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

Remember back during the housing boom, when all of the corrupt real estate appraisers were busy pumping up local comparables, and helping to drive prices higher?

Of course!

Do you recall how the National Association of Realtors swung into action, and being in the vanguard of responsible behavior: 1) Were the first to spot these problems;  2) Demanded their membership identify these corrupt appraisers and mortgage brokers; 3) Proposed fixes for this widespread corruption and presented them to Congress

Me neither.

My thoughts came back to that this week, when I was catching up with some missed research and economic reports. I was traveling to and from Vancouver, so I missed the June Existing Home Sales data. In finally reading June’s EHS, I couldn’t help but notice this doozy in the 4th paragraph of the National Association of Realtors release:

“A June survey of NAR members shows 37 percent experienced at least one lost sale as a result of the new Home Valuation Code of Conduct, with seven out of 10 reporting an increased use of out-of-area appraisers. Seventy percent of NAR appraiser members said consumers were paying higher fees, while 85 percent report a perceived reduction in appraisal quality.”

What contemptible bilge.

Where TF were these concerned citizens at the NAR when appraisers were engaging in all sorts of funny business, driving prices skyward?  They were AWOL.  You do not recall any commentary during the boom about the artificial number of sales, or the increased prices that appraisers were causing, because somehow, the greatest bout of Appraisal fraud, predatory lending, and irresponsible mortgage underwriting standards the world has ever known managed to escape these ethicsless weasels’ notice.

NEVER FORGET THIS: The NAR is a trade group, not a legitimate source of independent data. They are biased, not credible, and to be blunt, essentiually behave as PR flacks who will say ANYTHING if they think it will help their members make a quick buck. They are not a credible economic organization, they are not legitimate researchers, they are nothing more than hired guns pushing their members’ agenda — even when it is destructive to America.

I am the son of a Real Estate Agent, and growing up, the worst behavior of the people working in the RE  industry were dinner table fodder. The stuff my mom used to talk about — Outrageous! she would say — seems downright quaint compared to the un-f&^%-believable garbage that goes on now.

Not only does the worst of the Real Estate industry have proper representation in their trade group . . .  they seem to be running it.

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Previously:
Existing Home Sales, Non Seasonally Adjusted, Explained (March 25th, 2008)

http://www.ritholtz.com/blog/2008/03/existing-home-sales-non-seasonally-adjusted-explained/

Source:
Existing-Home Sales Up Again
NAR, July 23, 2009

http://www.realtor.org/press_room/news_releases/2009/07/sales_up

See also:
Realtors cry foul over low-ball appraisals
Carla Fried
CNN/Money, July 21, 2009 5:07 pm

http://moneyfeatures.blogs.money.cnn.com/2009/07/21/realtors-cry-foul-over-low-ball-appraisals/

U.S. Week Ahead: More Results, GDP Coming

The second heavy week of corporate results is upon us with about one quarter of the S&P 500 reporting. Highlights include the oil majors, telecom carriers and media giants. The first look at second-quarter GDP is also due. (July 24)

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Asia’s Week Ahead: Finding Opportunities 7/24/2009

Anthony Cragg, portfolio manager of the Wells Fargo Advantage Asia Pacific Fund, discusses the recent batch of earnings from Asian companies. He also explains why he sees good opportunities in China, India and Indonesia. Polya Lesova reports.

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Europe’s Week Ahead: Earnings Season 7/24/2009

European Markets will be dominated with financial results, including reports from oil giants, auto makers and media companies.

Well, maybe this audience will be more informed:

After his semi-annual testimony in front of Congress — with notably uninformed commentary from House and Senate members — the Fed chief tries a new tact, taking it to the public.

Excerpt:

“The Federal Reserve chairman is in Kansas City, Mo., for a town-hall forum hosted by The NewsHour’s Jim Lehrer. The taped program will appear this week on PBS stations. But we’re here at the Federal Reserve Bank of Kansas City to bring it to you live on Real Time Economics.

