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

In a recent smorgasbord post, I railed a bit about an upcoming increase in my monthly commutation (via the MTA), the third in as many years.  As I let off some steam with a friend — who happens to be a NY Times reporter — he turned me on to one of the more eye-opening sites I’ve seen in a very long time:  SeeThroughNY, which I mentioned to BR and he just introduced here.  This site is a remarkable repository of data detailing exactly where New Yorkers’ tax dollars are going, right down to the individual salaries of politicians, school administrators and teachers, law enforcement personnel and scores of other civil servants and public employees.  It also opens the kimono on contracts with vendors, as well as allowing for side-by-side comparisons, or “benchmarking,” of towns, villages, school districts, and counties.  I’ve barely begun to scratch the surface of what the site has to offer.  (Whether or not you’re a New Yorker, I’d be interested in reading about how those so inclined use the data; feel free to throw it in comments).

Let’s stipulate that there are many moving parts in the machinery that produces public policy toward civil service (and its attendant compensation).  That said, NY State Attorney General Andrew Cuomo released a preliminary report in July that addresses one ongoing concern:  ”pension padding” (the manipulation of salary and overtime payments near retirement), which falls into two broad categories:

1. Employees start working substantial overtime only when they near retirement.
2. Employees substantially increase their overtime near retirement

This occurs due to the fact that employees’ pension benefits are pegged to their compensation in their last three years of work.

Between the Metropolitan Transit Authority and the Port Authority of NY/NJ, for example, there are 75 police officers who earned in excess of $150,000 in 2009, a few in excess of $200k.  (By way of comparison, if you were a $30,000/year police recruit in 1980 and got highly unlikely 5% annual increases, you’d now be at about $130,000/year).  My sole purpose in using police officers as an example is that I believe most of us would agree that the numbers I’ve cited are not what we’d generally expect to see for this profession; we all have some frame of reference for what law enforcement personnel “should” make.  I might just as easily have used railroad engineers or conductors, but I suspect our collective frame of reference isn’t as clear on those occupations.  So please spare me the vitriol that I’m somehow disrespecting law enforcement.  I’m not.  I have the utmost respect for the fact that they put their lives on the line every day.  I’m merely pointing out that $150k+ is probably a bit north of what most of us believe police officers earn, or should.  YMMV.

Here are two charts that highlights the issue (click through for larger):

Source: NYS Office of the Attorney General, NYPensionpadding.com

While I understand, generally, that retirement benefits are to be calculated off the last three years’ compensation, I do not understand why “padding” is allowed to occur.  Why is someone who never worked an hour of overtime in a 25-year career allowed to suddenly work 1,000 overtime hours in each of his/her last three years?  WTF?  Where is the oversight here?

Let me be clear: I begrudge no one an honest day’s pay for an honest day’s work.  And I begrudge no one a comfortable retirement.  But it is indisputable that “pension padding” contributes — in some unquantifiable amount — to public entities’ ongoing budget woes and subsequent need to continue squeezing the taxpayer (i.e. MTA’s three hikes in three years).  This is an issue that could — and should — be better managed and controlled.

SeeThroughNY is a site run by right wing think tank Manhattan institute. It scrapes publicly available data to show the salaries and pensions of just about everyone in NYS who is on the public payroll, from the Governor to cops & firemen to your local teachers:

SeeThroughNY: A place for taxpayers to download, share, analyze and compare data on public payrolls, expenditures, contracts and taxes.

This is the sort of public information that should be available to taxpayers — and voters — at every level of government, from the US Federal Government to the smallest local town.

And, that should include campaign contributions. Everyone who buys a congressman donates to any campaign should have that information disclosed on the web. That includes corporations; No one  should not be able to hide behind nonprofit 501(c)(4) organizations to anonymously push their own corporate agenda.

Somehow, the Supreme Court has gotten this totally ass backwards. The rule is “One man, one vote” — not one Dollar, one vote. That the court has gotten this so wrong is a national embarrassment.

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Invictus discusses the impact of this on state employee pension plans here: Transparent Government: Part II

Josh Brown — the blogger formerly known as the Reformed Broker — is experiencing side effects including nausea, bloating, dizziness, and loss of domain name. I don’t want to point any fingers, but it appears that Punxatawny Phil from Stocktwits totally fucked up effected a minor but repairable administrative error, wherein Josh’s Reformed Broker domain name was allowed to expire.

