The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

The newspaper industry, laden with heavy debt, is forcing companies into bankruptcy. Money-losing papers are closing.

Here’s a look at the remaining newspapers, by city and circulation:

>

via NYT

>

Source:
As Cities Go From Two Papers to One, Talk of Zero
RICHARD PÉREZ-PEÑA
NYT, March 11, 2009

http://www.nytimes.com/2009/03/12/business/media/12papers.html

I could spill a 1000 words on this, but suffice it to say the well anticipated moment was a bit disappointing. Not because they didn’t throw down and start mud wrestling, but because of the missed opportunities — on both sides. I was surprised Cramer was so mellow, and that encouraged Stewart to go after him more aggressively.

But really, it was what was’nt said that got my attention: Consider the following misunderstandings and blown opportunities:

• Cramer could have better defended what CNBC does well. They speak with a plethora of economic voices and market perspectives, are not at all monolithic (that should have been mentioned). Not all of the anchors were cheering on the highs.

• It was not just Faber’s special reports (which he mentioned), but a number of other appearances that make the channel so well worth-while. Bringing people into the public view who viewers normally don’t get to spend much time with. Indeed, my favorite moments on CNBC are when they spend 3 hours with Warren Buffett, or when with David Einhorn and William Ackman are on the air for extended periods.

• Stewart missed the opportunity to note the lack of accountability of guests (Cramer tangentially touched upon this). My peeves and many readers find the very short, bumper sticker answers extremely distasteful, the Brady Bunch boxes (the octagon!) absurd, and the tendency towards making some shows Jerry Springer-like to be, well Jerry Springer-like.

• Most of the shows — and their guests — have a long-only, fully invested bias (Fast Money is the exception). This was never mentioned.

• TDS also could have noted what seems like a hard right turn the channel has taken since the election. There are several wing nut hosts now speaking their opinions and (what looked like) a 3 to 1 parade of GOP Congressman to Democrats. I don’t watch all day, so it may have evened up- — but the early morning show has been very one sided.

There’s a lot more, but I have other things to do . . .

If you have anything to add to this — I mean serious criticism, not just name calling — please use the comments for that.

>

Source:
Thursday March 12, 2009 – Jim Cramer
The Daily Show

http://www.thedailyshow.com/full-episodes/index.jhtml?episodeId=220533

Read the rest of this entry »

