Historical records of monthly financial highlights including updates from podcasts, radio,TV, magazines and some commentary.
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Mad Money 10/22/15
Short sellers are the cause of today’s gains. These are the actions of the panicked short sellers. The European central bank is staying soft. Short bets that have gone awry, sellers never materialize — Shorts expose frauds, faults, make money when companies falter or when people give into their fear. Hedge funds are a big part of this action. The bottom line — Take today’s gains in perspective.
Tax Code changes, House ways and means chairman Brady 02/10/17
There will be an entire over haul of the tax code for corporations, small businesses and individuals. Tax brackets will be reduced from seven to three. 35% / 25% / 12%. Corporations will no longer have special provisions and loop holes as they once did. Expecting this to generate 9% economic growth and 8% wage growth over the next ten years. Taxes on savings and investment will be cut in half. The standard deduction will be significantly increased which will help young families. The corporate tax rate will be put at 20%. The border tax for imports/exports will be such that all advantages of producing overseas will be eliminated.
Bloomberg Radio 02/10/17
Jeff Sachs, Sir Martin E.Franklin and Steve Case comment on Trumps performance and tactics during his first few weeks in office. America has never been better at the top, Tax code is still very generous for the rich. America is too focused on the short term; long term strategies maybe hard for the American public to swallow but are necessary if real change is to occur. There has been an unfair concentration, mostly due to lobbying that has been focused on wall street, health care (pharmaceuticals) , energy (Oil drilling and pipeline development), banking (mortgage derivatives and lending) and military contractors, while other economic areas have been given little attention and left to rust out. Instead of focusing on the pipeline we should be developing alternate energies such as wind and solar which will bring long term job growth. Instead of issuing impromptu mandates and making so many tweets Mr.Trump should concentrate on communicating long term thought out solutions to the public.Many of his current proposals offer only short term relief that will dispel before his first term is up.
The hope of higher interest rates under the new president have boosted bank stocks but may only hurt mortgage initiation in the long run. Protectionist policies may increase wages but could be a threat to consumption as well as cause inflation and jeopardize trade advantages for other nations if not done properly—International reliance and cooperation may also be compromised.
The majority of venture capital has been spent in the coastal areas leaving middle america out. This is another area that will need to be addressed if good jobs are to flourish and multiply across America. We need to get greed out of the room.
Bloomberg TV 10/16/15
There is a disconnect between economic data and investor sentiment. This is because sentiment will slowly follow behind hard data. FED policy does not have an immediate effect on the market.
Charlie Rose show: There is much disaffection among the young people overseas. Generally between the ages of 17 and 20 –they are the core of the Palestine problem. They take inspiration from ISIS–all they really need is an iPhone for that, there is no headquarters for the movements, it is spontaneous, it is generalized anger. Technology is mobilizing people like never before, unlike the isolated groups of yesteryear. Extremism has taken hold. There is no belief by Israeli that the Palestine’s want to resolve anything. The rhetoric is becoming harsher on both sides, a vicious cycle of hate from both sides.
[ The recent rioting and demonstrations we have seen in America is not unlike some of the student protests in the early 70’s. Only then the angst was over our involvement in the Vietnam War kept alive by the Nixon administration. The climax of which was at Kent state university where 4 students had died in an incursion with the National Guard.
I have always wondered if any modern day revolution would naturally start at the nation’s colleges. What is interesting is that in the end, the national sentiment was in favor of Nixon when he was re-elected with a land slide in 1972. It seems that the public, although fed up and disgusted with the war were even more horrified by the undignified and violent behavior of the students. I often reflect on this, wondering if and how our current national anguish would play out. Former president Nixon once said that he understands what the students want; he wishes that they would also understand what he wants. ] http://dept.kent.edu/sociology/lewis/lewihen.htm
Bloomberg the first word
Bankruptcy is on the rise for business, especially in energy and retail. The coal industry has regulations that are crimping while demand has decreased for electrical and steel production. Retailers are recalibrating themselves to use less space.
Mad Money Oct. 13, 2015 The S&P Oscillator is in way over bought territory. Anything over 5 is suspect, it is currently over 10 -well into the danger zone. Only 10% of the S&P500 benefits from higher oil prices. The Chinese stock market has been manipulated by China. There have been many earnings misses due to the strong dollar. At this time any bad news can cause a downward move in the market.
Mad Money Oct, 12, 2015 On August 24th 2015, industrials, oil and tech could have hit a bottom that could very well continue a trend that will last throughout the year. All of this on the turn of the Chinese stock market that has since withstood even more negative news coming out of that country. No other U.S. events or indicators were indicative of this. This is no coincidence, in the following weeks the show will reveal ways to take advantage of this and buy into weakness. The bottom of these sectors may again be tested but all in all it should hold. Some mitigating factors to consider: China’s year over year spending for the recent week long holiday was up, in addition, the largest energy independents were able to avoid a catastrophe. However, the Baltic freight index has yet to show a bottom.
