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

Goldman Sachs posted records profits in the second quarter of this year. Matt Taibbi, political reporter for Rolling Stone argues in “The Great American Bubble Machine” that the investment bank has been involved in every major market shift:

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Hat tip: Dealbreaker

Earlier this year, Maserati in the USA teamed up with Architectural Digest magazine to run a competition to design the perfect garage for a Maserati. The competition was split into two sections – Existing and Concept. Overall, some 125 entries were received and the winners have now been picked.

Classic Driver:

Victory in the Existing category (i.e. a garage that has already been built) went to Holger Schubert’s property in Los Angeles. It was designed with two clear objectives in mind: first, to create a pure, minimalist environment that displays the car as a piece of art and, secondly, to create the ultimate experience for the driver when he arrives home. With the atmosphere of an art gallery, Schubert’s garage is on the upper floor of a hillside extension to a 1953 ranch-style home, overlooking western Los Angeles. Access is via a bridge, while the 1200-square-foot space not only houses the car, but also contains a large open area for a sofa, slide-away TV and built-in bookshelf in front of a large storage room, along with a small kitchen, bathroom and library.

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Source:
Maserati – Architectural Digest “Design Driven”
Existing Garage Contest Winner, Holger Schubert

http://www.classicdriver.com/uk/magazine/3800.asp?id=14263

That’s all for July! With the 7th month of the year now in the can, let’s take a quick look at YTD performance:

Dow Jones Industrial Average +4.5%

S&P 500 INDEX +9.3%

NASDAQ COMPOSITE + 25.5%

52 week performance is a tad less robust.

When people ask why we own Tech, this is the reason: Relative Valuations and Momentum.

I don’t buy into the {Psychology arguments, but I thought it was interesting nonetheless:

Source:
Mind Over GDP: Economist Says Recession Over But Psychology Key to Recovery
Aaron Task
Yahoo Tech Ticker Jul 31, 2009 12:49pm EDT

http://finance.yahoo.com/tech-ticker/article/293464/Mind-Over-GDP-Economist-Says-Recession-Over-But-Psychology-Key-to-Recovery

The artist who created Wall Street’s famed “Charging Bull” statue sued Random House and the authors of a recently released book on the collapse of investment bank Lehman Brothers over their use of an image of the bull.

Wait, you mean you can’t do that . . . ?

Dow Jones Excerpt:

On Wednesday, artist Arturo Di Modica filed a lawsuit in U.S. District Court in Manhattan, alleging the book, “A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers,” uses an unauthorized image of the bull on its dust jacket.

The nearly 7,000-pound sculpture was placed unannounced in front of the New York Stock Exchange in 1989 and was soon moved to Bowling Green in lower Manhattan, where it has been on “temporary” display for 17 years. It has become a popular stop for tourists.

Di Modica has previously said he was inspired by the 1987 stock market crash to create a sculpture “that would encourage young people to rebound and help put American business back on track.” He registered a copyright on the bull in 1998 and has previously brought legal action over the unauthorized use of the bull’s image.

His Web site proclaims Di Modica “sculptor of the world famous bronze ‘Charging Bull’” and promises to soon have a “Charging Bull Gift Shop,” a 360-degree view of the sculpture and other features related to the bull.

My Superagent/Lawyer, Lloyd Jassin, emails me: “It’s a teachable moment. Pig parody = transformative fair use, i.e., a socially productive use looked upon favorably by copyright law. Used for a different purpose than original. Bull cover = infringement.” (see this on Fair Use)

Thank goodness for Derivative Works copyright rules! The pig pull is obviously protected as Parody.

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Now that I look at the two covers side by side, not only did they violate the Copyright of the bull sculptor, it really looks like they  did a nice job “imitating” the layout of my cover!

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Last 10-er of the week: These are the 10 most interesting things I spotted today.

• Bottom Lines Buoy Rebound Hopes: Though Profits Are Still Weak, Cost Cuts, Overseas Demand Help Many Companies Find Footing (WSJ)• CNBC Viewership Down 28% (ZeroHedge)  According to Nielsen, CNBC has lost 28% of viewers year over year.  I will have more on this next week . . .

• Bankers’ Bonuses Beat Earnings as Industry Imploded The nation’s nine largest banks handed out $32.6 billion in bonuses last year even as they ran up more than $81 billion in losses and accepted billions of dollars in emergency federal aid, New York Attorney General Andrew M. Cuomo says in a report released Thursday. (Washington Post)  see also It’s Still Good To Be A Banker (The Atlantic)

• The Great Recession is Over! Long Live the Ordinary Recession . . . (The Big Picture) I try not to do this, but damn, that was a good hedline

• Tell Me Lies, Tell Me Sweet Little Lies (MacroMan) Misrepresentation in corporate earnings statements is rife; according to S&P, of the 197 SPX companies to report this quarter, only a quarter have actually earned the number reported in the headlines. Fully 63.5% stuffed “one-off” or “extraordinary” items in their income statements, while only 24 of the 197 had reported earnings that were higher than headline operating earnings.• Former Tres Secy Hank Paulson Joins Electric-Car Startup As Advisor (Green Car Reports)

• Spinning in the Grave: The three biggest reasons music magazines are dying: Readership’s down, advertising’s down, the old guard has been slow in adapting to the Internet. (Slate)

• eBay May Shut Skype Over Licensing Dispute

• Artist Sues Random House Over Use Of Wall St Bull Image The artist who created Wall Street’s famed “Charging Bull” statue sued Random House and the authors of a recently released book on the collapse of investment bank Lehman Brothers over their use of an image of the bull.  (Dow Jones)  Wait, you mean you can’t do that . . . ?

