cut black suits and has the assured pace of the basketball player he was in his youth, that set him apart from the general frumpiness of his fellow central bankers.  In Italy, he is known as Super Mario, a moniker he earned in the 1990s when, as the Italian economy neared the brink, he became the acceptable public face of his country to foreign investors. He oversaw one the largest European privatization efforts ever and paved the way for Italy’s entry into the euro.
  • All central bankers must be politically adroit. In Mr. Draghi’s case, his deft touch and, perhaps more important, his essential malleability, are legend.   He has produced a deep treatise on government debt, served as chairman of a world-spanning regulatory body, run Italy’s central bank (while remaining coolly removed from the scandals and fracases of Italian politics) and made a pile of money working at Goldman Sachs — all without being pigeonholed as an academic, regulator or investment banker.
  • People who worked for Mr. Draghi during his 10-year run at the Italian treasury say he applied the M.I.T. approach that put aside models and theories for what actually works.  It was an action-packed 10 years, starting in 1991, with Mr. Draghi representing Italy at the talks that established the framework for the common monetary zone. The fragility of Italy’s application — high levels of debt, runaway deficits — was underscored the next year when Italy was expelled from the exchange rate mechanism and came close to running out of money.
  • But Mr. Draghi’s insistence that countries that delay reforms can go broke shows a departure from Mr. Trichet’s stance. Dating back to the early 1990s, Mr. Draghi has thought deeply about how governments can manage their debt burdens.
  • In one paper he co-wrote in the spring of 2002, just months after he joined Goldman Sachs to lead its effort to win investment banking business from European governments, Mr. Draghi argued that governments might use financial derivatives like interest rate swaps “to stabilize tax revenue and avoid the sudden accumulation of debt.”   The description of how this would work did not obey the letter of the controversial swaps program hatched by Goldman that masked the size of Greece’s debt. But it is faithful to the spirit — namely, that governments as well as pension funds can make use of derivatives to better manage their liabilities.
  • MR. DRAGHI’S Goldman connection has been the one mark on an otherwise spotless résumé and a cause for continued suspicion from some in Europe.   In June, at an appearance before the European Parliament after his appointment, he was asked once more about the Goldman swaps and, in a rare loss of his public cool, cited again his lack of involvement. He said that while at Goldman, he had no interaction with the public sector, despite being hired for that purpose. “I was not in charge of selling stuff to the governments,” Mr. Draghi said. “In fact, I worked in the private sector even though Goldman Sachs expected me to work in the public sector when I was hired.”
  • Those statements came as a surprise to Pascal Canfin, a French member of the Parliament’s economic and monetary affairs committee.   “Are we supposed to believe that he had a discussion with Goldman executives that he cannot have business with sovereign governments even though that was what he was hired to do?” he asked. “It’s very weird. The swaps are not illegal — the question is did he lie before Parliament?”

Friday, October 28, 2011

No Rest for the Weary

The first week of the month is normally jam packed, and next week is no exception with a Fed meeting thrown into the soup for good measure!  With several Fed members hinting at QE3, this is the first time the market seems a bit confused on what is going to be announced in a long while.  We haven't heard anything explicit from Mr. Bernanke himself, but we did have that leak in the WSJ a week ago today, so it remains to see if it happens this meeting or next. 

Bernanke will also have his quarterly press announcement Wednesday 2:15 PM so that might be the opportunity to stress to markets QE is coming if they don't deliver at the meeting.


Overnight Monday we will have the Purchasing Managers Indexes from China and Europe.

Tuesday: ISM Manufacturing

Wednesday: ADP Employment Report with the FOMC announcement in the afternoon

Thursday: ISM Non-Manufacturing

Friday: Employment data


Unlike the past few months where expectations were very low, we've piled on some 200 S&P points in a month, so economic data needs to start coming in better for the momentum to continue. 

We can also begin the hand wringing over the super committee which has an initial deadline towards the end of November to come up with a plan to find over $1T in cuts.

[Video] Stephen Roach - Fed "Repression" Punishes Savers, U.S. Consumers' Balance Sheet Won't be "Fixed" in His Lifetime

Based on this morning's data, Americans are back to their old ways - personal income rose 0.1% (after last month's -0.1%!) yet spending rose 0.6%.  This sounds like 2006 all over again expect the house ATM has been replaced by the federal government ATM (nearly 1 in 5 dollars of income now comes from transfer payments!)  The personal savings rate (which incredibly fell to a negative reading mid decade) has fallen from the mid 5% to low 6% over the past few years, back down to 3.6%. 
  • The saving rate, the percentage of disposable income socked away, fell to 3.6 percent, the slowest since December 2007, from 4.1 percent in August.

Frankly that's a realistic response to a Federal Reserve policy which is incredibly negative for savers.  We've been waving that flag for a few years [Mar 31, 2010:  Ben Bernanke Content to Sacrifice Savers to Recapitalize Banks and Benefit Debtors] but more voices are coming to the issue.   This reduction in savings is incredibly negative in the long run, as that's a large part of what got us in this huge mess in the first place but all government and central bank policy is for the short term and perverting long term outcomes.

