The Big Picture |
- Why is Buying a Car in the USA Such an Ordeal?
- 10 Mid-Week PM Reads
- The Internet A Decade Later
- 50 Things to Give Up
- Asset Class Returns, 2003-2012
- Colbert: Platinum Debt Ceiling Solution
- US energy independence in a few years ?
- 10 Mid-Week AM Reads
- Data: 2012 Hottest (+ 2nd Most Extreme) Year On Record
- Word as Image
- A Word About Portfolio Rebalancing
- Yet Another Favorable Settlement For Big Banks
| Why is Buying a Car in the USA Such an Ordeal? Posted: 09 Jan 2013 04:30 PM PST The other night, I found myself in a high-rent, commercial neighborhood in suburbia, where most of the buildings were medical offices and car dealers and luxury retailers. Since Mrs. TBP was at the movies with her girlfriend, I decided to pop into a few places to see a what cars on my short list might replace what’s coming off lease in the Spring. At the Audi dealership, I looked at the A7/S7. At Infiniti, I looked at the G37 convertible and the M37/56. Perhaps it had to do with the tony neighborhood (Great Neck and Manhasset), but I came away with the distinct feeling in both locales that this was merely an exercise in trying to separate me from as much of my money per month as possible. It was a few specific things and lots of general sense. Perhaps my prior experiences have colored my expectations. But what wasn’t an option was walking into a dealer, seeing prices like in a restaurant or department store, and placing an order. Which raises the question: Why is buying a car so frustrating? Why is what is likely to be the 2nd biggest purchase for most American families so fraught with pitfalls and danger and financial risks and annoyances? Why does car buying suck? Discuss. |
| Posted: 09 Jan 2013 01:30 PM PST My afternoon train reads, edited for you in real time:
What are you reading?
The age of man |
| Posted: 09 Jan 2013 12:30 PM PST click for complete infographic
click for ginormous graphic |
| Posted: 09 Jan 2013 11:00 AM PST My commentary and a selection of photos for a different look to this list of things to give up. Somewhere after New Years and before Lent—it’s a great time to reflect. …
by Quessity on Jan 05, 2013 |
| Asset Class Returns, 2003-2012 Posted: 09 Jan 2013 09:28 AM PST Asset Class Returns
In light of this morning’s portfolio rebalancing discussion, I thought the table above would help you to visualize the discussion. It shows the annual return over the past decade by asset class. Note that the highest returning asset classes are at top, down to the lowest returning. You can see how they all mean revert over time.
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| Colbert: Platinum Debt Ceiling Solution Posted: 09 Jan 2013 09:00 AM PST Minting trillion dollar platinum coins to pay off America’s debt is legal in that it is not technically illegal. The Colbert Report Monday January 7, 2013 |
| US energy independence in a few years ? Posted: 09 Jan 2013 07:51 AM PST Australian November retail sales declined by 0.1% M/M, as compared with a +0.3% gain expected, the 1st decline in 4 months. Consumers are pessimistic about the economy, jobs and house prices, reports Moody's. Job vacancies declined by -6.9% in the 3 months to November 2012. A further interest rate cut (25bps) by the RBA is likely, down from the 3.0% level at present; A number of reports (Reuters, most recently) suggest that the BoJ will agree to announce an inflation target of 2.0% at its next meeting on 21/22nd January, though will not set a date by which this target is to be achieved. In addition, there is talk of setting an unemployment threshold, a la FED. Reuters adds that the BoJ will increase the size of its asset purchase programme from the Yen 101tr current limit, by Yen 10tr?. A member of the BoJ board, Mr Shirai, stated that he was open to the idea of eliminating the interest-rate floor on deposits held at the BoJ by commercial banks. The Yen has stabilised over the last few days, but I remain short (at my maximum levels) against the US$ mainly. Fitch warned that they would downgrade Japan unless the authorities addressed the debt issue. Well, as that's not going to happen – indeed, debt will rise, as a result of a massive fiscal stimulus programme, I guess that a downgrade is baked in. Some Japanese industrialists warn against a much weaker Yen citing higher import costs, in particular energy, which will worsen the trade/current account deficit. All true, but its too late gentlemen; Chinese money market rates continue to decline and are at 3 week lows at present. Analysts are bullish as to China's economic performance this year. A mass of Chinese economic data will be released this week and next; Interesting developments in respect of a fightback by journalists in respect of censorship. Beijing journalists have refused to republish an article which criticised journalists in Guangdong, who were up in arms following moves by management to limit editorial independence. The journalists in Guangdong have won some concessions. It is going to be difficult for China to continue to impose its strict censorship rules, given the access to information from such