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

It appears this NY Times piece, which ran back in October, may have escaped Barry’s attention. [BR: I saw it and forwarded to a friend who owns a restaurant.]

Titled 100 Things Restaurant Staffers Should Never Do, it should be the Holy Grail for any restaurateur.  I have not yet found the restaurant with a spotless compliance record, and wonder if anyone else may have?  Any restaurateurs out there — if so, what say you?

The entire list is a worthwhile read; I’ve culled it down to some of my own personal hot buttons (I’d consider it a home run to find a restaurant that adhered to just these).  17, 75, 76 and 77 are probably what drive me craziest, and will ensure a sub-par tip every time.

Here are some select rules (and here are the best comments, as selected by the column’s author):

1. Do not let anyone enter the restaurant without a warm greeting.

3. Never refuse to seat three guests because a fourth has not yet arrived.

5. Tables should be level without anyone asking. Fix it before guests are seated.

8. Do not interrupt a conversation. For any reason. Especially not to recite specials. Wait for the right moment.

12. Do not touch the rim of a water glass. Or any other glass.

14. When you ask, “How’s everything?” or “How was the meal?” listen to the answer and fix whatever is not right.

15. Never say “I don’t know” to any question without following with, “I’ll find out.”

17. Do not take an empty plate from one guest while others are still eating the same course. Wait, wait, wait.

21. Never serve anything that looks creepy or runny or wrong.

31. Never remove a plate full of food without asking what went wrong. Obviously, something went wrong.

33. Do not bang into chairs or tables when passing by.

52. Know your menu inside and out. If you serve Balsam Farm candy-striped beets, know something about Balsam Farm and candy-striped beets.

56. Do not ignore a table because it is not your table. Stop, look, listen, lend a hand. (Whether tips are pooled or not.)

58. Do not bring judgment with the ketchup. Or mustard. Or hot sauce. Or whatever condiment is requested.

60. Bring all the appetizers at the same time, or do not bring the appetizers. Same with entrees and desserts.

62. Do not fill the water glass every two minutes, or after each sip. You’ll make people nervous.

62(a). Do not let a glass sit empty for too long.

63. Never blame the chef or the busboy or the hostess or the weather for anything that goes wrong. Just make it right.

64. Specials, spoken and printed, should always have prices.

68. Do not reach across one guest to serve another.

69. If a guest is having trouble making a decision, help out. If someone wants to know your life story, keep it short. If someone wants to meet the chef, make an effort.

75. Do not ask if someone is finished when others are still eating that course.

76. Do not ask if a guest is finished the very second the guest is finished. Let guests digest, savor, reflect.

77. Do not disappear.

84(a). Do not let an empty coffee cup sit too long before asking if a refill is desired.

85. Never bring a check until someone asks for it. Then give it to the person who asked for it.

89. Never patronize a guest who has a complaint or suggestion; listen, take it seriously, address it.

95. Never hover long enough to make people feel they are being watched or hurried, especially when they are figuring out the tip or signing for the check.

Thomas Frank on Wall Street RipOffs

(Watch the SEC discussion at the 8 minute mark)

click for video

Bill Moyers

Words from the (investment) wise for the week that was (January 11–17, 2010)

“Words from the Wise” this week comes to you in a somewhat shorter format as I do not have access to all my normal research resources while spending a few days with the gnomes in Geneva (also see my post “Blogging gone AWOL – to Switzerland“). Although the commentary is not as comprehensive as usual, a full dose of excerpts from interesting news items and quotes from market commentators is included.

With investors’ hopes of an economic recovery that might have gotten ahead of reality, the Dow Jones Industrial Index experienced its largest one-day drop (-0.9%) of the year in a sell-off on Friday – unnerved by China starting to rein in liquidity and cautious earnings guidance – causing the benchmark US indices to register a fourth down-week over an eight-week period. Not surprisingly, the CBOE Volatility (VIX) Index, also referred to as the “fear gauge” of US stocks, gained 1.2% over the week.

Providing “entertainment” of a dubious kind and reminding one of the 1933 Pecora Commission, the Financial Crisis Inquiry Commission on Wednesday started interrogating four of Wall Street’s top executives in Washington and promised to use wide-ranging powers to establish the causes of the financial crisis and pursue any wrongdoing.

Meanwhile, Christina Romer, who heads the president’s Council of Economic Advisers, said (via MoneyNews) the payment of big year-end bonuses for bailed-out financial institutions would be “ridiculous” and “offensive” and “is going to offend the American people. It offends me”.

