Shouldn’t Somebody Be Looking Into This?
by ilene - March 18th, 2010 8:21 pm
A lot can happen in seven days… Just look at Creation, and FedEx. - Ilene
Shouldn’t Somebody Be Looking Into This?
Courtesy of Michael Panzner at Financial Armageddon
A week ago, I highlighted a report from the Financial Times, "FedEx Warns on US Recovery," in which the head of the U.S. transportation and logistics company expressed concerns about the health of the economy:
The nascent US recovery could falter because businesses are still reluctant to invest in new equipment and technology, the head of global delivery and logistics company FedEx has warned.
“Business investment went up somewhat in the fourth quarter but is far below what it ought to be in a cyclical recovery like this,” Fred Smith, chairman and chief executive of FedEx, told the Financial Times.
He added that companies were being held back by continuing “uncertainty” over the outlook.
During the downturn many companies, including FedEx, cut their capital expenditures in response to falling demand, moves that in turn intensified the drop-off in economic activity. The levels have yet to recover.
Boosting investment spending was crucial to catalysing a sustainable recovery, Mr Smith said, because it created jobs. When people were worried about unemployment, they tended to spend less, undercutting a driver of the economy.
Now, just seven days later, there appears to have been a miraculous turnaround, as the Associated Press reports in "Fedex Sees Economic Recovery Spreading":
FedEx says the global economic recovery is broadening, as Asia continues to show strong growth and the U.S. economy gains steam.
Fred Smith, CEO of the world’s second-largest package delivery company, predicted a "relatively strong" first half as major economies emerge from the recession with steady economic growth in the last six months of the year.
FedEx expects U.S. gross domestic product to grow about 3 percent this year, led by the manufacturing sector, in line with economists’ expectations.
I’m not sure if 1) somebody has been misquoted; 2) this is one of the most egregious examples of expectations management I’ve ever seen; or, 3) somebody forgot to take their meds (or took way too much), but either way, shouldn’t an editor, a regulator, or a doctor be looking into this?
*****
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IS CONGRESS ABOUT TO DERAIL THE ECONOMY?
by ilene - March 18th, 2010 4:46 pm
Here’s an excellent discussion on the economy and China. We present many views here, and Pragcap’s are some of the most thoughtful and balanced. And if you haven’t yet, check out Op-Toon’s Review (fun images and satirical commentary). - Ilene
IS CONGRESS ABOUT TO DERAIL THE ECONOMY?
Courtesy of The Pragmatic Capitalist
The United States government has made a curious series of interventionist moves over the course of the last 18 months. Some have been beneficial, but not surprisingly, few of these policies are actually helping the economy recover from the Great Recession.
As I’ve previously mentioned, Keynesianism can work. There is good government spending and bad government spending, despite the constant shrieking from Austrian economists with regards to all spending being bad. Giving money (on a silver platter) to banks who are not reserve constrained is exhibit A of bad spending. Spending money on a healthcare plan in the middle of a recession is a close runner-up. The banking bailouts not only set a terrible social precedent, but were also implemented with the belief that banks are reserve constrained – something that is entirely false.
The great recession was never a banking sector problem despite it being labeled as a “credit crisis”. In reality, this was a consumer driven crisis. The results prove this. The banks have recovered, but lending hasn’t improved. Why? Because this is a consumer driven recession. Banks aren’t reserve constrained. Finding willing borrowers, on the other hand, is a whole other matter….
The healthcare debate is a bit more messy. While the social aspects of healthcare spending are likely positive, you just have to wonder about the motives of the men pushing this plan when we are mired in the worst recession in 75 years. Is healthcare really our top priority when unemployment remains near 10%? More importantly, is this an efficient form of government spending when we could easily target job creation or other productive investments in the long-term growth of America (China’s high speed rail system comes to mind here). Meanwhile, we have an antiquated infrastructure. Where are the priorities?