It’s pretty good timing for Mr. Bernanke. He has six months and five days left in his four-year term as chairman. In the coming months, President Obama will decide whether to reappoint Mr. Bernanke or choose someone else (that is, someone with Democratic credentials) to lead the central bank.

The Fed chairman’s public standing is bruised from the deep recession and his decisions ahead of it. At the same time, the Fed is under attack from a growing number of lawmakers who want the central bank’s power reined in after its extraordinary actions to keep the economy from falling into another depression. So the former professor has spent this year moving beyond the Fed’s usual forums. He appeared before the National Press Club in February, sat down for a lengthy “60 Minutes” piece in March and lectured at Morehouse College in April to explain his actions and show he’s not afraid to take on public criticism.”

This is obviously part of his re-election campaign.

The full forum will be aired on the PBS NewsHour during the week of July 27.

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Sources:
Bernanke Live: Fed Chairman Faces PBS Viewers
Sudeep Reddy
Real Time Economics   JULY 26, 2009

http://blogs.wsj.com/economics/2009/07/26/bernanke-live-fed-chairman-faces-pbs-viewers/

Bernanke on the Record

http://www.pbs.org/newshour/insider/

A helluva week in the market — The Dow is over 9,000, and the earnings are just fantastic (well, maybe they are better than lowered expectations) and things are looking, well if not up, then at least not down into the abyss.

REITs were the big winner, up 8.3% for the week (still off some 40% from their recent highs); The Russell 2000 gained 5.6%, which puts them a mere 23% from their 52 week highs. The S&P and Dow added just over 4%, which places them within just over 20% of their 52 week highs. The Nasdaq, which tacked no 4.2% is a mere 15% from 52 week tops. Of course, all of these indices are far far below their all time highs.

Taking a closer look  at the rally off of the March lows, Barron’s Trader column notes:

HERE’S A SNAPSHOT OF JULY’S ROMP, courtesy of Bespoke Investment Group: From their July 10 low, the 50 smallest stocks in the S&P 500 had rebounded 17.2% through Thursday, outgunning the 50 biggest stocks’ 9.7% gain. The 50 most heavily shorted stocks have jumped 17.6%, versus just 8.8% for the 50 least-shorted names. Companies raking in foreign revenues outran domestic earners, a sign that traders are still uneasy about the dollar.

Besides short-covering, there are also ample signs of bargain-hunting and risk-guzzling. The 50 stocks with the lowest price/earnings ratios jumped 18.4%, the best performance of any decile. The 50 stocks with the worst analyst ratings are up 12.7%, versus 8.9% for the most beloved companies. And the 50 stocks that fell the furthest during the June correction have bounced back most resoundingly, their 17.4% rise trumping the 7.4% for the correction’s top performers.

Fascinating details.

Where to begin this week? The Dollar? Retail Sales? Yields? Housing?  The 10 consecutive up day for the Nasdaq? No matter — we got it all covered

Enough Ben Steinery! On with the linkfest:

INVESTING & TRADING

• Dow Above 9,000 for the First Time Since January (NYT)

• Up 40%, but Still Feeling Down (NYT)  The truth is that for most investors, it’s more important to avoid big losses than to rack up big gains. That may seem a milquetoast approach, but in the miserable market of 2008 and early 2009, minimizing losses was the best that most people could do. And because of the ugly math of investing, it has been extraordinarily difficult to recover from big declines.

• S&P 500 Short Interest Drops, Led by Banks, as AIG Bets Shrink (Bloomberg)

• The long-awaited Dow Theory bull market signal finally arrived (Investment PostCards)

• FIFTY WAYS TO KILL RECOVERY Nearly every state government is required to balance its budget. When times are bad, jobs vanish, sales plummet, investment declines, and tax revenues fall precipitously—states have to raise taxes or cut spending, or both, and that’s precisely what they’re doing:  amplifying the effects of the downturn, instead of mitigating them. (New Yorker)

• Is the party over for Microsoft? JOHN DVORAK’S says Software giant’s too distracted by shiny objects  (Marketwatch)

• Goldman and Morgan are a study in contrast To oversimplify, Goldman and Morgan are now a contrast of offense versus defense. Goldman (Barron’s)

• Great barrier grief Countries that clung fast to the gold standard in the early 1930s resorted most to protectionism (The Economist)

• Schumer Presses SEC for Ban on ‘Unfair’ High-Frequency Trades (Bloomberg)

• Visualizing One Trillion Dollars (Video)

• 1990s Tech Guru Michael Murphy is back, covering gold, currencies,  and macro economic issues — at Seeking Alpha.

