The Big Picture

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• 40% of Americans Are Now Independents
• TBP Site Update: G+, Search, Mobile
• 10 Mid-Week PM Reads
• The New 2012 Porsche 911
• 100 Years of New York Real Estate
• Earnings Estimates
• If more QE, Evans says $600b
• McCulley: We Are In a ‘Liquidity Trap!’
• Profound and Pervasive Misconduct in Mortgage Servicing
• 10 Wednesday AM Reads

40% of Americans Are Now Independents Posted: 11 Jan 2012 10:30 PM PST A Stunning 40% of Americans Are Now Independent. Ron Paul Polls Highest Among Independents, and Independents Would Vote for Paul Over Obama Independents Prefer Ron Paul While mainstream pundits desperately cling to their mantra that Ron Paul is "unelectable", the numbers show a different story. Gallup finds a record high-high 40% of all Americans now identify as independents. This is higher than the 31% of Americans who identify as Democrats and 27% as Republicans. And which candidate do independents like? According to a new CBS poll, they like Ron Paul. As Forbes notes: In a head to head match up with incumbent President Barack Obama, the indie voter chooses Ron Paul, a CBS News poll suggested on Monday. A total of 47% of independent voters said they would choose Ron Paul compared to 45% of independent voters choosing Mitt Romney against Obama, and 41% of independents saying they would choose Rick Santorum. If a Paul-Obama showdown were ever to take place, 47% of independent voters would vote for Paul, 81% republicans and 10% Democrats for a total of 45% of the vote. Obama would get just 40% of the independent vote in that contest, with 85% of the Democrats choosing Obama and 9% of Republicans choosing the President on election day in November. Admittedly, Forbes notes that – if the general election were held today – Romney could beat Obama, and Paul couldn't: Obama would win the general election by a narrow one point margin if the election was held today between the two. However, Ron Paul is not the favorite among conservatives polled. Romney is the leader there, getting 90% of the conservative vote, followed by Texas governor Rick Perry at 85%. Ron Paul comes in tied with Newt Gingrich at No. 4 with 81% of conservatives voting for that particular candidate. Romney is the only GOP candidate seen beating Obama in November by a two point margin, according to the poll. Paul is in second. However, given that the CBS poll has a 3% margin of error, Romney and Paul are statistically tied in a match-up against Obama. And Romney's Gordon Gekko background is just starting to get air time in this campaign. And watch this short video. And while I don't believe that anyone should be discriminated against based upon their religion, the more protestants learn that Romney is a Mormon, the less they like him. So – despite the mainstream's attempts to sideline Paul as "unelectable" – I think that once the facts are aired, Paul would do better against Obama than Romney.

TBP Site Update: G+, Search, Mobile Posted: 11 Jan 2012 05:45 PM PST I’ve made a few tweaks, as you may have noticed. If there are any problems, please bring them to my attention. 1. Google Search restored (yeah!) 2. G+ added to share bar at the end of every post. 3. Mobile iPhone version. Note this is user definable, with a toggle (Desktop/Mobile) button at the bottom of site. Or, you can choose your link • Mobile • Desktop Note that if you cannot switch, log out and log back in, the default is desktop. BTW, that is a cheap off the shelf plugin for iPhones. If anyone has a better suggestion for mobile phones/tablets, I am all ears!

10 Mid-Week PM Reads Posted: 11 Jan 2012 01:39 PM PST My afternoon train reading: • 40% of Americans have a negative reaction to the term “Capitalism,” while 31% have a positive reaction to “Socialism” (Pew Research Center) • Gen Y: Post Traumatic Stock Syndrome (The Reformed Broker) • Hedge Funds Trail S&P 500 Index Most Since '97 (Bloomberg) • Will The ECB’s Stealth QE Programme Save The Euro? (Sky News) see also Bernanke Doubles Down on Fed Mortgage Bet (Bloomberg) • Stores Pay Price for Holiday Deals as Forecasts Slip (Bloomberg) • Mafia now “Italy’s No.1 bank” as crisis bites: report (Reuters) • No, Apple CEO Tim Cook didn’t really make $378 million in 2011 (Fortune) see also Why I Hate Android (Paris Lemon) • Did This Man Really Cut Michael Jordan? (SI Vault) • Who Is New White House Chief of Staff Jack Lew? (The Atlantic) see also Citigroup stint shadows Obama’s new staff chief (CBS News) • Campaign Finance – $1,201,772,978 Given (Influence Explorer) WhatTF are you reading? > Awaiting a Greek Payout Source: Washington Post

