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

Jim Morin of the Miami Herald:

>

>

Hat tip Mike R

There are a variety of estimates as to the total spillage from the Deepwater Horizon disaster.

As of yesterday, they were all significantly losses worse than the 10.8 million gallons of crude the drunk captain of the Exxon Valdez spilled. The range is 23.2 million gallons by the US government, to the worst case scenario of BP itself at 92.5 million gallons.

And counting.

When this is done, it will dwarf the Valdez in total spillage, economic an d environmental damage.

>

Tracking the Oil Spill in the Gulf

click for interactive timeline

Graphic via the NYT

>

Source:
Size of Oil Spill Underestimated, Scientists Say
JUSTIN GILLIS
NYT, May 13, 2010
http://www.nytimes.com/2010/05/14/us/14oil.html

Read the rest of this entry »

As the chart below shows, the S&P/Case-Shiller Composite-20 Home Price Index bottomed in January 2009 on an annual basis.  The quarterly change has once again turned lower, leading some to speculate that home prices may not be out of the woods yet.  Now that the first time homebuyer’s credit has expired, what should be expected of home prices in the near future?

WJB’s John Roque looks at the past 4 cycles in Gold relative to the valuation of the S&P500:

>
click for ginormous chart

>

Source:
It takes two to make a thing go right
John Roque
WJB Capital Group. Inc.
Technical Review May 17, 2010

The final look at May UoM confidence came in at 73.6, a touch above estimates and up from the preliminary reading of 73.3 and up from 72.2 in April. The gain was lead by a rise in the Outlook as Current Conditions were unchanged. The one interesting tidbit within the data was one year inflation expectations which rose to 3.2%, up .3% from April and up from 3.1% in the preliminary report. It’s now at the highest level since Oct ’08 and comes at a time when many are talking deflation again. The survey was done within the last few days so it is a timely measure of sentiment. Of course it could easily reverse soon if economic concerns grow but consumers are not as sanguine as the Fed when it comes to the inflation outlook b/c consumers live in the real world and the Fed relies on government statistics.

The May Chicago PMI was a bit weaker than expected at 59.7 vs the forecast of 61 and its down from 63.8 in April. The figure overall however is still good as the 20 yr average is 54 but the components were mixed. New Orders fell by 2.5 pts to 62.7 and Order Backlogs showed a sharp drop, falling to 52.7 from 61.4 to the lowest since Dec. Employment fell sharply too, down by 8 pts to 49.2 and is below 50 for the 1st time since Dec. Inventories rose 6.3 pts to 56.4 to the most since Nov ’06. Prices Paid fell by 7.4 pts to 64, the lowest since Dec. Net-net, all eyes are on the May and upcoming June data as we search for any clues to see what impact the European slowdown will have on global growth. While this could be company specific, BCSI last night said they saw “across the board weakness in virtually every country in Europe starting in April.” Our eyes are peeled for more color from others.

Very cool! Bloomberg names Bailout Nation as one of the top 50 Business books:

May 28 (Bloomberg) — With so many business books spilling from the shelves, we’re often asked for a comprehensive list of recommendations. Here are 50 of our favorite titles published since Jan. 1, 2009.

“Animal Spirits” by George A. Akerlof and Robert J. Shiller (Princeton). The two economists explore how psychology drove us from boom to bust.

“Bailout Nation” by Barry Ritholtz (Wiley). A financial blogger chronicles why the U.S. came to embrace bailouts.

>

Source:
Top 50 Business Books, ‘Animal Spirits’ to ‘What the Dog Saw
James Pressley
Bloomberg, May 28 2010
http://www.bloomberg.com/apps/news?pid=20601088&sid=aPJsasCVoVEk

My friend James Altucher is completely whacko:

~~~

Source:
It’s Not a ‘V’, It’s Even Better, Altucher Says: Look for New Highs by 2012
Peter Gorenstein
Yahoo Tech Ticker, May 28, 2010
http://finance.yahoo.com/tech-ticker/it’s-not-a-’v'-it’s-even-better-altucher-says-look-for-new-highs-by-2012-496236.html

This Reuters analysis looks at what comes next in crisis resolution, especially in terms of European debt:

“It took $5 trillion and an unprecedented global coalition of G20 countries to stabilize the economy after investment bank Lehman Brothers collapsed in 2008. Quelling the next phase of the financial crisis may be even harder.

To stop the panic that erupted nearly two years ago, governments transferred a mountain of debt from private to public accounts. Now, those government debts are distressing financial markets and there is nowhere left to shift the burden.

Europe’s clumsy response to Greece’s debt woes highlighted the economic and political headaches that await debt-laden countries and those who finance their borrowing.

European leaders have yet to convince investors that they have a credible short-term plan to contain government deficits and a long-term answer to the region’s slow growth. Until they do, financial markets will remain volatile, and the hard-fought economic recovery is in jeopardy…

Fixing the problem will require money and political will. One cannot work without the other, and both are lacking.

I’ve said before “you cannot borrow your way out of debt anymore than you can drink yourself sober.” The various crisis leaders should keep that in my mind as they take the easy route — throw more and more money at the problems, but fail o make the hard choices when it comes to resolving them.

>

Source:
Next phase of financial crisis may be the hardest
Emily Kaiser
Reuters May 21, 2010   
http://www.reuters.com/article/idUSTRE64K6B120100521

April Income rose .4%, in line with expectations but Spending was flat vs a forecasted rise of .3%. With this, the Savings Rate rose to 3.6% from 3.1%. The headline PCE price deflator was unchanged so REAL income and spending was the same as the nominal change. While spending was flat m/o/m, it is still up 4.6% y/o/y relative to a 2.5% y/o/y gain in income. Thus, after seeing a drop in the savings rate over the past few months, it’s now back in line with the average over the past few years. With this said it’s still well below the 50 yr average of 6.9% and I believe we will continue to trend in that direction and would be very healthy if it did. While it will impact consumer spending, the savings provide a basis for long term investment and domestic financing and would make us less dependent on foreign financing.

On the heels of the China SAFE comments to calm nerves about their euro holding intentions and the planned 25b euros of spending cuts, Italy successfully sold 3 yr, 7 yr and 10 yr paper today. Yields rose for the 3 yr and 7 yr relative to the auctions of the past few mo’s but the 10 yr yield was 2 bps below the Apr one and just 11 bps above the one in Mar. Italy 5 yr CDS is down by 15 bps. The main question of whether the euro zone bailout money will need to be tapped will depend on whether countries can access the capital markets on their own and for now they can, except Greece. The other issue though lies with banks in Greece, Portugal and Spain that cannot get access to short term funding and have to rely mostly on their deposits. US$ 3 mo LIBOR fell a hair and for only the 3rd time since early Feb. In a sign of inflation pressure to come due to a weak currency, Apr German import prices rose 7.9% y/o/y, above expectations of up 7.1%.