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

Its not that often that I go to, see or hear about a fascinating new technology or business model.

Today was one of those days.

What have you seen recently that was ground-breaking, game-changing, so out right brand effen fresh that it turned your world upside down?

Any new technology will do!

“We’re seeing some growth in the economy, but it’s all government generated,” Art Cashin, of UBS, told CNBC. He and Dick Armey, formerly a Texas Congressman, share their insights.

Airtime: Tues. Aug. 25 2009 | 7:35 AM ET

Congrats to Dylan Ratigan for the recognition of his outstanding work as an aggressive, take-no-prisoners news anchor.

First Amendment Awards

Best News Anchor Dylan Ratigan

Best Reporter Matt Taibbi

Best Blog Zero Hedge

Best Book Bailout Nation

Damn, that’s pretty good company!

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Here are your first 10 quick picks of the Bernanke era, part II:

• Volcker Says Money-Market Funds Weaken U.S. Financial System (Bloomberg) Paul Volcker, the former Federal Reserve chairman who is an adviser to President Barack Obama, said money-market mutual funds undermine the strength of the U.S. financial system and should be regulated more like banks.

• Fannie, Freddie Shares Soar, Puzzling Analysts (Washington Post)

• Remember me? Wall Street repackages toxic debt (Associated Press) Wall Street may have discovered a way out from under the bad debt and risky mortgages that have clogged the financial markets. The would-be solution probably sounds familiar: It’s a lot like what got banks in trouble in the first place.  See also The Next Credit Bubble Is Now

• The Real Reasons for China’s Real Estate Boom (China Knowledge) Despite the existence of rigid demand for housing, two of the real reasons for the current boom in the real estate market are speculation and “land financing.” provided by the local authorities.

• Many Hedge Fund Managers Still Under Water, Data Show (WSJ)

• Healthcare insurers get upper hand (LA Times) Lashed by liberals and threatened with more government regulation, the insurance industry nevertheless rallied its lobbying and grass-roots resources so successfully in the early stages of the healthcare overhaul deliberations that it is poised to reap a financial windfall. “It’s a bonanza,” said Robert Laszewski, a health insurance executive for 20 years who now tracks reform legislation as president of the consulting firm Health Policy and Strategy Associates Inc.

• Data Mining Isn’t a Good Bet For Stock-Market Predictions (WSJ) The stock market generates such vast quantities of information that, if you plow through enough of it for long enough, you can always find some relationship that appears to generate spectacular returns — by coincidence alone. This sham is known as “data mining.”

• Steve Jobs: The man who polished Apple (Sunday UK Times Online) Apple Inc is worth around $140 billion. But is it worth anything without Jobs? It is a company formed around his personality and inspiration. It is also the most watched, envied, admired and adored company in the world. So how, you may wonder, was it possible for Jobs to put out such a statement four months before a liver transplant? And how was it possible for consumer capitalism’s greatest hero to pull off the Memphis Liver Caper in absolute secrecy?

• Why Craigslist Is Such a Mess (Wired) The Internet’s great promise is to make the world’s information universally accessible and useful. So how come when you arrive at the most popular dating site in the US you find a stream of anonymous come-ons intermixed with insults, ads for prostitutes, naked pictures, and obvious scams? In a design straight from the earliest days of the Web, miscellaneous posts compete for attention on page after page of blue links, undifferentiated by tags or ratings or even usernames. Millions of people apparently believe that love awaits here, but it is well hidden. Is this really the best we can do?

• Photoshopped images: the good, the bad and the ugly (LAT)

Anything else worth mentioning?

The very volatile Baltic Dry Index has been swinging up and down for the past few years:

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Baltic Dry Index, 1999-2009 (logarithmic chart)

Chart via Ron Griess of The Chart Store.

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To highlight the seasonality of housing and its impact on pricing where the spring is the busiest of the year, the S&P/Case Shiller Index, which does not seasonally adjust its m/o/m pricing, has shown its best performance in Q2 in every year except one going back to ’01. ’09 is of course not complete but Q2 saw a gain of 1.3% after a drop of 7% in Q1. On the downside in ’07 and ’08, Q2 saw the smallest decline and in the boom years in ’04, ’05 and ’06, Q2 saw the biggest rise. In ’03, Q3 price gains barely exceeded the Q2 rise while in ’01 and ’02, Q2 had the best price increases. The price data seen is welcome relief but it’s that time of the year and the $8000 tax credit and slowing foreclosure rate had its impact. Add to this the still punk Present Situations component in Confidence and it helps to explain again, the lack of belief in the sustainability of recovery that the bond market has relative to stocks.

Data through June 2009 by the Case-Shiller Home Price Indices shows that the U.S. National Home Price Index improved in the second quarter of 2009, while falling year over year.

How much voluntary foreclosure moratoriums impacted pricing is an unknown in terms of degree, but they likely had a significant effect.

The chart below shows the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices.

Case-Shiller U.S. National Home Price Index fell Year over year 14.9% in Q2 of 2009 versus the 2nd quarter of 2008. This substantial negative annual rate of returns represents an improvement over the record decline of 19.1% reported in Q1. The 10-City and 20-City Composites recorded annual declines of 15.1% and 15.4%, respectively, an improvement over recent respective record losses of -19.4% and -19.1%.

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Bloomberg Lawsuit Judgment

August Consumer Confidence from the Conference Board was a better than expected 54.1 vs the consensus of 47.9 and up from 47.4 in July. It’s the highest since May which at the time was the most since Aug ’08. Almost all of the improvement was in the Expectations component which rose about 10 points while the Present Situation rose just 1.6 points and remains just 3 points from its lowest level since 1983. Expectations are the highest since Oct ’07. The labor market answers showed improvement as those that said jobs were Plentiful rose .5 point and those that said jobs were Hard To Get fell 3.4 points with both back to the level of June. Those that said they plan to buy a home within 6 months rose .7 points to the most since May and those that said they plan to buy a car rose .4%, also the highest since May. One year inflation expectations fell .1% to 5.4%, the lowest since Feb ’08.

The June S&P/CaseShiller 20 city Home Price Index fell 15.44% y/o/y, better than the expected fall of 16.4%. The index rose 1.4% m/o/m, the 2nd month in a row of m/o/m gains. From the record high, prices are down by 31.3%, off the high to low drop of 32.6% at the low in April. Every city except Detroit and Las Vegas saw m/o/m gains with Phoenix and Las Vegas again leading the y/o/y drop. The $8,000 tax credit (and $10,000 in CA) coinciding with a seasonally better time for housing sales (the data is not seasonally adjusted) and a smaller contribution from foreclosures (about 1/3 now down from 1/2 in the early part of the year) relative to a few months before are helping to stabilize pricing. The question looking out the next few quarters is what the influence will be from a catch up in home prices to the downside in the prime area and the end to foreclosure moratoriums at many banks.