Yesterday Morgan Stanley's Stephen Roach discussed that subject amongst many others in this 9 minute interview with CNBC.   It was actually quite a snippy interview!!(email readers will need to come to site to view)

  • The Federal Reserve is penalizing consumers by keeping interest rates near zero, threatening long-term savings and the U.S. economy, Stephen Roach told CNBC Thursday.  The Fed said in August it will keep interest rates at the current low rate until 2013.  Roach said doing so raises a serious question "about the financial repression practiced by your favorite central bank, the Federal Reserve. The idea that we can run zero interest rates in perpetuity and penalize savers is absurd."
  • Roach said the U.S. consumers' balance sheet won't be "fixed" in his lifetime.  "We’re going very, very slowly," said Roach, who is also a senior fellow at Yale University's Jackson Institute.  He said one of the big disconnects in the U.S. policy debate right now is a fixation on stimulus packages, the Fed's "unconventional monetary policy," and President Barack Obama's jobs bill at the expense of helping Americans get rid of their increasing debt load so they can save more.
  • "Do you know that half of American workers have no retirement fund?" he asked. "Until we address the debt overhang of the American consumers, especially mortgage debt…this consumer recovery is going to be anemic and hobble U.S. economic growth and U.S. employment growth." He added: "We’ve got to get together and get real on policy debate here. We’re not doing it at all."
  • Americans need to save a lot more over the medium to longer term, Roach said.  "How else are we going to fund economic growth?" he asked "Right now we’re borrowing surplus savings from abroad because we don’t save a nickel at home, and we have to wean ourselves from that."
  • As to Asia, he scoffed at the "China doomsday crowd" that "comes out of the closet and they talk about the coming collapse of China." Roach said he believes China is doing a good job in navigating treacherous global waters and called that "an opportunity for us in the west rather than a threat."

[Sep 22, 2011: [Video] Stephen Roach - U.S. Did Not Learn from Japan]
[Jun 7, 2011: Stephen Roach Revisits U.S. & China, Plus the Debt Connection]

[Jan 14, 2011: [Video] CNBC - Stephen Roach Talks U.S. & China]
[May 31, 2009: Stephen Roach on Asia - No Sail]

Best Performing Stock Year to Date? Silicon Motion Technology (SIMO)

While this is one highly correlated market, with almost everything moving en masse for much of the year there are still pockets of under and out performance at the edge.  I ran a screen last night on my typical pool of eligible companies (this excludes the very small caps below $300M, and those without liquidity - i.e. at least 200K average volume) and came back with 95 stocks that returned at least 50% year to date.  I estimate that 6-8 of these were buyouts but that still leaves 85+ big time performers, in a market that is essentially just above flat for the year.  (here is the screen if you are curious)  Sometimes you can find some interesting new ideas by seeing where the money is flowing over the past 3 months, 6 months, year to date, etc.

Who was at the top of the list? $510M market cap Silicon Motion Technology (SIMO) at a 289% return.  Never heard of it before last night but its a fabless semi company based in Taiwan which focuses on flash memory.  (Company website here)  They do have their hands in a lot of interesting markets however.

Silicon Motion Technology Corporation (NasdaqGS: SIMO) is a fabless semiconductor company that designs, develops and markets high performance, low-power semiconductor solutions for multimedia consumer electronics applications, such as mobile phones and smartphones, digital cameras, camcorders, notebook and tablet PCs, and personal navigation devices.
Founded in 1995 in San Jose, California, Silicon Motion is currently headquartered in Taiwan, with design centers and sales offices in Taiwan, Korea, China, and the US, and a branch office in Japan.

Silicon Motion has three product lines: mobile storage, mobile communications, and multimedia SoCs. Mobile storage products are composed of microcontrollers used in NAND flash memory storage products such as flash memory cards, USB flash drives, solid state drives (SSDs), and embedded flash solutions. Mobile communications products are composed primarily of mobile TV IC solutions and CDMA RF ICs. Multimedia SoC products are composed primarily of embedded graphics processors.

As we can see on the chart, even with a company up ~300% it's all about timing.  The entire move came from January thru mid April.... and then in October.  Between mid April and September, the stock was dead money.

These type of companies don't normally have a high PE ratio due to the cyclical business (and high competition) but SIMO seems to be in a narrow window of opportunity.  At $0.94 EPS projected for 2011, the company has a forward PE of 17.6.  2012 is currently projected at $1.13.  Last year's EPS was $0.42 so you can see it's been quite a year of bottom line growth.   The company reports next week (Nov 1).

Last quarter showed some impressive metrics:
  • The company just reported second-quarter sales of $50.5 million for a year-over-year jump of 58%. On the bottom line, non-GAAP earnings per depositary share soared from $0.09 to $0.29.