a multitude of sources. Wrongdoings by Chinese officials, are going to be highlighted more and more (Source FT); The Indian central bank, the RBI next meets on 29th January, with a 25bps rate cut expected, the 1st cut since last April. The 10 year bond yield continues to decline and is currently trading around 7.90%, the lowest since December 2010. The Rupee however, I believe will suffer, especially against the US$ – its currently trading at Rupee 55 against the US$. A credit downgrade is likely this year. Indeed, Fitch retained its negative outlook due to concerns about India's fiscal position; To ensure that the Euro/Swissy peg remains, the Swiss National Bank has been buying an enormous amount of Euro's, in particular. Its current holdings of currencies, gold and bonds has soared to US$541bn, which is close to Switzerland's GDP !!!!; Another "great" line from the former Italian PM, Mr Berlusconi. He is appealing his divorce settlement and has called certain Milan divorce judges "feminist communists". Good luck with your appeal Mr B. Mr Berlusconi has formed an alliance with the Northern League, though has promised that he will not seek to become PM, if the coalition gains power in the forthcoming elections. Personally, I don’t believe that the coalition will be successful, though it will take away votes from Mr Monti. As usual, Italian politics is getting messier and messier and…..; German press reports state that the opposition parties will not support a bailout for Cyprus. Cypriot banks are totally bust and there are continued allegations of money laundering by Cypriot banks, on behalf of Russians. If a bailout is not agreed, it will be Euro negative. The German business lobby forecasts German GDP growth at +1.0%, rather than the +0.4% predicted by the Bundesbank; German industrial production increased by +0.2% in November, much weaker than the +1.0% expected, though above the revised decline of -2.0% in October; Rumours floated around yesterday that France would be downgraded. The report was officially denied by French authorities. Well, maybe not this time, but I remain of the view that France will be downgraded this year – the only question is whether it will be by 1 or more notches?; ECB day tomorrow, though I do not believe that Draghi will cut rates. However, I do believe that the ECB will reduce rates by 25 bps in due course and, in particular, as inflation declines below 2.0%, which I believe will be the case within the next 3 or so months; The UK November visible trade deficit increased to Sterling 9.16bn, slightly higher than the Sterling 9.0bn expected, though lower than the revised Sterling 9.49 bn in October. Exports to the EU declined by -3.7% in the 3 months to November Y/Y, though rose by +6.8% to the rest of the world. Including income from services, the UK overall trade deficit declined marginally to Sterling 3.7bn in November, from Sterling 3.5bn in October; Ireland takes over the rotating Presidency of the EU for the next 6 months. Expect the Irish government to push for a deal in respect of the bank bailout related debt that the country took on. There is a reasonable chance that Ireland will exit its bailout programme this year; US imports of liquid fuels, including crude oil and petroleum products, are set to decline to their lowest levels for 25 years next year – to just 6mn bpd, according to the US Energy Information Administration the lowest since 1987. At the peak in 2004/7, US imports were nearly double that amount. Last year, the US produced 6.43mn bpd of crude oil, which should rise to 8mn bpd next year. Consumption has declined by some 2mn bpd to 18.7mn bpd last year and is expected to rise only modestly in coming years. The improvement in the US trade deficit will be significant, as US domestic production increases further in coming years. US industry will also benefit from cheaper energy. (Source FT); Outlook Asian markets closed mainly higher. Japan having been -1.0% lower initially closed +0.7% higher. Markets responded positively to the Alcoa results, which were released after US markets closed. European markets are trading higher, with US futures suggesting a better market, as well. The Euro is selling off and remains below US$1.31 – currently US$1.3058, with the Yen weaker against the US$ – currently Yen 87.54. The Euro may well recover somewhat if, as I expect, the ECB remains on hold tomorrow. Gold is higher at US$1660, with February Brent at US$112. US 4th Q 2012 earnings season is upon us. Alcoa kicked off, as usual, with a beat and a robust forecast, based on expected increased aluminium demand (+11.0%) from China and aerospace (+10%) this year. As usual, forward guidance statements will be the most important this earnings season. Chinese economic data, to be released later this week, are likely to move markets. It looks as if the US debate will focus on the spending cuts ie the sequester, rather than on Republicans trying to block the increase in the debt ceiling. At present, the sequester looks like coming into effect. Kiron Sarkar |
| Posted: 09 Jan 2013 07:00 AM PST My morning reads:
What are you reading?
