Archives for November 2012

An Oracle’s Oracle

An Oracle’s Oracle

Dr. Paul Price makes the case for buying Oracle (ORCL) in his Seeking Alpha articleOracle Versus SAP: Valuations That Defy Logic. Paul argues that ORCL is undervalued. Especially compared to SAP:

S&P assigned a 4-star (out of five) buy rating to SAP with the shares at $77.21. They called present-day “fair value” as $70.90. Standard & Poor’s 12-month price target? $78, a whopping 1.02% above the current quote. If S&P is correct, we’d see only a 2.23% total return over the coming year.

S&P puts ORCL’s quality ranking in the top 1% of its entire research universe. It sees “fair value” as $39. That figure is 26.1% above last week’s closing price. S&P inexplicably carries a 12-month target price of just $34.

S&P rates Oracle only as a “hold.” Achieving even its lower, very modest, $34 goal would bring investors almost 10% from the present price, plus a yield of 0.8%. Many people would be quite satisfied with about 11% on a high-quality stock in our ZIRP [zero interest rate policy] world.

 

Paul notes that Morningstar also likes ORCL, giving it a 4-star buy rating and a $39 fair value estimate – same as S&P’s. While Morningstar’s analyst coverage currently leaves SAP temporarily unrated (for stars), it suggests that SAP is overpriced “based on a fair value that has been cut to 23.6% below the present price.”

 

Paul continues,

My own preference for predicting future price action is to assume a regression to the mean on various metrics for the same company’s shares. Note the valuations for ORCL at its previous “best buying opportunities” of the previous decade.

Oracle’s P/E is now lower than any time in the previous 18 years, excepting the exact bottom in 2008-09… ORCL shares look extremely cheap based on P/BV and P/CF as well.

Oracle’s outstanding results are not being reflected in its share price, which remains 15.3% under its 2011 peak. Meanwhile, SAP trades just pennies below last week’s all-time high of $77.38. Swapping out of SAP and into ORCL makes sense. (Oracle Versus SAP: Valuations That Defy Logic)

We’re adding 95 virtual shares of ORCL to Paul’s Virtual Portfolio. 95 shares is about $3,000, representing approximately 3% of the initial value of the Virtual Portfolio.

*****

Here is a screenshot of the most recent update of the Virtual Value Portfolio:

 

Notes:

Paul began this virtual portfolio on 10/28, buying approximately $3,000 of the stocks listed in column A. The prices in column H are the closing prices on 11/28/12.

Paul added to ESRX on 11/7, taking this position to 5%. Paul increased the allocation of CLMS to 5% on 11/26.

*Originally, Paul’s virtual portfolio position allocations were approximately 3%. We put 70% of our virtual cash into 23 stocks on 10/28, 3% each. Paul raised ESRX’s allocation to 5% on Nov. 7. He similarly raised CLMS’s allocation to 5% on 11/26. (Rule: positions should not exceed 5% of a portfolio.)

Virtual profits taken on the ANF position on 11/15 at $41.80.

TAP added on 11/19 at $40.15.

**NEW ACTIONS**

KSS added  11/29 at $46.

ORCL added 11/29 at $31.93.

 

See also: Market Shadows (11/25): From Fed, With Love. For the latest Market Shadows newsletter, click here. 

 

When Barry Meets Sallie: The President’s Choices to Lead the SEC

Courtesy of Pam Martens.

Sallie Krawcheck, former CFO at Citigroup

It took the New York Times 12 years to admit it was dead wrong to run editorials urging the repeal of the Glass-Steagall Act, the depression-era investor protection legislation that prevented Wall Street from collapsing the financial system for 75 years. (It took just 9 years from the date of repeal in 1999 for Wall Street to thoroughly corrupt the system, wreck the economy and collapse century old Wall Street firms.)

One would have expected the New York Times to have acquired a little humility from its prior ill-informed meddling with Wall Street regulation. Nothing doing. The Times, together with Bloomberg News and the Wall Street Journal have all magically decided to push Sallie Krawcheck out in front as the leading contender to become the permanent new Chair of the Securities and Exchange Commission, despite Krawcheck’s lack of a securities law degree (or any other kind of law degree), zero experience as a prosecutor, and the stench of Citigroup indelibly attached to her otherwise well-coiffed persona.

Yesterday, The Times ran a 990 word article on who it says are three leading contenders for the permanent chair of the SEC, now that Mary Schapiro has announced she will step down on December 14.  (SEC Commissioner Elisse Walter will serve as interim Chair until President Obama selects a permanent replacement.)  Out of the 990 word article, 33 words were devoted to two of the contenders: Robert Khuzami, the S.E.C.’s enforcement director, and Richard Ketchum, the head of the Financial Industry Regulatory Authority (FINRA).  The Times devoted 11 paragraphs to Krawcheck. 

Two days prior, on November 26, Bloomberg News ran the headline, “SEC Needs Krawcheck, Not a Caretaker.” The Wall Street Journal, ostensibly a competitor to Bloomberg News, liked the idea so much that they amplified the idea by repeating it on their own pages, linked to the Bloomberg story, and ran with the headline: “SEC Needs Someone Like Krawcheck.”

On April 8, 1998, The Times urged the removal of the “unnecessary walls” imposed by the  Glass-Steagall Act:

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Carson Block Drills the Chinese Govt and More!!

Courtesy of Larry Doyle.

Sense on Cents welcomes the opportunity to promote those who boldly speak truth to power. While the market has a funny way of exposing frauds, the exposing of financial artifice can be facilitated by those who dig through books, records, and accounting statements. No question that our government has failed us often on these fronts. One who is making a real name for himself in this practice is Carson Block and his firm Muddy Waters.

Last week Block dropped his most recent bombshell on a Singapore-based commodities firm named Olam. The firm is fighting back and quickly launched a suit against the not easily scared Mr. Block who took his case against Olam to the airwaves in an interview on Bloomberg. This 12-minute clip is a “GREAT VIEW” as the indefatigable short seller not only calls out those at Olam but also zings the Chinese government for now more aggressively supporting the business practices of financial frauds within the People’s Republic. What else does Mr. Block address? 

He compares Olam to Enron. He discusses the potential liability in his business practice and the critical need for those who are willing to short selected stocks.

Carson Block occupies a special spot in the Sense on Cents Hall of Fame. Watch, listen, and learn why I welcome promoting Block’s work.

Calling out the Chinese government!! Gotta love it.

Navigate accordingly.

Larry Doyle

Isn’t it time to  subscribe to all my work via e-mail, an RSS feed, on Twitteror Facebook? Do your friends, family, and colleagues a favor and get them to do the same. Thanks!!

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

Currency War Coming to Europe?

Courtesy of Bruce Krasting.

Switzerland is becoming politically isolated in Europe. The country got a big slap in the face from Germany this week. The German Upper House refused to accept a settlement offer from the Swiss government over the very messy matter of German tax cheats, and their accounts with Swiss Banks. A bit of history:

–  The US Justice Department took on the Swiss over banking secrecy four-years ago. The DOJ used a very big club. The deal was that the Swiss would give up the “Names” of account holders, if they did not, they would have to close up all business in the USA. So the Swiss government, on behalf of their banks, folded like a cheap suit in the rain.

