The Big Picture |
- BIDzilla!
- 10 Tuesday PM Reads
- Are Second Terms Unlucky?
- Volatility Relative to Large Cap Stocks
- 10 Tuesday AM Reads
- BoJ Disappoints
- Where to Be Born: 1988 versus 2013
- Who the Hell Are Phil Mickelson’s Financial Advisers?
- Travelin’ Man
- Real-Time Properties of the Federal Reserve’s Output Gap
| Posted: 22 Jan 2013 10:30 PM PST This is what happens when traders try and game a correction of overbought conditions and there are no real sellers. BIDzilla as in Godzilla! Here's what we said after the first trading day of the new year:
Looks like the market is passing the first test as earnings seem to be coming in better than expected. See Google (up $34) and IBM ($8.52) after the bell. The second test was the debt ceiling, which the Repubs appear to be caving. The Russell and Trannies are at new highs. Stocks will remain bid until they are not and then offered until they're bid. Having sad that, we're getting long Harbaugh into the Super Bowl. Predicting or trying to trade short term moves is a mug's game. Follow
(click here if chart is not observable) |
| Posted: 22 Jan 2013 03:30 PM PST Hey, its -22 F below out. What else can I do but toss some afternoon reads:
What are you reading?
Pharmaceutical Spending Per Capita |
| Posted: 22 Jan 2013 11:30 AM PST The economic performance of American presidents tends to deteriorate during their second term: click for larger graphic |
| Volatility Relative to Large Cap Stocks Posted: 22 Jan 2013 08:30 AM PST click for larger charts
For all the complaining about Where the VIX is, this is not a terribly unusual level of volatility . . . |
| Posted: 22 Jan 2013 07:00 AM PST My Tuesday morning travelin’ reads:
What are you reading? Speech Signals a President Set to Fight Over New To-Do List |
| Posted: 22 Jan 2013 06:00 AM PST By a majority of 7 to 2, including the Governor Mr Shirakawa, the BoJ voted to raise the inflation target to 2.0% "at the earliest possible time". However, the BoJ's inflation forecast released today suggests that inflation will rise to +0.9% in the fiscal year ending March 2015, only slightly higher than the previous forecast of +0.8%, which certainly leads me to ask how you define "the earliest possible time". The BoJ also intends to start a Yen 13 Tr per month asset purchase programme, starting in January 2014 and only once the current Yen 101 Tr programme comes to an end. The BoJ, at that time intends to continue to buy bonds at that rate until a 2.0% target is reached. However, the prospective bond purchases will be mainly short term bills, which will reduce the effective size of the programme due to maturing bills, which were bought by the BoJ as part of their previous programme. Why delay to January 2014? It seems that Governor Shirakawa has not been quite as compliant as was expected. The joint statement by the BoJ and the government pledged that both parties would strengthen their policy coordination. I have to say, today's announcement was far less than expected. The Yen initially weakened, though has recovered materially and is currently higher at Yen 88.79 to the US$, around 100 pips stronger than prior to the announcement. Todays statement suggests to me that the PM, Mr Abe will have to get the BoJ to move further and faster, once Mr Shirakawa resigns in April this year, as do 2 of his deputies in March, if he is to achieve his objectives. The Nikkei which was trading higher around the time of the announcement turned and closed lower – personally, I would expect it to decline further, given, as I see it, a disappointing statement; The new Japanese Finance Minister stated that he would not seek to change the BoJ law. He added that the budget for the next fiscal year (starting April 2013) would be tighter. Furthermore, he proposes to stick to the previous guideline of reducing new bond issuance to under Yen 44tr. Does that mean less fiscal stimulus (possibly even tightening), with monetary easing (modest at best) postponed till January 2014 – sure does to little old me. The Japanese PM stated that a government panel had reported that it was important that the the primary budget deficit be reduced by half in the 2015 fiscal year and a surplus by 2020. That's not going to get the Yen lower and/or increase inflation !!!!, or for that matter create growth. This is mind boggling stuff and nowhere near what was expected, based on the previous comments by the Japanese government; The PBoC stated last week that it would start daily short-term liquidity operations. This policy will result in less spikes in short-term interest rates and may indeed reduce the level of interest rates as well; The FT reports that China's working age population declined in 2012, a trend which is expected to continue for the next 2 decades. The population between 15 and 59 was 937.3mn in 2012, a decline of 3.45 mn from 2011, according to statistics released by the Chinese National Bureau of Statistics. The rate of decline is expected to increase materially in coming years. Generally, a country's population declines as a country gets wealthier, but