Similarly, according to The Canadian Press, President Barack Obama said with reference to his proposed plans to impose a levy on big financial institutions to recoup some of the costs of the financial crisis: “If the big financial firms can afford massive bonuses, they can afford to pay back the American people.”

Source: Steve Sack, Comics.com

The past week’s performance of the major asset classes is summarized in the chart below – a set of numbers indicating a degree of risk aversion has crept back into financial markets. Steps by the People’s Bank of China to tighten liquidity by increasing the bank reserve requirement ratio and raising inter-bank interest rates negatively impacted oil and other commodities, causing the first decline in five weeks.

Source: StockCharts.com

A summary of the movements of major global stock markets for the past week and various other measurement periods is given in the table below.

The MSCI World Index and the MSCI Emerging Markets Index declined by 0.2% and 0.6% respectively during the past week. Among mature markets, Japan (+1.7%) bucked the trend and added a seventh consecutive week of gains – coinciding with a weaker yen over the period. (Also see my post “What to expect from Japan’s new finance minister“.) Among emerging countries, Russia (+7.2%) performed solidly, while China (+0.9%) also eked out a gain after having to balance adverse monetary developments in that country with impressive trade data early in the week.

Notwithstanding the huge rally since the March lows, only the Chile Stock Market General Index – again a solid performer on the expectation of a positive election result – has been able to reclaim its 2007 pre-crisis peak and is now trading 8.1% higher. Mexico could be the next country to eliminate the bear market losses.

As far as the US indices are concerned, Wall Street managed to hit 16-month highs on Monday and then again on Thursday, but reversed course on Friday as traders closed positions before the Martin Luther King long weekend, pulling indices into the red.

Seven of the ten economic sectors (as measured by the SPDR exchange-traded funds [ETFs]) closed lower for the week, with the defensive sectors outperforming the cyclical ones. Health Care (+1.4%), Consumer Staples (+0.8%) and Utilities (+0.6%) returned gains, whereas all the other sectors were under the water. Small caps, in particular, led the way down on Friday.

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

Top performers among stock markets this week were Estonia (+15.6%), Venezuela (+9.6%), Lithuania (+8.7%), Kazakhstan (+7.2%) and Kenya (+5.7%). At the bottom end of the performance rankings, countries included Greece (-7.9%), Jamaica (-6.7%), Cyprus (-6.5%), Luxembourg (-4.9%) and Portugal (-1.2%). “Greece on Thursday announced an ambitious three-year plan to curb its runaway budget deficit but failed to convince skeptical markets that its targets for growth and fiscal reform were feasible,” reported the Financial Times.

Of the 96 stock markets I keep on my radar screen, 53% recorded gains (last week 79%), 41% (15%) showed losses and 6% (6%) remained unchanged. The performance map below tells the past week’s rather bullish story

Emerginvest world markets heat map

Source: Emerginvest (Click here to access a complete list of global stock market movements.)

John Nyaradi (Wall Street Sector Selector) reports that as far as ETFs are concerned the winners for the week included iShares MSCI Japan (EWJ) (+4.8%), Claymore/Delta Global Shipping (SEA) (+3.6%), Vanguard Extended Duration Treasury (EDV) (+3.3%) and iShares MSCI Austria (EWO) (+2.7%).

At the bottom end of the performance rankings, ETFs included Claymore/MAC Global Solar Energy (TAN) (-8.7%), PowerShares WilderHill Clean Energy (PBW) (-7.2%), Claymore/AlphaShares China Real Estate (TAO) (-6.6%) and United States Oil (USO) (-5.7%).

Referring to the modern robber barons, or “banksters”, and Obama’s proposed bank tax to recoup bailout costs, the quote du jour this week comes from long-timer Richard Russell, writer of the Dow Theory Letters. He said: “Obama is fighting two wars, the war in Afghanistan and the war in Iraq. Now he’s got a third war going, the war on Wall Street. He’s joining the populist fury over Wall Street and its bonuses. It’s ‘payback time’, and Obama proposes a $90 billion tax on Wall Street’s banks.

“The Prez utters the words the crowd loves to hear, ‘We want our money back, and we’re going to get it.’ Obama’s words dovetails with Democrats’ worries that they would be blamed for the recession and the debts. Blame it on Wall Street, and get even with those greedy devils; maybe tax the greedy devils out of existence or at least tax their stinkin’ bonuses away. As Obama’s assistant Rahm Emanuel put it, ‘Its a shame to let a good crisis go to waste.’

