Posts filed under “Think Tank”

Checking Back in with Taleb

Good Evening: U.S. stocks today recovered almost half the losses they suffered yesterday. Credit for today’s light volume comeback goes to the combined effects of a recovery in Asian equities (China’s CSI 300 was up 1%), some analyst upgrades in the tech sector, and earnings beats by some retailers. What the future holds for U.S. equities is anyone’s guess, but many will be looking to the charts for clues. If the averages really are set to correct, then the S&P 500 should run into stiff resistance between 990 and 1000 during the next day or two. A close above 1000 will probably reset the clock on any near term correction, but should the widely watched benchmark continue to close below the 4 digit mark, then a test of the 950 level is likely imminent. A break of 950 will set up tests of support between 900 and 875. Below those levels will put the cat once more among the pigeons, but it’s too soon to speculate about a resumption of the primary bear market. As for reasons why such a possibility is not out of the question, perhaps it will help to check back with Nassim Taleb to get his latest views.

Since it was angst about Chinese equities and the implied lower demand for commodities by that nation that helped pressure stocks during the previous two sessions, an overnight rally in China helped stabilize stock prices around the world. Accordingly, our index futures were already in positive territory this morning when Home Depot and Target reported better than expected earnings (Saks reported a narrower than expected loss, though TJX disappointed). These retailers recorded punk top line sales, but both managed to cut costs and manage inventories well enough in Q2 to outstrip analyst expectations. Analysts were also responsible for a pop in technology stocks, with the most noteworthy upgrade coming for the entire mobile handset sector. Thus inspired, the NASDAQ then led the indexes higher for most of Tuesday’s trading, though it was interesting to see Google sit out the festivities. One day does not make a trend, but a leader like GOOG should not be a wallflower.

Stocks opened to the upside and were 0.5% higher during the first hour of trading. The economic data seemed to have little impact on today’s events, with PPI and housing starts coming in well below expectations. Perhaps there was some confusion as to whether falling producer prices were either good news or bad at this point in the cycle, and the same could also be said about the housing data (see below). While overall starts fell short of the mark (and remain far, far below peak levels), the glass half full contingent pointed to rising single family starts for the 5th consecutive month as unalloyed good news. Though I’m glad folks are gainfully employed while erecting these structures, the last thing an oversupplied housing market needs is more homes.

If any of the foregoing bothered equity investors, they didn’t show it. Stocks rallied 1% to 1.5% by mid day before settling in to a dull and narrow range. The averages went out near their highs, with the Dow (+0.9%) lagging, while the 1.7% gain in the Dow Transports led the way. Treasurys also played their “counter-trend Tuesday” role in giving up about half of yesterday’s gains. Yields rose between 2 and 5 bps. The dollar followed suit in falling after two days of gains, while commodities made it a clean sweep by rising. A 3.7% rise in crude oil set the pace as the CRB index rose 1% today.

Nassim N. Taleb needs no introductions to regular readers of these commentaries. I’ve read both his books, and recounted at length some of the interesting views he espoused at Barry Ritholtz’s conference back in June. I missed his appearance on CNBC last week, but a video and a capsulated version of his comments from that interview can be found below. I will let Mr. Taleb speak for himself, though I will say that sound-bite T.V. is not the best format for his powerful intellect. He is at his best when he writes about a topic, or when he is allowed to discuss it at length. Being wedged in between commercial breaks on Squawk Box does him little justice.

Though he revisits many of the topics he discussed back in June (like swapping debt for equity to aid the deleveraging process), he raised a few eyebrows when the subject turned to Fed Chairman Bernanke. Mr. Taleb is stoutly opposed to Bernanke’s reappointment, saying Bernanke, Geithner, and Summers have been part of the problem — so why reward them? When pressed for just who he would support to replace Mr. Bernanke, Taleb offered up Paul Volcker. I would love to see Volcker back at the helm, but he’s been marginalized inside the administration by Mr. Summers. Besides, like my favorite choice for the job (Jim Grant), Mr. Volcker would probably turn the offer down. Given how our politicians and the voters who elect them have little stomach for making hard choices, the job is almost impossible to do well these days. Any warm body can print money; the hard part is dealing with the consequences.

– Jack McHugh

U.S. Markets Wrap: Stocks, Oil Advance as Target Tops Estimates

U.S. Economy: Single-Family Home Starts Rose in July

‘Incompetent’ Leaders Pose Threat to Recovery: ‘Black Swan’

Category: Markets, Think Tank

Goldman Sach’s ‘American Socialism Manifesto’

Goldman’s new ‘American Socialism Manifesto’

Paul B. Farrell
Marketwatch, August 9th, 2009 4:57 PM

reprinted with permission, Copyright Marketwatch, all right reserved

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Warning: Behavioral economics means one thing to Wall Street and Washington and something quite different to Main Street. It depends on whether you’re the nudger or nudgee, the manipulator or the manipulated, the guys making lots of money or the folks being scammed.