Bob Bronson (BRONSON CAPITAL MARKETS RESEARCH) looks at the short term cycles, and concludes the final bottom still isn’t in . . .

~~~

Not only does our work strongly suggest that the Supercycle Bear Stock Market low did not occur at Thursday’s intraday low or Friday’s closing low (March 6th), but in spite of the extremely short term (days) uptrend, the very short term (weeks) trend is not bullish either.

Internal evidence reveals that today sharp gain, which is very typical in a bear market, was largely a unsustainable news-induced short squeeze. So we fully expect downtrend red #5 will continue to make new lows.

Fully half of today’s gains occurred during the first 15 minutes triggered by Bernanke’s statement that the recession will be over by year end if the banks are stabilized. His statement, besides being conditionally obvious, like “you’ll be rich if you start making a lot of money,” was circular and probably purposefully vague. Also, it undoubtedly was delivered to at least partially help encourage buyers of this week’s three separate Treasury auctions for a total of $92 billion of Treasuries…an astronomical $63B of three-year notes, followed the next day by $18B of 10-year Notes, and finally $11B of 30-year bonds. Furthermore, in spite of this huge supply and probable lack of any significant quantitative easing by Fed purchases of Treasurys, such prices are negatively correlated with the stock market during Supercycle Winters – see below — and turned decisively bearish for the stock market starting at least seven days ago forewarned by 90-day T-bills several weeks earlier.

The other half of today’s gains after the first 15 minutes were induced by CitiGroup’s positive earnings report and Barney Frank’s statement about his expectation of a substantial modification of mark to market write downs, and reinstitution of the uptick rule for short sales.

Rather than further dissecting the value of these additional short-squeeze inducing statements, note that today’s trading volume was not even bigger than seven trading days ago when the SPX decisively broke below its Nov 21st 2008 intraday low at 740, which now represents technical resistance. And although today’s advancing volume-to-declining volume ratio was 21:1, the last time this ratio was slightly higher at 23:1, which was last Oct 13th the day after that highly-celebrated bottom at SPX 840, the rally ended during the very next day!

Furthermore, that only one-day rally extension followed a 36:1 downside day, which was similar to the 36:1 one than occurred that same seven trading days ago when the SPX decisively broke below its Nov 21st 2008 intraday low at 740. This parallel is almost eerie since that only three-day rally was the A upleg of the three week up-down-up ABC pattern blue #4 – see chart below – which could be repeated this time as the A upleg of a multiple-week up-down-up ABC pattern subdivision #4 of a five subdivision of red #5 this time.

We’ll make these shorter term subdivision cycle-trend counts more clear during the immediate days ahead, along with S&P’s latest revision to 4Q earnings and their response to Jeremy Siegel’s nonsense criticism thereof.

>

OUR NOV 4 ’08 (blue 4) SELL SIGNAL FOLLOWING OUR MID-MAY (red 2) AND MID-AUGUST (blue 2) SELL SIGNALS

>

EIGHT-WEEK RESULT UP TO OUR JAN 6 ’09 (red 4) SELL SIGNAL

>

The above cycle-trend counts are similar, but importantly different than Elliott Wave Theory both in principle and application – see Exhibit C on page 7 here:

A Forecasting Model That Integrates Multiple Business and Stock-Market Cycles
By Bob Bronson
Bronson Capital Markets Research
Updated January 13, 2008

http://www.financialsense.com/editorials/bronson/model.pdf

Its been exactly 6 months since the single dumbest newspaper column ever published appeared in The Washington Post. Breathtaking in its ignorance, shocking in its fallibility, astonishing in its author’s perversely misperceived world view, it stands as a monument to sheer cluelessness as an economic discipline.

It wasn’t merely off — its simply hard to find anything market or economic related in it that wasn’t 180 degrees wrong. It is a monument to why economists should never allow their politics to influence their day jobs.

I was otherwise occupied when this fetid pile of foolishness was published. Six months later, it reads even more ridiculously than it did on 9/14/08.

Let’s take a closer look at this, sentence by sentence, and see if we can find anything of value in it.  (My comments are ALL CAPS AND BOLD)

Quit Doling Out That Bad-Economy Line

“It was the worst of times, and it was the worst of times.”

I imagine that’s what Charles Dickens would conclude about the current condition of the U.S. economy, based on the relentless drumbeat of pessimism in the media and on the campaign trail. [THAT PESSIMISM WAS THE CORRECT CONCLUSION]  In the past two months, this newspaper alone has written no fewer than nine times, in news stories, columns and op-eds, that key elements of the economy are the worst they’ve been “since the Great Depression.” That diagnosis has been applied twice to the housing “slump” and once to the housing “crisis,” to the “severe” decline in home prices, to the “spike” in mortgage foreclosures, to the “change” in the mortgage market and the “turmoil” in debt markets, and to the “crisis” or “meltdown” in financial markets. [THAT'S BECAUSE ALL THOSE SECTORS HAVE BEEN IN ENORMOUS SLUMPS]