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French Unemployment Highest in 14 Years (And It's Going to Get Much Worse)

Courtesy of Mish.

According to Google translation from Le Monde, October marks the 18th consecutive month of rising unemployment. A second article from Le Monde discusses the Rise in Unemployment for October.

Unemployment has risen sharply again in October. According to statistics released Wednesday, November 27 by employment center and the Ministry of Labour, the number of applicants for employment who had no activity during the month (Class A) increased by 46,500 people, including DOM. In September, he had jumped nearly 47 000 people. Worse, counting the unemployed reduced activity (category B and C), the increase reached 73,600 people!

Such explosion had not been seen since March 2009. With 4,870,800 people registered at employment center, the number of job seekers Class A, B and C reached a level never seen before, as far back as statistics. For those in category A, the level was not as high for fourteen years, in May 1998. Since the accession of François Hollande at the Elysee Palace, very bad numbers keep on coming: nearly 230,000 people have registered at employment center and since May.

In detail, it is over 50 years old who suffer most from the increase in October, with nearly 2% increase in a month for this category. Rising long-term unemployment is still very high, with nearly 11.5% of registered job seekers concerned about one year.

French Unemployment vs. US Unemployment

Those outside France need a bit of perspective on various classes of unemployment cited above. This is my understanding, pieced together from two different sources.

  • Class A: Jobless people that have had no activity at all during the past month.
  • Class B: Jobless people having worked less than 78 hours during the past month (“short reduced activity”)
  • Class C: Jobless people having worked more than 78 hours during the past month (“long reduced activity”).
  • Class D: Looking for a job, but currently sick, or in internship, or in state-sponsored “professional development” courses, etc
  • Class E: Those in state-sponsored low-pay “community service” jobs

The official unemployment rate only comes out quarterly.

Reader Andrea offers these comments …

For the sake of clarity, the official unemployement rate is given by the National Institut of Statistics (INSEE) each three months, not the ministry of labor class A-E activity. The distinction is similar to the weekly unemployment stats in the US vs. the official monthly unemployment and jobs report.

Moreover, and also similar to the US, many jobless people are not counted as unemployed because they have not been actively searching for a job.

Hollande Threatens to Nationalize Steel Plants Over Layoffs

Economic insanity in France continues at a steady pace. The latest bit of insanity is Hollande’s Threat to Nationalize Steel-Maker Mittal.

French President Francois Hollande has met the owner of steel giant Arcelor Mittal, after saying he would discuss nationalising one of its plants.

Arcelor Mittal – which employs some 20,000 people across France – announced in October that it intended to shut down the Florange plant’s already inactive furnaces, saying they were uncompetitive in such difficult trading times….

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Will We Hold It Wednesday – Fiscal Cliff Fever Edition

Will We Hold It Wednesday – Fiscal Cliff Fever Edition

By Phil of Phil’s Stock World 

 

Time to worry about the cliff again!

We took a few days off from worrying but comments from Senators Harry Reid and Mitch McConnell yesterday both indicated that little progress was being made on the ongoing negotiations and that was all it took to panic people out of positions yesterday afternoon, as we gave back most of Friday’s ill-gotten (low volume)gains.

In context, we’re still making good, bullish progress but yesterday’s action pretty much takes a “V”-shaped recovery off the table and now we’ll have to fight and claw tooth and nail just to get back to our strong bounce lines by the week’s end.  Anything less than that will not be a bullish signal into the weekend.  Our levels remain:

  • Dow 12,720 weak, 12,950 strong.
  • S&P 1,375 weak, 1,400 strong.
  • Nasdaq 2,900 weak, 3,000 strong.
  • NYSE 8,000 weak, 8,100 strong.
  • Russell 790 weak, 805 strong.

 

 

No serious damage yet but those paying attention to what’s going on in China are becoming very concerned about the Shanghai Composite, which just spent it’s 2nd day below the the very-critical 2,000 line – and that’s down 16.66% since June.

So far, the Hang Seng has avoided the same fate – trading at 22,000 and that’s up from 18,500 in January (18,9%) but it’s going to matter a lot which one of these indexes breaks first to follow the other.  So far, the drag is down, with the Shanghai finishing today down 0.9% at 1,973 and the Hang Seng dropping 0.62% to finish at 21,708.  It’s been a while since China has been a big concern but, if we finish out the month this way – expect it to be a big topic of conversation in December.

FXP is an ultra-short play on China and makes a nice hedge to Asian exposure (or commodities).  At $21.48, I favor selling the Jan $20 puts for .65 and buying the $21/25 bull call spread for $1.05 so you net into the $4 spread for .40 with a 1,000% upside potential at $25.  This is a nice hedge into the holidays if you’re worried about Global Panic as we forget to solver the fiscal cliff by 12/31.

 

Chinese economic growth relies on excessively high and potentially destabilizing levels of investment, according to an IMF paper – catching up to news from 2 years ago. The investment is mostly funded by domestic savings – good news, say the authors, but likely only meaning the coming adjustment will look different than if the country relied on foreign capital.

As you can see from the chart above, we still rely on those emerging markets for the majority of Global growth in GDP.  With Europe in Recession, we can ill-afford to lose China in 2013 and, of course, that’s assuming our own Fiscal Cliff nonsense doesn’t throw the US into Recession as well.

This morning, in Member chat, I predicted $85 or less for oil on any kind of build in supply on today’s inventory report.   We didn’t have to wait as it turns out, as oil has already hit $85.50 in pre-market trading – down $2 already from yesterday’s $87.50.  The problem facing oil is the same one facing copper ($3.50), silver ($33.16), gold ($1,712) and gasoline ($2.66) at the moment – people are losing faith in demand growth – especially in Asia.

We’ll watch this story unfold very closely and we’ll keep an eye on our levels.

Try Phil’s Stock World FREE here >

Kohl’s – Ready to Play Catch Up?

Note: I put this article up last night when the price of KSS at $51.15 (closing price), not realizing it would open substantially lower. KSS has traded today between $45.51 and $47.17. Paul noted that the stock was down today on negative same store sales from the Thanksgiving week. KSS’s on-lines sales were up. He said he was a big buyer today at an average price of $45.73. So, at this lower price, we are still adding KSS to the VIRTUAL Value Portfolio (below) at $46, and upping the number of shares to 65. In the future, rather than using last nights prices, I will wait till the next day to fill in a price. My apologies. ~ Ilene

Kohl’s – Ready to Play Catch Up?

By Dr. Paul Price 

A classic way to big profits is buying companies where the fundamentals kept improving while the shares stayed stagnant over relatively long periods. Wal-Mart (WMT) proved this theory is still valid earlier this year. Its stock went nowhere from August of 2008 through almost mid-year 2012 even as its EPS jumped from FY 2008’s $3.42 to an estimated $4.95 for the FY ending January 31, 2013.