10/08/15 Bloomberg TV Bond rates are not in there normal sink with the stock market. The FED is dovish in its opinion of the stock market mainly due to overses markets. We have had the highest closing since August 20th. The VIX has retreated much over the past week. Energy and materials have bounced back. What is happening now graphically with the S&P looks similiar to what happened in 2011. Very little inflation in the world due to lower employment and low produtivity growth. The true unemployment rate is well over 11 or 12% — A very anemic recovery. There is an excess supply of labor as well as commidities bringing us almost to the point of deflation. Inequality and a lack of shared prosperity is only fueling the situtation.Right now we have a financial sector that only serves itself and a corporate sector that operates only in the short term. 10/07/15 Mad Money Are we banking to much on a turn from bear to bull in China? Strength is coming from China not the US. Many stocks brought low by China in the last few months are suddenly turning around –Mining,Energy, Commodities are examples. China has been raising the market by bond sales. Growth stocks have done poorly since all this started. This could easily change. Tomorrows opening in China could propel the market in either direction depending on what happens.
9/27/15 Bloomberg TV Residential home sales fell 2ed time this year. Biotech has been waning this year. Golfing suppliers having lax year, twenty and thirty somethings have not been coming on board. Donald Trump reveals his plans for revamping the tax code. He wants to cut the number of tax brackets from seven to four. No tax at all for singles up to 25K, couples 50K. Limit or remove the estate tax. The corporate tax rate will be limited but he will be going after overseas cash ports kept by internationals. Oil is down mainly do to the slowdown in China, gold is at a 5 year low due to the FED. Inflation has been held at bay due to the labor slack in the U.S. The cost of insuring debt known as credit swaps is up. Short interest in the S&P is at its highest level since 2008.We are noticing the highest correlation between earnings and currency rates that we’ve seen in decades.
MAD MONEY 09/15/15 Todays rally wasn’t for good reasons. This is a very treacherous time for stocks. If the FED raises interest rates we could be in for some serious volatility if not a market fallout. These are some of the possible effects: Housing and auto sales will cool. Earnings will continue to decrease The dollar will go up thus hurting stocks, it will make it harder for our exports to compete against foreign companies. There will be a disincentive for foreign travelers to come here.The Shanghai may dip another 30%.The weaker emerging markets may see more pain. A very bearish tone coming from the show —Not usual for this program.
BLOOMBERG TV 09/14/15 –Underweight equities by 5%. $35.00 cash cost of producing oil. If it lowers past this point then significant parts of the industry will be in trouble. Metals are taking a hit, China missed their industrial output numbers Emerging markets are hurt by China’s slowdown and this is affecting the rest of the market. Large scale fiscal stimulation aimed at households and consumption needs to be put in place by China to curb slowdown. Inflation and employment numbers dictates a rate increase by the FED this week. Treasuries have gained and yields are at session lows. Oil has been dropping. Although this tends to be a damper on inflation FED moves generally address where the economy will be a year from adjustment. In any case this will give them room for small future increases should the economy sputter. 35 IPO’s were listed over 35B. It has been a tough 12 months for them.
Materials and energy are down the most. Copper is down by 1.5%. The VIX has increased to 4.9%. This has been the biggest rise since Sep 4. When you have had a correction like we have had of more than 10% of the 52 week highs, 10 of the last 13 preceded a recession. The longer the stock market remains stagnant the higher the probability of a recession. The appetite for currencies is fairly weak. When earnings slip as they have earlier this year it is historically indicative of a market decline. Tech does better in a rate hike environment. We have been 44 months without a decline, the average is 18. The medium decline for periods greater than 30 months is a 19% correction. Expecting relatively low oil prices for the remainder of 2015 through 2016. Currency valuations have kept non OPEC production higher than otherwise as well as keeping its production lower than usual.
CNBC Friday March 13, 2014 The strong dollar is causing pain in foreign companies with their US denominated debt. This may also be the reason for the unusual inter-day market gyrations we’re experiencing. .
BLOOMBERG Sep 28,20 Consistently high earning w/ disinflation in commodities. Stocks have had low volatility but currency has been high. Price of bonds has been down but yields up. Russia investments unstable due to conflict with Ukraine which has spilled over into Europe. Steady pulling out of Mutual funds.
CNBC July 9, 2014 A decrease in corporate stock buybacks coupled with an increase in M & A activity could signal a decreasing market. M&A activity was valued at 2.91 trillion world wide for 2013 up 11% from the previous year. 37,212 deals down 15% from 2012. The S&P 500 Corporate Buyback Index is down 0.2 percent for the quarter.
CNBC May 7 2014 3 Investment philosophies: Out of higher risk momentum/ growth stocks Into Big cap stocks with good dividends. I.E. Industrials, Productivity. Into high yield bonds.
Squawk on the street April 15, 2014 10yr Treasury note often reflects the global market anxiety.