Retail Centers See Modest Growth |
| Data: 2012 Hottest (+ 2nd Most Extreme) Year On Record Posted: 09 Jan 2013 05:30 AM PST NOAA: 2012 Hottest & 2nd-Most Extreme Year On Record
It's official: 2012 was the warmest year on record in the lower 48 states, as the country experienced blistering spring and summer heat, tinderbox fire weather conditions amid a widespread drought, and one of the worst storms to ever strike the Mid-Atlantic and Northeast. According to the National Oceanic and Atmospheric Administration (NOAA), 2012 had an average temperature of 55.3°F, which eclipsed 1998, the previous record holder, by 1°F. That was just off Climate Central's calculation in mid-December, which projected an expected value of 55.34°F, based on historical data. The 1°F difference from 1998 is an unusually large margin, considering that annual temperature records are typically broken by just tenths of a degree Fahrenheit. In fact, the entire range between the coldest year on record, which occurred in 1917, and the previous record warm year of 1998 was just 4.2°F. The year consisted of the fourth-warmest winter, the warmest spring, second-warmest summer, and a warmer-than-average fall. With an average temperature that was 3.6°F above average, July became the hottest month ever recorded in the contiguous U.S. The average springtime temperature in the lower 48 was so far above the 1901-2000 average — 5.2°F, to be exact — that the country set a record for the largest temperature departure for any season on record. “Climate change has had a role in this [record]," said Jake Crouch, a climate scientist at NOAA’s National Climatic Data Center in Asheville, N.C. He said it isn’t clear yet exactly how much of the temperature record was due to climate change compared to natural variability, but that it’s unlikely such a record would have occurred without the long-term warming trend caused in large part by emissions of greenhouse gases. During the summer, nearly 100 million people experienced 10 or more days with temperatures greater than 100°F, which is about one-third of the nation's population, NOAA reported. With 34,008 daily high temperature records set or tied the year compared to just 6,664 daily record lows — a ratio of about five high temperature records for every one low temperature record — 2012 was no ordinary weather year in the U.S. It wasn't just the high temperatures that set records, though. Overnight low temperatures were also extremely warm, and in a few cases the overnight low was so warm that it set a high temperature record, a rare feat. Even more astonishing is the imbalance between all-time records. According to data from NOAA’s National Climatic Data Center, there were 356 all-time high temperature records set or tied across the entire U.S. in 2012, compared to four all-time low temperature records. All of the all-time record lows occurred in Hawaii. As the climate has warmed during the past several decades, there has been a growing imbalance between record daily high temperatures in the contiguous U.S. and record daily lows. A study published in 2009 found that rather than a 1-to-1 ratio, as would be expected if the climate were not warming, the ratio has been closer to 2-to-1 in favor of warm temperature records during the past decade (2000-2009). This finding cannot be explained by natural climate variability alone, the study found, and is instead consistent with global warming. Driven largely by the warm temperatures and the massive drought, one measure of extreme weather conditions, known as the Climate Extremes Index, shows that it was the second-most extreme year on record, second only to 1998. Studies show that in response to global warming, some extreme events, such as heat waves, are already becoming more likely to occur and more intense. Nineteen states had their warmest year on record in 2012, mainly in the Plains and Midwest, where summer heat and drought was the most intense. An additional 26 states had one of their top 10 warmest years on record. Remarkably, every state in the lower 48 experienced an above-average annual temperature. The extreme heat is even more vivid when examined at the local level. Cities such as New York, Boston, Washington, Milwaukee, St. Louis, Denver, Des Moines, and Chicago all set records for their warmest year. Marquette, Mich., which is well-known for its cold and snowy winters, not only set a record for the warmest year, but also set a record for the most amount of days above freezing (32°F) in a single year, with 293 such days, and the number of consecutive days above freezing, with 237. In Des Moines, which set a record for its warmest year smashing the old 1931 record by 1.5°F, it was the first year not to reach 0°F. In addition, March had the largest monthly temperature departure from average of any month on record there, coming in at 16.4°F