But the political pandering is taking a turn for the worst in recent days and surprisingly, markets are ignoring this potentially devastating global debate. Hypocritically, the latest government pandering is targeted at the Chinese and their “manipulative” government. Oh those darned Chinese and their interventionist ways! How dare they manipulate their currency! (Nevermind that the United States indirectly “manipulates” its currency via…
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THREE THINGS I THINK I THINK
by ilene - March 18th, 2010 2:15 am
THREE THINGS I THINK I THINK
Courtesy of The Pragmatic Capitalist
- The complacency in the market is now reaching a fever pitch. It always amazes me that investors can be so bearish near the bottom and then be so incredibly bullish after the
market has risen so substantially. On January 28th I said the market was not forming a major market top and that the downside was “more likely a correction within the uptrend”. At S&P 1,140 I went net short for just the second time in the last 12 months. With our H1 outlook largely playing out as expected I now find myself wondering if we are in a euphoric blow-off top and on the wrong side of the trade….
- Mad Money started 5 years ago on CNBC. I vividly remember seeing the show when it started because it began right around the same time when the great Louis Rukeyser got sick. My first thought was: “there is something seriously wrong with the market if its participants are willing to listen to a man banging on buttons and acting like a lunatic.” The power of Cramer over the years is undiminished and leaves me wondering exactly the same thing today. Cramer is a good investor and a GREAT salesman, but you just have to wonder after 5 years – the market is flat over the same period – have any of his viewers actually come out on top after taxes and fees? My guess is very few….Investing is not a joke. It is not entertainment. I am not sure why anyone thinks it is okay to make it seem that way.
- While I continue to think the VIX is a sign of near-term complacency you just can’t help but wonder if investors are still too fearful in the long-term. The majority of investors still don’t have an ounce of faith in the recovery and this is reflected in the historically high VIX. In the past two recessions, the VIX did not reach its historical low of 10 until at least 3 years into the recovery. Perhaps most important, the market rallied this entire time.
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Wait…What?
by ilene - March 17th, 2010 3:54 pm
Wait…What?
Courtesy of Michael Panzner at Financial Armageddon
We interrupt the euphoria in the stock market to bring you this breaking news flash –
"Shipping Market Worst Since World War II, Fisher Says" (Bloomberg)
The world shipping market is mired in its biggest slump since World War II, said James Fisher & Sons Plc, a U.K. hauler of oil products.
“This is the worst shipping recession since the war,” Chairman Tim Harris said today in a telephone interview. He spoke after the Barrow-in-Furness, England-based company reported little-changed annual profit. Prospects for a rebound at its shipping unit hinge on the timing of any increase in industrial output in northwest Europe, Harris said.
Demand to haul cargoes has plunged because of the global recession, sending charter rates lower and spurring carriers to take vessels out of service. BW Gas Ltd., the world’s biggest shipper of liquefied petroleum gas, said last week it idled four tankers because rates plunged so low that each vessel was losing the company about $25,000 a day.
“There’s been an unparalleled collapse in demand,” said Harris, who was previously chairman of Clarkson Plc, the world’s largest shipbroker. Fisher has a fleet of tankers that haul oil products around U.K. waters.
"Wait…what?" said one of the countless bulls who’ve been blindly bidding up share prices, "I thought the global economy was on the road to recovery…?
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Econobloggers need their crisis back
by ilene - March 8th, 2010 6:52 pm
While Ultimi Barbarorum’s Baruch would probably rather me argue a fine point in his sadly overall true post, I happen to agree with him. However, not be overly picky, he missed Phil’s Stock World in his list of bloggers who still care. Oh, and let’s not forget two of my favorites, JESSE’S CAFÉ AMÉRICAIN and Mish’s Global Economic Trend Analysis. (And all those others I’m missing.) - Ilene
Econobloggers need their crisis back
Courtesy of Ultimi Barbarorum
I think so, dear readers. With the advent of peace and plenty, as we move to the broad sunlit uplands of The Recovery, I fear some of the spice has gone out of the commentary on sites like this one, and its friends. Where people used to read econoblogs to actually understand a crisis that CNN and Fox News soundbites didn’t seem to encompass anymore, as the meltdown recedes into the past there’s now just a dull ennui. And with that, the econoblogosphere is moving back to where it used to be, which is to cater to a niche, broader than most, but a niche nonetheless, with a circumscribed influence.
The high point of bloggy “power”, we shall probably find in retrospect, was when a number of bloggers were invited to the US Treasury department and fed some by all accounts delicious cookies, as well as being ferociously spun to by the Goldmans guys whose turn it was to be on sabbatical at the Treasury that when it came to financial reform and what had gone wrong in the banking sector they did in fact Get It, whatever It was.