Squawk on the street April 7, 2014 Comments on the recent market sell off: Stocks with high multiples are selling off and going into bell weathers instead. Money is being moved out of high growth, higher risk areas in high tech. With the tapering efforts starting to take effect especially with institutional investors. There have been a lot of IPO’s coming into market which can cause a drag on the Nasdaq. There is a possible contagion effect on the rest of the market. Consider that market corrections of some sort occur on average every 20 months, (we did not have one in 2013), they last about 70 days and take about 13% of the market. Currently we have a very large disparity between earnings and growth. Keep a close look on this earnings season especially within the energy, financial and materials sectors. If these sectors do not do well this could solidify further market declines. Today’s losses are headed toward the biggest 3 day drop since November of 2011. The Russell 2000 has been particularly hard hit. Real Estate: Only 30% of mortgages given to people with FICO
under 720. Lenders are all but unwilling to give a mortgage to anyone with a FICO under 700. Fifty percent of all transactions are done in cash. House prices keep rising over most of the US shutting out more and more people to home ownership. Unlike previous recoveries banks have shown themselves unlikely to let up on qualification requirements. Money is going into emerging markets.
Squawk on the street Feb 25, 2014 History tells us that stock targets don’t necessarily double when price targets double. We cannot have 2 separate stock markets simultaneously. Indexes follow each other. S&P 500 vs. NASDAQ as far as price to earnings and YOY comps. Home prices have risen nationally 11.3% YOY. Robert Shiller (Yale Economic Professor) Believes stocks should be up for 2014. :Although there are Lots of signs that show housing prices weakening, home prices are still cheap and rents are reasonable. Bankers like commercial lending with high margins more than private lending.
CNBC Dec 23, 2013 Trading the new high’s list You can use the IBD newspaper as a source. Decide upon a stock in the list and do a fundamentals check on it to make sure it isn’t just a fluke. Wait for a 5-8% pullback then purchase long in increments with the largest purchase first; continues buying in smaller increments as the stock increases. For maximum safety you can limit your final investment to no more than 5% of your trading capital. Plan out your selling strategy at that point.
Trading around a core position (similar to range trading) Start buying in 5% increments OR (increasing the percentage with each purchase) when the stock begins its downward motion. When the stock turns around (verified by technical indicators) plan out your selling strategy. Again, for maximum safety, you may want to limit your investment to 5% of your trading capital per stock
When deciding upon a mutual fund purchase look at the 3-5 year records. Watch for insider buying activity when a stock hits a new low. Often times the reason for the decrease was based on bogus information put out on the internet. This can be a good buying opportunity. Some websites to find the information you need for theses strategies can be found at: Insiderinsights.com, Thestreet.com and IBS.com.
12/04/13 CNBC Retail stocks down and unpredictable Canada has been growing very well last few years. Canadian Club Stocks. SJR RCI BNS BMO RBC TD RBA TD RBA. Resource companies are vulnerable to world events. Keep in mind: Rising interest rates will most assuredly cause a stock market decline. Traders will abandon companies that get hurt with an interest rate decline. Banks will do well with high rates. Pension accounts will do well. Cash businesses like Apple will get more interest. Jewelry companies, especially small cap will be hurt as gold decreases.
12/03/13 NY Times Many of the provisions of the affordable care act are under attack by courts across the country. Most on the argument that the precepts were enacted without proper due process. Some examples are the delayed employer mandate, the power of the IRS to give tax credits, subsidies that were not initially stated and forcing non-profits to provide contraception benefits against their beliefs. These laws were spawned either from the Senate or by presidential mandates not by congress, where they should rightfully originate according to the arguments being put forth. The importance of adhering to constitutional process and law making has come up in historical cases such as Marbury V. Madison and McCulloch V. Maryland.
10/24/13 CNBC News Analysis Top 2 companies from the consumers standpoint: FORD & Amazon. Bottom 2 companies: J.P. Morgan and Goldman Sachs. Tesla and Facebook liked by consumers but not generally with institutional investors. .
10/7/13 Foreign debt holder furious over GOV. shutdown. GDP will collapse if all focus is on paying down the national debt. Some good sectors to look at during this crisis: Utilities, Drug companies, snack foods and senior services. They will be good buys and most likely pop when the crisis is over. Government may be reimbursing public employees/businesses who have been furloughed but what of private companies who do business with them. They are left out in the cold and could be a drag on the recovery. Some American oil companies claiming large oil reserves found in western US areas. Not newsworthy since administration/media focus has been on green energy.
10/04/13 Consider it a RED flag If a stock gets more expensive as It decreases in price
09/26/13 Keep close eye on stocks that are accumulated a few days before the end of the quarter. They are often Gems within the investment community. Restaurant industry stocks hurt by low end consumers staying away. Stocks will continue there increase during stimulus since companies can borrow at 4% and get returns at upwards of 10%. Warren Buffett- Stocks were priced ridiculously low 5yrs ago but Stocks are fairly valued now. Continuing Stimulus is O.K. since we don’t have any asset bubbles or inflation. Bull markets die during euphoria-we don’t have euphoria yet. Currently we need to be very selective in our stock acquisitions. Financials, Industrials and technology are good areas of investment in the near to mid-term under current market conditions.
9/06/13 Utilities, Financial, Telecom don’t do well during interest rate increases.
9/03/13 Under these market conditions you can expect: Increasing oil prices, Increasing defensive stock prices, Increase in precious metals, however decreasing commodity prices, decrease in discretionary stock prices.