 

 

WMT shares, at $70.80,  are now up about 24%  from this year’s low. WMT trades for a still moderate 14.3x current year estimate. In essence, WMT caught up with most of its past four years’ earnings growth of 44.7%, all in the last six months.

Discount retailer Kohl’s (KSS) now appears primed to do the same thing. The company has shown nothing but positive year-over-year comparisons over the past four years. Fiscal Q3 (ended October 31st) showed 13.7% growth at $0.91 this year versus $0.80 in 2011. Its shares have not yet reflected multiple and consecutive years of good news.

 

 

If Kohl’s hits its FY 2012 estimate, it will have grown EPS by more than 59% in four years. That’s a bigger jump in earnings than WMT posted over the same period.

At the November 28 quote of $50.85 KSS is offered at just below 11.1x this year’s projection. That’s a big discount to its 10-year median multiple of 18x.  Its average P/E from 2008 through 2011 was 13.9x even during poor economic times. Furthermore, its secure dividend provides a 2.52% current yield while we wait for the stock to catch up.

Kohl’s stock still looks undervalued and is long overdue for a move to at least $65 – $70 over the next 12 – 18 months. The mid-point of that range would be just about 13.3 times next year’s estimate of $5.07.

That’s quite achievable. KSS peaked at $75.50 during 2006 and hit $79.60 in 2007 on earnings that were well below today’s levels.

Value Line assigns Kohl’s an A+ for financial strength while noting its 90th percentile ranking for earnings predictability. (A 100th ranking is the best.)

Buyers now get the benefit of four years of growth without having to pay for it. My guess is that KSS stock will prove to be at least as good a bargain as its merchandise typically is.

My Trade for the Virtual Portfolio (screenshot below):  Buy 60 shares of KSS for $51.20 or better

Disclosure:  Long KSS shares

*****

Here is a screenshot of the most recent update of Paul’s Virtual Value Portfolio:

 

Notes:

Paul began this virtual portfolio on 10/28, buying approximately $3,000 of the stocks listed in column A. The prices in column H are the closing prices on 11/28/12.

Paul added to ESRX on 11/7, taking this position to 5%. Paul increased the allocation of CLMS to 5% on 11/26.

*Originally, Paul’s virtual portfolio position allocations were approximately 3%. We put 70% of our virtual cash into 23 stocks on 10/28, 3% each. Paul raised ESRX’s allocation to 5% on Nov. 7. He similarly raised CLMS’s allocation to 5% on 11/26. (Rule: positions should not exceed 5% of a portfolio.)

Virtual profits taken on the ANF position on 11/15 at $41.80.

TAP added on 11/19 at $40.15.

**NEW ACTIONS**

KSS added on 11/29 at $46.

ORCL added on 11/29 at $31.95.

 

Read the full newsletter: Market Shadows (11/25): From Fed, With Love. For the latest Market Shadows newsletter, click here. 

Student Loan Delinquency Rates Now Higher than Credit Card Deliquency

Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

As we’ve been speaking about for quite a few years, student loans are the next great bubble… in fact the broader university system is the next great bubble.  Tuition has been increasing at far greater rates than healthcare costs the past two decades, and both are well ahead of income growth.  (the first chart below is a few years old but you get the picture)  Hence the need to subsidize/borrow to the moon to keep the systems going.   Much as I spoke of the student loan bubble well before it was fashionable I will now be early on the “student debt forgiveness” action I expect coming.  

 

I fully expect the federal government to (in due time) to absolve America’s students of large portions of their debt sometime in the coming decade or two, as the numbers continue to go in very wrong directions.  To facilitate this, the government has taken over the vast majority of student loan servicing, just as it has done in the mortgage market.  So when you own the loans, it is much easier to give say a 40% haircut to their values someday down the road.  The government is already at step 1 of this by absolving all student debt in 20 years as long as you pay a minimum – 10% of income.  This of course creates an incentive to borrow huge sums since you need only pay a relatively small portion and can walk away from it all in 2 decades – quite perverse actually.  It is also a massive taxpayer subsidy to the university system.  Also if you work for certain parts of government the “stimulus plan” of 2009 created a path to walk away from all student debt after 10 years.

Along these lines the one area of debt that has exploded the past few years as people hunker down on their credit cards and mortgages is student debt.  In fact we highlighted a story showing student debt has passed credit card debt in this country.  Part of this is of course the bad job market, but part of this is the (even lower) rates offered by government on student debt.  But at some point one leaves school and has to begin paying those loans.  The chart to the right (below) is amazing in its consistency – essentially a 45 degree angle, starting from a relatively low base just over $200B – this has grown by a factor of 4(!) in a decade.

 

A good portion of this newly minted loans have already gone bad, and as this WSJ story points out as a whole student loans now have surpassed credit card debt in delinquencies.  I expect this to accelerate in the years ahead as “ability to repay”, especially for the young and out of work, doesn’t really seem to be much of an issue when offering tens of thousands of loans.  This lack of worrying about “ability to repay” should bring back memories of just half a decade ago in the mortgage market.  Last, I am reading many more stories in the past 12 months of parents taking on the burden of these loans on behalf of their kids, and now emptying their 401ks and savings to service them.   This is going to have implications for the economy that are incredibly broad and deep.

 

  • U.S. student-loan debt rose by $42 billion, or 4.6%, to $956 billion in the third quarter, the Federal Reserve Bank of New York said Tuesday. Overall household borrowing fell during that period.
  • Payments on 11% of student-loan balances were 90 or more days behind at the end of September, up from 8.9% at the end of June, a rate that now exceeds that for credit cards. Delinquency rates for all other consumer-debt categories fell or were flat.
  • Nearly all student loans—93% of them last year—are made directly by the government, which asks little or nothing about borrowers’ ability to repay, or about what sort of education they intend to pursue.
  • “Is there any way the federal government could possibly come out to the good?” Sen.Bob Corker (R., Tenn.) asked at a Senate Banking Committee hearing in July on student loans, noting that the government demands no collateral and has no underwriting requirements. “What we’re really doing is piling up debt down the road the same students are going to have to pay off.”
  • Unlike most other types of consumer credit, student debt is extremely difficult to discharge in bankruptcy. After falling behind on payments, a borrower typically finds it harder to obtain other types of consumer loans, or can only do so at higher interest rates.
  • Moody’s economist Cristian deRitis earlier this year warned of the prospect of a wave of future student-loan defaults that could have a “crippling effect on the ability of many households to access credit in the future.”
  • So-called Stafford loans account for more than three-fourths of federal student loans. They impose no credit standards and are capped at a total of $57,500 for undergraduates. Some of the money can be used to cover living expenses. For loans to parents and some graduate students, which have no upper limits, the government weeds out borrowers with an “adverse credit history,” such as a bankruptcy filing in the previous five years.
  • Student lending grew rapidly in the 2000s, as did other consumer borrowing. The bulk of the loans were made by private lenders and guaranteed by the federal government. In 2010, in a money-saving effort pushed by Mr. Obama, Congress cut out the private middlemen and had the federal government start making loans directly.
  • Since the end of 2007, just before the financial crisis hit, total student debt has grown by more than 56%, adjusted for inflation, the new Fed data show. During that time, overall household debt—including mortgages, student loans, auto loans and credit cards—fell by 18%, to $11.31 trillion as of Sept. 30. (surely a good portion of that is explained my massive mortgage defaults however)
  • Earlier this year, New York Fed researchers said that their reported delinquency figures understate the problem because many borrowers are not yet required to make payments, either because they are still in school or have been granted a postponement. The unemployed, for example, can defer payments for a limited period.
  • In an effort to reduce defaults, the Education Department has tightened standards for loans to parents and grad students, prohibited federal lending to schools if more than a certain percentage of its graduates default over several years, and allowed borrowers to postpone payments during periods of “hardship.” The administration also has finalized rules that enable certain borrowers to have their remaining debt forgiven after 20 years, provided that they make monthly payments at 10% of discretionary income—down from the previous standard of 15%.
  • Loans to students attending for-profit schools have been especially prone to problems. Such students account for 12% of total undergraduate college enrollment and 22% of Stafford loan funds, according to the College Board. Among those whose federal loans came due in the year ended Sept. 30, 2009, 23% defaulted—meaning they went a year without making a payment—within three years, Education Department figures show. That compares with a 13% default rate among students at all institutions.

