Doug Kass points us to this chart (from “Fast Money’s” Steve Cortes) depicting copper’s price with the S&P 500.
Source: Bloomberg
Wicked cool data visualization from Fathom:
The companies in the Fortune 500 during the years from 1955 to 2010 can be viewed by Rank, Revenue and Profit:
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click for interactive graphic
What is missing is a linked alphabetical listing or even simple search function. I’d also like to be able to “shift-click” and see multiple companies simultaneously.
Regardless, way cool.
Hat tip Flowing Data
These are the items I am reading this morning:
• U.S. Investing: Are the Best Times Over? (Businessweek) see also A Fear Gauge Comes Up Short (WSJ)
• The cruelest month for gold (Market Watch)
• Why China is all that matters (MSN Money) see also How Fast Can China Go? (VF) and China as J.P. Morgan Might Have to Save World (Bloomberg)
• Rivals Scout Paulson Assets (WSJ)
• You can lever, but will you take the loss? (FT.com) the short answer: Take the Loss (TBP)
• A $50 Billion Claim of Havoc Looms for Bank of America (Deal Book)
• Don’t count on Markozy to save you as Greece falls (Market Watch) see also Tracking Europe’s Debt Crisis (NYT)
• Fisher Says Central Bank Is Under Attack From Ron Paul, Barney Frank (Bloomberg)
• Google will finance rooftop solar installations (LA Times)
• What Do Studebaker And Geocities Have In Common? No One Remembers Them (Fast Company)
What are you reading?
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Poll: Should Microsoft CEO Steve Ballmer Go?
Source Seattle PI
Headline Aug Durable Goods orders and ex transports both fell by .1% vs expectations of down .2%. Importantly, Non defense capital goods ex aircraft rose 1.1% vs an expected gain of just .4% and July was revised up. Shipments, which get directly plugged into GDP, fell by .2% after a 2.1% rise in July and because inventories rose by .9%, the inventory to shipments ratio rose to 1.82 from 1.80. Bottom line, August as we all know was when the global economy started to roll as Europe flared up, among other things, and today’s August data was better than feared. This data point though is subject to large revisions and Sept business likely remained volatile so we need to see more months of data in what is now a new economic reality compared to pre August #’s to draw any confident conclusions. Large companies are cash rich but also have historic debt levels (some only look at one side of the balance sheet). Turning the cash though into more property, plant and equipment is what many are waiting and hoping for
Absolute Zero
John Mauldin
September 26, 2011
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It was Gary Shilling – way back in the last century – who first woke me up to the real whys and wherefores of deflation, with his 1998 best-seller, Deflation: Why it’s coming, whether it’s good or bad, and how it will affect your investments, business, and personal affairs. I had read various works on deflation, but nowhere was it put together as well as Gary did it. He followed it up the next year with Deflation: How to survive and thrive in the coming wave of deflation, and in that one he strongly urged his readers out of the stock market – just ahead of the 2000 dot-com bubble burst. But Gary has been so right over the past three decades. (He recently updated Deflation with The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation. It’s on Amazon at http://www.amazon.com/Age-Deleveraging.
Today’s Outside the Box is a condensed version of Gary’s monthly INSIGHT newsletter, and in this one he tackles the lack of effectiveness of the Fed’s QE1 and QE2 and delves into the “strange things [that] happen in security, currency and commodity markets that don’t fit normal rules” when the Fed and other central banks take interest rates down close to zero. He notes that at the same time QE2 was fomenting a global commodity bubble and stock-market advances through 2010 and into early 2011, it was also punishing lower-income households with higher food and energy costs, and saddling them with falling home prices “that are likely to drop another 20%.” Crucially, the Fed is “pushing on a string” that, with “the depth and breadth of the financial crisis, the collapse in housing, the ongoing sovereign debt crisis in Europe, Japan’s continuing two-decade-old deflationary depression, the impending hard landing in China, etc. make the monetary policy string much more limp than usual.”
Picking up a theme from his most recent book, The Age of Deleveraging, Gary also examines the question of whether the US is headed for a deflationary depression like the one that has beset Japan for more than two decades. I won’t spill the beans on his conclusion here, but let’s just say that we have our work cut out for us.
If you appreciate Gary’s lucid analysis and want to subscribe to INSIGHT, be sure to mention Outside the Box, and you’ll get 13 issues for the price of 12, PLUS their January 2011 report in which Gary lays out his investment strategies for the year. The price via email is $275, and the address is insight@agaryshilling.com, or you can call them at 1-888-346-7444.
Your loving London but lusting for Ireland analyst,
John Mauldin, Editor
Outside the Box
(excerpted from the September 2011 edition of A. Gary Shilling’s INSIGHT)
In its written release after its August 9 Federal Open Market Committee policy meeting, the Fed included a statement that was highly unusual because of its specificity. “The Committee currently anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through mid 2013.”