08/27/13 Continued market selloff possible in Oct. as debt ceiling nears, similar to 2011 debacle. If economy slows In next few months interest rates may well fall as well. Possible 2-4% further decline in markets. Biotech and Pharmaceuticals safe haven. International news not priced in yet. Consider selling when 4 or more analysts start covering a once obscure stock. Short squeeze opportunity (A heavily shorted stock suddenly has exceptionally good news) Stock will surge. Usually happens when false rumor’s get out. A rare opportunity to buy is when insider buying is strong at a stocks 52 week high. Buy into underlying stocks after a 5-8% pull back (if the fundamentals are good)
6/24/13 High yielding dividend stockst compensate against low interest rates.Cyclical stocks will defend against high interest rates.
6/20/13 DOWN openings are great opportunities for a day reversal. Large UP openings are often due to foreign news. When a company emerges from bankruptcy its stock may rally. Strong equities equate to strong crude prices.1.5% is the historical high – low on S&P 500 for a given day. Stocks and bonds typically move the reverse of each other.6/4/13 New type of cancer therapy called immunotherapy makes its debut CDX211. Worth A closer look. [CLDX] 33% response rate on trials.
5/30/13 Breakups can be a good thing for large companies. Often investors like spinoffs that are simpler and more easily understood. Hidden divisions within the parent company can do very well if isolated .
5/29/13 Interest rates will need to go higher for the stock market to keep rising. Banks are loosing incentive to lend to small business. Uncertainty over Obama Care policies costs etc, is stifling hiring.
5/03/13 Defensive stocks leading market higher in recent rally.
5/03/13 Blackstone buying up homes as new investment vehicle — bidding up housing prices.
4/16/13 OnTheLarryKudlow reportthefollowingcommentswere made. (Paraphrase)Most of the money printed in the US is simply being “swallowed up” by corporations and investors, it is not being put to use.Thisisduetoadeleveraging economy, that is why, as yet, inflation has not taken root, however at some point this will reverse, interest rates will have to rise and the dollar will be at risk.We are already seeing price inflation in many necessary commodities as any thoughtful shopper can see but the true effects have not yet transpired. Gold may decrease below $1000.00/oz.butlooktothe possibility of it going above $2000.00/oz. in the long run.
401K Accounts 3/16/13
401K accounts are a good way to save for retirement, usually a match of at least 5% is given by your company. Start as early as possible in your career to maximize the benefits of compound interest. You won’t notice it’s effects until your account hits around 10-12k, with the average overall market producing 8-10% annually that will yield you somewhere in the neighborhood of $100.00 a month; recognizable at least as a PT income, from that point on it only gets better. It took me 10 years to get to the 10k point but patience will pay off.Management of these funds can seem tricky since you don’t have the same flexibility you would have in a brokerage account. I recommend putting the automatic bi-weekly deposits in a low risk investment such as bonds or a balanced fund, then when the market goes thru its down cycles I slowly transfer the money into higher risk funds. Keep watch on the 3 and 6 month returns for your funds and skew more money into the funds that are performing the best. I usually update the mix every 3 to 6 months. Don’t try to chase the market by constantly transferring funds when the market shifts, you’ll end up inhibiting the accounts growth. If the market turns into a LT bear then transfer the money into reverse market ETF funds where you can profit from downtrends — many 401K company accounts now have a managed brokerage area where you can do this. In extremely volatile times make sure to have a maximum loss point, somewhere between 7-10% where you transfer all of your money into low risk funds.The fee’s for these funds tends to be high relative to other types of investments (sometimes $5-$10 per thousand annually, but the company match makes it worth it.
Pick out your loosers druing an intensive rally as these stocks will stick out as laggards.
If your up to much, even during a rally you may have to much risk on the table. Gains of more than 5-8%.
In this market (volatility stocks are better than growth)
Although preferred stock is less risky you will limit your gains during a rally. Common stock is better.
Sometimes there is an unrealistic or frenzied demand for stocks as during the 1999-2000 rally.
Sometimes public information is ignored, even by the pro’s. You will never go wrong or waste time buy doing your research.
You can achieve 20-100% gains by picking an IPO, but be very, very selective. Be wary as Many IPO’s are overpriced and doomed at the start.
Allocate no more than 20% of your portfolio for any given sector then use the house money for speculative plays.
In the western part of the country 50% of the house loans were originated by investors who subsequently remodeled them before selling/renting them. Two to Three years down the road when/if interest rates rise or investors decide to sell for other reasons we could end-up with a re-occuring housing crisis.
03/01/14 Janet Yellen testimony Feb 26, 2014 (Some paraphrased highlights)
The economic data has been softer since the last hearing but we will not assign definitive blame to the weather. Inflation is still well below the 2% target with a full commitment toward full employment.
The models and rules the fed uses with insurance companies is different than with the banks. This is one of our concerns.
Income inequality has been widening since the mid-eighties. Reasons stated were skill sets, technology and globalization. Less educated workers suffer more unemployment and stagnant wages. We are looking to more education and training as well as early childhood education programs to remedy the problem.