 

Disclosure Notice

Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog

Quote Of The Day: SNB's Jordan "Base Scenario Doesn't See Euro Collapse"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

While Nassim Taleb sees Switzerland as the poster-child for what Europe should become, the quote above from SNB’s Jordan begs the question – which scenario does include the Euro Collapse (and remember, as he tells us, the Franc cap is ‘not’ currency manipulation).

  • *TALEB: FOR EUROPE TO SURVIVE MUST BECOME MORE LIKE SWITZERLAND
  • *JORDAN: FRANC CAP ISN’T CURRENCY MANIPULATION
  • *JORDAN: SNB MAY NEED TO TAKE LIQUIDITY OUT OF MARKET EVENTUALLY
  • *JORDAN SEES SUBSTANTIAL RISKS WEIGHING ON SNB BALANCE SHEET
  • *JORDAN: SNB BASE SCENARIO DOESN’T SEE EURO COLLAPSE


Student-Loan Delinquencies Surpass Credit Cards, 37.5% of Graduates Work in Jobs Requiring No Degree; Who is to Blame? What About Solutions?

Courtesy of Mish.

As costs of college soars (with thanks to absurd union salaries and benefits, as well as absurd administrator salaries and benefits), those attending college have increasing trouble paying back loans.

The fully expected consequence is Student-Loan Delinquencies Now Surpass Credit Cards.

The proportion of U.S. student loan balances that are in delinquency — that is, unpaid for 90 days or more — surpassed that of credit-card balances in the third quarter for the first time, according to the Federal Reserve Bank of New York. [no link provided]

Of the $956 billion in student-loan debt outstanding as of September, 11 percent was delinquent — up from less than 9 percent in the second quarter, and higher than the 10.5 percent of credit-card debt, which was delinquent in the third quarter. By comparison, delinquency rates on mortgages, home-equity lines of credit and auto loans stood at 5.9 percent, 4.9 percent, and 4.3 percent respectively as of September.

Since the NY Fed’s data began in 2003, the share of student debt which is delinquent has nearly doubled, from a starting level of 6.13 percent, while credit-card delinquency has steadily drifted lower since peaking at 13.74 percent in mid-2010 in the wake of the financial crisis.

Moreover, the actual rate of student loan delinquency is far higher than the official tally suggests. According to the New York Fed [no link provided], “these delinquency rates for student loans are likely to understate actual delinquency rates because almost half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle.”

In other words, the real delinquency rate for loans in the current repayment cycle is “roughly twice as high,” per the Fed — which would put it north of 20 percent.

37.5% of Graduates Work in Jobs Requiring No Degree

In its article Student Loan Debt Hits Another New Record: Study, Senior CNBC Correspondent Scott Cohn cites a study noting these facts.

  1. The average college student who graduated in 2011 had $26,600 in student loans
  2. Two-thirds of last year’s college graduates had student loan debt
  3. 37.8 percent of recent graduates are working in jobs that do not require a college degree
  4. State budget cuts, which have led to large tuition increases, fewer grants, and an increasing need for college students and their families to borrow money to finance their education
  5. 96 percent of graduates from four-year, for-profit colleges took out student loans, borrowing 45 percent more than graduates of other types of colleges.

Cohn mentioned the word “study” fourteen times without once providing a link to the study, or even mentioning the name of the study. I suspect this is some kind of record, jut not one anyone should be proud of.

Such semi-plagiarism is quite frankly inexcusable.

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Consumer Confidence in U.S. Increases to Four-Year High, But There’s a Catch

Courtesy of Lee Adler of the Wall Street Examiner

The financial news media ballyhooed the Consumer Confidence release today, as the index hit a 4 year high and beat economists’ consensus expectations.

Consumer confidence rose in November to the highest level in more than four years, a sign U.S. household spending will keep growing.

The Conference Board’s confidence index climbed to 73.7, the highest since February 2008, from a revised 73.1 reading the prior month, figures from the New York-based private research group showed today. The median forecast of 75 economists surveyed by Bloomberg projected a reading of 73.

via Consumer Confidence in U.S. Increases to Four-Year High – Bloomberg.

But there’s a catch.

Briefing.com publishes a nice chart of the index along with its two primary components. I’ve added a few embellishments, including an overlay of the S&P 500 and a trendline connecting the peaks in the present condition component. That chart shows that there’s less to the 4 year high than meets the ear. It sounds great, but the fact is that this “high” is below the low of 2002-03 and way below the upper limit of the 13 year downtrend in confidence.  While there’s been some recovery, consumers can hardly be seen as ebullient or even resilient. In fact, they remain downright depressed.  The Present component of the index is still at less than half the level it was in 2006 and 2007.

Consumer Confidence Index- Click to enlarge

It is about 4 years from the last low in the present conditions index. Yet it remains well below the trendline established by the last two peaks, in 2000 and 2007, in  the present condition component. In the 4 years from the 2003 low to the 2007 peak, the index rose 80 points. In the 4 years since November 2008, the index has risen by less than half the amount it rose in the 2003-2007 period.

The other thing we notice is that consumer confidence tends to follow stocks. The biggest exception was in 2007, when consumer confidence began to collapse as housing prices started down before stocks. The fact that this indicator typically follows the stock market makes it relatively useless as a market indicator.

Get regular updates the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Click this link to try WSE's Professional Edition risk free for 30 days!

Copyright © 2012 The Wall Street Examiner. All Rights Reserved. The above may be reposted with attribution and a prominent link to the Wall Street Examiner.

Why should I consider harvesting Natural Gas gains and buying Coffee?

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

The above chart reflects a wide variety of products performance, year-to-date! Two assets to note are… Natural Gas, up 21% YTD and Coffee down 32% YTD.