The New 2012 Porsche 911 Posted: 11 Jan 2012 12:15 PM PST Watch the all new Porsche 911 (991) being put through its paces at the Porsche Experience Centre Silverstone. Gordon Robertson explains some of the new cutting edge technology developed for the car while also exploring how it remains true to its iconic 911 roots. For more visit: http://www.porsche.co.uk/origin

100 Years of New York Real Estate Posted: 11 Jan 2012 11:30 AM PST Last fall Prudential Douglas Elliman turned 100 years old and they asked me to write an article for their Elliman magazine. If you've been living in a cave, I've been writing their housing market report series since 1994. What started as a simple project morphed into a fun, albeit gigantic, research project. I learned a lot about the evolution of the Manhattan housing market, largely through the amazing incredible New York Times archives. This was right about the time of my web site revision and semi-necessary hiatus so I am cleaning out my desk of posts I have been itching to write so please indulge me. The article I wrote for Douglas Elliman was beautifully presented by their marketing department and prominently inserted in their Elliman magazine (and iPad app!). Diane Cardwell of the New York Times in her "The Appraisal" (an incredible column name BTW) penned a great piece: In an Earlier Time of Boom and Bust, Rentals Also Gained Favor that originated from my article and zeroed in on the 1920s and 1930s to draw a comparison to the current market. Click to enlarge: Source: Change is Constant: 100 Years of New York Real Estate Miller Samuel (January 11, 2012)

Earnings Estimates Posted: 11 Jan 2012 09:00 AM PST The Wall Street Journal – Earnings Pessimism Could Be Overdone Alcoa is the Iowa of companies. But like the decidedly mixed verdict from the first Republican caucus, its bellwether status these days is questionable. The aluminum giant kicked off earnings season Monday night with a fourth-quarter loss. That, though, has more to do with structural overcapacity in its industry. So the result offers limited guidance to markets. Granted, the result does reflect the gloomy mood hanging over earnings season. Alcoa was just one company to see its estimates slashed in the run-up to results. As of last Friday, S&P 500 fourth-quarter earnings per share were forecast at $24.31. That would represent 7.8% growth year-on-year, according to Thomson Reuters, down from an expected 15% at the start of October. What's more, analysts expect earnings in the last three months of 2011 to decline quarter-on-quarter. That would be rare: S&P 500 fourth-quarter operating earnings have risen sequentially 80% of the time since 1948, according to Citigroup. Even stripping out volatile financial-sector results, it is unusual for fourth-quarter earnings to fall this way. As bad as that sounds, it may actually be a sign the pessimism surrounding earnings is overdone. Yes, uncertainty abounds about the strength of the economic recovery. But the fourth quarter was hardly a washout. MarketBeat (WSJ Blog) – Herd On The Street: Company Analysts All In This Together Is this what they mean by "consensus estimates"? Company analysts aren't generally known for sticking their necks out, but this is getting ridiculous. In the lead-up to fourth-quarter earnings reports, analysts are more clustered than ever in their profits estimates, says Savita Subramanian of Bank of America-Merrill Lynch. According to her calculations, estimate dispersion for S&P 500 company earnings are now down below 10% — the lowest that figure has been since at least Feb. 1986 (check the chart). In other words, it's been at least 25 years since analysts were in such close agreement about where earnings are likely to land. This unusual state of affairs suggests one of two possibilities: (a) Wall Street analysts are so certain, and prescient, about where earnings are going to be that they've all naturally clustered around the correct figures; or (b) Wall Street analysts have no idea what's going to happen, given the magnitude of macroeconomic uncertainties, that they're all cribbing each other's notes and/or going with the safest, most middle-of-the-pack estimates they can muster. Comment There is an option (c).  Companies are so good at guidance that analysts wait for investor relation departments to tell them what to estimate and follow their lead.  This would be our choice. FactSet Research Systems Inc. – Earnings Insight Comment The chart above shows the percentage of S&P 500 companies that report earnings above estimates in the earnings "pre-season" (cyan).  The final percentage of S&P 500 companies that beat earnings estimates once all the number have been reported is shown in dark blue.  The earnings "pre-season" takes place before Alcoa reports each year (which happened yesterday), the unofficial start of the earnings season. A FactSet Research Systems Inc. research report dated December 23, 2011 noted that, of the 21 companies who actually report "pre-season" earnings, 57% beat the mean estimate for Q4 2011. As the chart above shows, this is the lowest percentage since the end of the 2007 to 2009 "Great Recession."  FactSet also notes (page 4): …. However, there is one trend in the data that may offer some predictive value for the Q4 2011 earnings season. In the nine quarterly "pre-seasons" where the percentage of companies reporting actual EPS above estimated EPS was below 80%, the final percentage of companies beating estimates was higher than the "pre-season" percentage for each quarter. If history is any indication, we should expect the final number to be higher, but only marginally so.  This suggests that this earnings season will have the smallest actual number of earnings beats since the end of the recession three years ago.  In other words, this metric is suggesting a relatively poor earnings season. Source: Earnings Estimates January 10, 2012 Bianco Research, L.L.C.

