The Big Picture

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• Succinct Summation of Week’s Events (11/29/13):
• Ignore the Black Friday “Giant Hypefest & Consumer Orgy”
• No, David Rosenberg’s Bullishness Was Not “Purchased for $3M”
• 10 Black Friday AM Reads
• Here’s What You Probably Ate Yesterday (by Region)
• Charlie Pellett, Voice of New York Subway

Succinct Summation of Week’s Events (11/29/13): Posted: 29 Nov 2013 12:30 PM PST Succinct Summation of Week's Events: Positives: 1) The Fed's recent emphasis on forward guidance seems to be working as the 2 yr note auction was good with the bid to cover at the best level since April. It's the long end of the curve now that is doing the tightening for the Fed; 2) Building permits in October jump to 1.034mm, well above expectations of 930k BUT almost all of the gain was seen in the multi family category which rose to the most since June '08; 3) Home prices as measured by S&P/Case-Shiller rose 1% m/o/m and 13.3% y/o/y in September as all 20 cities surveyed saw gains. With higher rates and prices, expect the strong pace of gains to moderate in months to come; 4) Off the lowest level in 7 weeks, Initial Jobless Claims fell a further 10k to 316k bringing the 4 week average to 332k from 339k, the lowest since early October; 5) After a government shutdown depressed manufacturing figure in October, the Richmond region bounces back by 12 pts to +13 in November. Chicago PMI fell by 2.9 pts to 63 but that was better than the forecast of 60; 6) The final November UoM confidence figure rose to 75.1 from 73.2 in October and was above the preliminary print of 72 a few weeks ago. All of the gain however from October was in the Outlook component which was higher by 4.3 pts while Current Conditions actually fell 1.9 pts to the lowest since January; 7) Spain's economy officially expands in Q3 by .1% q/o/q, after 9 straight quarters of contraction; (S&P revises Spain's credit outlook to stable from negative citing) 8) Economic confidence in the EU in November rose to 98.5 from 97.7 and .5 pt above the estimate. It's the best since August '11; The EU unemployment rate in October ticks lower by .1 to 12.1% off record high of 12.2% in September; November CPI rises .9% y/o/y and 1% core vs expectations of up .8% and .9% respectively. Services inflation gains 1.5%; 9) Towards the Abe goal of inflation in Japan, CPI in October rises 1.1% y/o/y, unchanged with September but matching the fastest pace in 5 years. CPI ex food and energy gains .3% y/o/y, the highest level since August 1998 led by a sharp increase in electricity costs. Higher wages can't come soon enough for the populace;10) The Japanese jobs to applicant ratio rises to .98 from .95, above the estimate of .96 and the highest since December '07; Japan's manufacturing PMI in November rose to 55.1 from 54.2, the strongest figure since July '06; Negatives: 1) October Durable Goods orders continue sluggish trend as the core rate of spending (non defense capital goods ex aircraft) falls 1.2% m/o/m vs the estimate of up .8% after a drop of 1.4% in September; 2) In a month where the average 30 yr mortgage rate was 4.25% according to Bankrate.com, down from 4.47% in September (drop due to mid September no taper meeting), October Pending Home Sales still fell for a 5th straight month to the lowest of the year but the government shutdown was an influence. The NAR specifically said that "17% of realtors reported delays in October, mostly from waiting for IRS income verification for mortgage approval." 3) After rising 5.8% last week to its lowest level of the year, mortgage applications to buy a home fell .2% w/o/w while refi's rose just .1% after the prior 3 weeks of declines which took it to an 8 week low. The average 30 yr mortgage rate ticked up 2 bps to 4.48%, an 8 week high as interest rates remain sticky at current levels; 4) Conference Board's measure of Consumer Confidence in November fell 2 pts to 70.4 which was below the estimate of 72.6, the lowest since April and compares with 80.2 in September. Both the Present Situation and Expectations components were lower. The answers to the labor market questions were a touch better but spending intentions on homes, cars and major appliances over the next 6 months all declined; 5) The Dallas regional manufacturing PMI falls to the lowest since May, following declines m/o/m in NY, Philly and Chicago. Monday's ISM is expected to fall modestly to 55 from 56.4; 6) Margin debt rises to another record high in October and is about 2.4% of GDP vs 2.6% in July '07 and 2.8% in March '00. In the weekly II investor sentiment poll, bears fall to the lowest level since 1987. These are not timing tools but important perspective. 7) German unemployment in November rose by a net 10k people vs the forecast of no change m/o/m. It's up for a 4th straight month. German and French retail sales in October both unexpectedly fall m/o/m for the 4th month in the past 5