In the recent past, the Fed has stated its plans to keep rates low for an “extended period,” but we can’t recall the central bank ever being this precise on any policy. The statement was also significant because it means that unless the economy takes off like a scalded dog, the overnight federal funds rate will continue close to zero, its absolute bottom. Not surprisingly, longer term Treasury rates dropped on the announcement. The 2-year note yield fell to 0.185%, an all-time low, and the 10-year note yield hit 2.033%, below the previous 2.034% low reached on Dec. 18, 2008, after the collapse of Lehman Brothers drove investors to the safe haven of Treasurys.
The Fed is not alone in keeping central bank short-term rates close to zero (Chart 1) in response to sluggish and declining global economic growth and the inability of massive monetary and fiscal stimuli to revive economic activity. The outlier among major central banks is the ever-inflation wary European Central Bank, the spiritual descendant of the German Bundesbank and based in Frankfurt, Germany, for good reason. The ECB raised its target rate in April and again in July to 1.5% in response to Eurozone consumer inflation above its 2% annual rate target for the overall index. Nevertheless, ECB President Trichet apparently has put further increases on hold and may later cut its rate in response to unfolding weakness and persistent financial turmoil in Europe.
Zero interest rates are significant for several reasons. Zero is the floor below which rates normally don’t fall, although the 3-month Treasury bill rate recently was negative amidst investors’ mad rush for liquidity and the safe haven of government paper. More importantly, at zero interest rates, strange things happen in security, currency and commodity markets that don’t fit normal rules. This doesn’t mean that actions are illogical and don’t follow rational behavior, but rather that the rules of difference. Most observers don’t understand thoroughly the new norms, their causes and effects. Most significantly, central bankers and fiscal policy managers don’t seem to either, which makes forecasting the outcome of their actions and the unintended consequences extremely difficult.
You’ll probably recall how the Fed got to its current federal funds target of 0-0.25%. In early 2007, the subprime residential mortgage market started to fall apart. By August, the Fed had cut its discount rate and the federal funds target rate shortly thereafter, initiating the declines that resulted in the current levels.
In 2008-2010, in what became known as QE1, the Fed bought $300 billion in Treasurys, $1.25 billion in residential mortgage- related securities and $100 billion in Fannie Mae and Freddie Mac securities in an attempt to further prop up the faltering housing market and reduce mortgage rates. But these efforts were of little aid to the housing market, and prices resumed their decline in mid-2010 after the effects of the tax credits for new home buyers expired. So, in August 2010, Fed Chairman Bernanke hinted at QE2, which was implemented in late 2010, ran through mid-2011 and initiated the purchase of a net additional $600 billion in Treasurys.
Like QE1, QE2 did put money in the hands of investors in return for Treasurys, but had no follow-on effects. As we’ve discussed repeatedly in past Insights, the Fed creates reserves by buying Treasurys and other securities. It doesn’t print money, as the media insists, except for paper currency to satisfy public demand. It requires the cooperation of the banks as lenders and the creditworthy borrowers to turn those reserves into loans and money. But banks and borrowers have been reluctant to do so and excess reserves over and above reserve requirements now total about $1.6 trillion. Nonfinancial businesses have more than ample cash and little desire to borrow. Creditworthy individuals are also reluctant to borrow, and instead are paying down their mortgage and other debts.
Following the story late yesterday in the FT titled “Cracks in Greek bail-out” on the desire for some EU countries to impose a sharper haircut on Greek bondholders than is taking place with the current debt exchange, an EC spokesman said “As far as I’m aware, there is no such discussion within the Eurogroup, which is the relevant body to consider issues related to private sector involvement.” This spokesperson may not be aware but Germany will likely get what it wants at the end of the day with Greece and a German newspaper is reporting that Merkel told her fellow CDU politicians that a Greek default is a possibility and could come as early as this year. With respect to getting the newly constituted EFSF off the ground, Finland, a thorn in Greece’s side, approved their participation. Ireland continues to be the standout in the eyes of the market of troubled European countries as 5 yr CDS fell to the lowest since June and their 10 yr bond yield is below 8% for the 1st time since Dec ’10. Italian business confidence in Sept fell to the lowest since Feb ’10. In the US, refi’s apps are picking up in response to the last drop in mortgage rates. The MBA said refi’s rose 11.2% to the most since Nov ’10 while purchases were up just 2.6%.
Seth MacFarlane — the creative force behind “Family Guy” — has new album out (9/27). Its titled Music Is Better Than Words — a big band Jazz record, arranged, conducted, and produced by film and television composer Joel McNeely.
MacFarlane’s phrasing may be classic Frank Sinatra, but he cannot help but bring in lots of classic Broadway into his style. In addition to channeling Sinatra and the crooners of the ’30s and ’40s, MacFarlane’s first outing is notable for his choice of material.
Chris-willman of TheWrap explains it thusly:
“MacFarlane scores big points, though, for his choice of neglected vintage material. A handful of tunes here will be familiar to the average movie-musicals buff — namely, the lesser remembered numbers lifted from the not-so-obscure scores of “Gigi,” “The Sound of Music,” and “The Music Man,” plus the non-movie vocal version of “Laura.”