“The $90 billion Obama will extract from Wall Street won’t even begin to shrink the monster deficit the Fed has run up. Let the next administration (probably Republicans) deal with that problem.”

How the lie of the land has changed! The Financial Times yesterday headlined an article: “Obama is right to clobber Wall Street”.

Next, a quick textual analysis of my week’s reading. This is a way of visualizing word frequencies at a glance. As to be expected with the banking shenanigans moving to center stage, “banks” commanded poll position.

The major moving-average levels for the benchmark US indices, the BRIC countries and South Africa (where I am based in Cape Town when not traveling) are given in the table below. With the exception of the Shanghai Composite Index (discussed above), the indices in the table are all trading above their 50-day moving averages, with all the indices also comfortably above their respective key 200-day moving averages.

As far as the S&P 500 Index is concerned, an upward sloping trend line extends from the August lows. A break below this line’s support level of 1,080 (and the December low of 1,092) could signal a deeper pullback.

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

Last week I discussed a long-term chart of the S&P 500. Let’s now also consider monthly data, going back to 1998, for the 10-year Treasury Note. As shown below, the MACD oscillator provided a sell signal about seven months ago and Treasuries are still classified as being in a primary bear market.

Source: StockCharts.com

This raises the question of when rising long-term rates start ruining the equity party. “For me, a sustained move above 4% by ten-year Treasuries will be equivalent to a yellow caution light for equity investors. Above 5%, stock markets could be in dangerous territory, as we saw in the last cycle,” commented David Fuller (Fullermoney). “I will continue to view US Treasury 10-year yields as a lead indicator. Currently, they are still in a ‘sweet spot’. However, when they move higher I will monitor stock market indices, particularly for Wall Street, even more closely for signs of fatigue in the form of inconsistencies, not least a loss of upward momentum.”

Read the rest of this entry »

So I am updating some of the content around the site — pages like, “About,” “Contact,” etc. — and I click around to a few pages to see how some of my friends have handled these.

Some are better than others, I get a few ideas, but nothing inspirational — until I click over to my friend Paul’s About page:

“Back before there were such things as credit default swaps, collateralized debt obligations, and subprime mortgages, we vandalism-loving greed-heads on Wall Street were forced to take down capitalism the hard way — by selling over-valued technology companies to an unsuspecting public via initial public offerings. While it eventually worked out (c.f., the tech crash of 2000), the next generation of Wall Street-ers learned from our inefficiency and took down the global money grid in half the time it took us to mess up Nasdaq. Lesson learned.”

That is destined to become an instant classic . . .

Clive Thompson is blogging again. He is a science writer, and publishes frequently about gaming, technology, science, and other fun items for Wired and the NYT.

His blog is Collision Detection.

If you recognized his name, Clive is the person who turned us on to the idea of Agnotology.

He fell off the blogging wagon in March of last year, and in what seems to be a case of New Year’s Resolutions, started up again on Jan 1.

It’s a fun site — check it out.

Jonah Lehrer – Jonah Lehrer is an Editor at Large for Seed Magazine and the author of How We Decide and Proust Was a Neuroscientist. He graduated from Columbia University and studied at Oxford University as a Rhodes Scholar.

He’s written for The New Yorker, Nature, Wired, The Washington Post and The Boston Globe. He is also a Contributing Editor at Scientific American Mind.

Hat tip Paul

The heads of the surviving, large Wall Street investment banks testified before the Financial Crisis Inquiry Commission – a group chartered by Congress to look into the causes of the 2008 financial collapse. Bankers acknowledged that their companies took excessive risks in the years leading up to the crisis . . .

Hat tip V

In today’s Barron’s, Mike Santoli very politely and quietly, using language suitable for a family dinner, calls Charles Biderman out for his clueless commentary about secret government cabals:

“One conspiracy theory gaining undeserved traction on Wall Street lately holds that the Federal Reserve or another government entity might — or must — have been a buyer of stocks or stock futures during the run higher off the March lows.

A report by fund-flow research firm TrimTabs Investment Research a couple of weeks ago intensified the usual conspiracy chatter in the blogosphere and across trading desks, suggesting the Fed might be goosing stocks because publicly observable fund flows (via mutual funds, corporate buyback plans and insiders) seem not to be able to account for the 70% gain since the March bottom. Aside from the observation that theories that assign blame to unseen forces are inherently the laziest of all possible explanations, there are many problems with this assertion.