We are bringing more capital to the mortgage industry by backing all such notes. Congress is slated to consider more rules in tweaking Dodd Frank. Areas such as end uses, swaps and push outs are being addressed. We are also looking at regulatory burdens on banks.
Cross border trade issues involving regulatory restrictions are being addressed. We would like to have insurance regulations that are consistent globally and provide a level playing field.
The contradiction of having a restrictive fiscal policy alongside an expansive monetary policy was brought up. Fiscal policy has been a drag on the economy to the tune of 1.5%. Economy is still making some progress – at the very least we have kept Fiscal policy from doing real harm. Congress needs to look at helping the long term unemployed.
Since the labor force participation rate is falling. 6.1% unemployment rate is not a reliable number, we believe the real number to be somewhere under 6% when we take out those people. We do realize that 7 million people who are now working PT would like FT. Real unemployment (U-6) is at 13%.
In its QE program the government has purchased more treasuries than mortgage backed securities. Unwinding these positions effectively is difficult. We will continue to develop tools to taper without more and more asset sales. We still need to get a full handle on how much the weather was involved with the recent weakness before we make any more changes. We will continue on a pre-set course. We are moving toward more qualitative vs. quantitative guidance going forward.
To combat financial instability we are looking at some of these factors: Asset prices, Leverage w/ treasuries, Bubbles, Credit growth and new stress tests. We have concerns with underwriting standards, leveraged lending as well as farmland prices and will be looking closely at them.
Community banks are getting squeezed. They are losing representation at the fed- this needs to be addressed.
Although we have a dual mandate the emphasis should be more on unemployment than on inflation.
The proliferation of tax evasion using Swiss bank accounts is being looked at in light of the many new marketing techniques now employed.
10/29/13 CAPITAL HILL HEARING on HC Website: Marilyn Tavenner: (Director Administrator for the Centers for Medicare & Medicaid Services.) Pre-existing conditions O.K. People have reasonable coverage. Many of the old policies that were didn’t even have hospital coverage. When asked if website was safe from hackers she replied that we follow all standards to protect information.
Charles Rangel congressman D-NY: Republicans had history of opposing Medicare and social security. People have suffered! Health care coverage is important from birth to death. We had to get rid of a system that is not working.
Kevin Brady R-TX: Republicans have supported positive changes to Medicare in the past. The health care law itself is flawed. They made us all believe that everything was ready to go. You have had 4 years to prepare! To which Marilyn responded that they underestimated the number of people who would access the site. We are adding capacity and system performance. We found glitches but are confident they will be fixed by the end of November.
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Why don’t we make it voluntary and not force everyone to enter Obama care? Catastrophic plans are basically going away. Upwards of 5 million lines of code need to be re-written. People have less choices. It is by design that the system doesn’t work — it will lead to a single payer system.
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Paul Ryan R- Wisconsin: Site is using 10 year old technology. Are we verifying if people are eligible for a subsidy up front?
John Lewis D-Atlanta: The responses were strongly partisan. There were many heated debates over the lack of cooperation and a lack of alternatives from the republicans.
10/08/13 WHITE HOUSE PRESS CONFERENCE : Boehner: President refusing to start negotiations on debt ceiling crisis and shutdown situation. First time in history.
- 8/2/13 Senator Mike Enzi R. Wyoming (Healthcare) We currently have an Unsustainable Health plan. The equivalence formula for computing the nbr of FT employees an organization has:
- 29 hours or less X the number of employees / 30 = # of FT employees. This formula actually increases the number of FT employees an organization has. Employees that are not eligible will be forced to go on an exchange or pay a penalty. All fees are subject to a 3.5% tax.
- In addition 3 Billion in subsidies will be paid by tax payers to eligible people. There will be slashes to Medicare benefits as well
- At this time no one really knows where these exchanges will be, what other options will be available or what the cost will be.
- The law will encourage more patients and more procedures but not better health care. It will not differentiate between “Big” city care and remote area care.
- He believes the politics of negotiation work best by agreeing on common ground rather than compromise. The law still leaves open contentious areas and does not encourage competition across state lines.
8/2/13 Senator Jeff Sessions R. Alabama (Immigration)
We are forming a permanent underclass of foreign workers with current immigration policy. Fifty percent wage decrease due to immigration in un-skilled work. from 1980 to 2000.
Governments investment is 100 to 1 when comparing monies put toward welfare programs versus job training. Leisure and hospitality have benefited the most from foreign workers.
BLOOMBERG SURVEILLENCE March 13, 2015
China’s growth is slowing. The ECB may need to cut back. David Wilson (Equity markets). Possible rate increase in June 2015. Why so many discounts in retail, the age of deflation in commodities. Sales abound in most stores. Teen employment is the worse its been in over 30 years. Easter is a big selling month but because of the port strikes they may not have what they need to sell. Although the numbers have been down last 3 months they still have done better year over year. Deep discount stores have an advantage.