The people responsible for this error have been sacked.

While the matter is in litigation, we have offered the Reformed Broker, aka the Stock Rabbi, the use of TBP. Here’s Josh:

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US Corporations are a lot like Wesley Snipes – they used to kick ass but now they spend most of their time trying to avoid paying taxes.

As a patriot, I yearn to see Corporate America put back atop its pedestal and restored to its rightful place in the Pantheon of Human Achievement.

This Fall, We The People have an historic opportunity to vote for our favorite corporations and interest groups via their sponsorees and political champions in the House and Senate  I hope that you will consider the below bullet points before riding your Medicare-subsidized scooter to the polls:

1.  Wal-Mart is a miracle of entrepreneurship. Never mind the fact that the planet’s largest retailer of heavy-duty lawn chairs and bacon-infused spring water has been aided along the road to triumph by just about every state government and agency in the country.  Pay no attention to the fact that the company hands out state medicaid enrollment forms to its employees that are meant to be reserved for poor people.  Don’t you concern yourself that 90 percent of their distribution centers were paid for with public money in the name of “creating jobs”.

2. Oil exploration is a shared endeavor, oil selling is a corporate one. How dare you criticize $30 billion in tax subsidies that have gone toward the costs of oil exploration by the major integrated oil producers?  Do you hate America?  Would you rather that $30 billion be wasted on some fruity advanced battery research program or some stupid 5 year plan to end our dependence on Middle Eastern energy imports?  Don’t be silly, we’ve been doing it this way for decades, it can’t be wrong!

3.  Making corporations pay taxes makes them less competitive in the global marketplace. I see absolutely no problem with our attempt to become “an export-driven economy” while allowing corporations to retain all earnings from overseas business.  How could this possibly blow up in our faces of the long-term.  And hey, corporations in Luxembourg don’t have to repatriate any profits, and our economy is uncannily similar to Luxembourg’s in every way imaginable.  As long as we don’t allow American citizens the same ability to shield income from the Federal government, everything should work out just fine.

4.  No, zero percent rates are NOT Corporate Welfare for the nation’s banks. How could you even cast an aspersion like that?  Look, if a few million seniors have to struggle to earn a low-risk fixed income while the banks get to borrow from the left hand of the government while lending back to the right at a guaranteed spread, so be it!  After all, you think those record banker bonuses that support so many BMW dealerships and European hair dressers come from thin air?  Besides, it is a known fact that handing money to bank employees is way more stimulative than whatever meager spending we might see in and around the Boca Raton retirement communities.

Please be sure to keep the above factors in mind as you prepare to vote for your congressional corporate representatives next month.  Someone’s going to get taxpayer subsidies, you may as well have a hand in choosing where they go.

Interesting graphic from an otherwise mostly anecdotal NYT article discussing poor prospects for job recovery.

It made me think of this chart from when the NBER declared the end of the 2007-09 recession:

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click for gionormous chart

Chart courtesy of Economagic

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Here’s the NYT:

click for ginormous graphic

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Source:
Across the U.S., Long Recovery Looks Like Recession
MICHAEL POWELL and MOTOKO RICH
NYT, October 12, 2010
http://www.nytimes.com/2010/10/13/business/economy/13econ.html

Coincident with the CRB index touching 300 for the first time since Oct ’08, the two main commodity currencies the Aussie$ and Canadian$ today are a stones throw from being worth the exact same amount as the US$. For the Aussie$ it will be the first time ever and for the C$ it will be for the first time since April. On the inflation front, the implied inflation rate in the 10 yr TIPS is now above 2% at 2.03% for the first time since June. The 5 yr 5yr breakeven is moving to the highest since May at 2.66%.

Invictus here, folks.  (Have I mentioned what a pain in the ass it is to track down references to my work since Morgan Freeman and Matt Damon stole my name?).

Now that the NBER has officially dated the end of the recession, it probably makes some sense to start putting comps in terms of “from the trough” instead of “from the peak.”  I know, I know, the recession hasn’t really ended.  It doesn’t feel much like a recovery.  The depression is ongoing.  Yes, I get all that, and I agree.  But, as BR has pointed out on more than one occasion, it is indisputable that we are experiencing some growth in key metrics, however slow and painful it might (as I’ll demonstrate in a moment).  Point is, whether or not I want to agree that we’re still in recession doesn’t change the fact that the NBER says we’re not.  So, in the interest of pursuing the “truth,” as BR likes to say, I just have to stipulate that we’re in recovery and growing — as unacceptable and anemic as that growth might be – and revisit some comps indexed to troughs.