If more QE, Evans says $600b Posted: 11 Jan 2012 08:29 AM PST In what I believe is the 1st time a Fed member has quantified the size of potentially more QE, the ultra dove Evans says it could be $600b, in what would likely be in the MBS space, in a Q&A after a speech. Evans dissented in the past few FOMC meetings in 2011 in that he wanted more QE. He however doesn’t vote in 2012 but there will still be plenty of doves on the committee to follow thru. As I wrote earlier today, further artificially suppressing the level of interest rates is not the solution to a deleveraging cycle, time and debt paydown/writedown is. However, central bankers and politicians don’t have the luxury of time and thus patience and it’s why QE will continue to be their preferred answer. At some point they’ll realize it doesn’t work but how much damage will have already been done to the value of paper currencies and resultant inflation before they do?

McCulley: We Are In a ‘Liquidity Trap!’ Posted: 11 Jan 2012 08:03 AM PST Wednesday, 11 January 2012 7:37 AM ET Better monetary policy and better coordination between monetary and fiscal policy is worth underwriting risk, says Paul McCulley, former PIMCO portfolio manager/Global Interdependence Center managing director ~~~ McCulley: We Are In a ‘Liquidity Trap!’ Former Pimco portfolio manager Paul McCulley says we need to accept that we are in a “liquidity trap” that requires “a whole different set of economic policies.”

Profound and Pervasive Misconduct in Mortgage Servicing Posted: 11 Jan 2012 08:00 AM PST I think I am in love. With a Federal Reserve Governor. Have a read of this speech from Fed Governor Sarah Bloom Raskin, titled Creating and Implementing an Enforcement Response to the Foreclosure Crisis. “More fundamentally, a failure by regulators to enforce the laws and regulations as strong antidotes to financial misconduct and unsafe and unsound practices by the institutions they regulate establishes de facto acquiescence to the dominant norms of the financial marketplace. At that point, our laws become the resting place for unfair practices and broad disrespect for the law generally.” She quotes Shakespeare as to why we need to support the law, why enforcement against rogue banks is crucial to society. Now, it should not be a big deal that a central banker believes in the rule of law. (Hey, that J.D. from Harvard Law wasn’t a waste of time after all!). Perhaps it even is an indictment of the past decade that its even noteworthy. But Goddamit, its a start. It is an improvement over the lawlessness, the refusal to prosecute bank crimes, lawlessness, perjury, as this administration and its banker toady Treasury Secretary have unfortunately made into official policy. Go read the speech. > Previously: Tell the Fed to fire Kathryn Wylde (September 7th, 2011)

10 Wednesday AM Reads Posted: 11 Jan 2012 07:00 AM PST My morning reads: • The unprecedented behaviour of the central banks (FT.com) • Europe's $39 Trillion Pension Threat Grows as Economy Sputters (Bloomberg) • Right Kind of Dividend Makes a Difference (WSJ) see also Dividends Rise in Sign of Recovery (NYT) • Let's talk about the market economy (John Kay) • Blackstone Group says it "sucks" (Schwarzman, too!) (Domain Name Wire) • In Greece, fears that austerity is killing the economy (Washington Post) see also Greek parents too poor to care for their children (BBC) • Microsoft Says 4Q PC Shipments Likely Fell Short (Bloomberg) see also The Critics Rave … for Microsoft? (NYT) • NYSE Deal Nears Collapse (WSJ) • Romney Follows GOP Pattern of Losers Who Win (Bloomberg) see also Gingrich-Sponsored Attack Film Shows Romney as 'Ruthless' Rich (Bloomberg) • Jacob Lew, Obama Nominee And Former Citigroup Executive, Doesn’t Believe Deregulation Led To Financial Crisis (HufPo) What are you reading? > Dividends Rising Source: NYT

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