The first Target opened in 1962 in Roseville, Minnesota. Today, there are now over 1,600 stores across the United States. This animation shows that growth, via Flowing Data:
What I find astounding are the number of criminals who come out of the closet whenever there is any sort of program like this, in an attempt to defraud the government and taxpayers:
“Tens of thousands of people may have taken advantage of the first-time home buyer tax credit to defraud the government, an IRS watchdog office said Thursday, in testimony that could jeopardize efforts to extend the popular program.
Treasury Inspector General for Tax Administration J. Russell George told a House panel that more than 19,000 people filed 2008 tax returns claiming the credit for homes they had not yet purchased. Russell said his office had identified another $500 million in claims, by some 74,000 taxpayers, where there were indications of prior home ownership.
He told a House Ways and Means oversight subcommittee that they also found 580 taxpayers under the age of 18 who claimed $4 million in first-time home buyer credit. One was 4 years old.”
Yesterday, I am at NPR, waiting to tape a segment on foreclosures. There is a pile of books and magazines a coffee table. I spy the title Satisfactionby Chris Denove and J.D. Power IV.
As someone who has been blurbed and who gives blurbs, the above the title blurb by Lee Iacocca catches my eye:
“If you can find a better book on customer satisfaction, buy it.”
The August FHFA home price index fell .3% m/o/m and is down for the first time since April and is down 3.6% y/o/y. From the record highs in April ’07 it’s down 10.7%. Hard to believe, I know. This index only measures those homes that have mortgages backed by FNM and FRE but is geographically diverse. The m/o/m decline was led by the South Atlantic region which includes the DC area, North and South Carolina, Georgia and Florida and the New England area. The y/o/y drops continue to be mostly in the heavily foreclosed areas of the West and South. With regards to the home buying tax credit which expires next month, the IRS today said tens of thousands of people may have taken advantage of it to defraud the government. 19k people filed ’08 tax returns claiming the credit for houses they haven’t bought yet and 74k had already owned a prior home. Also, 580 taxpayers under 18 yrs old claimed the credit and one was 4 yrs old.
The Financial Times – Upbeat start to US earnings seasonCorporate America issued a string of quarterly earnings results on Tuesday that exceeded Wall Street’s expectations, reflecting how big US companies have cut costs faster than revenues have fallen. However, stocks fell as investors focused on the lack of top-line improvement, with the S&P 500 index slipping 0.6 per cent to close at 1,091.06. “A lot of the numbers are not due to revenues but due to cost-cutting, so the market has sold off slightly, regardless of the fact that the results have been good,” said Doreen Mogavero, a floor trader on the New York Stock Exchange.
Comment
With earnings season well underway there are rumblings that earnings will beat expectations yet again this quarter. We want to remind everyone of a story we came across in the Wall Street Journal roughly a month ago:
The Wall Street Journal – Profits Poised to Surprise Again Even a Bona Fide Bear Sees Figures Beating Forecasts for 3rd Quarter in a Row
Earnings in the first two quarters of the year that beat expectations helped propel the market’s recovery, and the prospect of a repeat has even some bears wondering if they have been too pessimistic. Morgan Stanley investment strategist Jason Todd, one of the few remaining bears on Wall Street, told clients last week that the stock market is looking stronger than he thought and won’t tumble, as he has been predicting, at least through the end of the year. “We think equities will now trade above” his previous target for this year, Mr. Todd said in his report, “in large part because earnings will be higher than we previously anticipated.” Until now, Mr. Todd had been predicting the market would fall 14% from today’s level by the end of the year. Now he is telling clients that the Standard & Poor’s 500-stock index — which is up 54% from its March 9 low — is likely to rise marginally between now and year’s end and could be up as much as 15% before it gets into trouble.
Comment
Look closely at the chart above. You will note that the last time the majority of companies failed to beat analysts’ profit expectations was the beginning of 1996. With results like this, why did the stock market ever go down in the last half-generation?
The answer lies in when the estimates are taken. The study above is based on the last estimate before earnings are released. We have likened this to the point spread in a football game getting reset with 1 minute left to play.