2016 shopping season — Droughts in CA will cause higher food, health care, utilities. Fashion houses are down, the ties are coming off. Sales worldwide are down. Off price retail is up, not flagship – the dollar strength, lack of demand, China’s currency, are all causes. Walmart has the route 11 problem, people don’t have the money, never cracked the code for fashion. The deep discounters are once again taking away business. People are unable to shop a full basket for all of what Walmart offers.
BLOOMBERG Oct 23, 2014 Daren Blomquist (Senior VP of Realty Trek)
Home owners underwater has fell to the lowest level in 2 years. From an all time high of 28% to a current 15%. Coastal California, NY and DC all have single digit numbers.
Home prices are advancing at the lowest pace in 2 years -averaging 5-6%. At current interest rates it will take another 5 years to get to a to a total housing recovery.
CNBC Kyle Bass (Hayman Capital Management) 10/22/14
Ending Quantitative easing will shake up markets. Japan has large deficit but is still able to pay its interest on debt. Maybe the beginning of the end for Japan. – 1/2% current account deficit. First time in 34 years. We think its going to -2 to -4% in the not so far future. They are in a 70year debt super cycle.
We will be seeing high volatility in U.S. interest rates, Global rates and currency valuations as has not been seen over the last decade.
Bloomberg The First Word 7/21/1
Ken Perkins, (President of Retail Metrics)
Retail margins under pressure due to tepid wage growth and part time employment trap. Only niche areas stand a chance. Last 12 months very slow. It will take a significant improvement in the labor picture for things to improve. Much of the budget is taken up on essentials. Auto sales have been the best. Discounters such as Costco’s and Macey’s are doing O.K. as our automobiles -up 16% YOY growth for Auto makers. Back to school sales promotional at best. Horrific world events also contribute to an uneasy feeling toward spending but only temporarily.
May 23, 2014
Bloomberg Surveillance w/ David Melpass
Holding rates down at the long end benefits the wealthy.
Bonds protect capital
Growth from innovation and labor but labor must get its share.
Government bond buying is causing a polarization in wealth and income inequality. There is financial repression and distortion. A mix of capital away from small business as well as horrific bank lending.
The old trickle down theory is benefiting fewer and fewer people as long as the Federal Reserve keeps holding rates down at the long end. A non-market condition within certain areas of the economy has developed. We will not have a free market economy under the current conditions that have been in place for the last 5 years.
2 very good indicators of the health in bank lending is the household survey and truck sales.
Bloomberg The First Word Apr 15,2014
W/ Howard Davidowitz
Malls are on their way out as middle class retail collapses. Amazon and other on-line services are set for more growth. 30% of brick and mortar stores are set to go away as middle income consumers are disappearing.
Alternatively the luxury markets are improving, the top 1% of consumers is exploding.
Thomas Piketty
What we saw in the middle of the 20th century (1950’s – 1980’s) was actually the exception not the rule as income inequality has actually been the norm for most of history. This was due in part to the two World wars and the subsequent population explosion in its aftermath. What is needed is a progressive tax overall that raises taxes on the super rich while giving substantial breaks to aspiring business owners and entrepreneurs.
Adam Taback
We have a high dispersion and somewhat low volatility environment which is conducive to (Long – Short) plays in the market. We have an unbalanced proportion of underperforming and outperforming stocks. A switch into value from growth.
Bloomberg Feb 21, 2014
Housing Starts (Lawrence Yun) NAR chief economist
Prices have risen on average about 20% over the past 2 years. Combine this with stagnant wages and higher interest rates and we have a formula for lower affordability.
Inventory is also low due to regulatory uncertainty and loan availability for builders. (Dod Frank is only 1/2 finalized and government lawsuits against banks are only compounding the problem). Consumer confidence is lacking and the Government tapering is expected to cause rates to rise at least another 1% by end of year. 1/3 of all transactions have been in cash.
Ray LaHood (Transportation Secretary) and Ed Randell on the capital impact of decreased spending.
The US is one big Pot hole. We need more leaders in Washington willing to take risks. We need a big bold vision. We need a lift on the cap of private activity bonds and interstate highways. The populous does not want tax increases but they don’t want any programs cut either. Good leaders need to make the unpopular changes that will eventually be appreciated.
We need a federal capital budget of 200 Billion more each year for the next 10 years. This will also create 4 1/2 million American jobs that won’t be outsourced. The highway trust fund has been responsible for many large projects of the past such as the interstate highway system — this fund has historically built America.
Bloomberg Surveillance Jan 3, 2014
Greg McBride. Senior financial analyst for bankrate.com. Tipping point on 30 year mtg. on int. rates. The speed of increase is more important than the actual increases.
Better economy gets people to buy houses. Secret to getting a mortgage. Good credit, proof of income and sizable down payment. 710 is the medium credit score in America
Correlation between 30 and 10 year. Typical mtg. ends up lasting 8 to 10 years.
Auto loans are easy since the creditor knows that if you don’t make the payments, car will not be in the driveway in the morning. People can live in houses over 2 years without making payment or being kicked out.
Credit Card issues are fighting tooth and nail for credit worthy individuals.
People now have different attitude toward debt. Shying away from credit cards and large houses. This attitude will not go away soon.
The avg. auto loan is now 5-7 years.
