by Zero Hedge - March 18th, 2012 11:07 pm
Submitted by Tyler Durden.
By Nic Colas of ConvergEx Group,
The persistent negative investment flows at U.S. listed mutual funds specializing in domestic stocks is one of the most important long-term trends catalyzed by the Financial Crisis. AUM has dropped by $473 billion since January 2007 despite the S&P 500 Index’s essentially flat performance over this period. The news is no better since the beginning of 2012 – despite the ongoing rally in domestic equities – with $6.8 billion of further outflows year to date. In today’s note Nic Colas, of ConvergEx analyzes what will reverse this trend along two vectors: the desire and ability of individuals to invest. The rally in risk assets, along with declining actual volatility, is the best hope for a reversal in money flow trends. Offsetting that factor are continued stresses on household budgets and consumer psychology combined with problematic demographic trends. Bottom line: domestic money flows have likely become more economically sensitive than in previous cycles.
Like many investment professionals who came up through the ranks as single stock analysts, I turn to time-tested but industry-specific paradigms when analyzing unfamiliar business problems. In my case, that means pulling lessons from a decade-plus of staring at the U.S. auto industry for clues about how and when individuals choose to spend their money on large purchases like cars and trucks. These products are typically deeply cyclical in terms of demand. A good year might see 16 million or more units move off dealer lots. A bad year would register 12 million or less. Product pricing follows the same contour; a weak market means more incentives – a polite word for the old Lee Iacocca catch phrase, “Buy a car, get check!”
Back in the early 1990s, Chrysler’s chief economist – a talented and gregarious fellow named Don Hilty – walked me through his model for assessing how the American consumer decides it is time to buy a new car. This calculus was critical for Chrysler, since it had little in the way of overseas operations to buffer the shock of a weak U.S. market. Getting demand levels correct – and therefore production and dealer inventories – was worth well over $100 million in incremental profits, and Don’s assessment of the market was the lead presentation at every company Board of Directors meeting.…
by ilene - March 18th, 2012 10:47 pm
Submitted by Tyler Durden.
We have long argued that at its core, modern society, at least on a mathematical basis – the one which ultimately trumps hopium every single time - is fatally flawed due to the existence, and implementation, of the concept of modern "welfare" – an idea spawned by Otto von Bismarck in the 1870s, and since enveloped the globe in various forms of transfer payments which provide the illusion of a social safety net, dangles the carrot of pension, health, and retirement benefits, and in turn converts society into a collage of blank faces, calm as Hindu cows. Alas, the cows will promptly become enraged bulls once they realize that all that has been promised to them in exchange for their docility and complacency has… well… vaporized. It is at that point that the final comprehension would dawn, that instead of a Welfare State, it has been, as Bill Buckler terms it, a Hardship State all along. Below we present the latest views from the captain of The Privateer on what the insoluble dilemma of the welfare state is, and what the key problems that the status quo will face with its attempts at perpetuating this lie.
From The Privateer
The Great Delusion – “Welfare”
For the best part of the last two decades, it has been accepted as an indisputable fact even by the mainstream media that the two great pillars of the welfare state – medicare and social security – will break the government which offers them. Today, every nation in the world makes at least some pretense of providing “welfare” to its citizens. Since the “developed” (or “rich”) nations are those where these systems are most “developed”, these are the nations most at risk of crumbling under their burdens.
Welfare has many antonyms, but “hardship” is particularly apt in this context. Wikipedia’s entry on “welfare” ends like this: “… this term replaces “charity” as it was known for thousands of years, being the act of providing for those who temporarily or permanently could not provide for themselves.” As usual, the defining characteristic is missed. Charity is voluntary. “Welfare” as practised by government is compulsory. This makes the two terms opposites. It also brings about the opposite results. Charity is a voluntary act made by those who have a surplus to assist
by Zero Hedge - March 18th, 2012 9:19 pm
Submitted by Tyler Durden.
Submitted by ZH reader Sleestak, who sports a 15 year career in the bulge bracket, including GS and the less fortunate Lehman Brothers, as a fixed income trader.
Greg Smith, the Jerry Maguire of Goldman Sachs, has struck a nerve with his New York Times OpEd admonition of the culture at his former firm, the symbol of all that is successful – and wrong – on Wall Street. What he did was gutsy, if ill-advised. But his disillusionment at a once-admired business culture gone bad is also almost adorably naïve and, worse, diverts from the real cancer that has metastasized in our banking “culture” during his years in it.
I’ll say it again: Greg Smith has nerve. He took great risk putting his name to that letter. He will be getting calls, emails and all else, straight to his person. He might well face litigation, this from a foe few dare challenge. And the men at the at the top, CEO Lloyd Blankfein and COO Gary Cohn, are powerful indeed, and Greg Smith has just publicly done them far more damage as individuals than any testimony in front of Congress did.