Fund flows don’t capture changes in positioning by hedge funds, mutual funds, pension funds, individual stock buyers, foreign capital and others. The fact that long-short hedge funds outperformed the Standard & Poor’s 500 both into the lows last year and for all of 2009 shows hedge funds went from substantially hedged/short in the deleveraging phase to very long.

More broadly, why would the Fed have to buy stocks, with all it has openly done to penalize risk aversion by adding reserves to the banking system, setting short rates at zero and buying credit products and Treasuries? The whole asset spectrum has fed off these initiatives.”
(emphasis added)

Mike is a nice guy, and way too polite to write anything nasty — so I will add what he is implying. Outside of fund flows, Biderman’s track record is mediocre at best.

Further, the rise of hedge funds, dark pools and private trading networks means that there is much less volume information available for fund flow analysis — which is TrimTab’s bread and butter research.

So its no surprise that Biderman missed the turn, and has remained on the wrong side of the market’s 70% rally. He has concocted a half-assed government conspiracy theory, rather than admit the error. That is weak.

The analytical faux pas has provided a few positives: 1) It reveals that the level of skepticism amongst the public is still high; 2) Its a way to measure someone’s investing IQ. If they bought into the nonsense of this theory, then pull your money/delete them from the blogroll/unsubscribe from the newsletter.

Worse than worthless, they will cost you money.

>

Previously:
TrimTabs: Its a Recession, and Its Already Over (Wrong) (April 2nd, 2008)
http://www.ritholtz.com/blog/2008/04/trimtabs-its-a-recession-and-its-already-over-wrong/

Trimtabs Continues to Abuse Withholding Data (April 23rd, 2008)
http://www.ritholtz.com/blog/2008/04/trimtabs-continues-to-abuse-withholding-data

Trimtabs: Americans have stopped saving (?!?) (January 2nd, 2009)
http://www.ritholtz.com/blog/2009/01/trimtabs-figures-out-that-americans-have-stopped-saving/

PPT: The President’s Working Group on Financial Markets (January 8th, 2010)
http://www.ritholtz.com/blog/2010/01/ppt-the-president’s-working-group-on-financial-markets/

Source:
Suspicious Minds
MICHAEL SANTOLI
Barron’s JANUARY 18, 2010
http://online.barrons.com/article/SB126359793047030055.html

Your Help Is Needed
When the Fed Stops the Music
Who Wants the Old Maid?
It’s the Deleveraging, Stupid!
London, Monaco, and Zurich

Last week we delved into the uncertainties that face us and that make forecasting for 2010 problematical. Will the government actually increase taxes as much as they say, with unemployment still likely to be at 10%? Or will cooler heads prevail? Would such an increase cause a recession? Will the markets anticipate the effects of such a major increase in advance? How will the mortgage market react when the Fed stops buying mortgage securities at the end of March? There are so many things in the air, and today we explore more of them, as I continue (perhaps foolishly) to try and peer into what is a very cloudy crystal ball.

Your Help Is Needed

But first, and far more important, is the tragedy that is unfolding in Haiti. Long-time readers know that several times a year I mention in this letter my very good friend Walt Ratterman, who volunteers his time going all over the world to install solar-power systems for hospitals and clinics, along with other relief efforts. My readers have been very generous over the years to Knightsbridge and their relief efforts. Walt and other members of Knightsbridge literally go into places where if they were caught by the government they would simply be shot (as in Burma). In Afghanistan, before our troops went in, the Taliban put a very hefty price on his head as he brought food and medicine to the northern tribes. Pakistan, Sudan, Darfur, Sri Lanka after the tsunami, in rebel-held territory, to bring medicine when no one else could get through – the hell-holes of the world. He and I talk frequently about the wisdom of taking such risks, and he cheerfully replies that someone has to. There are people dying.

When we talked just a few weeks ago he mentioned he was going to Haiti. At least, I said, that was one place where no one would be shooting at him. He had been there several times. And then we find a different type of uncertainty rearing its head. After all the places he had been where the danger was fellow human beings, this occasion found him in the courtyard of the Hotel Montana, minutes before the earthquake hit. There were teams on the ground the next morning, specifically looking for him, but as of Friday evening he has not been found. We are hopeful, because they are still finding survivors at the hotel.

His friends from Knightsbridge will be going there to assist in the recovery. Medical teams from Knightsbridge are going in early next week, and another experienced team will follow later in the week. These are people who know what to do and how to get it done.

A few of you who have done this type of work may want to contact Ed Artis (see below) to see if you can be of service (especially medical). As I have often written, these are the good guys. They pay their own way and have no office overhead. It is a total volunteer effort. But they do need money for medicines, supplies, etc., and transport to get them there.

