AAII vs II

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By Peter Boockvar - August 27th, 2009, 12:55PM

In contrast to the weekly Investors Intelligence data out yesterday which revealed that newsletter writers are the most bullish since Dec ’07 and the least bearish since Oct ’07 with the balance expecting a correction, the AAII sentiment measurement of individual investors reflects a different opinion. Bulls were little changed on the week at 34 but is down from 51 two weeks ago while Bears rose 9 points to 49 and are up from 33 two weeks ago. The AAII data is much more fickle than the II but the difference in sentiment between the ‘experts’ and the individuals is worth noting.

King Report:

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By Bill King - August 27th, 2009, 12:48PM

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Let’s say that an aging baseball slugger who had abused performance-enhancing drugs for over a decade had a horrendous collapse in his hitting statistics. So the team put him on even stronger doses of steroids, HGH, testosterone, dianabol, insulin, protein shakes, creatine, glutamine and unknown powerful designer pharmaceuticals.

The team had him do Olympic and ballistic [weight] lifts, plyometrics and intense ‘core’ training. Though the slugger’s home runs and RBIs had fallen over 30% from the previous year, he started to hit one more HR per month and a few more RBIs.

This is the US economy and financial system. Trillions of dollars have been poured into the system and economy and trillions more have been pledged to buttress troubled entities. There have been nationalizations, record stimulus and various inducements for consumer to spend more money. And all this is producing is modest m/m gains or smaller losses!

At some point the US, like the slugger, must come off the juice, or the artificial boosts will blow them up.

Even though MLB has a shoddy enforcement and drug testing record at least it isn’t the entity injecting the massive amount of unnatural stimulants.

Upon further review yesterday’s economic data was not as jiggy as initially thought.

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FDIC’s Bair: Economy Signaling Improvement

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By Barry Ritholtz - August 27th, 2009, 12:15PM

FDIC CHAIRWOMAN SHEILA BAIR TELLS FOX BUSINESS NETWORK THAT COMMERCIAL REAL ESTATE WILL BE A BIG FACTOR IN BANK FAILURES NEXT YEAR

FDIC’s Bair: Economy Signaling Improvement

FDIC’s Bair on Special Assessment Outlook FDIC’s Sheila Bair on the credit industry and private equity’s role in resuscitating the banking sector.

FDIC Chairwoman Sheila Bair spoke exclusively with FOX Business Network’s Alexis Glick and said that commercial real estate losses are going to be “a much bigger factor” next year and “there’s not a whole heck of a lot we can do about it.”

Below are excerpts from the interview:

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Steely Dan: Countdown To Ecstasy

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By Bob Lefsetz - August 27th, 2009, 12:00PM

Bob Lefsetz is a music industry observer, and publisher of the Lefsetz letter:


MY OLD SCHOOL 1

Insiders will tell you the best Steely Dan album is the second, “Countdown To Ecstasy”, the one that ended their touring career, the one sans any hits.

I disagreed.

But last night I became a believer.

“Bodhisattva” blistered.

“Show Biz Kids” swung.

But “My Old School” was STAGGERING!

“I remember the thirty-five sweet goodbyes
When you put me on the Wolverine
Up to Annandale”

For the uninitiated, for those who grew up in the midwest, or even further left, Annandale-on-Hudson is the location of Bard College, where those who were smart but thought high school was b.s. and didn’t have the grades commensurate with their intelligence ended up going to college to further their creativity.  It’s where Walter Becker and Donald Fagen went to school before they moved on to back up Jay Black as two of his Americans and ultimately get a deal with ABC Records, the worst of the major labels, where they were forced to get a lead singer, David Palmer, since Fagen’s voice was supposedly not radio-ready.

Then the insane occurred.  Steely Dan was successful out of the box!  After struggling in the trenches for years, plying their trade far from the spotlight, Steely Dan was an AM radio fixture.  Not an FM staple.  FM was in the process of getting dumb, featuring meat and potatoes rock as opposed to intelligence, but the hooks of “Do It Again” and “Reelin’ In The Years” could not be denied by AM, “Can’t Buy A Thrill” became a huge hit, an album you saw oftenmost in the dorm rooms of those not quite hip, they didn’t have to worry about their cred, they were able to buy what felt good without worrying about external judgment.