China's one child policy (started in 1979) has a lot to do with this decline. Previously, analysts, including myself, had expected that the working age population would start to decline in 2015. China will have to rebalance even more so than at present. Can it – I have my serious doubts. The decline in the working population will reduce GDP, though will also reduce the need to seek 7% to 8% GDP growth to ensure that unemployment (and therefore social instability) does not become a problem.Personally, I believe that Chinese GDP will slow to 4% to 5% over the next few years with the danger of even lower growth. I am short term bullish, though medium to long term bearish on China – the impending change in leadership suggests that the Chinese authorities will try to keep matters in hand for the next few months at least. However, the big question is what happens next. I will be particularly vigilant as to Chinese government policies; The Indian Finance Minister Mr Chidambaram repeated his pledge to reign in the budget deficit, with measures to be announced in next month’s budget. He added that he would introduce a goods and services tax (VAT), to widen the tax base and increase revenue. He repeated that the budget deficit for the fiscal year ending March 2014 would come in at 4.8% of GDP and no more than 5.3% this fiscal year – both big asks, in my view. The RBI is likely to cut interest rates at its next meeting on the 29th January. Credit ratings agencies have threatened to downgrade India to junk, unless the government acts; Israeli PM Mr Netanyahu is expected to be reappointed PM in Israel. Relations between Mr Netanyahu and President Obama are and will remain strained; Here we go again. The IMF reports that Greece needs a further E5.5bn to E9.5 bn in 2015/6, though Greece is funded till 2014. Experience has taught all of us that these numbers will be revised higher. Furthermore, the IMF recommend that interest on bilateral loans between EZ countries and Greece be cut to zero and that debt relief and continued aid was crucial. They added that a reduction in interest rates on EFSF loans would also be necessary. The prospective bailout of Cyprus has been delayed for 2 months – until after the elections in February, at which time the current President is expected to be replaced. Ignore the official reasons, the reality is that the EZ and Germany in particular, are not prepared to deal with the current Communist President, Mr Christofias. The elections are likely to see his removal. Interesting times, using economic/financial power to change administrations – in this case totally justified (as it was with Mr Berlusconi) but….. Now I'm in trouble – Mr Jeroen Dijsselbloem (age 46), the Dutch finance minister (for just 6 weeks) has been appointed head of the Eurogroup. If someone can tell me how to pronounce that name, I will be most grateful. Mr D, according to Reuters, was a radical leftist in the 2000's and is considered to be both determined and conciliatory. Hmmmm. He has specialised in agriculture and education in the past – essentially a social policy person – great qualifications for a finance person !!!. Mr Schaeuble, who wanted the job, could not get the support of other EZ countries. However, the German's were determined that a person from a AAA rated country (though for how much longer) be appointed to replace the ghastly Juncker. Glad he's gone. The Dutch normally are practical and pragmatic people. Time will tell how Mr D gets on; The EZ finance ministers meeting, chaired by the Dutchman Mr D (will have to call him Mr D, as i will spell it wrong otherwise), failed to address the issue of using funding from the ESM to recap EZ banks directly rather than through the relevant government. Germany, Finland, Austria etc suggested that such measures would have to wait until the ECB becomes the formal regulator in 2014. Bad news for the Irish in particular, though no surprise; Mrs Merkel's party narrowly lost the regional elections in Lower Saxony last weekend, with the opposition SPD/Green coalition the winners by 1 seat. The CDU attracted the most votes – around 36%, with the SPD at 32.6%. Mrs Merkel's coalition partner, the FDP, did much better than expected, polling around 9.0% of the votes. However, the much increased support for the FPD was probably due to tactical voting by CDU supporters, who did not want the FDP's vote fall below 5.0% threshold (which would have barred them from representation at the State Legislature) and which was the real danger. Support for the Greens shot up to 13.7%, from just 8.0% previously, which could well make them the decider as to who gains power in the September general elections. The German ZEW investor confidence index came in at 31.5 for January, much higher than the 6.9 in December and the forecast of 12.0. It was also the highest reading since May 2010. The current situations component rose to 7.1, from 5.7 in December and as compared with 6.2 forecast. The survey suggested that economic conditions for Germany over the next 6 months had improved. Companies may start to