Since then, of course, we have had Obama praise the bonuses to “savvy businessman” Lloyd Blankfein, who as we all know is doing god’s work; mind-numbingly massive “trading” profits from all the big commercial, investment, commercial, investment banks at the same time as accepting government and Fed largesse*; an even more hideous clusterfuck over finance reform than exists over healthcare reform in the US; and this despite none of the proposals under discussion seeming likely to properly change anything worthwhile, other than maybe the Volcker prop trading rule and this last seems fairly dead in the water.
What really rankles this blogger is that the Great Spinozist Republic is being subverted again. Regulatory capture is one thing, the total inability of a political system to make any steps to reform itself when what is wrong is staring at you in the face, is quite another. Political money and public ignorance has…
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Durables Goods - Oops
by ilene - February 25th, 2010 2:21 pm
Durables Goods - Oops
Courtesy of Karl Denninger at The Market Ticker
New orders for manufactured durable goods in January increased $5.2 billion or 3.0 percent to $175.7 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly increase and followed a 1.9 percent December increase. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders increased 1.6 percent.
Uh huh.
Ex-transports it’s down.
Internals are not all that good either. Inventory on computers and electronics are being rapidly depleted - manufacturers (despite the BS claims of the media) are NOT replenishing stock. Take the so-called "pumping" and stuff it.
Not-seasonally-adjusted new orders and shipments are down significantly. Since most Christmas "stuff" is ordered and shipped in advance of December, this isn’t very positive at all.
Most important in the "new orders" column is the decrease in computers and electronic components. Remember, we keep hearing how wonderful it has been in earnings reports. Well, if that’s so, then explain the decrease from 31,577 to 23,146 in new orders month/over/month - that is almost a THIRTY PERCENT decrease!
Someone’s been lying.
It’s across the board too - not just computers, but also the subindex for communications equipment. NOT GOOD.
This is a leading indicator for hiring activity folks. I’ve harped on it before and will keep doing so. New employees = more computers and cell phones. If you’re not seeing it there (and you’re not) then the entire premise of "a recovering employment picture" is absolute crap.
Best-a-luck with that "recovery" thesis folks.
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THE ONE CHART THAT SCARES RICHARD RUSSELL
by ilene - February 22nd, 2010 12:38 pm
THE ONE CHART THAT SCARES RICHARD RUSSELL
Courtesy of The Pragmatic Capitalist
Nothing would derail the Fed’s great reflation/recovery experiment like higher interest rates. Several notable investors including David Einhorn (see Einhorn’s thoughts here) and Julian Robertson (see Robertson’s thoughts here), have expressed their concerns over the potential for higher interest rates. The great Richard Russell of the Dow Theory Letters has long feared a spike in interest rates. In a recent note he explained that the end of quantitative easing has bond investors worried over the future of interest rates. Russell believes higher rates are the next big move in the bond market:
“Older subscribers may remember that I said that the Fed could continue its “quantitative easing” (printing money) until the bond market says it can’t. Below is a daily chart of the 30-year Treasury bond. The bond market doesn’t like what it sees. I view the pattern on this chart as a huge, down-slanting head-and-shoulder top with the bond sitting right on support. The bond appears weak, and if support is violated, interest rates will be heading higher. And that’s the last thing the Fed wants at this time.”
Source: Dow Theory Letters
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Interest Rates,
Bond Investing,
Federal Reserve
at Wikinvest
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Goldman Says “Something Brewing” in China on Currency; What’s Really Brewing Is “Trouble”
by ilene - February 16th, 2010 12:41 pm
Goldman Says "Something Brewing" in China on Currency; What’s Really Brewing Is "Trouble"
Courtesy of Mish
With a lot of eyes focused on the PIIGS (Portugal, Ireland, Italy, Greece, Spain), especially Greece and Spain, please don’t forget about China. Goldman’s O’Neill Says ‘Something Brewing’ in China on Currency.
Goldman Sachs Group Inc. Chief Economist Jim O’Neill said China may be poised to let its currency strengthen as much as 5 percent to slow the world’s fastest growing major economy.
“I have a strong opinion that they’re close to moving the exchange rate,” O’Neill said in a telephone interview from London after China’s central bank told lenders on Feb. 12 to set aside larger reserves. “Something’s brewing. It could happen anytime.”
Chinese policy makers are seeking to restrain credit growth after their economy grew the fastest since 2007 in the fourth quarter. Banks extended 19 percent of this year’s 7.5 trillion yuan ($1.1 trillion) lending target in January as property prices climbed the most in 21 months.