While everything in this market nowadays is about guessing macro events, and front running central bank and government intervention (not very fun) it still is interesting to discover these individual stories.
No position

Census Confirms a Historic Reveral of Fortune for Internal Migration Among Americans

Generally Americans have been amongst the most mobile of populations, especially within the country.  If there was a job in a far flung part of the country, many would pull up roots and go there.  Other countries are much more family centric - generally you live with your parents much longer, and even when you move out you tend to stay within a certain radius of your parents/family. 

Back in 2009, we mentioned a few stories about how the housing crisis / recession had created a change to this pattern.  The recession effects were pretty typical - less household formation as adult children stayed at home.... but we also have read many more stories of parents moving in with children.   [Apr 8: Recession Causes Relatives to Move in Together & Sharp Drop Off in Divorces. Housing Bubble 2.0? (Not)]   But what was especially different this time around was the fact so many people are stuck in underwater homes, and hence can't sell and move on. [Dec 24, 2009: WSJ - Recession Alters Migration Patterns in U.S.] [Apr 23, 2009: As More Homes Fall Underwater, Trapped Americans Cannot Migrate]

Migration around the U.S. slowed to a crawl last year, especially for this decade's boom towns, as a weak housing market and job insecurity forced many Americans to stay put. Demographers say the dropoff in migration, shown in Census data to be released Thursday, is among the sharpest since the Great Depression. It marks the end of what Brookings Institution demographer William Frey calls a "migration bubble."

Migration typically slows during recessions. But in past downturns, the slowdown has been more regional in scope, with workers fleeing weaker job markets for places where companies were still hiring. In the deep 1980s recession, for instance, laid-off auto workers fled the industrial Midwest for energy-rich states in the South with more plentiful jobs. What's unique this time is migration has slowed almost everywhere.

The bureau found that the number of people who changed residences declined to 35.2 million last year, the lowest number since 1962, when the nation had 120 million fewer people.

More data from the recent census confirms this issue:

  • Americans are staying put more than at any time since World War II, as the housing bust and unemployment keep young adults at home and thwart older Americans' plans for a beachfront or lakeside retirement.
  • New information from the Census Bureau is the latest indicator of economic trouble, after earlier signs that mobility was back on the upswing. It's also a shift from America's long-standing cultural image of ever-changing frontiers, dating to the westward migration of the 1800s and more recently in the spreading out of whites, blacks and Hispanics in the Sun Belt's housing boom.
  • Rather than housing magnets such as Arizona, Florida and Nevada, it is now more traditional, densely populated states -- California, Illinois, Massachusetts, New York and New Jersey -- that are showing some of the biggest population gains in the recent economic slump, according to the data released Thursday.
  • Residents have been largely locked in place; families are stuck in devalued homes and young adults are living with parents or staying put in the towns where they went to college.
  • "The fact that mobility is crashing is something that I think is quite devastating," said Richard Florida, an urban theorist and professor at the University of Toronto's Rotman School of Management. He described America's residential movement as a key element of its economic resilience and history, from development of the nation's farmland in the Midwest to its coastal ports and homesteading in the West.  "The latest decline shows we are in a long-run economic reset and that we never really recovered -- we've just been stagnating along," Florida said.
  • Roughly 11.6 percent of the nation's population, or 35.1 million, moved to a new home in the past year, down from 12.5 percent in the previous year. The current level of low mobility comes after the recession technically ended in mid-2009, beating a previous low of 11.9 percent in 2008.
  • It is the lowest in the 60-plus years that the Census Bureau has tracked information on moves, dating back to 1948.
  • The shares of people moving have been declining for decades, due in part to increases in two-income families that are more tied down by jobs and to an aging population that is less mobile. The peak for U.S. mobility came in 1951, when it hit 21.2 percent. The rate had leveled off at around 13 percent before falling off notably in 2008 during the recession.
  • Among young adults 25 to 29 -- the most mobile age group -- moves fell to 24.1 percent from 25.9 percent in the previous year. Longer-distance moves, typically for those seeking new careers in other regions of the country, remained largely flat at 3.4 percent. The biggest drop-off occurred in local moves, down to 15.4 percent from 17.7 percent in 2010, a sign that young adults in the prolonged slump weren't even willing to venture outside their counties, continuing instead to live with relatives or on college campuses.
  • Americans most often cite a desire to live in a new home as the main reason for moving, as well as reasons of family or economy such as marriage or a new job. But analysts say with many young adults delaying marriage while struggling to find employment and aging baby boomers expressing financial worries about retirement, the current mobility freeze could continue for several more years.
  • The annual growth of retirement-destination counties -- typically in Sun Belt states such as Florida, Arizona and New Mexico -- has fallen sharply since the recession that began in late 2007. It's down nearly half compared with the period 2000-2007, according to recent census data.
  • Renters were more mobile: Overall, 68.8 percent lived in the same rental unit one year ago.

The findings were based on the Census Bureau's Current Population Survey as of March 2011, as well as comparisons of the 2005-2007 and the 2008-2010 American Community Survey to provide a snapshot of every U.S. community with at least 20,000 residents. Figures on income inequality come from a census analysis of survey data from 2005-2009.

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