The Big Picture

10 Monday PM Reads
Education Still Matters . . .
Sell Side Consensus Indicator Still Extremely Bearish
10 Monday AM Reads
Housing Score: Barron’s 1, Ritholtz 2
Five Dumb Moves to Avoid
Lamborghini Veneno

Posted: 01 Apr 2013 01:30 PM PDT

My afternoon train reads:

• 10 things Brokers won't say (MarketWatch)
• A Brief History of the ETF (money&markets)
• Will Wall Street Ever Learn E-Mails Are Forever? (Bloomberg)
• Wonk alert: Seasonal adjustments post crisis moderate for U.S. economy (WSJ)
• What's Dell's Bidding Process Really About? (Clue: It's Not About Fixing Dell) (All Things D)
• Same generic drug, many prices (Consumer Reports)
• Your Next Smartphone Screen May Be Made of Sapphire (MIT Technology Review)
• Password denied: when will Apple get serious about security? (The Verge) see also Samsung filing confirms ‘Apple can seek even more damages [than $1.05 billion] in the new trial’ (FOSS Patents)
• Inside North Korea's Environmental Collapse (PBS)
• On Reddit, good links rise to the top — but sometimes take a few attempts to get there (Nieman Journalism Lab)

What are you reading?

Major Asset Classes Q1 2013 (as of March 31 2013)

Source: Capital Spectator

Education Still Matters . . .

Posted: 01 Apr 2013 11:30 AM PDT

. . . If you want a decent paying job

click for ginormous chart

Data: BLS, FactSet, J.P. Morgan Asset Management. Source: Census Bureau, J.P. Morgan Asset Management; Unemployment rates shown are for civilians aged 25 and older.

Source: JPM Morgan Guide to Markets, Q2 2013

Sell Side Consensus Indicator Still Extremely Bearish

Posted: 01 Apr 2013 08:30 AM PDT

Click to enlarge

Source Merrill Lynch

I’ve shown this chart several times over the past year, but its worth repeating: The Street remains very bearish by historical standards.

Note this is not at all a short term indicator; and does operate with a bit of a lag.

Previously:
Strategists Most Bearish on Equities since 1985 (August 1st, 2012)

Source:
Equity sentiment ticks up in March
Savita Subramanian, Dan Suzuki, Alex Makedon, Jill Carey
Merrill Lynch, April 1, 2013

10 Monday AM Reads

Posted: 01 Apr 2013 07:00 AM PDT

My morning reads:

• S&P 500 Rally Shows Analysts Slow or Investors Sanguine (Bloomberg)
• Does Blame Predict Performance? (research associates) see also Only 24% of Active Mutual Fund Managers Outperform the Market Index (nerd wallet)
• How to Save More For Retirement Without Really Trying (WSJ)
• Business Outsider Can a disgraced Wall Street analyst earn trust as a journalist? (New Yorker)
• Zombie foreclosures: 300,000 ‘undead’ properties stalk ex-owners (Christian Science Monitor)
• Meet the Man Who Sold His Fate to Investors at $1 a Share (Wired)
• 21 graphs that show America's health-care prices are ludicrous (Wonkblog) see also U.S. Health Care Prices Are the Elephant in the Room (Economix)
• When Google lost its cool (Salon)
• Buzzkill? How Climate Change Could Eventually End Coffee (U.S. News) see also Climate Change Rewrites World Wine List (Discovery)
• Great new weather app: Forecast (Forecast)

What are you reading?

Mom and Pop Run With the Bulls

Source: WSJ

Housing Score: Barron’s 1, Ritholtz 2

Posted: 01 Apr 2013 04:00 AM PDT

In 2008, Barron’s published a cover story by Jonathan Laing calling a housing bottom titled “Bottom’s Up: This Real-Estate Rout May Be Short-Lived.”

It was not just that it was wrong. Rather, it was how it got the bottom call wrong: The analytical process was flawed, as it ignored data, misunderstood and misstated history, with the author engaging in all manner of wishful thinking. It was not at all what one would call rigorous. This was surprising, as the usual skepticism Barron’s was renown for was nowhere to be seen.

The net result of that flawed process was a housing bottom call less than 18% from the top. Ultimately, the U.S. residential real estate market lost twice that amount, falling 35%, with specific bubble areas dropping 40, 50 even 60%. All told, a disastrously premature bottom call. As a comparison, my own housing analysis, made in 2005 and repeated in January 2008, was that US housing could fall 25-35%. It was based on simple historical prices, credit bubbles, and (eventually) included Reinhart and Rogoff data.

There were other bullish real estate articles in Barron’s during the slide, and eventually, they got it right: In March, 2012, the article Ready to Rebound (by the same author), struck a similarly bullish tone. Kudos to Jonathan Laing and Barron’s, as they were correct last March and again repeating the call in September 2012 (Happy at Last).

Meantime, I remained skeptical of the recovery as little more than Fed driven and manipulated bank bailouts. Regardless, home prices rose appreciably, gaining ~8% since then. I publicly admitted my error in my annual mea culpas (here and here).

Now here’s where things get interesting: In this weekend’s Barron’s, there was a bit of chest pounding about their Housing call: As We Predicted, Home Prices Are Ascending:

“Barron’s didn’t have much company a year ago when we predicted in a cover story (Ready to Rebound, March 19, 2012) that the six-year collapse in home prices was just about over. Our call that the turn in the market would come in the spring of 2013, “if not before,” drew derision from many quarters, including influential market pundit Barry Ritholtz.

Then we doubled down on our thesis in another cover story (“Happy at Last,” Sept. 10) that delineated early signs of rebounding home prices, pointing to slowly rising month-over-month increases, if not the sturdier indicators of substantial year-over-year price gains” (emphasis added)

To which I call foul.

Noticeably omitted from this article was any mention of that 2008 bottom call. Prices remain far far below their original call.

Doubling down? This was more of a tripling down.

Despite years of ZIRP, bailouts, QE, foreclosure abatements, bank settlements, HAMP, subsidies, extended delinquencies, non foreclosure-defaults, and dumping bad mortgages on GSEs, etc.* Home prices are rising, inventory is tight, unemployment is falling, rates are near record lows. Given all of the above, it would be a huge cause for concern if sales and prices were not going up.

Hence, we are reminded that if one make the same call repeatedly over the course of 5 years — one will, like the proverbial broken watch, eventually get it right. The problem with broken clock calls is they are useless to investors.