• By now, you likely have seen the JK Wedding Entrance Dance (if not watch the video, it is charming). But you probably have not yet seen what happens 6 months later:  JK Divorce Entrance Dance.

Enjoy your weekend!

My friend and colleague Janet Tavakoli sent me this scathing comment.  She is one of the most respected analysts in the world of structured finance and risk.  When I see Janet rant, I read.  Also, 7/30/09 reply from Jim Rogers at bottom. Enjoy –  Chris

Where Were Drama Pundits [Whitney, Taleb and Gasparino] When It Mattered?

TSF (Opinion) Roundup Commentary – July 29, 2009

By Janet Tavakoli

Hundreds of people from clergymen to lawyers have claimed decorations for bravery that they never earned.  Why should finance be any different?

Meredith Whitney’s Unreported Death Threats (See also: “Reporting v. PR”)

In the early part of 2007, Meredith Whitney appeared on Cavuto on Business with Jim Rogers and opposed his viewpoint.  She rated Citigroup “sector perform.” Rogers was short.  By the end of October 2007, three other prominent analysts already had a sell on Citi; Whitney followed by rating it sector underperform and said Citigroup could trade in the low ‘30’s and would have to cut its dividend.  The dividend cut was a good call.  Rogers made it months earlier when he shorted the stock.  It was too late to give an early warning about Citigroup’s toxic assets.  Securitization had already ground to a halt, and everyone was taking losses.  Citi hit $5 in January 2009, just as Rogers said it would.

According to Reuters, Whitney said she got “several death threats” as a result of her Citi call.  The rumored death threats were widely reported.  But who told the press about death threats? Security consultants advise the target of death threats not to discuss it, particularly not with the press.  The threats were downgraded faster than Whitney downgraded Citigroup—a Fortune interview said she received “one death threat.”  Whitney rated Bear Stearns perform and downgraded it to underperform on March 14, 2008 as it tumbled 53% in one day.  Clues to Bear Stearns’ problems were publicly reported in May 2007 when the Everquest IPO became news, and CDOs from BSAM’s hedge funds landed on Bear Stearns’s balance sheet.  Reportedly, Whitney hesitated Bear’s fateful week of March 2008 due to her perceived pressure over her Citi dividend call, but pressure or not, she was already too late.

Jim Rogers also warned about Lehman when Bear Stearns imploded in mid-March 2008, but Whitney continued to rate Lehman outperform.  Whitney downgraded Lehman to “perform” at the end of March 2008—so much for taking a hint or issuing an early warning.  Lehman went under September 2008.

I first took an interest when Whitney was billed as the woman who gave early warning about AIG, because she did not as far as I know.  In August 2007, I challenged AIG’s earnings—specifically its failure to take losses on credit derivatives protecting “super senior” structures, the type of products on which we eventually paid out TARP money.

When asked by an economist to comment on my analysis of her calls that missed some death threats, Whitney retorted: “She is just jealous.”  Not true.  My feeling is akin to that which I have for Rosie Ruiz, who appeared to run a marathon in record time, but had merely jumped in at the end of the race—it’s a different feeling entirely.

Read the rest of this entry »

Art Cashin, director of floor operations at UBS, has the buzz from the NYSE.

I noted earlier that the oddity of imports versus exports calculation would produce a positive contribution to GDP. Let’s look at the details of this, and find a way to understand what this means.

First, off conceptualize the difference between what imports and exports are. At the most basic level, Imports represent our consumption of overseas production, i.e., We buy what they make.

Exports are where overseas consumers purchase our production, i.e., They buy what we make.

What were the specifics of the GDP data regarding import/export?

-Real imports of goods and services decreased 15.1%

-Real exports of goods and services decreased 7.0%

So in Q2, both consumption by us of overseas goods and services and by them of US made goods and serivces declined significantly.

The Differential between imports and exports — who dropped fastest — was the key to this quarter’s GDP data.

According to Bloomberg, Decreasing Exports subtracted 0.76% from GDP. At the same time, falling Imports added 2.14%.  Net contribution of the fact that Imports are free falling twice as fast as Exports are = 1.38%.

If they were both falling at the same rate — if Europe and Asia’s consumers were hurting as much as ours –  GDP would have been -2.38%.

If it seems weird to you that the ratio of domestic and overseas shrinking economies and their reduced consumption somehow turned into a positive GDP contributor, well, welcome to the wonderful world of government statistics.

Turnover in the American real-estate market may be bottoming, but prices are unlikely to do so for some time. History suggests they’ll keep drifting for another year or two before they find a floor.