“Can’t Buy A Thrill” is a masterpiece.  Unfortunately, Mr. Palmer sang the lead vocal on the most legendary track, “Dirty Work”, and therefore when done live it hasn’t got the same power, backup singers taking the lead, but Mr. Fagen still sings “Reelin’ In The Years”…

“You’ve been telling me you’re a genius
Since you were seventeen
In all the time I’ve known you
I still don’t know what you mean”

In this era of self-promotion, “artists” tell us how great they are (can you hear me Kanye?), whereas the music used to speak for itself, it was your calling card, in an era that seems far distant.  But for those of us who lived through it, when we hear these Steely Dan songs we’re brought right back.  Yes, last night Becker and Fagen and their troupe of hired gunslingers returned us to what was and who we used to be.  And one could say it was aged music, but like wine, some things get even better as the years go by.

This is our classical music.  And even though youngsters might not understand, they’ll be positively blown away by the musicianship.  That was the focus, not staging, not production. John Herington, a fellow most have never even heard of, blistered elite-level guitar solos, Jim Pugh blew his face out on the trombone, and Keith Carlock pounded the skins, earning Irving Azoff’s sobriquet as the best touring drummer.

Still, we were there to hear the music.

It was billed as a complete performance of “Aja”.  And it was, right off the top.

DEACON BLUES

“I’ll learn to work the saxophone
I’ll play just what I feel”

Credit the Beatles.  They proved the older generation had no clue.  Suddenly, the acts were in charge.  You could work in the studio of your choice, for seemingly as long as you liked, laying down your vision.

But Steely Dan was not on Warner, they were on the aforementioned ABC, they had to earn this right.  Which they did with not only their spectacularly successful debut album, but the hit “Rikki Don’t Lose That Number” off their third disc, “Pretzel Logic”.  It was no longer about hits, it was about EXCELLENCE!  Becker and Fagen were competing with no one other than themselves.

The apotheosis was “Aja”.  When they didn’t give a fuck what their audience thought and delivered a jazz-influenced album.  To a world that was enraptured with corporate rock. Listeners dropped the needle and were surprised.  There was the mellowness of a corner club, where in this year of the Sex Pistols punkers were not pogoing, but old jazzbos were blowing.

But “Aja” was so right, that despite having no AM hits it became a staple on the soft rock FM stations, and in the houses of those not only sipping wine, but denizens addicted to sound, Steely Dan was the foremost warrior on this front, in an era when squashed MP3s, never mind compressed CDs, were unheard of.

JOSIE

Dancing is an involuntary motion.  Maybe not for Paula Abdul, but for the rest of us, especially we self-conscious white folk.  But sometimes the sound emanating from the speakers is just SO funky that you turn into Gumby, you’re shimmying and shaking, even if you previously believed you had as much soul as Steve Martin in “The Jerk”.

“Josie” is the last track on the second side.  There are only three cuts on side one, a risk heretofore unknown in the rock world.  You could have ONE cut per side, like Jethro Tull, but THREE?

Whereas the first side ends with the reflective “Deacon Blues”, side two immediately stands at attention with “Peg”, as if the singer had gone to bed, and gotten up to do it all over again, not like a star, but a musician.

The band finished “Aja”, there was a standing ovation.  And then the show truly got good.  “Aja” put the butts in the seats, it was the draw, performed flawlessly, it still had a sense of nostalgia, a sense of calcification.

Then Steely Dan blew the roof off the joint.

They played tonight’s “Babylon Sisters”.  The anthem for the change of the decade, from the seventies to the eighties, as the boomers finally realized they were getting older and became reflective, before they raped and pillaged in the Reagan decade.

They also performed “Hey Nineteen” and “Time Out Of Mind” from “Gaucho”.

But we also had Becker standing up to the mic to sing “Daddy Don’t Live In That New York City No More”.  As unexpected as that performance was, the killer of the evening was “Don’t Take Me Alive”, in a sneak peek from Monday’s show.

But the surprises were from “Countdown To Ecstasy”.  Hearing John Herington play the lead on “Bodhisattva” was like visiting a future world where the seventies were perfectly preserved, but still positively ALIVE!

DEACON BLUES 2

“This is for me
The essence of true romance
Sharing the things we know and love
With those of my kind
Libations
Sensations
That stagger the mind”

This was not an AC/DC show, not a Rolling Stones extravaganza, I didn’t see a single person under the age of twenty in attendance, no parents bringing their kids to expose them to what once was, when they had all their hair and their bodies were not lumpy.  This was a pilgrimage to Mecca, a journey to what once was and still is for those who lived through an era when if you wanted to know which way the wind blew you didn’t fire up the Weather Channel or Accuweather.com, you put a record on the turntable.  The limit-testers were not techies, but musicians, all of whom had seen the Beatles and picked up instruments, practiced and then gone off in divergent directions, all of which we paid attention to.  We could love the Allman Brothers and Joni Mitchell.  James Taylor and David Bowie.