What follows is a brief message from Ed, along with a way to send them money. And if you are not comfortable sending money to this rather small but extremely effective outfit, then donate to your favorite charity. This is a real disaster and they need our help. Also, I am including a picture of Walt, and all our prayers go out to his brave family. We are still hoping we find Walt. The world needs every Walt Ratterman it has. And your donation will make sure the work of this brave humanitarian goes on. And now from Ed:

John,

Tax deductions for donations via checks are thru Steps for Recovery … as are those which are immediate online thru the Paypal icon on the website www.kbi.org We are going to have one, possibly two flights going in … one led by Dr. Jim Laws and the other by me… Jim is in Florida tomorrow, staging the first one… I will follow and do likewise with the second one within the next week…

I will be the point of contact for this action as I have very good communications and will be in constant contact with the Team and updating the Blog from the field daily…

Banking of donations by check will be handled by Mike Carlin while I am away… Online donations are immediate and I can handle them via the net with tax documents to follow…

UPDATED INFO VIA OUR “CURRENT MISSIONS Blog”: http://currentmissions.blogspot.com/ (and info on Walt)

ONLINE DONATIONS VIA THE DONATE ICON LOCATED ON THE TOP PAGE OF OUR WEBSITE, LOCATED AT: www.kbi.org (scroll down a little)

DONATIONS SENT VIA CHECKS SHOULD BE MADE OUT TO “STEPS FOR RECOVERY”

BUT CLEARLY MARKED “FOR KNIGHTSBRIDGE / HAITI “

CHECKS SHOULD BE MAILED TO the address below as I will be in the field:

Steps For Recovery
P.O. Box 67522
Century City, CA 90067

(A California 501(c)3
Federal ID # 95.4472343)

Ed Artis – Manila

Friday January 15, 2010

knightsbrg@aol.com

When the Fed Stops the Music

The Federal Reserve has been very clear about the fact that they intend to stop the quantitative easing program at the end of March. What that means in practice is that they are going to stop buying mortgage securities. That does two things. As Bill Gross so aptly points out, those mortgage purchases helped keep mortgage rates low. But they also financed the US government fiscal deficit, albeit indirectly. It seems that funds and banks that sold the mortgage securities turned around and bought US government debt or put the cash right back at the Fed.

Foreigners bought about $300 billion of the $1.5 trillion in new government debt. The rest came from the US, courtesy of the Fed buying mortgages. But that program stops (theoretically) at the end of March. The government still plans to run yet another $1.4-trillion-dollar deficit (give or take a few hundred billion). The question is, who will buy the debt? Foreigners will kick in another $300 billion, unless they decide to stop selling us stuff, or buy other less liquid or physical assets. So far there is no sign of that.

But as I asked last year, who is going to buy the multiple trillions in government debt that the G-7 countries want to issue? Who is going to buy another $1 trillion here in just the US? That is 7% of GDP. That means that consumers and businesses will have to save an additional 7% of GDP just to finance government debt at the federal level, not counting state and local debt. As Bill Gross concludes in his recent column (www.pimco.com):

“The fact is that investors, much like national citizens, need to be vigilant, and there has been a decided lack of vigilance in recent years from both camps in the U.S. While we may not have much of a vote between political parties, in the investment world we do have a choice of airlines and some of those national planes may have elevated their bond and other asset markets on the wings of central bank check writing over the past 12 months. Downdrafts and discipline lie ahead for governments and investor portfolios alike. While my own Pollyannish advocacy of ‘check-free’ elections may be quixotic, the shifting of private investment dollars to more fiscally responsible government bond markets may make for a very real outcome in 2010 and beyond. Additionally, if exit strategies proceed as planned, all U.S. and U.K. asset markets may suffer from the absence of the near $2 trillion of government checks written in 2009. It seems no coincidence that stocks, high yield bonds, and other risk assets have thrived since early March, just as this ‘juice’ was being squeezed into financial markets. If so, then most ‘carry’ trades in credit, duration, and currency space may be at risk in the first half of 2010 as the markets readjust to the absence of their ‘sugar daddy.’”

This is yet another uncertainty. We simply have no idea, no relevant marker, for what happens when a country goes so cold turkey, coming off a central bank bond-buying binge. And this in the midst of a massive deleveraging and with stock market valuations basically where they were in 1987 – except there was at least large earnings growth then.

Read the rest of this entry »