It’s a virus — and it’s spreading. Do a Google News search for “since the Great Depression,” and you come up with more than 4,500 examples of the phrase’s use in just the past month. [HOW DOES THIS COMPARE TO OTHER PERIODS? IS THIS A LOT OR A LITTLE?]

But that doesn’t make any of it true. [BUT IT WAS & IS] Things today just aren’t that bad. [UNLESS YOU LOOK AT THE DATA; THEN ITS EVEN WORSE] Sure, there are trouble spots in the economy, as the government takeover of mortgage giants Fannie Mae and Freddie Mac, and jitters about Wall Street firm Lehman Brothers, amply demonstrate. [JITTERS? ABOUT THE BIGGEST BANKRUPTCY IN AMERICAN HISTORY? NICE TIMING]  And unemployment figures are up a bit, too. [A BIT? 4 MILLION JOBS LOST SINCE THE RECESSION BEGAN] None of this, however, is cause for depression — or exaggerated Depression comparisons.  [WHY NOT?]

Overall, the pessimists are up against an insurmountable reality: In the last reported quarter, the U.S. economy grew at an annual rate of 3.3 percent, adjusted for inflation. [HOW'S THE REVISED GDP DATA?]  That’s virtually the same as the 3.4 percent average growth rate since — yes — the Great Depression. [EVERYTHING IS FINE, NOTHING TO SEE HERE, MOVE ALONG]

Why, then, does the public appear to agree with the media? [BECAUSE THEY ARE SMARTER THAN YOU] A recent Zogby poll shows that 66 percent of likely voters believe that “the entire world is either now locked in a global economic recession or soon will be.” [AS WE HAVE LEARNED, A LOT SMARTER] Actually, that’s a major clue to what started this thought-contagion about everything being the worst it has been “since the Great Depression”: Politics. [THE FIRST THING YOU GOT RIGHT: YOUR POLITICS HAS BLINDED YOU TO REALITY]

Patient zero in this epidemic is the Democratic candidate for president. [ITS ALL HIS FAULT!] As it would be for any challenger, it’s in his interest to portray the incumbent party’s economic performance in the grimmest possible terms. [LIKE: "ARE YOU BETTER OFF NOW THAN YOU WERE 8 YEARS AGO?"] Barack Obama has frequently used the Depression exaggeration, including during a campaign speech in June, when he said that the “percentage of homes in foreclosure and late mortgage payments is the highest since the Great Depression.” [DAMN FACTS, HOW DARE HE] At best, this statement is a good guess. [NO, ITS ACCURATE DEPICTION OF DATA. DO YOU KNOW WHAT DATA IS?] To be really true, it would have to be heavily qualified with words such as “maybe” or “probably.” [HOW ABOUT 2 MILLION PLUS FORECLOSURES AND RISING?] According to economist David C. Wheelock of the Federal Reserve Bank of St. Louis, who has studied the history of mortgage markets for the Fed, “there are no consistent data on foreclosure or delinquency going all the way back to the Depression.”  [YOU ARE GOING WITH "WE DONT HAVE FORECLOSURE DATA GOING BACK THAT FAR?" REALLY?]

Read the rest of this entry »

Good Evening: Investors waiting for the information to help them decide whether this week’s equity rally is genuine or not received good news on multiple fronts today. First, the economic statistics released today were either as expected or better than had been expected. Second, Bank of America became the third major bank in as many days to declare that it has been “profitable” during the opening months of 2009. Third, GE was downgraded merely one notch by S&P, to AA+ from AAA, much to the relief of investors in the company’s various securities. Finally, both bonds and commodities rallied together, an odd coupling that meant all the major asset classes went up in value today. Before we all break out the sunglasses to peer into what many suddenly perceive as a bright future, however, we should consider the deeds of a villain from our recent past.

In falling only 0.1%, retail sales figures for February came in much better than economists had been predicting. The ex-auto sales figures were even more surprising, rising 0.7% last month. Given the large upward revision to the January data, it was hard to claim this report was anything but strong. Jobless claims remained elevated, but at least they weren’t worse than had been feared. Equity investors took note of these data points, lifting our stock index futures out of the red prior to this morning’s opening bell.

Shortly after a lackluster open, stocks popped when Bank of America CEO, Ken Lewis, announced that, just like his competitors at Citigroup and JP Morgan, his bank also sports a profitable bottom line two months into Q1. Mr. Lewis expects this trend to continue all year (see below). Investors seized upon the news as further evidence that all the gloom surrounding bank shares has been unwarranted, but they failed to notice the footnotes. As with Vikram Pandit and Jamie Dimon before him, Mr. Lewis offered his profit forecast before including such mundane items as taxes and write-downs. If the CEOs get their way, EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) will apparently be replaced as a standard measure of cash flow. Let’s now all unite behind “EBITDAW” — EBITDA before the Write-offs — as the best way to measure bank profitability. Why Mr. Pandit and Mr. Lewis felt the need to tap Uncle Sam for huge new cash infusions during this “profitable” period is unknown, since both were mum on the subject.