The Hays Advantage Jan 2, 2014
Harry S. Dent Jr. President of the H.S. Dent foundation and founder of Dent Research.
The accelerating retirement of the baby boomers has been in the spotlight. Most people make a large downturn in their spending by their early fifties. Governments are making up for the demographic headwinds by quantitative easing. This has happened in Japan, N. America and then Europe. China’s Real estate bubble is about to burst. Historical comparison. 1929 peak, down decade until the 40’s WW2. 70-80% of households don’t feel that we have ever got out out of this recession. Every time a generation has a peaked we have had a downturn. This time Gov. has stepped in and printed monies. 42 trillion debt private debt 2008, we have only deleveraged 4 trillion, the Gov. has added 7 trillion.
The stock market is up 180% in 5 years. Unprecedented! Each bubble goes a little higher and each crash goes a little lower. Stocks are in a bubble right now. The fundamentals of the global economy are bad. Tech, geopolitical, demographic and 10 year cycles are down. You can stave off a depression but you end up with a coma economy.
Recommends being defensive from late January until summer. Buy high quality long term treasury bonds in middle 2014. Wait 2 years to buy a house. Predicts mtg. rates and housing prices to go down further. Fed is afraid of de-leveraging which creates 1930’s scenario; leads to depression, debt deleveraging. We are fighting this bubble like we can keep it going forever. The bubble will have to burst which is the only thing that will ultimately create opportunity for the young generation.
The Hays Advantage Dec 13, 2013
W/ Berry Banister of the Stifel Nicolaus research team.
Having an open ended QE is going to be hard to close. Expecting taper –6 month March to September or 12 month December to December. The GDP doesn’t correlate with Wall Street and the stock market. After the taper begins what we loose on Price to Earnings gain we will gain on earnings per share. We had a balance sheet recession with years and years of over consumption funded by debt. Since then the debt has diminished leaving us with surplus capacity and no allowance for borrowing. Since the 08 recession oil and autos have tripled while housing is still struggling.
He believes the future holds promise for tech, energy materials and industrials with the latter being the only sector that has so far come along. The beta of such sectors has averaged 1.3 vs. defensive stocks like health care less than 1. Foreign currencies will strengthen relative to ours since we are the reserve currency. Keep in mind that Europe doesn’t react like the US to the extent that it is a confederation not a union like ours. Bonds real rates will stay low.
Surveillance 12/03/13 Bloomberg Pod Cast w/ Nick Pilkington (CTO Drone Deploy)
Drone technology may be the new forefront in areas such as agriculture, gas, mining, oil and pipeline inspection — even public transport and package delivery. With its biggest concern right now being safety, somewhat ironic since the technology was originally developed for military use. But forget about its history of killing adversaries- will it be a job killer as well as many critiques fear? CTO Nick Pilkington says that, to the contrary, new job opportunities will spring up around it. By 2015 the FAA is expected to develop new rules governing the technology. Amazon’s recent clip showing a drone delivering a package may be more than just a publicity stunt, it may be a look into the future.
Featured Podcasts 11/04/13 Bloomberg Pod Cast
w/ Anthony Hsieh (CEO Loan Depot)
The mortgage industry is not as efficient as it was before the crisis. There has been no ease up in lending standards. Although we have the lowest interest rates in history few people can qualify. One must have a significant down payment and/or equity, debt to Income standards are the strictest in history and a stellar credit rating is required.
Private investors are all but non existent in the business – Outstanding mortgages total about 11 trillion dollars. Last year only 1 trillion of those mortgages were refinanced. Ninety percent of this lending is thru government entities such as FHA, Fannie Mae and Freddie Mac. with only ten percent private investors. This compares to a sixty to forty percent mix in 2003 with just 4 trillion outstanding.
However there still is plenty of cash business in the industry through institutional investors.
Surveillance 10/23/13 Bloomberg Pod Cast
Interview with William Bernstein “The Investors Manifesto” An M.D. with a PHD in Chemistry turned investment guru. He describes how he came up with his theories through much reading, scoping out various models and testing processes. He believes the market cannot be beat long term by the typical small investor through individual stock purchases. Your up against people with greater knowledge and some with inside information that you will never be privy too!
This being said he does acknowledge that the market can be horribly irrational as in the dot-com bubble of the late 90’s as well as the fallout in 2008. This often can give opportunity to the small investor.
Seventy to eighty percent of fund managers underperform the indexes. Therefore he believes that buying into an index within the 3 major asset classes” Domestic, International and fixed income will give the best LT results. He does not recommend mutual funds.
The First Word 10/24/13 Bloomberg Pod Cast
Interview with ING Chief Economist Carsten Brzeski Advises caution on China. Although their business cycle continues to improve they have been putting a little to much effort into their infrastructure, commercial property, zombie banks and to little in domestic growth. They have had an over dependence in exports as well. Growth in the export models will not hold for the long term.
Although the world economy continues to do fairly well the underlying fundamental issues such as unemployment, high debt continue to plaque many economies across the globe. He believes that the FED may begin tapering as early as March 2014. Everyone wants the Euro zone to survive but he believes a growth focus is necessary.