Average folks erroneously believe behavioral economics helps them. But behavioral nudgers just want to help themselves.

And both political parties are guilty. Behavioral economics is all the rage since the new president hired some academic behaviorists. That also helped the GOP, made average folks forget the former president had his nudgers, too, like former Treasury Secretary Henry Paulson. Moreover, his party recently hired 350 lobbyists, many former Senators and Congressmen, to kill the new guy’s health-care reform.

The truth is, folks, behavioral economics, nudging, manipulation and lobbying, whatever you call it, has been a part of American politics for a long time under many names, though neither party publicly admits their nudging strategies.

Puzzled? Ask yourself: Why is the GOP so aggressively demonizing Obama’s health-care reform as “socialism?” Why? Yes, something smells fishy, especially since the GOP created the biggest “socialized medicine” program ever with Medicare drugs.

Then suddenly the “why” hit me. Here’s why … All the fear-mongering about health-care “socialism” is actually a strategic smoke screen, a brilliant counterattack, a sneaky political cover-up of the GOP’s recent historic takeover of America using taxpayer-funded bailout money against us. Get it? The Right’s making Left turns into “socialism.”

You heard me. In “Bailout Nation,” money manager Barry Ritholtz summarizes this clandestine takeover of the great American democracy, led by Paulson and the Goldman Conspiracy juggernaut. In less than a year America has become “Socialism for the Rich! Capitalism for the Rest,” says Ritholtz.

It all began last October, just before the elections. Paulson, Goldman’s Trojan Horse inside a GOP-controlled White House, moved with the lightning speed of a special-ops team attacking behind enemy lines. Paulson took command of the meltdown, before our clueless Congress knew what happened.

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Category: Bailout Nation, Bailouts, Think Tank

Status of the Clunker plan

According to Edmunds.com (the auto consumer info website), “the rush of automotive sales activity brought on by the ‘Cash for Clunkers’ program is fading fast. They said auto purchase intent is down 31% from its peak in late July. “Now that there is plenty of money in the program and the most eager shoppers have…Read More

Category: MacroNotes

Federal Reserve Releases “Real” FOMC Statement

James Bianco is founder and CEO of Bianco Research in Chicago.  He has been producing fixed income research with a circulation of hundreds of portfolio managers and traders since 1990. Jim’s commentaries have a special emphasis on: money flow characteristics of primary dealers, mutual funds, hedge funds, futures traders, banks, and institutional investors. Prior to…Read More

Category: Federal Reserve, Think Tank

S&P 500 Market Review

Kevin Lane is one of the founding partners of Fusion Analytics, and is the firm’s director of Quantitative Research. He is the main architect for developing their proprietary stock selection models and trading algorithms. Prior to joining Fusion Analytics, Mr. Lane enjoyed success as the Chief Market Strategist for several sell side institutional brokerage firms….Read More

Category: Quantitative, Think Tank

Data

July Housing Starts totaled 581k, 18k less than expected and down from 587k in June while Permits were 17k less than the consensus and 10k below the prior month. The drop in starts and permits was solely in the multi family category as single family starts and permits rose to the highest since Oct ’08….Read More

Category: MacroNotes

The Future’s So Bright, I Gotta Wear Shades

“The Future’s So Bright, I Gotta Wear Shades,” sang Timbuk3 but helps to sum up the much better than forecasted German ZEW figure which measures the expectations of future economic growth within the next 6 months. It was 56.1 vs the estimate of 45, up from 39.5 in July and is at the highest level…Read More

Category: MacroNotes

Some Thoughts About the Pullback in Equities

Good Evening: Global equities suffered a broad retreat today, with most of the damage centered in Asia. China in particular has been a standout to the downside of late, a situation I tried to call attention to last Wednesday. Including Monday’s 6% drubbing, the major Chinese indexes have declined 15% or more (the CSI 300,…Read More

Category: Markets, Think Tank

C&I loans

On the question of whether or not banks are lending and also where the level of demand is for loans, weekly Commercial and Industrial loan data (out on Friday) can be a helpful gauge. C&I loans outstanding for the week ended Aug 5th fell by $4.6b to $1.475t, the lowest since the week ended Feb…Read More

Category: MacroNotes

August NY Fed survey

The August NY Fed survey, the first August industrial number out, was a much better than expected 12.1 vs the consensus of 3 and up from -.6 in July. It’s the first positive reading since April and the highest since Nov ’07. The number however does not measure the degree of the improvement, just the…Read More

Category: MacroNotes