What this proves is investor relation departments have become very good at gaming the system. They do everything in their power to make sure the headlines say their company beat earnings estimates. But, beating the last estimate has no economic value. To gain any insight on the economy based on earnings estimates one must take a longer-term view.
The next chart uses Bloomberg data for bottom-up forecasts. By mixing IBES and Bloomberg forecasts, we risk comparing apples to oranges. But, if the surveys are done properly they are both surveying the same people and should offer a very similar data set.
As highlighted on the chart below, the current forecasting error is now near 100%, more than three times the largest error seen from 1985 to 2002. No other period has ever come close to the current period.
<Click on chart for larger image>
Conclusion
In actuality, earnings forecasts are worse now than at any time in human history. As the chart below shows, the decline in earnings in the last year was worse than any decline in the last 140 years ( no typo). The data comes from Robert Shiller who got it by way of the Cowles Commission.
Do you recall anyone forecasting a biblical collapse in earnings? We do not. In fact, Dr. Jeremy Siegel set records in tortured logic to explain this was not happening last February.
Rather than writing about rebounding earnings, a more interesting story might look into why consensus estimates have been so horribly wrong lately. Do the forecasters understand the degree to which they missed, and have they changed their methodology at all to avoid a similar fate should this happen again in the future? Only when these questions are answered should anyone pay attention to these highly inaccurate guesses.
I don’t want to spend too much time on this, but I have to laugh every quarter when we get economic data out of China.
China’s economy expanded at the fastest pace in a year as stimulus spending and record lending growth helped the nation lead the world out of recession. Gross domestic product rose 8.9 percent in the third quarter from a year earlier, the statistics bureau said in Beijing today. The median of 34 estimates in a Bloomberg News survey was for a 9 percent gain. Separate reports showed industrial production and retail sales accelerated in September.
The dollar headed higher and Asian stocks dropped on concern that the acceleration in China’s growth will spur policy makers to consider withdrawing record fiscal and monetary stimulus in coming quarters. Qin Xiao, chairman of China Merchants Bank Co., this week said it’s “urgent” for the central bank to tighten policy to avert asset-price bubbles.
I look askance at the US economic data — skewed, massaged, modeled to within an inch of its life. But its mostly transparent, with the statisticians readily available for further discussion.
The Chinese data looks to me as if it is issued by edict — they are non-transparent, well managed, and remarkably consistent over time.
I wonder if Beijing’s accountant is an 80-year-old with offices in New City and Florida . . .
I’m not sure if this is the exact reason for the Euro bouncing off its early morning lows and is almost back to 1.50 vs the US$ in the last 10 minutes but a cnbc interview with Fed Pres Rosengren revealed his opinion that the US$ weakness is just a result of increased risk taking and is no more than a reversal of its Sept thru March rally which was due to a flight to safety. He referred to the US$ movement as “natural.” If his view is common in the Fed and they don’t hold their own policies responsible for the US$ weakness (in addition to government debt and deficits) they thus likely won’t shift policy just to defend it if it goes lower from here.
I’m not sure if this is the exact reason for the Euro bouncing off its early morning lows and is almost back to 1.50 vs the US$ but a cnbc interview with Fed Pres Rosengren this morning revealed his opinion that the US$ weakness is just a result of increased risk taking and is no more than a reversal of its Sept thru March rally which was due to a flight to safety. He referred to the US$ movement as “natural.” If his view is common in the Fed and they don’t hold their own policies responsible for the US$ weakness (in addition to government debt and deficits) they thus likely won’t shift policy just to defend it if it goes lower from here.
"I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -Thomas Jefferson (letter to John Taylor in 1816)
After 3 quarters in a row that averaged just 1.2%, Q4 GDP grew 2.8%, a touch below expectations of 3.0% BUT Nominal GDP grew well below forecasts. Because the price deflator was up just .4% vs the estimate of 1.9%, Nominal GDP was up 3.2% vs the estimate of 4.9%. Personal Consumption rose 2.0% vs the forecast of 2.4%. Fixed Investment rose 3.3% helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%. Trade was a slight drag on GDP growth and government spending was as well led by a 12.5% decline on national...
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