Why should investors consider harvesting long positions or shorting Natural Gas? Power of the Pattern suggested to take this action last week in NG.  (see harvest NG here)

Why should investors consider going long Coffee with stops just below support? (see why buy coffee on support here)

 

The Central Banks’ Potemkin Villages

The Central Banks’ Potemkin Villages

Courtesy of Surly Trader

Kyle Bass of Hayman Capital made a through a dystopian view of our central banks’ inability to keep their hands from “fixing” the world’s problems:

Central bankers are feverishly attempting to create their own new world: a utopia in which debts are never restructured, and there are no consequences for fiscal profligacy, i.e. no atonement for prior sins. They have created Potemkin villages on a Jurassic scale. The sum total of the volatility they are attempting to suppress will be less than the eventual volatility encountered when their schemes stop working…

In the end, the EMU won’t look the same, if it exists at all. This is even before the tide turns on some of the world’s largest sovereign debtors like the United Kingdom, and of course the biggest debt zombie of them all:    Japan. Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion.  We believe that war is an inevitable consequence of the current global economic situation.

For now, Mr. Bass has put his focus on Japan where he sees a rapid and unexpected deterioration due to an aging population, shifting current account status, and a massive debt load:

We believe that Japan is teetering on the precipice of financial collapse, and any number of data points or events in the coming weeks and months could be the proverbial tipping point.    It could be as significant as a negative structural current account, a revocation of BOJ policy independence, or even political and economic conflict with regional neighbors or perhaps something as innocuous as ratings actions or Basel III regulations that force financial institutions to reduce their hugely concentrated exposure to JGBs. What we do know is that when it does break loose, 20 years of suppressed spring?loaded interest rate volatility on the back of the largest peacetime accumulation of sovereign debt will afford no time to readjust portfolios to get out of the way.

Read the full letter here: Kyle Bass – Hayman Capital Market Commentary Nov 2012

Picture credit: Jesse's Cafe Americain

The Fiscal Cliff And The Grand Bargain

Courtesy of Charles Hugh-Smith of OfTwoMinds blog

The Grand Bargain is unraveling, and a new arrangement will take the place of the Status Quo–whether we like it or not.

Correspondent Arnold suggested that I address the fiscal cliff, so here goes.
 
The first step is to set aside ideological blinders and confirmation bias, i.e. only looking for data that supports our current beliefs.
 
The second step is to look at the foundation of everything: household income.Household income is the foundation of taxes paid, consumption (spending) and savings/investment. If household income is declining, that means the pie of money that can be divided up into taxes paid, consumption and investment is shrinking.
 
If taxes go up, there is less pie left for spending or investment. And since the economy ultimately depends on private-sector spending and investment, then reducing those to fund government spending means there will be less private spending and investment.
 
If the government spent the taxes on investments that yielded a higher return than private investments, higher taxes would not devastate the economy. But the problem is that there are no feedbacks on government spending that favor efficiency or high yields.
 
Government spending decisions are made solely on the basis of constituency pain:the constituencies that create the most political pain for politicos and Upper-Caste government bureaucrats get funding. Efficiency and high-yielding investments are not in the political equation at all; there is no feedback in monopolies except those that favor expansion of budgets and constituencies.
 
Let's look at a chart of household income from Median Household Incomes: The "Real" Story (Doug Short). Household income has been negative since 2000 except for two brief spikes:
 
 
 
 
Here is another chart depicting the huge gap between nominal income and real income:while nominal income rose a seemingly healthy 25% since 2000, real income has declined almost 10%.
 
 
 
 
Median income doesn't tell us who is getting most of the income, so let's look at this: All the increases in income since 1970 accrued to the top 10%.
 
 
But we have to remember that median income includes all income, including the wealthy. Real income has declined by 8%-9%. The pie is smaller, period.
 
Some of that is due to a declining full-time workforce, which has dropped to 115 million workers:
 
 
 
 
Now let's look at the size of government spending and taxation. In terms of the overall economy (GDP), government spending's share of the economy has been rising for decades. The Internet and housing bubbles briefly "grew" the economy faster than government spending, but once these one-off expansions faded, government spending quickly returned to its trendline (ever higher).
 
 
 
 
Federal spending rose exponentially until it exceeded the carrying capacity of the economy. For context, recall that Social Security costs $817 billion, Medicare and Medicaid costs total about $800 billion annually, and the Pentagon/National Security budget is around $690 billion. Add in interest on the ballooning national debt, and the vast majority of the Federal budget goes to these four. You could eliminate all other Federal spending and these four consume all the tax revenues and then some.
 
 
 
 
Tax receipts, meanwhile, topped out at $2.4 trillion, leaving a structural gap of $1.3 trillion.
 
 
 
 
OK, so now we see why government spending can't keep following an exponential path higher: households are earning less income.
 
Next up: the welfare/cartel State. Some welfare flows directly to individuals ("transfer payments") and some flows to cartels: defense, sickcare, the education cartels, etc.
 
The problem here is the number of citizens who are dependent on government transfers and spending now exceeds the number of full-time workers. Recall (see chart above) there are 115 million full-time workers in the U.S.
 
Of the roughly 150 million workers in the U.S., 38 million earn less than $10,000 per year, 50 million earn less that $15,000 a year and 61 million earn less than $20,000 annually. All these numbers are drawn directly from Social Security Administration payroll data.
 
100 million wage earners, or 2/3 the entire workforce, earn less than $40,000 per year.
 
In practical terms, only the 115 million full-time workers pay significant taxes, and of those, The top 25% (those earning more than $66,193) paid 87% of the taxes. The bottom 50% of taxpayers, roughly 70 million people, earned 13% of the income and paid 2% of the income taxes collected.
 
(The top 1% of taxpayers reported almost 17% of all taxable income and paid 37% of all income taxes. The top 5% reported 32% of all income and paid 59% of the taxes, and the top 10% earned 43% of the income and paid 70% of the taxes. Where Do You Rank as a Taxpayer?)
 
There are roughly 127 million people dependent on government transfers: 61 million recipients of Social Security and Medicare (That Which is Unsustainable Will Go Away: Medicare May 16, 2012) (or Medicaid for the 11 million people drawing lifetime SSI Social Security disability) and 66 million people receiving welfare (SNAP food stamps, housing credits, Medicaid, etc.): When Work Is Punished: The Tragedy Of America's Welfare State(Zero Hedge)
 
That means there are 1.1 government dependents for every full-time worker in the U.S. Please read the linked stories above if you believe this is sustainable.
 
In my analysis, there has been a Grand Bargain reached by the 3.5 classes in the U.S. The Three-and-a-Half Class Society (October 22, 2012)
 
The top 1/2th of 1% owns most of the productive assets of the nation and most of its machinery of governance (this is the "half class"). Most of the income not siphoned off by this "we own the important stuff" class goes to the next 19.5% who pay most of the Federal taxes (class #1).
Class #2 is the dwindling "middle class" (also known as the working poor) which receives no government transfers and lives off earned income. This is perhaps 30% of the households.
Class #3 is the lower 50% who depend on transfers, subsidies, etc. because they are retired, don't make enough at their jobs to support their families or are disabled (legitimately or otherwise).
 