The sun is setting on these baby boomer acts.  Their audience is getting older, fans don’t feel the same need to go to the show.  But if you’re a musician as opposed to a star, you play anyway.  That’s what you’re in it for, not the fame, not the riches, but the SOUND!

Last night we exulted in the sound.

MY OLD SCHOOL 2

“California tumbles into the sea_
That’ll be the day I go_
Back to Annandale”

Even though “Aja” was released when I was firmly ensconced in Los Angeles, its performance brought me back to college, when the future was an irrelevant haze and I lived to spin records, nothing else on my mind.

Getting nostalgic for New England, the band swung into this 1973 tune.

I was thinking about the east coast game, getting good grades to get into a good college, the brisk fall days, the emphasis on intellectual activities, and then I heard the above lines.

EXACTLY!

When the Big One hits, that’s when I’ll think of moving back east.  Because just like all those bands, Steely Dan included, I moved to California to ESCAPE!  The hierarchy, the b.s.  I needed to be free!

I’m not talking about Republican free, where you can’t marry who you want to, where the government is in your personal business, but a sixties free, which extended, just like Steely Dan, into the seventies.  Where the world was a land of possibilities, and it was up to you to grab hold and go for a ride!

DEACON BLUES 2

“I cried when I wrote this song
Sue me if I play too long”

The foremost misquote in the Steely Dan canon.  Those who were casual listeners, who didn’t purchase the album, who didn’t live for the music, are under the impression it’s: “Sue me if I play it WRONG!”

An artist can’t worry about the audience’s judgment, the only right and wrong is in his head.  The only thing an artist can worry about is if people stop paying attention.  Then again, are you willing to take this risk?

No one is anymore, not anyone with any traction.  They’re afraid of giving up what they’ve got.  Hell, even Garth Brooks failed with Chris Gaines.  You’re supposed to give people what they expect.

But music blew up because that precept was nowhere to be seen.  No label honcho could envision, never mind execute, “Sgt. Pepper”.  It took Steely Dan six albums to get to “Aja”. And what resulted was not only completely unexpected, unlike the evanescent hits of the day, that drivel you can look up on “Billboard”‘s site, “Aja” has got legs, it sustains, it sounds as fresh today as it did back then.  Truly.  That’s what originality will do for you, whether it’s Becker and Fagen or Picasso.

Too much of what Steely Dan represents has not only fallen by the wayside, it’s been actively SUPPRESSED!

Kids are not liberal arts majors, contemplating existence, they study business.  What kind of music does a business major make?

I ain’t got much money.  But like that old Frank Sinatra song, I’ve done it my way.  It’s been rough, but worth it.  I’ve got no regrets, nobody I fucked over to get ahead.  I’ve got the music.  And my writing.  And I constantly get e-mail telling me there’s too much, to not only not overload people, but to release it in drips and drabs, to improve my career arc.  But my creative process does not work that way.  And I keep writing not only to get it down, but in search of the Holy Grail, where I get it EXACTLY RIGHT!  Like my heroes of the sixties and seventies, who worked in a different medium, sound as opposed to print, but were on the exact same journey.

“This brother is free
I’ll be what I want to be”


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U.S. Consumers, Retailers in a “Death Spiral”

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By Barry Ritholtz - August 27th, 2009, 11:15AM

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Source:
In the Tank Forever”: U.S. Consumers, Retailers in a “Death Spiral,” Davidowitz Says
Peter Gorenstein
Aug 27, 2009 07:30am EDT

http://finance.yahoo.com/tech-ticker/article/312114/%25E2%2580%259CIn-the-Tank-Forever

Four Stages of Secular Bear Markets

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By Barry Ritholtz - August 27th, 2009, 11:00AM

As promised earlier, I pulled up a chart showing the stages of Secular Bear Markets historically.

This fascinating composite chart below is courtesy of the Strategy desk of Morgan Stanley Europe. It shows what the average of the past 19 major Bear markets globally have looked like:

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Typical Secular Bear Market and Its Aftermath

secular-bear-markets

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The Chart represents typical secular bear markets based on MS’s sample of 19 such bear markets as shown after the jump.

There are obvious differences and similarities — the SPX fell 43% over 18 months, and snapped back 50% in 6 months. Almost but not quite as deep, but much faster a fall. What that means for the snapback is anyone’s guess.

There is no guarantee that the current market will track that amalgam, knowing what a composite of past Bears looks like can be helpful to your understanding of what is typical.