As part of a post in July, I presented a chart showing Final Sales of Domestic Product (indexed at that time to economic peaks).  The chart showed that Final Sales (FINSAL at FRED) were experiencing their slowest recovery on record.  I have updated the chart — below — to reflect indexing at economic troughs and also include the latest data available.  What has not changed is that this is the slowest recovery on record for Final Sales.

What is interesting is that the second slowest FINSAL recovery on record was from the Q42001 trough, and the third slowest was from the Q11991 trough.  In other words, FINSAL has been getting progressively weaker coming out of the last three recessions.  Coincidence?  I think not.

I’ve referenced our demographics in some previous posts here and elsewhere, and this trend plays right into that theme.  The median boomer– born in 1955 — was a spendthrifty 36 years old in 1991 (the year that housing bottomed and a housing boom ensued).  That same boomer still had some gas in the tank — at 46 years old — in 2001.  Now, however, at 55 years old, that boomer is pretty much done.  He’s trying to recover from massive twin bubbles not even a decade apart while working feverishly on his abacus to see if he’ll ever be able to retire.  Boomers are downsizing (or at least trying to).  They may now be empty nesters (unless the kids moved back in to the basement).  They want to sell their home, but not at the price the realtor tells them it’s worth; the real estate related dollar signs they saw in 2006 (and probably extrapolated 10 years forward) translated into a more comfortable retirement.  Oops.  Now what?

Further, it does not help matters that there will be no Social Security COLA increase for the second year running.  Living on a “fixed” income has never been quite as “fixed” as it is now, with no cost of living adjustments.  Not a positive development for the senior set.

Click through for ginormous

Following further confirmation from most members of the FOMC in yesterday’s minutes that they will respond to an economy that is not getter better from current levels rather than wait for a move lower in activity, global stocks are being further buoyed by Chinese Sept bank loans that were almost 100b Yuan above expectations, Aug Japanese machinery orders that rose 10.1% vs the forecast of -3.9%, earnings beats from CSX and JPM (INTC just beat the guidance that was lowered in Aug), and a rally in the Greek 10 yr note for the 17th day in the past 18 (yield now below 9%). From the perspective of the US$ based investor however, the $ index is back to the lowest since Jan and gold is rising to near a fresh record high. The Yuan is rising to a fresh record even though the Sept Trade Surplus was almost $1b below expectations. China’s Sept FX reserves rose by another $100b to a new high of $2.65T.

With the average 30 yr mortgage rate falling to a new low at 4.21%, the MBA said refi’s responded positively, rising 21% to just below the highest since May ’09 but purchases fell by 8.5% after last week’s highest level since May. ABC confidence rose by 2 pts to -45 and is 1 pt above the one yr average. II: Bulls 47.2 v 45.6 Bears 24.7 v 28.4, both at levels last seen in May.

I recorded this last week with Max Keiser

I come up around the 14 minute mark, and once again, I look like I just torched up a big fattie:

This time Max Keiser and co-host, Stacy Herbert, look at rich people buying gold and the rest of the world decoupling from the United States. In the second half of the show, Max talks to Barry Ritholtz about foreclosure-gate, corporations versus the people and his panoramic view of the bailed out banks of New York.

Fed Minutes combined with a strong earnings report from Intel and CSX to propel futures higher this morning. US Indices closed marginally higher yesterday, reversing their negative opening after Asia was off 1.5-2%.

This market has had repeated opportunities to roll over, to fall on bad news, to follow other bourses lower, or to take a modest sell off of 0.50-0.75% and turn it into something more dangerous.

In just about every case, Mr. Market has refused to cooperate with the bears.

The bottom line remains: Excessive pessimism, under-invested Main St, a gradually improving economy, backwards looking sentiment, and a flood of liquidity continues to make it challenging to be short this market.

The Fed has made cash trash. Commodities, Tech, Ag, Precious Metals, Dividend yielders, Small Cap Tech, telecom are all sectors in play.

My questions: Does this rally end once the bears throw in the towel and cover? Will it run through the elections? Can it go to year’s end? And will we ever see carbon based volume return to the market, or are we all just trading with Skynet?

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click for active Futures

SGW’s guide to Toxic Discharge