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

Nice interactive map from Dismal Scientist (Moodys) showing the state of recovery of various nations:

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click for interactive map

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Hat tip chartporn

Within the minutes of the June FOMC meeting where they reviewed the economic stats seen since the prior meeting, they believed looking forward that the recovery in economic activity would be moderate thru 2011, “supported by accommodative monetary policy, an attenuation of financial stress, and strengthening consumer and business confidence.” They did say that the pace of recovery will be “somewhat slower than previously predicted” and they also reduced their expectations for both headline and core inflation slightly. Some members wanted to consider “whether further policy stimulus might become appropriate if the outlook were to worsen appreciably.” In terms of ‘helping’ the economy, I believe their gun is out of real bullets and all they got left is water. They have reached the law of diminishing returns and Fed impotence is a growing risk.

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“How Crazy Is That?”: Startups Are Safer Than Stocks, Howard Lindzon
Peter Gorenstein
Yahoo Tech Ticker Jul 14, 2010
http://finance.yahoo.com/tech-ticker/”how-crazy-is-that”-startups-are-safer-than-stocks-howard-lindzon-says-520088.html

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Tomi Kilgore warns that the recent bounce may be a sucker’s rally:

“The current rally marks the fourth time since early May that the Dow Jones Industrial Average has bounced more than 5%. Previous bounces have taken the Dow above key resistance levels, and yet subsequent declines have resulted in even lower lows. Essentially, the recent pattern surrounding key technical breakdowns and breakouts suggests the Dow is nearing yet another turning point.

It is easy for bulls to fall into another technical trap, since the Dow has climbed above the 50-day simple moving average, which has acted as resistance since the Dow first fell below it in early May, and is now peeking above a downward sloping line that started at the April 26 high and connects the June 21 high. But rather than embolden bulls, the apparent breakout should actually make them skeptical, especially following a six-session rally. “

Other traps of note:

-When the Dow fell below the 200-day moving average;
-After the Dow closed above the 50-day moving average
-When the Dow hit a new low for the year.
-The break below the June 8 low of 9757 (confirming a head-and-shoulders pattern)

Kilgore wanrs that “those reacting to technical breakdowns and breakouts have been fooled many times. And keep in mind that the Dow’s last six-session winning streak ended on April 26, the day before the market correction began.”

The broad trading range, lack of volume, and short term trends that reverse have some people sitting on their hands. Its not a bad way to prevent them from doing something silly . . .

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Source:
Investors Shouldn’t Be Fooled By Another Breakout
Tomi Kilgore
DOW JONES NEWSWIRES, TAKING STOCK: Jul 13 2010
http://www.cmemarkets.com/v3/2010/07/13/dj-taking-stockinvestors-shouldnt-be-fooled-by-another-breakout/

Read the rest of this entry »

I’ve attended Wired’s Disruptive By Design conferences, and they are always top notch.

Here is the Conference Digital White Paper, with highlights from the WIRED Business Conference on June 14, at the Morgan Library in New York City.

This White Paper features a summary of each session, where various business execs, including Howard Schultz, Frederick Smith, Vivian Schiller, Steve Case, William Bratton, Mark Pincus, Caterina Fake, Clay Shirky, Bre Pettis, Eric Cahill, and Chris Anderson, discussed how disruption can energize business today.

You can watch any of the sessions at Fora.tv

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WIRED Business Conference White Paper 2010

Land Rover has revealed its newest model, a compact SUV dubbed the Range Rover Evoque. Based on the LRX concept that debuted in 2008, the two-door Evoque is the smallest, lightest Range Rover, and the company claims it will be the most fuel efficient Rover.

The reveal of the model will be at the 2010 Paris Motor Show in September; the car’s website — Hello Evoque — has a counter ticking down the minutes until then.

Plans for the Evoque include both a two-door and a four-door models.

The car has very interesting lines, but I expect this will run into the same rear visibility problems that are inherent in this design. There is a compromise between form and function for cars such as the BMW X6, Infinity FX, Acura ZDX, and Honda Crosstour –they all suffer some degradation of rear visibility as a result.

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Read the rest of this entry »

Morgan Stanley’s Stephen Roach tells WSJ’s Kelly Evans the fragile US recovery could be undone and Federal Reserve Chairman Ben Bernanke’s policies too closely mirror Alan Greenspan’s. He also insists Asian economies aren’t ready to take the baton from the West.