Still, what did Greg Smith really think he was getting into when he signed up to work on Wall Street? Perhaps when contemplating his career he saw the ads we all see on television for Morgan or Merrill: “We’ll help you build your future with sound financial knowhow…” And that does sound nice. Finance is complicated and “lay” people surely can use a hand from a thoughtful ally in the trenches. It is charming to think Greg Smith was taken in by such a mission.
But away from the advertising sets, Wall Street always has been a kill-or-be-killed pit of near-violent wills set against each other. Perhaps a bit less so in the retail businesses that sell to Moms and Pops (though “broker production” is a hotly competitive racket, to be sure), but certainly in the institutional businesses where Greg Smith operated. In these businesses, in which the banks trade with professional, accredited investors, the customers are often as bloodthirsty as the banks. Yes, many could use a good salesman’s hand in furthering their interests, but as many – so many – seek the desk that’s sleeping that day and exact a predatory…
by Zero Hedge - March 18th, 2012 8:02 pm
Submitted by Tyler Durden.
From Grant Williams’ Things That Make You Go Hmmm
After the attack on ‘speculators’ failed to lower gas prices (here’s a piece of free advice by way of a simple mathematical equation for anybody in the current Administration who may be reading: ZIRP ? Low Gas Prices), it was the turn of the other staple solution to an intractable problem; the US Strategic Petroleum Reserve (SPR):
(Montreal Gazette): A group of Democratic lawmakers in the U.S. House of Representatives is again urging President Barack Obama to aggressively use the threat of releasing oil from emergency reserves to rain on speculators driving up oil prices.
The three lawmakers are gathering signatures from others in Congress for a letter to Obama to press him to wield the 696 million barrels of oil that the government stores in salt caverns as a weapon against “rapid price escalations resulting from speculation in the oil markets.”
Last June (the 24th to be precise), it was announced that 60 million barrels of oil would be released from world reserves, with about half of that amount being taken from the SPR. Oil was trading at $91 when the announcement was made but actually rose in price – hitting $97 – before dropping to $88 once the surplus oil was introduced on July 15.
60 million barrels = $3 lower price. Hardly bang for the buck – especially as oil was back above $100 before the end of the year.
As much as the SPR is seen by many to be the panacea for high prices, the lack of available additional supply from the world’s biggest producers is a far bigger concern; one which my friend Ronni Stoeferle from Vienna wrote a fantastic report on recently entitled “Nothing To Spare” (you can email Ronni HERE for a copy of the report which is an incredibly detailed piece of work). In it he took an in-depth look at some of the supply constraints facing the world and his conclusions are, to say the least, troubling:
The still low reserve capacity makes the oil price vulnerable to geopolitical tensions. With the exception of Saudi Arabia, no country holds any significant reserve capacities. But since
by Insider Scoop - March 18th, 2012 7:36 pm
Courtesy of Benzinga.
Tim Cook, Apple’s (NASDAQ: AAPL) CEO, and Peter Oppenheimer, Apple’s CFO, will host a conference call to announce the outcome of the Company’s discussions concerning its cash balance. Apple will not be providing an update on the current quarter nor will any topics be discussed other than cash.
The conference call will take place Monday, March 19, 2012 at 6:00 a.m. PDT/9:00 a.m. EDT.
by Chart School - March 18th, 2012 7:27 pm
Courtesy of Declan Fallon
The S&P cleared the 2011 swing high, but has larger resistance at 1,426 from 2008 to contend with. But given the breaks in other indices this should be cleared over the coming weeks.
The Percentage of S&P Stocks above the 50-day MA rose sharply after spiking at a low in the 50s, but is off past swing highs in the 90s. The one concern is the ‘sell’ trigger in the MACD which may suggest the top in the S&P is closer than expected.
The S&P Bullish Percents slow burn a swing high, but this is not necessarily bearish for the S&P; in 2009 the S&P added another 10% after the breadth indicator topped at 88%.
The Dow was able to take the Large Cap rally a stage further. It cleared the 2008 high by Friday’s close.
The Nasdaq posted a new multi-year high, but unlike Large Cap indices was unable to do so on higher volume accumulation. Bears may look to broadening wedge resistance as an opportunity to take profits or launch a short attack, although the first point of support is just below 2,900.
While the Russell 2000 is working on a challenge of 825, but has larger resistance at 868 to consider.
For the coming week, bears are likely to turn up the heat on the Nasdaq. If they can turn it away from broadening wedge resistance it will add supply into the market and see other indices fall in sympathy. But any decline will quickly run into support, making it a better environment for profit taking than for aggressive shorts.
by Chart School - March 18th, 2012 6:47 pm
Courtesy of Declan Fallon
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by Zero Hedge - March 18th, 2012 6:47 pm
Submitted by Tyler Durden.