Already trotting ahead with gains north of 1%, the major averages received a further boost when S&P took out its ratings axe and gave GE merely a close shave instead of a feared beheading (see below). GE’s shares and bonds rallied on the news, since AA+ is a lot better than the A or worse ratings previously implied by the prices for GE debt. Served up in addition to the ratings change was a slice of humble pie for GE’s CEO, Jeff Immelt. Mr. Immelt had made the absurd promise earlier this year that GE would hold onto both its AAA rating and its dividend. As speculated here back in January, Mr. Immelt lost both bets.

With GE, BAC, and other financial stocks leading the way higher, the major averages rallied for the rest of the day. The S&P 500 sliced right through the technical resistance at 740 (the November lows) and went out on its high tick (up 4%). Lagging behind the pack was the Dow Transport index (+ 3.1%), while the Russell 2000 (+ 6.5%) galloped ahead. Treasurys also finished on the firm side, and a solid 30 year auction was given most of the credit. The dollar eased 0.25% today against a basket of competing currencies, but commodity prices acted like stocks and shot higher. Crude oil’s advance of more than 10% set the tone as the CRB index posted an S&P-like gain of 4%.

I always welcome the comments and viewpoints of others, and, in the interest of equal time, let’s briefly take a look at Alan Greenspan’s written defense of the Fed’s behavior during the late, great housing bubble (see below). In crafting this piece for the Op Ed page of the Wall Street Journal, the Maestro acknowledges the growing chorus of discontent with the flow of easy money while he was at the helm of the Fed. Mr. Greenspan tries his best to lay out the case that it was a surplus of savings from abroad (read: Asia) that led to low interest rates for fixed rate mortgages, not Fed policy. The ankle-high fed funds rate had nothing to do with creating the housing bubble, according to the former Fed chief. Really.

Constant readers are probably already trying to click the delete key, since they know well my views about Mr. Greenspan. At the risk of picking too hard at the scab of repetition, let me offer a few observations of the Maestro’s defense of himself, er, the Fed. In preview, let me say that, in attempting to fire back at his critics, Mr. Greenspan actually shoots himself in the foot.

1) How could the term “Housing Bubble” be included in the title of your Op Ed, Mr. Greenspan? While in office you repeatedly stated that bubbles of all types were impossible to identify and that residential real estate in particular was unsuited to bubble-like investment behavior. That you now admit there was a housing bubble at all is an indictment of your previous claims.

2) Fixed rate mortgages were not the problem, sir. It was adjustable rate mortgages and their low teaser rates tied to the bottom-scraping funds rate that encouraged many to reach beyond their means for homes. ARM loans — the ones you advised folks to sign up for back in 2004 — are leading the way among mortgages that are currently either delinquent or in default.

3) The worst performing of these ARMs, Mr. Greenspan, have been Negative Amortization Option ARMS, a product that allows a mortgage holder to pick their own payment. This time-bomb-like option of deferring even principle payments came courtesy of the financial engineers on Wall Street. You publicly and repeatedly encouraged this form of creativity while in office. Similarly, your cheerful backing of CDOs and other structured products in support of the American Dream has also proved to be monumentally costly for all of us.

4) Your hidden shame, the nasty role in the housing bubble only a precious few have correctly fingered you for, was letting mortgage lending standards drop through the floor. As overseer of the banking system, the Fed has always had the power to regulate lending standards. It holds considerable sway with investment banks and even non-banks, too. Low Doc, No Doc, Liar’s loans — even fraud — were all allowed to take root, flourish, and push the value of homes ever higher on your watch. If someone could sign their name, they could buy a house. From 2003 until you left office, Mr. Greenspan, no American could either watch T.V. or pick up the daily mail without being assaulted for adds encouraging people to use and abuse these new mortgage products. You could have told the banks and others on Wall Street to cease and desist at any time. And yet you stood mute.