The Grand Bargain was this: we at the top will pay significant taxes as long as we get to control the levers of financial and political power. We in the top 19% will pay much of the taxes as long as we and our children can continue to live well and accumulate wealth. We in the "middle class" will continue to work hard as long as we have hope of bettering our lifestyle and the lives of our children. We in the bottom 50% and retirees agree not to threaten the top .5%'s power and the wealth of the top 19% as long as we can get by on our government transfers.
 
This Grand Bargain is now fraying as the promises made to everyone cannot possibly be met. Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. The triple-whammy is the upper-middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their net worth.
 
That which is unsustainable will be replaced by another more sustainable arrangement. Everyone who slips off their ideological/self-interest blinders knows the Status Quo is unsustainable, and so everyone in the 3.5 classes is shifting nervously: will I get taxed to the point of "uncle" or will my bennies get slashed?
 
By heavily taxing earned income, the system extracts the highest taxes from the most productive citizens, leaving the less-productive with essentially no income taxes and the super-wealthy with the huge tax break offered to capital gains and other unearned income.
 

In essence, this is a vote-buying scheme by the Status Quo: the top .5% control the policies of the State in alliance with the State's own Elites, and together they buy the complicity of the bottom 50% to passively accept their dominance.

In other words, the bottom 50% pay relatively modest taxes or are recipients of Central State aid and the top .5% who "own" the political process limit their taxes by favoring unearned income (what they collect from sales of securities, stock options, rents, etc.). Thus the productive quintile (top wage earners) pay the highest tax rates and most of the taxes.
 
It's a partnership of "Tyranny of the Majority" and "entrenched incumbents Elites."If the political Status Quo alienates the majority by making them pay more taxes, they risk losing power in the next election. If they alienate the top .5% who fund their multi-million-dollar campaigns, then they will also lose power. So they heap the tax burden on what remains of the upper-middle class.
 
When that 20% rebels, falters or opts out, the system collapses for want of tax revenues. Not coincidentally, that happens to fit the Pareto Distribution: the 20% "vital few" exert outsized influence on the 80%.
 
The Grand Bargain is unraveling, and a new arrangement will take the place of the Status Quo–whether we like it or not.
 
 

My new book Why Things Are Falling Apart and What We Can Do About It is now available in print and Kindle editions–10% to 20% discounts.

The EU Just Lost Another Prop

Courtesy of ZeroHedge. View original post here.

Submitted by Phoenix Capital Research.

 

Meanwhile, as Greece continues to distract the markets, France, the other primary prop for the EU besides Germany, is now experiencing an economic contraction on par with that of 2008-2009.

 

Indeed, France’s September’s auto sales numbers were worse than those of September 2008 (the month Lehman collapsed). The country’s PMI reading is back to April 2009 levels. Even the French Central Bank, which would hold off as long as possible before unveiling bad news, has announced the country will re-enter recession before year-end.

 

Over the past few weeks, an extraordinary cry of alarm has risen from chief executives who warn that the French economy has gone dangerously off track. In an interview to be published on Nov. 15 in the magazine l’Express, Chief Executive Officer Henri de Castries of financial-services group Axa (CS:FP) warns that France is rapidly losing ground, not only against Germany but against nearly all its European neighbors. “There’s a strong risk that in 2013 and 2014, we will fall behind economies such as Spain, Italy, and Britain,” de Castries says.

 

On Nov. 5, veteran corporate chieftain Louis Gallois released a government-commissioned report calling for “shock treatment” to restore French competitiveness. And on Oct. 28, a group of 98 CEOs published an open letter to Hollande that said public-sector spending, which at 56 percent of gross domestic product is the highest in Europe, “is no longer supportable.” The letter was signed by the CEOs of virtually every major French company. (The few exceptions included utility Electricité de France, which is government controlled.)

 

            http://www.businessweek.com/articles/2012-11-14/french-ceos-help

 

We get additional confirmation that France is in big trouble from its partner in propping up the EU, Germany.

 

German Finance Minister Wolfgang Schaeuble has asked a panel of advisers to look into reform proposals for France, concerned that weakness in the euro zone's second largest economy could come back to haunt Germany and the broader currency bloc.

 

Two officials, speaking on condition of anonymity, told Reuters this week that Schaeuble asked the council of economic advisers to the German government, known as the "wise men", to consider drafting a report on what France should do…

 

"The biggest problem at the moment in the euro zone is no longer Greece, Spain or Italy, instead it is France, because it has not undertaken anything in order to truly re-establish its competitiveness, and is even heading in the opposite direction," Feld said on Wednesday.

 

"France needs labour market reforms, it is the country among euro zone countries that works the least each year, so how do you expect any results from that? Things won't work unless more efforts are made."

 

http://uk.reuters.com/article/2012/11/09/uk-germany-france-economy-idUKBRE8A80MN20121109

 

France will be a bigger problem than Spain or Italy for the EU?!?! That is one heck of an admission from a German official. If France deteriorates then it’s game over for the EU.  The current bailouts mean Germany is already on the hook for an amount equal to 30% of its GDP. If France tanks the amount will balloon astronomically. At that point it’s game over.

 

This is why the Powers That Be in Europe are absolutely terrified of what’s happening there.

 

If you’re looking for ideas on how to navigate this mess, we have produced a FREE Special Report available to all investors titled What Europe’s Collapse Means For You and Your Savings.

 

This report features ten pages of material outlining our independent analysis real debt situation in Europe (numbers far worse than is publicly admitted), the true nature of the EU banking system, and the systemic risks Europe poses to investors around the world.

 

It also outlines a number of investments to profit from this; investments that anyone can use to take advantage of the European Debt Crisis.

 

Best of all, this report is 100% FREE. You can pick up a copy today at:

http://gainspainscapital.com/eu-report/

 

Best Regards,

 

Graham Summers

 

PS. We also offer a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a copy of this report at:

 

 

 

Algos Take Stocks In A World Of Their Own

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Reid’s sell-off has been entirely retraced by a Boehner-Obama double-act in which they didn’t spit, scratch, and gnaw at each other. The algos have it now and so stop-runs in stocks are all that counts. Equities are in a world of their own as they decouple from everything from high yield credit to Treasuries and from oil to the USD. Correlations have dropped as we approach Reid’s top – we wonder if reality will sink back in shortly. It would seem, once again, that EURUSD is the most-leveragable vehicle of the day once again… and of course this ramp enabled AAPL to get back to yesterday’s VWAP.