above average. The year was also characterized by extreme drought, and two states — Nebraska and Wyoming — also had their driest year on record. Eight more states had annual precipitation totals that ranked in the bottom 10. At its maximum extent in July, drought conditions encompassed 61 percent of the nation, with the most intense conditions in the Great Plains, West, and Midwest. The nationally averaged annual precipitation total was 2.57 inches below average, making 2012 the 15th-driest year, and the driest year since 1988, which also featured a major drought. The drought of 2011-12, which is still ongoing, is comparable in size to severe droughts that occurred in the 1950s, and is already being blamed for more than $35 billion in crop losses alone, according to the reinsurance company Aon Benfield. In fact, it's quite possible that damage from the drought will eclipse the total bill from Hurricane Sandy, which some estimates place at more than $100 billion. Overall, the drought could end up robbing the limping U.S. economy's GDP of a full percentage point, said Deutsche Bank Securities. The drought was instigated in large part of very low snow cover and warm temperatures during the winter of 2011, and record warmth during the spring, which allowed for an early start to the growing season and depleted soil moisture earlier than normal. The record March heat wave put the drought into overdrive, accelerating its development across the Plains and Midwest in particular. The drought conditions created ideal conditions for wildfires, as 9.2 million acres went up in smoke in the West, the third-highest on record. The same weather patterns that led to the drought helped suppress severe thunderstorms and tornadoes, with a final tornado count that is likely to be under 1,000, which would be the fewest twisters since 2002. According to NOAA, the year saw 11 natural disasters that cost at least $1 billion in losses, including Hurricane Sandy, which struck the Mid-Atlantic and Northeast on October 29-30. Globally, 2012 is expected to be ranked as the eighth-warmest year on record, with that announcement coming later in the month. |
| Posted: 09 Jan 2013 05:00 AM PST Challenge: Create an image out of a word, using only the letters in the word itself. Rule: use only the graphic elements of the letters without adding outside parts. Word as Image (by Ji Lee) from jilee on Vimeo. Word as Image (by Ji Lee) |
| A Word About Portfolio Rebalancing Posted: 09 Jan 2013 04:27 AM PST On Yesterday’s Bloomberg Surveillance show, Tom Keene referenced some of my bullet points from Keep Investing Simple. (One bullet was to Ignore the Chattering Class, but I was not referring to Tom, whom I have a great deal of respect for). Live TV being what it is, we briefly touched upon rebalancing, but gave it short shrift. A few emails from viewers and a comment from Econochat later, it is clear that I muddied the waters rather than clarifying them. This post will hopefully correct that misadventure. Whenever I reference rebalancing, I am referring to asset classes — Equities, Bonds, Real Estate, Commodities, etc. It does NOT refer to individual stocks.
Why do this? Because history teaches us that all broad asset classes will eventually mean revert. The goal of the rebalance is to take advantage of the short term volatility and price swings to move you back towards your model 60/40 allocations at more advantageous valuations. In practice, it means you trim your bonds holdings after they had a good run and you buy equities after they have fallen. If you have more asset classes, you do the same, rebalancing to your model. A typical allocation may be that are 62% equities 31% bonds, 4% Real estate and 3% commodities 62/31/4/3. On a regular basis, quarterly, semi annually or annually, you rebalance back to your original allocation. 50/50 is a very conservative allocation, 60/40 more moderate, 70/30 more aggressive, 80/20 even more so. The original allocation decision you make is a function of your risk tolerance, assets, and time horizon. If you own Berkshire or Visa or JNJ (as we do) and they are working, you lock them in your portfolio and let them run. With individual stocks, you DO NOT rebalance — but eventually, you may have to make a sell decision. That is an entirely different conversation. Asset classes mean revert. Any stock can go to zero, but an asset class cannot. And the reason to own an individual name (versus an index) is that it has the potential to outperform that broad index. That’s why you DO NOT rebalance them — it defeats the primary purpose of owning individual companies. . |
| Yet Another Favorable Settlement For Big Banks Posted: 09 Jan 2013 04:00 AM PST The Times's Gretchen Morgenson talks about the big banks' victory in connection with foreclosure abuses. |
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