7/9/2010 9:35:57 AM

Fascinating economic discussion from 3 Quarks Daily, on how the market for supermodels functions:

“[Supermodel] Coco is what economists would call a winner in a “winner-take all market,” prevalent in culture industries like art and music, where a handful of people reap very lucrative and visible rewards while the bulk of contestants barely scrape by meager livings before they fade into more stable and far less glamorous careers. The presence of such spectacular winners like Coco Rocha raises a great sociological question: how, among the thousands of wannabe models worldwide, is any one 14 year-old able to rise from the pack? How, in other words, do winners happen?

The secrets to Coco’s success, and the dozens of girls that have come before and will surely come after her, have much less to do with Coco the person (or the body) than with the social context of an unstable market. There is very little intrinsic value in Coco’s physique that would set her apart from any number of other similarly-built teens—when dealing with symbolic goods like “beauty” and “fashionability,” we would be hard pressed to identify objective measures of worth inherent in the good itself. Rather, social processes are at work in the fashion modeling market to bequeath cultural value onto Coco. The social world of fashion markets reveals how market actors think collectively to make decisions in the face of uncertainty.”

What does this mean for finance? Consider:

“This social side of markets, it turns out, is key to understanding how investors could trade securities backed with “toxic” subprime mortgage assets leading us into the 2009 financial crisis . . .These formal and informal mechanisms result in a classic cumulative advantage effect in which successful goods accrue more success (also known as “the rich get richer” phenomenon, or by Biblical reference, the Matthew Effect) . . . In behavioral economics, a model’s success is a case of an information cascade. Faced with imperfect information, individuals make a binary choice to act (to choose or not to choose) by observing the actions of their predecessors without regard to their own information. In such situations, a few early key individuals end up having a disproportionately large effect, such that small differences in initial conditions create large differences later in the cascade.

Herding and cascades are rather problematic to financial markets; they leads investors to artificially bid up asset values, thereby leading to bubbles and eventual crashes, even if investors knew better all along, which, it turns out in the housing market, they largely did.

But because investors, like fashionistas, react to each other as well as to the aggregate traces of fellow investors’ actions, they exacerbate systemic risk.“  (emphasis added)

An unusual and interesting article worth reading.

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Hat tip Mike Panzner

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Source:
How Supermodels Are like Toxic Assets
Ashley Mears
3 Quarks Daily, July 12, 2010
http://www.3quarksdaily.com/3quarksdaily/2010/07/how-supermodels-are-like-toxic-assets.html

Following policy changes in Taiwan, India, Malaysia and South Korea, Thailand raised rates by 25 bps to 1.5%. It was expected but this comes just a few months after daily rioting that threatened to derail their economy. A BoT official said “the economy has strengthened, so it’s time to start adjusting the rate to normal levels.” To the same theme, EXPD, a global logistics co, raised guidance. The pound rose to a 2 mo high vs the $ after a slightly better than expected jobs figure. Portugal successfully sold 2 yr and 9 yr notes. EU 3 mo LIBOR fell for the 1st time in a month but 3 mo Euribor ticked higher again. ABC confidence fell 2 pts to a 4 week low. The MBA said their purchase component fell to the lowest since Dec ’96 as low interest rates cannot offset the drop off in demand in a post tax credit world. Refi’s fell 2.9% but after sharp gains in the previous weeks. II: Bulls 32.6 v 37 Bears unch at 34.8, the 1st time Bears are above Bulls since April ’09.

June Retail Sales fell more than expected by .5% but the ex auto decline was in line down .1% and taking out both auto and gas station sales saw a gain of .1% vs the forecast of flat. The real core figure which excludes auto’s, gasoline and building materials saw a rise of .2% after two prior months of declines. Thus, net-net, the headline # masks an underlying bounce which was led by electronics, health/personal care, clothing, department stores, restaurant and bars and online retailers. The sales data gets plugged into GDP and won’t do much to alter the expectations for a 3.2% rise in Q2 with some slowing in the 2nd half. A sustainable rise in sales needs income growth and job creation and that are the two most important economic data points to watch in terms of consumer spending’s contribution to growth.

Dear Short Sellers, it’s me Boockvar, pronounced without the C. Some think I’m Mr. Bear, I prefer Mr. Realist (reflation trade bull in March ’09). I’m writing now to say be very, very careful here into year end (2011 a different story with plenty of concern). Combine a settling down of European credit stress with potentially a better than feared earnings season (INTC was impressive), the growing possibility of gridlock in Washington, DC come November (Intrade.com has greater than 50% chance of change in the House), a Fed that wouldn’t know a rate hike if even the Bank of Japan wrote it on Bernanke’s forehead and a very underinvested money management community and we are set up for a big rally (after some backing and filling of the current 7% bounce as we are somewhat overbought short term) over the next 5 1/2 month which may have already started.