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Commercial paper outstanding jumps

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By Peter Boockvar - August 27th, 2009, 10:19AM

On a seasonally adjusted basis, commercial paper outstanding rose $43.7b, the largest gain since April and was mostly led by the asset backed category that saw a gain of $41.5b, the most since January and maybe is beginning to respond to some thawing out in that sector due to the Fed’s TALF program. Financial unsecured CP outstanding rose by $12.4b but non financial unsecured CP outstanding fell by $10.2b, the biggest decline since late June. Non financial is the smallest area of the CP market but is one area to watch to see if companies are investing in their businesses. Short term CP is supposed to be used only for operating expenses and/or working capital such as receivables and inventories.

Cashin’s Acorns

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By Barry Ritholtz - August 27th, 2009, 9:30AM

A check on the markets, with Arthur Cashin, UBS Financial Services director, floor operations.

Airtime: Thurs. Aug. 27 2009 | :50:0 09 ET

Kass Calls The Top

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By Barry Ritholtz - August 27th, 2009, 9:00AM

Doug Kass made a top call this week (mentioned yesterday here).

While I disagree with the timing of his market conclusion — historically, bear markets can run much further than we’ve seen so far — I am in agreement with his economic assessment. I will dig up a few historical analyses of what Secular Bear markets look like; As I have mentioned ad infinitum, 1973/74 is my favored comparison.

I suspect we will see a healthy correction of the market eventually, I remain unconvinced that we have seen the high print yet of this up-leg. Strong Momentum from a deeply oversold condition and popular underinvestment are a powerful and dangerous combination. (We are 60% long/40% cash at the moment).

Here are Doug’s 10 reasons why the rally has run out of steam and has “likely topped:”

1. Cost cuts are a corporate lifeline and so is fiscal stimulus, but both have a defined and limited life.

2. Cost cuts (exacerbated by wage deflation) pose an enduring threat to the consumer, which is still the most significant contributor to domestic growth.

3. The consumer entered the current downcycle exposed and levered to the hilt, and net worths have been damaged and will need to be repaired through higher savings and lower consumption.

4. The credit aftershock will continue to haunt the economy.

5. The effect of the Fed’s monetarist experiment and its impact on investing and spending still remain uncertain.

6. While the housing market has stabilized, its recovery will be muted, and there are few growth drivers to replace the important role taken by the real estate markets in the prior upturn.

7. Commercial real estate has only begun to enter a cyclical downturn.

8. While the public works component of public policy is a stimulant, the impact might be more muted than is generally recognized. There may be less than meets the eye as most of the current fiscal policy initiatives represent transfer payments that have a negative multiplier and create work disincentives.

9. Municipalities have historically provided economic stability — no more.

10. Federal, state and local taxes will be rising as the deficit must eventually be funded, and high-tax health and energy bills also loom.

Good stuff, Doug.

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Source:
Kass: Market Has Likely Topped
Doug Kass
TheStreet.com, 08/26/09

http://www.thestreet.com/story/10590765/1/kass-market-has-likely-topped.html

Economic data

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By Peter Boockvar - August 27th, 2009, 9:00AM

Q2 GDP was left unchanged at -1% vs expectations of a fall to -1.5%. Personal Consumption was revised to a drop of 1% from -1.2% and vs an expected fall of 1.3%. Government spending was revised higher to a rise of 6.4% from 5.6%. Also helping was an upward revision to Exports. Offsetting this was a downward revision to inventories and also investment, led by commercial real estate. Interestingly, the residential construction decline was revised to down 22.8% from -29.3%. Real final sales which takes out the impact of inventories, was revised up by .6% to +.4%, the first positive figure since Q2 ’08. Also giving a lift to the overall revision relative to expectations was a change in the price deflator to flat from up .2%. Back in July, expectations for the deflator was 1% so with the figure now flat, REAL GDP was helped out by 1% point due to a change in this inflation measurement vs the consensus.

Initial Jobless Claims totaled 570k, 5k more than expected and the prior week was revised up by 4k to 580k. Continuing Claims though fell by 119k and were 109k below the consensus and at the lowest level since April but those receiving Emergency Unemployment Compensation, which includes those that have exhausted the 26 weeks of benefits and is measured in continuing claims, continues to rise as 38k were added and 64k started receiving extended benefits which comes after the EUC ends. While some are finding new jobs (which of course is good) and falling off the continuing claims rolls, many are still seeing their benefits exhausted and thus are falling into other categories. The insured unemployment rate did fall .1% to 4.6%. The Labor market is definitely improved relative to the past few quarters but the level of claims above 550k still remains at a level that is consistent with monthly job losses of 200-400k in the aggregate.

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