O’Neill, who coined the term “BRICs” in 2001, anticipating the boom in the emerging economies of Brazil, Russia, India and China, said China may allow the yuan to rise as much as 5 percent in a one-off revaluation and to then trade within a bigger band or against a larger basket of currencies. That would help counter international pressure, he said.
Record lending last year and a 4 trillion yuan stimulus package helped China lead the recovery from the deepest global recession since World War II. Investors’ concern about investment bubbles in China, and what action the government may take to prevent or deflate them, has mounted this year.
Traffic Signal With No Red Light
In China, when the Central bank says "lend", banks lend.
"Don’t lend" does not seem have the same effect. It’s as if the central bank traffic signal only has green and yellow lights, not red.
If China wants to make less money available then what is it doing with stimulus at 14% of GDP, the highest in the world?
And what pray tell will China do with vacant shopping centers, vacant office space, and even vacant cities?
50% Office Vacancy Rate In Beijing
Inquiring minds are reading Beijing Seen Vacant for 50% Commercial as Chanos Predicts Crash.
Beijing’s office vacancy rate of 22.4 percent in the third quarter of last year was the ninth-highest of 103 markets tracked by CB Richard Ellis Group Inc., a real estate broker. Those figures don’t include many buildings about to…
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Un(Employment) Friday 2/5
by ilene - February 5th, 2010 4:42 pm
Here’s Karl Denninger’s take on the unemployment numbers. - Ilene
Un(Employment) Friday 2/5
The data continues with the January Employment Situation Report.
The top-line was a loss of 20,000 jobs but the unemployment rate "as reported" fell from 10.0 to 9.7%.
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This was good for an almost-immediate 10 point ramp in the futures, exactly as I had talked about last night in the video - the potential for anything "in line" to provoke a snapback was quite real, and it became realized - at least until people actually read inside the report, that is!
But one must dig into the report and try to determine if we’re seeing real improvement, or whether we’ve got statistical adjustments, remembering that January is a difficult month under the best of times because of benchmark and annual revisions.
And here we find some problems.
First, let’s start with the good news:
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While we’re not gaining employment yet the direction of the move is back toward gains - and has been since September. The trajectory continues, but one must remember that until this number has a positive sign in front of it, we’re still losing.
The problem is that a big part of this has to do with revisions to population "guesses" that were put into the system for this month. When one looks there, we see a few problems - first, the usual "January Effect" change in the "Not In Labor Force" table:
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It is common to find downticks in this chart in January - but whether they mean anything is another matter. We had one last year, we had one the year before, and we had one this year. While the last few years this has been a negative print (improvement) there are years in which the change was positive. Whether this is a consequence of the population normalization that happens every January or whether it’s real will have to wait for another month or two. One month a trend does not make.
But in some of the other details things don’t look so good, where we look at the product of these statistical adjustments that filter through to both sides of the sheet.
.png)
That ain’t good. The total employed continues to decline, which is in line with the actual report. So in this case household and establishment are in alignment - and showing continued losses. The bad news is that in the household survey the trajectory of losses has resumed since September its downward trend - and shows no evidence…
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TOP-LINE GROWTH MAKES A COMEBACK, OR DOES IT?
by ilene - February 3rd, 2010 11:13 am
CHART OF THE DAY: TOP-LINE GROWTH MAKES A COMEBACK, OR DOES IT?
Courtesy of The Pragmatic Capitalist
The talking heads are all aflutter about the “return of revenues”. This earnings season has been far better than expected (as we expected). With about half of the S&P 500 reporting we are seeing a remarkable 78% of companies beat bottom-line estimates while 72% also beat top-line estimates. This is a substantial improvement over the last quarter when less than 55% of companies beat top-line estimates. The good folks over at Bespoke Investments put things into perspective for us:
“In the last three earnings seasons, all we heard about was that bottom line numbers were coming in strong, but top line numbers remained weak. This earnings season, however, the top line numbers have been very strong as well. Below we highlight the percentage of stocks that beat revenue estimates on a quarterly basis going back to 1998. As shown, the revenue “beat” rate is currently at 72% this quarter. This is the highest level seen since the fourth quarter of 2004.”
Don’t get too excited just yet though. On a year over year basis (with very easy comps) the revenue
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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