• The New Model for Financial Research? (Advisors for Advisors)

• Accountants Gain Courage to Stand Up to Bankers (Bloomberg)

• Warren Buffett to Teach Kids About Finance in Cartoon (Bloomberg)    Video here

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ECONOMY

Markets keep climbing a wall of worry:

• A long way to go: The global recession is coming to an end, but the ingredients of a lasting recovery are still missing  (The Economist)

• Lasting recession works way into pop culture (MSNBC)

• Do We Need More Stimulus? (Delong)

• Job Cuts Outpace Economic Decline (If no WSJ, go here)

• When Debtors Decide to Default (NYT)

• Sales Fail to Keep Pace With Profits as Economy Stays Sluggish (Bloomberg)

• Dropping the shopping:  Can America wean itself off consumption? The first of a series on how the world’s four biggest economies must change to ensure sustainable global growth  (The Economist)

• Henry Kaufman, writing in Barron’s, discusses A Long Road to Recovery (Barron’s)

• Association of American Railroads has begun publishing “Rail Time Indicators,” their monthly look at Rail Transport related data.

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HOUSING

• The U.S. currently has enough vacant housing to put the entire population of the U.K., with room left over for Israel.  (Infectious Greed)

• New Appraisal Code Raises a Row (WSJ)

• Seasonality factors in Existing Home Sales (Hanson)

• Lennar Signals Fleeting Builder Rally as Buyers Flee (Bloomberg)

• Foreclosure-relief program launched for Countrywide Financial customers (Denver Biz Journal)

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FEDERAL RESERVE

• Chairman Ben Bernanke confronts challenges to Federal Reserve’s record (LA Times)

• Light at the end of the Tunnel?

• The NYT Week in Review has dueling views on whether Ben Bernanke should be reappointed.

Nouriel Roubini votes yes: “Ben Bernanke … deserves to be reappointed. Both the conventional and unconventional decisions made by this scholar of the Great Depression prevented the Great Recession of 2008-2009 from turning into the Great Depression 2.0.

Anna Schwartz votes nay: As Federal Reserve chairman, Ben Bernanke has committed serious sins of commission and omission — and for those many sins, he does not deserve reappointment.

• Taylor Says Fed Gets Rule Right, Goldman Doesn’t (Bloomberg)

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WAR/MEDIA/POLITICS/ENERGY

• An Open Letter To The Financial Media (Zero Hedge)

• Build the Wall: Why Media Should Charge for Online Content (CJR)

• Obama leaves foxes in the Commodity Futures henhouse (True Slant)

• Inside Bush and Cheney’s Final Days (Time)

• Health Care: A Case of Getting What You Pay For (Washington Post)

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TECHNOLOGY & SCIENCE

• A Special Twitter Guide for Businesses

• Hubble image shows debris from Jupiter collision (USA Today)

• 100 Things Your Kids May Never Know About (Geekdad)

• Music Streams That Soothe an Industry:  Many music industry observers now believe that there is a fundamental shift under way: from illegal downloads to licensed streaming services like MySpace Music, imeem and Spotify, where users can play any song, anytime and — coming soon — on any device (NYT)  See also Pandora’s Back (The Big Money)

• Clouds in climate ‘vicious cycle’ (BBC)

• PowerPoint considered militarily harmful Writing in the Armed Forces Journal, retired Marine T.X. Hammes excoriates PowerPoint and its impact on decision-making in the military (boingboing)

• Amazon Apologizes For Kindle Flap (Info Week)

• Scientists Worry Machines May Outsmart Man (NYT)

• Get Me Rewrite: Microsoft Alters Laptop Hunter Ads (PC World)

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MUSIC BOOKS MOVIES TV FUN!