reinvest again, advised the ZEW economist. Yesterday, the Bundesbank stated that Germany's economy was showing signs of recovery and the ZEW economist advises that the Bundesbank may well increase its forecast of German GDP, from the current +0.4% for the current year; The UK budget deficit widened to Sterling 15.4bn in December (Sterling 15.2bn forecast), higher than the Sterling 14.8bn a year earlier. The data reinforces my view that the UK will lose its AAA rating fairly shortly. Having said that I continue to believe that the UK economy is performing better than the official data and the current weakness of Sterling will reverse over the next few months; US existing home sales rose by +1.2% to an annual rate of 5.1mn, in December, the highest rate of sales since November 2009. Yet better US housing data again, which should translate into a stronger US economy; Outlook Asian markets closed mainly flat to lower, with European markets lower as well. US futures suggest that the market will open marginally lower. The Euro is trading at US$1.3342, with the Yen stronger at Yen 88.76 Spot gold is trading at US$1690, with March Brent at US$112.40. The key remains the baffling statement by the BoJ, given the previous comments by the Japanese government. Mr Hamada, the Japanese PM's special adviser, stated that the BoJ could have done more – no kidding, they have essentially failed to deliver as proposed by the Japanese government. Rapidly closed my Yen short and actually put on a modest long position. I remain of the view that markets are overbought, though will hold off selling any more for the moment. The Japanese news is deeply perplexing and potentially equity negative, in my view. The Yen carry trade could well be in question. Kiron Sarkar 22nd January 2013 |
| Where to Be Born: 1988 versus 2013 Posted: 22 Jan 2013 05:00 AM PST click for ginormous graphic |
| Who the Hell Are Phil Mickelson’s Financial Advisers? Posted: 22 Jan 2013 04:00 AM PST This is the third or so in a continuing series of WTH/WTF posts where we look at famous wealthy folks’ investing errors, and wonder just WTF is going in their personal finances. Our goal: Learn from other people’s mistakes. Today’s WTF?! celeb is 42 year old golfer Phil Mickelson. Phil is “mad as hell about rising tax rates, and he's not going to take it anymore.” As Forbes (with tongue firmly in cheek) reports:
Yes, our exploited golfer is seemingly going Galt. And while the above paragraphs are truly hilarious — Max Abelson has shown it is terribly amusing to mock the oppressed top 0.1% — I have to wonder who is advising the world’s second ranked all-time money winning golfer. But if we can be serious for just a moment — and ignore the oblviousness of Mickelson’s utter lack of gratitude for his soft lot in life — this raises actual financial issues worth exploring. What are the legal — and I mean black-&-white-legal, no shades-of-grey here — options that people (whether they are means or not) should consider to minimize their taxes and maximize their investing returns? A short list would have to include:
There is nothing especially fancy here. Of the list above, Family Foundations and Estate Planning primarily matter only to those with a wealth north of $5 million — but everyone can take advantage of tax-free muni income, tax deductions for charitable donations, and maximizing your retirement accounts. Again, I want to emphasize that these are all standard, run of the mill planning steps — legal, accounting and tax planning methods the IRS recognizes and approves of. In other words, they are not the stuff of Wesley Snipe’s accounting firm. If I were a gambling man, I would bet that Phil sucks it up, and keeps playing golf. His sponsors (including accounting giant KPMG!) pay him $44 million per year. A more cynical type might assume the entire episode was an appeal to the golf playing demographics, who also do not care for increased taxes. It appears that ordinary tax planning moves are either unknown by our ungrateful golfer, or maybe are being ignored by his advisers. Perhaps this explains Phil’s ire — he is misdirecting his anger broadly instead of focusing on his crappy advisers — who seem to be costing him millions. Which brings us to our my original headline: Who the Hell are Phil Mickelson’s financial advisers . . . ?
Why so angry, Phil?
Previously: Advice for Rich Uncles and Others . . . (August 2007)
Source: |
| Posted: 22 Jan 2013 03:28 AM PST
Just a quick note: I am off to some meetings and a few conferences in Canada. Partly because its business, but also because I am curious what 20 below feels like (hopefully for no longer than 3 minutes at a time). Despite the House GOP Debt Ceiling deal, futures are flat. This is either because a) But for my travel, they otherwise would have been plus 25 on the SPX; or b) Like the fiscal cliff, the debt ceiling is much ado about nothing — or at least very little. Back in a bit . . . |
| Real-Time Properties of the Federal Reserve’s Output Gap Posted: 22 Jan 2013 03:00 AM PST |
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