The Big Picture

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• Square Goes Mainstream
• US Lawsuits (InfoPorn)
• What Bernanke Told Us At Jackson Hole
• Dallas mfr’g follows negative NY, Philly, Richmond
• Is the S&P500 Cheap?
• 10 Electric Monday AM Reads
• Effects Of Corruption On The Markets
• Deploying Corporate Cash
• Greece saves the day!?

Square Goes Mainstream Posted: 29 Aug 2011 11:48 AM PDT Square, the iPhone Credit Card Machine, Goes Mainstream: > via The Atlantic

US Lawsuits (InfoPorn) Posted: 29 Aug 2011 11:40 AM PDT I’d love to see the counter arguments to this: Via HolyKaw

What Bernanke Told Us At Jackson Hole Posted: 29 Aug 2011 09:15 AM PDT

Dallas mfr’g follows negative NY, Philly, Richmond Posted: 29 Aug 2011 08:52 AM PDT Following the negative readings in the mfr’g regions of NY, Philly and Richmond, and slightly positive Kansas City area, the Dallas Fed mfr’g figure was -11.4, 2.4 pts worse than expected and the 4th month in a row of declines. New Orders fell from 16 to 4.8, Production dropped from 10.8 to 1.1, Backlogs fell almost 17 pts to -8.6 and Employment was down to 5.4 from 12.1. Prices Paid fell while Prices Received was unchanged. In terms of timeliness and sensitivity to the August goings on, this survey is helpful as it covers data collected from Aug 16th to the 24th. While the Dallas survey is never a market focus because the data point is only 7 yrs old and thus lacks any history, the trend in mfr’g nationally is becoming obvious. The Chicago region reports next on Wednesday and all will be reconciled on Thursday with the release of the national ISM.

Is the S&P500 Cheap? Posted: 29 Aug 2011 08:43 AM PDT I was somewhat surprised by a Bloomberg article discussing how cheap the S&P is (mentioned here this AM). Its not that Bloomie has suddenly become a cheerleader, but rather, this piece reflects the beliefs of a large chunk of classically trained value mutual fund managers. Here’s a Bloomberg excerpt: “At 1,176.80, the S&P 500 is trading at 10.8 times analysts' forecast for profits in the next 12 months of $109.12 a share. For the P/E ratio to reach its five-decade average of 16.4 without shares appreciating, earnings would have to fall to about $71.76 a share, 22 percent below the last 12 months, data compiled by Bloomberg show. Should companies meet analysts' profit estimates, the S&P 500 must advance to about 1,790 to trade at the average multiple of 16.4 since 1954, according to data compiled by Bloomberg. That's more than 50 percent above its last close. Futures on the S&P 500 expiring next month gained 1 percent to 1,185.9 at 7:48 a.m. in London today.” (emphasis added) Of course, left unsaid is what if analysts estimates are too high; Historically, the fundie community has overestimated earnings growth by a factor of 2X. Also unsaid was the impact of recession on earnings. A 22% drop during a recession is hardly a Great Depression collapse; its not even a Great Recession drop. Indeed, that line of thinking ignores the overhang of housing, the deleveraging consumer, and tight credit conditions — all of which could easily persist for years to come. Bottom line: The Reagan Recession came at the end of a 16 year bear market, plus benefited from Volcker breaking the back of inflation. The threat today is a Japan like deflationary spiral, including falling asset prices and an unwillingness for investors to buy up for a dollar of earnings. In other words, a falling P/E could be evidence of an ongoing deflationary phase, and not proof that markets are cheap. > Source: S&P 500 Falls to Reagan Recession Values Inyoung Hwang Bloomberg Aug 29, 2011 2:49 AM http://www.bloomberg.com/news/2011-08-29/s-p-500-trading-at-reagan-recession-valuations-after-losing-2-3-trillion.html

10 Electric Monday AM Reads Posted: 29 Aug 2011 06:38 AM PDT Hey, I have electricity in the office! A welcome change from what the weekend storm damage wrought.  If I actually had electrical power, this is what I would be reading: • This curious title requires a closer look: S&P 500 at Reagan Recession Values After $2.3 Trillion Drop (Businessweek) • Robust Profits Face Hurdles (WSJ) see also Consumer fears put economy on the brink (Washington Post) • Europe's Big Mistake (New Yorker) • Hussman’s Unhedged Recession Call: A Reprieve from Misguided Recklessness (Hussman Funds) • Alan Krueger to chair CEA (WSJ) was called an “excellent choice” by George W Bush’s CEA Chair (Greg Mankiw) • The Rescue That Missed Main Street (NYT) see also A how-to guide for fixing America's banks (Washington Post) • Dollar Cheap in Purchasing Power as Investors See Shelter (Businessweek) • Recovering From a Balance-Sheet Recession (Economix) • Tim Cook: Apple's New CEO and the Most Powerful Gay Man in America (Gawker) see also Don't ignore Tim Cook's sexuality (Salmon) • How Hard Is It To Get a Cartoon Into The New Yorker? (Slate) What are you reading? > via Gaping Void

Effects Of Corruption On The Markets Posted: 29 Aug 2011 05:52 AM PDT Source: The Money and Wealth Show

Deploying Corporate Cash Posted: 29 Aug 2011 05:00 AM PDT Deploying Corporate Cash Earnings Estimates and Valuation Drivers Stock Valuation Measures: S&P 500 Index Source: BLS, FactSet, J.P. Morgan Asset Management. Data reflect most recently available as of 6/30/11. Source: JP Morgan funds

Greece saves the day!? Posted: 29 Aug 2011 04:43 AM PDT Greece saves the day!? A merger of Eurobank and Alpha Bank, the 2nd and 3rd largest banks in Greece will merge. Qatar, the 2nd biggest shareholder already in Alpha Bank, will add more capital to the combination. The Greek stock market is up more than 11% in response as Greek banks are up 30%. Greek debt however remains under pressure as we await still a resolution on the collateral issue that many now want from Greece in return for loans. The Greek 2 yr yield is back above 45% and the 1 yr is above 60% for the 1st time. Italian yields are at 2 week highs ahead of auctions tomorrow as the impact of the ECB purchases wane with the reduced size of daily buys. While the ECB continues to purchase Italian and Spanish debt, the market is playing a game of chicken with them knowing that once the purchases end, yields are going right back up again. All Asian stocks rallied too except China where the Shanghai index responded negatively to Friday’s move on the part of the PBOC to increase the amount of bank assets subject to the 21.5% reserve requirement ratio. The Yuan also moved to a new high.

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