• Monday’s WSJ reviews some good beach reads

• The I-Hate-My-Cellphone Film Festival (Video)

• CNBC’s New Home Page (Amusing!)

• What’s this? They’re making a new Tron movie!

• What you need to know about Cash for Clunkers

• Armando Iannucci: What the In-the-Loop director taught Sacha Baron Cohen. And Ricky Gervais. And Stephen Colbert (Slate)

• Window on the body: CT scans become art (New Scientist)

• Top 10 George W. Bush YouTube Moments

That’s all from a sticky hazy hot humid weekend in the NorthEast, where Summer has finally arrived . . .

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Got a comment, suggestion, link idea? Or do you just have something on your mind? The linkfest loves to get email!  If you’ve got something to say, send email to thebigpicture [AT] optonline [DOT] net.

Interesting discussion

Some nice words about Bailout Nation from Dave Kansas in Monday’s WSJ, as the first of 7 suggested summer beach reads:

“Heading into August, beaches and books beckon. While it’s nice to curl up with a page-turning, mind-free thriller, this summer of our great recessionary discontent might be a good time to bone up on things finance and investing.

There’s certainly been plenty of news in the past several months, and many books have come out to chronicle all that has gone awry with the economy and the markets.

So, here’s a short reading list that includes current items as well as a few classics:

“Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy” by Barry Ritholtz.

Mr. Ritholtz is a financial commentator who has drawn a large following to his blog, The Big Picture (ritholtz.com). Several people have written books about the current crisis, but Mr. Ritholtz succeeds in laying out all that transpired in easy-to-understand language. If you want to know how we got into this mess and what might still be coming, this is the book for you.”

Other books mentioned include:

-”Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street” by Kate Kelly.

-”When Genius Failed: The Rise and Fall of Long-Term Capital Management” by Roger Lowenstein.

-”Manias, Panics and Crashes: A History of Financial Crises” by Charles P. Kindleberger.

-”The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)” by Benjamin Graham and Jason Zweig with Warren E. Buffett.

-”The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers” by Robert L. Heilbroner.

-”Reminiscences of a Stock Operator” by Edwin Lefevre.

I loved Lowenstein’s When Genius Failed and Lefevre’s Reminiscences.  I haven’t read The Worldly Philosophers but just ordered it from Amazon.

Beach reading? These days, they end up being  airplane reading . . .

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Source:
… And Dave Has His Book List
DAVE KANSAS
WSJ, July 26, 2009

http://online.wsj.com/article/SB124856712152681467.html

Source: Jerry Holbert, Comics.com, July 23, 2009.

Not only did the Dow Jones Industrial Index on Thursday breach 9,000 for the first time since January and the Nasdaq Composite Index notch up a streak of 12 consecutive advancing days, but other global stock markets, commodities, oil, precious metals, high-yielding currencies and corporate bonds also put in a stellar performance as a bullish mood prevailed.

Bonds and other safe-haven assets such as the US dollar and Japanese yen were out of favor as investors sought higher returns elsewhere. Also, the CBOE Volatility Index (VIX), or “fear gauge” was at its lowest level (23.1) since before the Lehman collapse in September.

The past week’s performance of the major asset classes is summarized by the chart below – a set of numbers that indicates an increase in risk appetite.

Source: StockCharts.com

A summary of the movements of major stock markets for the past week, as well as various other measurement periods, is given below. As the second-quarter corporate results in the US rolled in, the American and most other markets closed the week in solid positive territory.

The MSCI World Index (+4.6%) and MSCI Emerging Markets Index (+5.2%) last week again added to the rally’s gains to take the year-to-date returns to +11.7% and a massive +45.3% respectively. Strikingly, the World Index advanced for ten straight sessions through Friday, whereas the Emerging Markets Index gained on nine of the past ten trading days.