Surveillance 9/26/13 Bloomberg Pod Cast (Professor Nouriel Roubini NY Univ (Economics))
Global GDP stats are mixed. Hard data of Growth, Demand and employment soft. Spain unemployment is 25%. Fifty percent of that is of the young. Spain public debt is 130% of GDP while Italy is 100% of GDP. Wage reductions in Greece continue. Monetary Stimulus and quantitative easing can only go so far. Projects China’s growth to go below 7% next year. Wealth inequalities continue fueled by Globalization, Skill bias (as low skilled jobs evaporate) and current trade practices.
The Hays Advantage 9/12/13 Bloomberg Pod Cast [Gary Burnison] CEO of Korn/Ferry. Discussion on US job market. Top areas are Life Sciences, Energy and Digital communication (Applications and Internet). The need for job mobility is Waning. PT employment has been persistent which is typical of employers after tough economic periods. Needed skill sets have been changing rapidly over the past 2.5 decades to service and skilled. He stressed the importance of continuing education.
The First Word 9/6/13 Bloomberg pod cast
[David Malpass (Sema Global) on the unemployment report.] The US participation rate at lowest point since 1978. Jobs created 95K. The household employment change -312K. The medium duration 16.4Wks. The underemployment rate 13.7%. Yields down 12 basis points to 288, Equity futures up 9. People on the margin not able to find jobs since employers are not hiring even though business activity and profits are up. A 2 tier economy is forming. He believes small tapering steps will still happen as FEDS look at the whole picture including ISM and LEI which are both strong.
Surveillance 8/30/13 Bloomberg pod cast
An Interview with John Sfakianakis (Chief investment strategist at Masic) An expert in Saudi Arabia, gulf, Egypt and middle east oil.
Saudi Arabia is working toward change in the region. They are helping the rebels in Syria by training and arming them. If a punitive attack occurs (20-30 Missiles) there will likely be fallout (collateral damage) in Tunisia, Lebanon, Iran and Iraq from this. We cannot predict the exact response. Saudi Arabia will likely increase supply of oil to compensate for reduction from other regions. Libya is producing less – currently 200K down from 1.4. Events in Iran are affecting (Spilling over) to Iraq politics at present.
There will be a difficult future for Syria going forward.
Surveillance 8/30/13 Bloomberg pod cast
An Interview with Dom Barton (Head of operations British Gas Energy Performance)
Manufacturing revival is coming back to US due to shale gas discoveries as well as In Colorado with the revival of the space sector. Albeit most of the jobs will be very advanced requiring Masters degrees and will be difficult to obtain and keep due to the continuing advances in the field. However there will be a trickle down effect felt with some lower level jobs as well. Big data (Silicon Valley) effect in US will give a 6-7% improvement in productivity.
Infrastructure improvements will also contribute to the sector and will have its own multiplier effect as other support level jobs emerge. This will be felt mainly at the city and state level.
8/23/13 SURVELLENCE (Bloomberg Podcast) Guest: VInce Rinehart (JP Morgan)
Expecting FED to begin tapering in September due to diminishing marginal effectiveness. Somewhat data dependent but a 200K net gain in jobs will ensure tapering. Confident about the economy, Good guidance on employment rates and inflation will replace QE.
Must separate its 2 policy instruments, there is a decision on balance sheet and a decision on interest rates.
A financial crisis really hits and the level and rate of growth of GDP.
Gas extraction in the central part of the country is helping. Monetary policy is always made in an uncertain environment. Shell oil and NAT gas!
The next Financial chairman will not be as self effacing as current one. The rest of the world has faired well with FED decisions. FED tapering will be a Real time stress test for Emerging markets. With current policies emerging markets experienced increasing asset pressure, exchange rates appreciated, Government revenue became better. Capital inflow a good predictor of subsequent crisis. This will reverse as the FED backs off.
8/23/13 THE FIRST WORD (Bloomberg Podcast) Guest: Anita Kahn (Economist for Wells Fargo) Comments and talking points
487K sales of New SF homes declined in July. Looking for 495K. After a very good June.
Sales going along fine generally increasing. Builder sentiment is still highest since 2005. Housing recovery still on tract but possible down word revisions In near term. Europe and Germany expanded and their currency continues rising against ours. This will not affect their recovery. Their GDP has risen for the most recent quarter. U.S. trade balance not adding to their GDP.
Our own 2% growth cannot be considered strong or weak just steady as she goes. Tapering will happen in September just a question of how much.
8/6/13 THE FIRST WORD (Bloomberg Podcast)
Guest: Anita Kahn (Economist for Wells Fargo) Comments and talking points:
A disappointing drop in US payroll Data (non-farm) despite a tick down in the unemployment rate. Still believes the FED will hold its course and has not lost conviction in its tapering plans. The FED wants to see strong economic activity as well as strong job and housing data. A slight drifting up of inflation is also evident..
A Growth in the services area has materialized. Europe has been sluggish but only twenty percent of US exports goes there. Europe has seen a clear turn around with overall stabilization. PMI at 54.1. China is also important.
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