Posts filed under “Think Tank”

To US or not to US

While its only one week and much can change, in looking at the pullback
in the stock market this week, I believe one can glean a trend that we
may see over the next few years in those groups that have underperformed
the overall market this week. On the belief that the US economy was the
first one into the global recession (as the bulk of the imbalances
occurred here) and will be one of the last one’s out for the same
reason, I believe the key to outperformance on the long side will be
having exposure to non US dependent co’s and sectors. As 86% of the
world’s population is outside of the developed world and the developing
world ironically has a better balance sheet than the US consumer and
government, emerging market land is where most of the growth will be on
any global rebound. I know this is not a new revelation as it was the
theme of the prior expansion but I believe it will resurrect itself on
any recovery. As measured by the ETF’s, XRT, XLY, XHB, XLF and IYR,
consumer discretionary including retail, financials, housing and REITS
have been the worst performing sectors this week in the S&P as all are
predominantly US dependent of course. The perfect pair trade IMO is thus
short US and long anything outside of it.

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Category: MacroNotes

U of Michigan Confidence

The preliminary May U of Michigan confidence # was a touch higher than expected at 67.9 and up from 65.1 in April. It’s now at the highest level since Sept ’08 when it reached 70.3 before falling to 55.3 in Nov. The survey is done via phone just within the last few days so it…Read More

Category: MacroNotes

CPI, IP, TIC data

April CPI was flat but core CPI was up .3%, .2% more than expected and its the 1st .3% reading since July ’08. Y/o/Y CPI fell .7% after falling .4% in Mar and its the biggest drop since ’55 but with the recent rise in energy and food prices, that trend will reverse. The y/o/y…Read More

Category: MacroNotes

Location, location, location

Location, location, location doesn’t only apply to buying the right house or piece of real estate, it also means being near the few countries in the world that are showing growth. March Japanese core Machinery Orders fell 1.3% m/o/m, better than forecasts of a drop of 4.6% and foreign orders rose by a record 46.4%…Read More

Category: MacroNotes

Adjusting to “A New Normal”

Good Evening: U.S. stocks persistently drifted higher today after 3 straight down days. The economic and earnings news was mostly of the offsetting variety, thus helping to hold prices in a fairly narrow range as volatility continued to ebb. Since yields on everything from Treasurys, to corporate bonds, to credit cards were the subject of…Read More

Category: Markets, Think Tank

Chrysler, GM and the New Industrial Policy

Chrysler, GM and the New Industrial Policy
May 14, 2009

IRA Releases Preliminary Q1 2009 Bank Stress Ratings and Index Results

“While President Hoover had some understanding of the political implication of the crisis, he lacked any clear comprehension of the economic realities that underlay it. He accepted the views of most monopolists and of the conservative economists who advised them. He had been completely seduced by the prosperity myth; as a result, he thought at first that the stock market crash was an isolated event indicating nothing more than the correction of the worst abuses encouraged by him and perpetuated by the speculative fraternity. When shortly his initial appraisal proved incorrect, Hoover could not understand why such an outwardly powerful economic system as this country boasted could not without great difficulty pull itself out of the doldrums. He failed to grasp the paradox that it was the display of economic power that denoted the most severe contradictions. The strategy he adopted was the strategy pursued before in dealing with the cyclical crisis – let the disaster rack the country, purge it, and wear itself out.”

Bruce Minton & John Stewart

The Fat Years and the Lean

International Publishers (1940)

First we have to note the passing of two great Americans: Former Congressman Jack Kemp (R-NY) and former FDIC Chairman Bill Seidman. Both of these men believed in the power of free people and free markets, qualities sorely lacking in our current leaders. Their clear vision will be missed as we grapple with the challenges in the financial markets.

The response to our release of the preliminary Q1 2009 results for the IRA Bank Stress Index has been excellent. We appreciate the user feedback and the media attention. Bottom line is that the jump in the Stress Index, from 1.8 at year-end 2008 to 5.7 at the end of Q1, suggests a year-end 2009 loss rate peak for commercial and residential exposures. Click here to learn more.

To us, the use of the enhanced FDIC data distribution technology illustrates how better public access to financial disclosure and automated distillation can improve timeliness and relevance, thereby encourage debate and dialog among and between analysts, and in turn drive better asset allocation choices by investors. Our census of the US banking industry also shows that, more often than not, politicians prevaricate when speaking about the soundness of large financial institutions – who are their clients, after all.

In the most recent comment in IRA’s Advisory Service, we talk about bank valuation in the age of “Industrial Policy” reborn, reflecting the clear shift away from the interests of private investors visible in the White House’s handling of the Chrysler bankruptcy and in prospect with the impending failure of General Motors (NYSE:GM) and GMAC.

In the cases of both companies, several sources tell the IRA, Obama Administration officials have threatened professional advisers with various official sanctions if they do not go along with the new political agenda of giving control of GM and Chrysler to the UAW. The unions have taken a disproportionate share of the economic output from the Big Three automakers for decades, measured by salary and benefits, but now Washington will give the UAW the rest, leaving creditors disenfranchised by the arbitrary action of the Executive Branch?

Read More

Category: Think Tank

Changes in Consumer Credit

Yes another informative chart from Ron Griess of The Chart Store.

Category: Consumer Spending, Credit, Think Tank

Is U.S. government-data being “massaged”?

> Many market-watchers claim that U.S. economic statistics are increasingly being revised downward in subsequent periods, suggesting that the figures initially being reported by Washington are “puffed up,” so to speak, most likely for political purposes. Well, I went back and had a look at the differences between the reported and revised data for various…Read More

Category: Think Tank

Claims, PPI data

Initial Claims totaled 637k, 27k more than expected and up from a revised 605k last week and Continuing Claims rose 202k from last week and was 160k higher than expected. The Labor Dept is blaming the auto industry for the jump in initial claims as it was those auto producing states that saw the biggest…Read More

Category: MacroNotes

Green shoots with inflation?

In addition to the heated debate over whether the global economy is experiencing a bottoming process or is just an inventory head fake, the other discussion is whether the policies of the Fed and other central banks will eventually lead to a period of high inflation. Inflation will be a process not an event so…Read More

Category: MacroNotes