Stocks (blue) in world of their own…

 

long-term EURUSD and stocks remain coupled but bonds have left the party…

 

as correlations (lower right) break down across asset classes and equities surge away from credit, rates, commodities, and FX markets…

 

If you are a bull it seems like HYG is better trade here; if bearish fade SPY’s exuberance; or play the middle…

and meanwhile in AAPL – we retraced to yesterday’s VWAP…

 

Charts: Bloomberg and Capital Context

Bank of Japan Posts Whopping ¥233 Billion Loss as its Soaring Balance Sheet Hits Record ¥156 Trillion

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

But… but… a central bank can never lose money. Bzzzz, wrong. As it just so happens, the world's most tragicomic farce of a central bank, and one which is about to officially lost its (faux) "independence" and become a branch of the Japanese government if the up and coming PM Abe has his way, the Bank of Japan, just reported that in the quarter ended September 30, the Japanese central bank reported an operating loss of ¥183.4 billion, and a net loss of ¥232.9 billion. As a comparison, the loss in the same period in 2011 was "only" 91 billion. This is a harbinger of the total collapse that is the utterly meaningless capital tranche of all central banks will go through before the terminal phase of the global Keynesian experiment is finally completed.  But in the meantime, enjoy this chart of the Bank of Japan's balance sheet returning back to a record ¥156… trillion.

 

And for those who enjoy having fun with google translate, here is the BOJ press release. Red – amusement follows:

128th fiscal year financial statements for the first six months (FY 2012)

Assets and Liabilities

Looking at the situation of assets and liabilities at the end of the first half of fiscal 2012, compared with the end of the previous fiscal year increased by 12 trillion yen 2,317 billion (+8.9%), total assets are 149 trillion yen 9,208 billion, mainly government bonds was. In addition, compared with the end of the previous fiscal year increased by 12 trillion yen 3,019 billion (+9.1%), total debt was 4,410 billion to ¥ 14.7 trillion center (current account) deposits.

And is as follows: take a closer look at these changes in the assets and liabilities of the Bank of Japan. First, looking at the part of the asset, from the fact that government bonds, etc., etc. The amount of the purchase exceeds the amount of redemption, and 102 trillion yen 8,593 billion, more than 18 trillion yen 4,922 billion of the previous fiscal year end (Tasu21.9%). On the other hand, due to a decrease in funding due to funds-supplying operations against pooled collateral, and 34 trillion yen 4,435 billion, less than 8 trillion yen 4,959 billion the prior year end loans, (? 19.8%). The balance of assets purchased by the Fund "such as asset purchases", to ¥ 61 trillion 7,729 billion.

Then, looking at the part of the debt, primarily due to funding through the Fund "such as asset purchases", and ¥ 43 trillion 9,683 billion, more than 9 trillion yen 3,278 billion end of the prior year current account, (+26. 9%). During this time, the 80 trillion yen 9,287 billion, and more than 2 trillion yen 45.8 billion the prior year end balance of ticket issuance, the Bank of Japan (+2.6%).

Profit and loss situation

As for the status of the profit and loss for the first six months of fiscal 2012, ordinary income was a loss of ¥ ? 1,833 billion (ordinary loss). This is intended to primarily driven and that the income related foreign exchange has become more than loss significantly due to the strong yen, that income investment (equity trust property) became super loss money held in trust due to the impairment of shares held is.

Like that it has made trading losses reserve fund of index-linked exchange-traded fund, special income, to ¥ ? 468 billion.

As a result, loss of ¥ ? 2,329 one hundred million surplus before income taxes, surplus income after deducting next (Fri loss before income taxes), corporate income tax, the business tax and residence tax yen ? 2,302 million, income ( I became a gold) loss.

Coffee bulls were on the wrong side and got “Creamed!” Time for the bears to get “Creamed?”

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

After a 200% rally in Coffee futures between 2009 and 2011, investors grew to love coffee, hitting a 90% bullish reading near Coffee’s top!  Boy were the bulls in for it, as Coffee proceeded to lose 50% of its value in 18 months.  Was this a crowded trade? FOR SURE!!!

Investors might like Coffee in the morning, yet when it comes to sentiment readings, very few are bullish Coffee right now.  Current readings stand at just 15% Bulls, one of the lowest readings in years.  Articles are easy to find in regards to record short positions that are in place in Coffee right now. Line (1) in the chart above, represents a 7-year support line, that has seen some decent Coffee rallies take place off of.

The bulls formed a crowded trade in Coffee 18 months ago and got creamed.  Have the bears formed a crowded trade and about to get creamed too? 

Europe Shrugs Off Harsh Reality On Boehner's Banter

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Europe was looking a little dark this morning; EURUSD was sliding, sovereign bonds flat-to-wider, and European stocks and credit were at one week lows. Then Speak Boehner opened his mouth and the correlated world of systemic cliff-on / cliff-off jumped to life and saved the day for all asunder. EURUSD remains down on the day as GGBs lose some hope, credit remains an underperformer but the jerk higher in stocks into the close was just remarkable in its idiocy. The equity move looks far out of line to the rest of risk assets for now…

 

Stocks soared on Boehner – as did credit – but the latter remains less excited as is clear…

 

and while EURUSD managed to scoot higher and test stops, it remains lower on the day…

 

and even GGBs got a lift on the idiocy…

 

Charts: Bloomberg

From Black Friday To White Noise: Why Thanksgiving Sales "Data" Is Biased And Irrelevant

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

While the common wisdom, espoused by any and all commission-taking wealth manager looking to up his AUM, is that Black Friday sales (and the anecdotal evidence from self-referential store-owners and CEOs) can tell us about the trend in the economy or they offer some divine extrapolated insight into the year’s final sales number. The truth; you can’t handle the truth.  As BofAML’s Michelle Meyer notes, there is no correlation between total holiday sales and Black Friday sales over the past seven years. In fact, we believe that not only are the early estimates of Black Friday sales insignificant, they can send misleading signals. More fundamentally, Black Friday sales can either signal a
healthy consumer or a desperate one, depending on the state of the
economy. The bottom line is that we advise fading the Black Friday sales reports, but paying attention to the aggregate holiday sales reports.

 

Via BofAML: Black Friday = White Noise

Although not in the spirit of the holiday season, we are going to throw some cold water on some of the hype surrounding Black Friday sales. After the Thanksgiving weekend, the press goes wild reporting on the early estimates of Black Friday sales and its signal about the health of the economy. The argument typically goes as follows: about a third of retail sales occur during the holiday season and since consumer spending is 70% of GDP, Black Friday sales can tell us about the trend in the economy. We disagree. In fact, we believe that not only are the early estimates of Black Friday sales insignificant, they can send misleading signals. Instead of focusing on Black Friday sales, we think it is best to wait for more comprehensive data regarding total holiday sales.

 

 

Biased and irrelevant


We find that Black Friday sales have no correlation with total holiday sales over the past seven years. This is because there is likely a sampling bias from one year to the next as retailers have steadily expanded the amount of time shoppers can receive Black Friday discounts. This is exacerbated by the steady shift toward internet shopping, which is likely difficult to account for. More fundamentally, Black Friday sales can either signal a healthy consumer or a desperate one, depending on the state of the economy. Discounts during the Black Friday period can effectively “pull forward” sales from the rest of the holiday season. In particular, when economic conditions are particularly challenging, shoppers may be more inclined to search for discounts. This could explain the divergence in 2008 where Black Friday sales jumped higher while holiday sales declined.