The major US indices are all back in the black for the year to date, with each index having fallen for only one day last week. Prior to a slight decline on Friday, the Nasdaq Composite Index experienced its best winning streak since 1992 as it rose for 12 sessions in a row.

Click here or on the table below for a larger image.

Stock market returns for the week ranged from top performers Romania (+11.1%), Russia (+9.5%), Egypt (+8.8%), Hong Kong (+7.9%) and Poland (+7.8%) to Greece (-3.6%), Bermuda (-2.5%), Jamaica (-2.0%), Côte d’Ivoire (-1.9%) and Bangladesh (-1.0%) at the other end of the scale.

Of the 97 stock markets I keep on my radar screen, a majority of 82% recorded gains, 15% showed losses and 3% unchanged. (Click here to access a complete list of global stock market movements, as supplied by Emerginvest.)

As an aside, the capitalization of China’s stock market is currently $3.2 trillion compared with $11.2 trillion for the US market, according to data compiled by Bloomberg. Mark Mobius, head of emerging markets at Templeton Asset Management, said (via MoneyNews) China might surpass the US as the world’s largest stock market in as little as three years, as China’s state-owned companies will sell new shares and the nation’s 1.4 billion people will put more of their money into the market.

Back to the corporate reporting season in the US. Of the 142 S&P 500 companies that have so far announced quarterly results, 111 came out ahead of earnings expectations, 10 in line and 21 below. While the earnings announcements thus far have been impressive at the headline level, the reports become less striking once one digs a bit deeper to discover that the earnings numbers often only beat estimates due to cost-cutting.

At the top line revenues are still deflating, indicating no pricing power. Specifically, 72 companies posted revenue that failed to live up to expectations. But the prospects are looking up as for the first time in quite a while many more companies are raising guidance versus lowering guidance.

John Nyaradi (Wall Street Sector Selector) reports that as far as exchange-traded funds (ETFs) are concerned, the winners for the week included Claymore/MAC Global Solar Energy (TAN) (+17.9%), PowerShares Biotech & Genome (PBE) (+17.4%) and Market Vectors Solar Energy (KWT) (+15.9%). Among the country ETFs, Market Vectors Russia (RSX) (+ 12.5%) performed splendidly.

On the losing side of the slate, ETFs included “all things short” such as ProShares Short MSCI Emerging Markets (EUM) (-6.2%), ProShares Short QQQ (PSQ) (-5.0%) and ProShares Short Russell 2000 (RWM) (-4.9%).

As far as credit is concerned, the cost of buying credit insurance for US and European companies eased sharply during last week’s trading, as shown by the narrower spreads for both the CDX (North American, investment-grade) Index (down from 131 to 118) and the Markit iTraxx Europe Index (down from 107 to 95).

CDX (North America, investment-grade) Index

Source: Markit

The quote du jour this week comes from Bill King (The King Report) who said: “Sorry, Mr. President – you ‘wasted a good crisis’. You, Ben, Hank, W, Little Timmy and Democratic Congressional leaders told Americans that the world would end unless US taxpayers mortgaged whatever little future remained in order to provide record stimulus now. You and your ilk said there was no time to delay. Remember you said ‘catastrophe’ would occur if there was no stimulus. You and your team boasted that millions of jobs would be created. No jobs yet. But Goldman Sachs and other insiders minted more money and numerous crony capitalists were able to salvage as much net worth as possible.

Read the rest of this entry »

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Want to see if your vehicle qualifies? Then go here: http://www.fueleconomy.gov/feg/CarsSearchIntro.shtml

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Important Things to Know

• Your vehicle must be less than 25 years old on the trade-in date
• Only purchase or lease of new vehicles qualify
• Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
• Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in
• You don’t need a voucher, dealers will apply a credit at purchase
• Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
• The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

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See also:
Cash for Clunkers Facts

http://www.cashforclunkersfacts.com/

Source:
Cash-for-Clunkers Clears Hurdle
JOSH MITCHELL and COREY BOLES
WSJ, JUNE 13, 2009

http://online.wsj.com/article/SB124485495153311725.html