The interest rates you cite in your defense played only a bit part in this still-unfolding drama; the damage wrought by non existent lending standards have become the star of this horror show. Rather than make the hard choices while in office, you simply retired and handed to Mr. Bernanke both your keys and an impossible set of circumstances. The trail of tears you’ve left behind has brought both our banking system and the global economy to their knees. Thanks to you, bank CEOs now feel a need to trumpet their rising EBITDAWs. Shame on you, Mr. Greenspan, and shame to anyone who believes what you wrote in yesterday’s Wall Street Journal.

– Jack McHugh

U.S. Markets Wrap: Stocks Surge Most Since November, Oil Jumps

U.S. Economy: Retail Sales Fall Less Than Forecast

General Electric Rises as S&P’s Ratings Cut Eases Concern

Bank of America Expects 2009 Profit After Gain in First Months

The Fed Didn’t Cause the Housing Bubble

Not very good: The Federal Reserve reported that “Americans’ net worth fell in 2008, erasing four years of gains, as the value of their houses and stock market portfolios decline, according to new data from the Federal Reserve.”

The specifics ain’t pretty:

• Household assets as a whole fell 15% to $65.7 trillion, unadjusted for inflation.

• Household liabilities a declined less than 1% to $14.2 trillion.

• Net worth for households and non-profit groups decreased $5.1 trillion in Q4 2008;

• Real-estate-related household assets declined by $937.1 billion;

• Net worth of American households (difference between assets and liability) was $51.5 trillion, down $11.2 trillion or nearly 18% from 2007.

• Americans’ total wealth is now back to levels prior to 2004.

• Mortgage credit fell to $10.5 trillion, the first decline since the Fed started keeping track in the 1950s.

• Non Mortgage consumer credit rose nearly 2% to $2.6 trillion.

• Household debt increased by 0.5% , 6.25 percentage points less than the 2007 increase.

• Americans’ homeowners’ equity as percentage of the value of their homes fell to 43% in 2008. (Includes both homeowners with mortgages and those who have paid their mortgages off.)

• Americans’ stock market holdings — both direct holdings, mutual funds and retirement plans — fell to $12.1 trillion a year-end 2008 from $20.6 trillion the year before, the lowest level since 1997.

• Total bank deposits rose nearly 5% to $7.7 trillion in 2008.

Makes me think of those Capital One ads: What do you have in your wallet ?

Answer: A lot less than last year  . . .

>

Sources:
Q4 2008 Flow of Funds.
Federal Reserve, March 12, 2009

http://www.federalreserve.gov/releases/z1/current/default.htm

See also:
The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble
David Rosnick and Dean Baker
CEPR February 2009

http://www.cepr.net/documents/publications/baby-boomer-wealth-2009-02.pdf

U.S. Household Net Worth Tumbled Last Year
S. MITRA KALITA
MARCH 12, 2009, 5:05 P.M.

http://online.wsj.com/article/SB123687371369308675.html

Dow industrials gain 238 points, up 3.4%, at the closing bell. S&P 500 up 3.9%; Nasdaq up 3.9%.

From the Monday lows, the markets have now gained 12%. The S&P surged 11% since March 9.

The bank sector has seen a 45% gain; Homebuilders up 20%.

Crude Oil for April delivery gained $4.70 (11%), to $47.03/barrel. GM rose 17%.

GE added 13% — despite losing the AAA ranking that it held since 1956 — and is up 68% since Monday

As noted previously, tonite is the big Cramer versus Stewart meet up.

TBP pal Rob put together the full run of videos for your viewing pleasure — they can be found here: Let’s Get Ready to Rumble !

Its 27 minutes of amusing time-wasting goodness . . .

Our quote of the day belongs to John Haskell, who writes:

NO NATIONALIZATION

That’s socialist.

“Capitalization,” now that’s something I think we can all get behind. C and BAC need to be “capitalized.” If the people who put in the capital get 100% ownership, well that’s just how the game is played

You mean like Bear Stearns, Citigroup, Bank of America, AIG and Merrill ?

[ View Post ]

Rob writes in to say:

There has been a wee bit of a dispute going on between CNBC’s Jim Cramer and Jon Stewart of The Comedy Channel. Sort of like there was a mild difference of opinion between the Allies and the Nazis. Or perhaps like that time that Ali and Frazier got together for a light workout.

Well, tonight on The Daily Show, Cramer will be Stewart’s guest. That should prove to be rather interesting.

Here are some clips of the matter up to this point. By the way, whether you agree with Cramer or whether you agree with Stewart, this is pretty funny stuff.

~~~

Jon Stewart’s original bashing of Cramer/CNBC and his follow-ups after Cramer began talking about it on the air. (Note – it takes a while to view the videos, but its not like we’re busy making money or doing work anyway these days):

1) March 4, 2009: CNBC Gives Financial Advice

~~~

2) March 6, 2009 Some Liquid Sunshine: An “intervention” by Stephen Colbert (also of The Comedy Channel)

~~~

3) Monday, 9 Mar 2009 Cramer’s retort and explanation:

~~~

4) March 9, 2009: In Cramer We Trust

~~~

5) March 10, 2009: Basic Cable Personality Clash Skirmish ’09

~~~

Final clash of the titans this evening at 11pm . . .