 

Wait for the aggregate number


While the early read from Black Friday is not informative and at times misleading, the reports of total holiday sales should not be dismissed. There are a number of organizations that report holiday sales on a timely basis, including the National Retail Federation (NRF), ShopperTrak and the International Council of Shopping Centers. In this analysis, we focus on the NRF data since 2000 (the longest history available). We find that the NRF measure of holiday sales has a good correlation with certain components of retail sales.

 

 

The bottom line is that we advise fading the Black Friday sales reports, but paying attention to the aggregate holiday sales reports. This is useful as an early read for predicting certain components of retail sales. However, once we have the actual retail sales report, we no longer need to focus on just holiday activity to understand the trend in consumer spending.

 

Boehner Arouses Market As Reid Beatdown Forgotten

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Just 12 days ago (before the cone of silence began), we saw the beginning of the Boehner bounce as the speaker spaketh and the market obeyeth. Headline-chasing algos know only one thing it appears, when Democrats speak, sell; when Republicans speak, buy… oh how we love these efficient markets…

It seems someone somewhere was desperate to see a Green day…

 

and as we pointed out two weeks ago (before the cone of silence)…

 

Charts: Bloomberg

Boenher Comments Move Market Up

Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

This is going to be very tiring in a few weeks…after this morning’s selloff, we had these comments to lift the S&P 500 up 5 points in minutes:

BOEHNER SAYS WILLING TO PUT REVENUES ON THE TABLE IF ACCOMPANIED BY SPENDING CUTS, OPTIMISTIC DEAL WITH OBAMA CAN BE REACHED

Of course that is nothing new but it’s just a market dominated by these politician comments.

 

EDIT 10:42 the entire gap down just got filled – more crazy action.

Disclosure Notice

Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog

Surprise: Right After The Election, New Home Sales Tumble From Downward Revised Two Year High

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

There are those who may be surprised that last month’s number of Seasonally Adjusted New Home Sales, which was then reported at 389K, and which number hit the airwaves days before the Obama reelection, was the highest since April 2010. We are not among them, as we were fully expecting today’s number to be a major revision of the September number lower – as just happened, with the whopper of a print revised far lower to 369K – but doubled down with the additional miss of expectations of Seasonally Adjusted annualized new home sales of 390K for October when in reality only 368K were sold. All these numbers are annualized. When observed on an as is basis, in October there was a grand total of 29,000 new homes sold in the entire USA, with the Northeast representing a whopping… 2,000 of this. Oh and of the 29,000 houses sold, 9,000 were not even started. And finally, for those who enjoy pointing out the rise in home prices driven only and exclusively by foreclosure inventory stuffing and removal of all such real estate from the open markets, both the median and average new home price ($237,700 and $278,900) printed at at the lowest since June. Oh wait, we know: Sandy’s fault. Which explains all bad data. When the data is good, it is nobody’s fault.

Please point out the housing “recovery” on the chart below.

And a longer term chart:

The Grand Inquisitor

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Via Mark J. Grant, author of Out of the Box,

“Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”
 
                     -Ferris Bueller, Ferris Bueller’s Day Off
 
Sometimes you just have to sit down and stop.
 
Greece and the grand machinations of the European Union came to mind as it occurred to me that all of the fine points aside; Greece had become a ward of the State, that the debt was unpayable and everyone knew it, and that all that had been accomplished was to hand them more money, add more debt and to couch it all in complicated phrases with ingenuous fantasies of surpluses to come which is the game initiated by Greece and picked up now by the EU. The math doesn’t even add up so it can be said that it was a poor attempt at hide-and-seek but I suppose it was the best they could do given their skill-set these days. Whatever had lingered from German exactness and precision has faded into a management where each problem is dealt with by handing over more money and where facts are maligned and sculpted by political expediency. Yes, there are attempts at austerity, more controlled budgets and the like but, in the end, more money is thrown about as there is not a leader in Europe that is prepared to confront any other solution.
 
“Ford, you’re turning into a penguin. Stop it.”
 
                   -The Hitchhiker’s Guide to the Galaxy
 
Spain
 
As you watch the antics of the politicians in Spain you realize that they are first cousins to the Greeks. Prime Minister Rajoy and his merry band of henchmen are playing the same tunes as we have all heard before. The reasons that Spain has not come begging for alms yet is not too complicated. They don’t want to be audited by the Troika, God forbid, they want no one peering at the actual state of their Real Estate market, they don’t want anyone but paid flunkies examining their banks and they want the EU/ECB to buy their bonds, give them money and lower their interest rates like some kid in Madrid awaits for Santa Claus. They might get away with it too except for the IMF which is held to different standards, not too much different these days, but not quite the ones to be found in Athens, Lisbon or Madrid.
 
Los cupones de alimentos se detendrá inmediatamente eficaz porque recibimos aviso de que falleciera. Que Dios los bendiga. Usted puede volver a solicitar si se produce un cambio en sus circunstancias.
 
[Your food stamps will be stopped effective immediately because we received notice that you passed away. May God bless you. You may reapply if there is a change in your circumstances.]
 
Spain is now going to take the EU money to recapitalize their banks. This means they will lay off about 60% of the people of the troubled banks in Spain. They are also going to set up a bad bank which will be have an actual value of maybe 55% of what they claim given the Real Estate conditions in Spain. The sub debt holders and the preferred holders of these institutions will take part of the losses. Any thoughts that the two major Spanish banks will not be affected by all of this is a late night fantasy accompanying the drinking of too much red wine. The Spanish economy, bad now, is going to get worse and the unemployment figures; much worse. The government, much to their dismay, is going to be forced to the wall and the auditors will march in and their “dynamic provisioning” exposed for what it is, fiddling with the books, and the recent history of Athens will be replayed in Madrid as the Spanish Prime Minister declares it a “Great Victory for Europe.”
 
“A brick falling from your hand to the ground may be a great victory for gravity but it may also be a great travesty for your foot.”
 
                                           -The Wizard
 
The European Central Bank
 
The ECB will save the world subject to the decisions of Europe’s political leaders. Saving the world is a good thing and keeps getting promised by virtually every religious leader for the past several thousand years. Just do this and do that and pray a lot and ask for divine guidance and surely we will all be saved. The ECB will hand out Euros, toss them with wild abandon in the streets of Paris and Madrid and fling them from the cathedral roofs in Europe if directed by their Holinesses in Brussels. As Spain is just about to take the indulgence and as the standards are set for piety and religious observation; the second Spanish Inquisition is about to begin and the zealot may be found wanting.
 
Preparation
 
The Spanish chronicler, Sebastiande Olmedo (Chronicon magistrorum generalium Ordinis Prædicatorum) calls Torquemada “the hammer of heretics, the light of Spain, the savior of his country, the honor of his order”. Perhaps Senor Barroso will welcome him back but perhaps not; Fray Tomas de Torquemada, the Grand Inquisitor.