But even the musical theater buffs among us may have to do some Googling to find out or remember where the sublime “Nine O’Clock” comes from (answer: the little-remembered 1959 Broadway musical “Take Me Along”). MacFarlane is the rare revivalist who knows that the Great American Songbook is more than 100 pages thick, and it’s his willingness to look deeper into the catalog that gives “Music is Better Than Words” its kick.”
We always appreciated Family Guy’s occasional musical numbers, but this 2009 Royal Albert Hall should have clued us into MacFarlane as a wannabe lounge lizard.
Seth MacFarlane – “Singin’ in the Rain”
Here is something that you may not think about often enough: Taking losses.
Its something that every rookie trader must learn to do — and all of the TBTF banks refuse to do. Even sovereign nations seem unwilling to accept this simple fact of financial life.
There will be losses. How you handle them determines your fortune, your fate and your future.
Seeing how people handle losses is revealing of their character and integrity. Hiding losses is what rogue traders do. Its also what rogue banks do, and apparently, rogue nations.
$2.3 Billion in losses hidden from UBS sights by a rogue trader is chicken feed. But ponder how many $100s of billions of dollars in mortgage losses are hidden from view? The real rogues are America’s largest banks, and their enablers in Congress. .
When the TBTF banks (via their purchased Congressman) forced the Financial Accounting Standards Board to pass a rule allowing them to hide their mortgage losses — FASB 157 — it showed the dishonest nature of these entities. It was revealing of the lack of integrity of all of the institutions involved — from Congress to the banks to FASB.
When Bear Stearns first began to wobble in 2007, the initial error in this era of bailouts was in rescuing their bondholders. Instead, in 2008, they should have been forced to take the loss.
Its the same for creditors of Citi, Bank of America et. al. — instead of rescue packages, their creditors should have had to take the loss.
Mortgage delinquencies growing? More and more defaults in the pipeline? We can extend & pretend, or we can take the loss.
Note that via the FDIC, some bank lenders did take the loss. Washington Mutual’s collapse led it to being bought by JPM. Wells Fargo picked up Wachovia. Other examples abound, In each case where losses were forced to be realized, we ended up with a healthier few banks, and no moral hazard.
Zombie banks get created when they do not take the loss.
Now we have the European crisis, wherein all of the parties involved refuse to (say it with me) take the loss.
Greek debt piling up? You can restructure, renegotiate, reneg, or you can take the loss. Portugal’s balance sheet a problem? Well, the ECB can kick the can down the road, or they can force lenders to take the loss.
The model for not taking the loss has to be Japan. Look at their stock market since 1989 and you will see the net result of not taking the loss. The Japanese have suffered through lost decades as a result of their refusal to take any write-downs, propping up their Keiretsu.
Until we purge the bad debt from the financial system, we will be stuck with a long and painful de-leveraging.
Please, won’t someone in Washington or Brussels or Tokyo understand the importance of this simple trading rule? Take The Loss already!
Explaining Dissent on the FOMC Vote for Operation Twist
(With Reference to Jan Mayen Island, Paul Volcker and Thor’s Hammer)
Richard Fisher
Remarks before the Dallas Assembly
Dallas, Texas
September 27, 2011
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Thank you, Anne [Motsenbocker]. I was privileged to have been a member of the Dallas Assembly before I aged into being “mature.” Being here today with you young folks brings back very fond memories and is wonderfully energizing. Thank you for inviting me to lunch today.
Jan Mayen Island
I am going to start by taking you far away from Dallas, near the Arctic Circle, where, were you to visit Jan Mayen Island, you would see this sign:
Jan Mayen is a desolate volcanic island located about 600 miles west of Norway’s North Cape. It is the home of a meteorological and communications station manned in the harshest of winters by 17 hearty members of the Norwegian Armed Forces. If you read Tom Clancy’s Hunt for Red October, you would know it as “Loran-C,” a NATO tracking and transmissions station. In the video game Tomb Raider: Underworld, Lara Croft visits Jan Mayen in search of Thor’s Hammer, considered the most awesome of weapons in Norse mythology, capable of leveling mountains and performing the most heroic feats.
My brother Mike recently visited this station on Jan Mayen. This is the sign that greeted him.
In norsk, it reads as follows:
“Theory is when you understand everything, but nothing works.”
“Practice is when everything works, but nobody understands why.”
“At this station, theory and practice are united, so nothing works and nobody understands why.”
My wry brother implied that this about summed it up for monetary policy. Drawing on theory and practice, the 17 members of the Federal Open Market Committee (FOMC) have been working in the harshest economic environment to harness monetary theory and lessons learned from practice to revive the economy and job creation without forsaking our commitment to maintaining price stability. But the committee’s policy has yet to show evidence of working and nobody seems to quite understand why.
Today, I am going to quickly summarize the action taken by the FOMC at our meeting last week. I am going to explain at greater length why I dissented from the consensus of the committee, incorporating why I believe the monetary accommodation we have thus far implemented has failed to deliver.
"Markets can remain irrational longer than you can remain solvent." —John Maynard Keynes
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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