Minutes ago Apple announced that first thing tomorrow it will “host a conference call to announce the outcome of the Company’s discussions concerning its cash balance. Apple® will not be providing an update on the current quarter nor will any topics be discussed other than cash.” As a reminder, Apple has just about 100 billion in cash. Everyone expects a dividend. So what happens when everyone finally gets what they have been expecting for so long? Will it mean the end of the growth phase and the advent of the “MSFT” anti-growth curve? Also, which bank will claim the commission for advising Apple on how to spend a cash amount that while nearly a third of Greek GDP, is less than half of the US February budget deficit (in other words, Apple could fund just 12 days of the US spending burn rate in February)? Finally, was the pre-election administration at all involved in the making of this decision – remember the company was expected to announce a cash-related decision a month ago, and nothing happened. Why now? All shall be revealed tomorrow at 9 am.
From the press release:
WHAT: Tim Cook, Apple’s CEO, and Peter Oppenheimer, Apple’s CFO, will host a conference call to announce the outcome of the Company’s discussions concerning its cash balance. Apple® will not be providing an update on the current quarter nor will any topics be discussed other than cash.
WHERE: Via conference call. The dial-in number for press is (877) 616-0063 (toll-free) or (719) 219-0041. Please enter confirmation code 592016.
WHEN: Monday, March 19, 2012 at 6:00 a.m. PDT/9:00 a.m. EDT
REBROADCAST: The conference call will be available as a continuous rebroadcast beginning Monday, March 19 at 9:00 a.m. PDT/12:00 p.m. EDT through Monday, April 2 at 9:00 a.m. PDT/12:00 p.m. EDT. The dial-in number for the rebroadcast is (888) 203-1112 (toll-free) or (719) 457-0820. Please enter confirmation code 6274937.
WEBCAST: Apple will provide live audio streaming of its conference call using Apple’s industry-leading QuickTime® multimedia software. The live webcast will begin at 6:00 a.m. PDT on March 19, 2012 at www.apple.com/quicktime/qtv/call31912 and will also be available for replay for approximately two weeks thereafter. The webcast is available on any iPhone®, iPad®, iPod touch® or any Mac® or PC running…
by Chart School - March 18th, 2012 6:35 pm
Courtesy of Doug Short.
The 2012 worldwide rally reignited last week, with six of the eight indexes in our basket finishing with a weekly gain — the reverse ratio from the previous week. Germany’s DAXK was the top performer with a gain of 4.03%. France’s CAC 40 finished second with a gain of over 3%. The S&P 500 finished in third, but its gain of 2.43% was enough to make it the sole index to set a new interim high. The SENSEX and Shanghai Composite were the two indexes posting weekly losses, with the Shanghai as the biggest loser, down 1.42%.
The adjacent table shows the 2012 year-to-date performance of our gang of eight. At this point six markets are holding double-digit gains at the end of eleven weeks, but the S&P 500 is a new member of the 10% plus club, replacing the Shanghai Composite. But even the worst year-to-date performer, the FTSE 100, is up over 7%.
A Closer Look at the Last Four Weeks
The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. I’ve also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.
The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.
A Longer Look Back
Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Mumbai, Hang Seng) is readily apparent.
by Zero Hedge - March 18th, 2012 6:29 pm
Submitted by Tyler Durden.
Submitted by David Schawel of EconomicMusings.com
Who Is Really Paying The $25 Billion TBTF Mortgage Settlement
The surprising tale that I will attempt to pen in this blog entry has a very familiar cast of characters; the Obama Administration, the Housing Bubble, “Toxic Mortgages”, and Too Big To Fail “TBTF” Banks among others. While the headline of TBTF banks in a $25bil mortgage settlement is known to many, the underlying details of the settlement are less known and quite appalling when you pull back the covers.
The wounds on past and present homeowners are still fresh from the housing crisis. As Jonathan Laing points out in this weekend’s Barron’s cover story, “five million of the country’s 76million mortgage holders have lost their homes to foreclosure or lender ordered short sales since 2006, and an estimated 14million more own more on their homes than their properties are currently worth. In all, some $7.4 trillion in homeowners’ equity has been destroyed according to Mark Zandi…”
Cries for Accountability
While blame deserves to be cast upon numerous parties for the housing bubble, Americans have rightly called for accountability on the TBTF banks. Accountability for what? Among other faults, robo-signing became prevalent among TBTF banks as they forged mortgage documents in order to ensure proper paperwork was done to foreclose on properties.
Details of the $25bil Settlement (in the words of HUD) & Public Lauding
“On February 9, the Department of Justice, the U.S. Department of Housing and Urban Development, other federal agencies, and 49 state attorneys general announced the largest federal and state settlement agreement in history with the five major mortgage servicers for their mortgage servicing practices. The agreement has the potential to help nearly two million American homeowners through a variety of means, including loss mitigation tools such as principal reduction and refinancing of loans for borrowers who owe more on their house than it is worth (“underwater” homeowners), payments of billions of dollars to federal and state parties, and payments directly to individuals who lost their homes to foreclosure and meet certain other criteria.” The public seemed to buy right into this news. After all, $25bil being paid by the bank sounds pretty tough right? Upon news of the $25bil Mortgage settlement many media members gushed over President Obama’s “accountability” of…