Ignore the Black Friday “Giant Hypefest & Consumer Orgy” Posted: 29 Nov 2013 10:00 AM PST Source: Yahoo Finance

No, David Rosenberg’s Bullishness Was Not “Purchased for $3M” Posted: 29 Nov 2013 07:00 AM PST I was going to write a long point-by-point rebuttal to a Zero Hedge post about David Rosenberg that is factually erroneous, biased, defamatory and just plain wrong; instead, I will offer my correction. Before proceeding further, my disclosure: I have known Rosenberg personally for a decade or so, and professionally for much longer. I consider Rosie a close friend. He presented at our annual Big Picture Conference last October 2012. We frequently disagree on economics, politics and markets; we rarely disagree about wine. I am also familiar with his current contract. Rosenberg’s deal is detailed in Gluskin Sheff‘s regulatory filings. Its no secret that he makes a lot of money — about $3m per year. That is the going rate for a strategist/economist of his stature. He was Merrill’s Lynch‘s grand poobah for almost a decade, ends up on all sorts of lists of most influential Canadians, etc. That Gluskin Sheff was on anyone’s takeover radar is due in no small part to Rosenberg dramatically raising the firm’s profile (They ended up selling a big chunk of the firm). Regardless, Rosie get paid market value for what he does; (its no secret amongst strategists that Gluskin matched another offer from a competitor). What the Globe and Mail got wrong, and what ZH then completely distorted, was the basis of that package. Breakfast with Dave, the daily research product Rosenberg puts out, has nearly 3000 subscribers paying $1,000 per year. That alone allows the company to pay Rosenberg’s cost. Sweet deal? The Globe and Mail got it ass backwards –  Gluskin Sheff is the one with the absurdly sweet deal. Rosenberg costs GS almost nothing. His pay is generated by his own work product, even if it isn’t structured that way formally. GS then flies him all over North America and the rest of the world meeting institutional and retail clients. A top economist for essentially free is a damned good deal. (GS: Let me know if I can take him off of your hands) As to Zero Hedge’s error — his more or less $3M deal has been in place since July 2011. He gets paid the same whether he is bullish or bearish. The actual subscription info to Breakfast with Dave suggests that clients have been paying for his bearish perspectives.  As the Wall Street Journal detailed earlier this year, clients actually turned on Rosie for flipping bullish, cancelling subscriptions. The change is posture — first telegraphed in mid 2012 — has not earned him any money, and probably cost him some. But to me, the most revealing aspect of Zero Hedge’s hit piece is the opening sentence: “In early 2013, many were mystified when one of the most vocal deflationists, and hence stock market bears, David Rosenberg, turned furiously bullish.” Except anyone who pays attention to equity prices — they were not mystified: Year to date, the S&P500 is up more than 25% and the Nasdaq is up more than 30%. What is mysterious is that no actual market performance so much as enters the discussion. The most revealing thing I can write about the piece is that nowhere does Zero Hedge bother to admit that Rosenberg’s call was 1) Correct and 2) Made money for clients. How can you make a big deal over a change in market posture but omit that its been right? When your biases are such that it is unimaginable that anyone could legitimately change their views on the markets, you have cognitive issues that will hurt your ability to navigate markets. But when that hubris leads you to conclude someone disagreeing with your market posture is only due to a monetary payoff, that is cognitive dissonance writ large. Zero Hedge owes David Rosenberg an apology.

10 Black Friday AM Reads Posted: 29 Nov 2013 06:00 AM PST My Black Friday shopping day reads: • 11 Economic Lessons to Make You a Smarter Shopper This Black Friday (The Atlantic)  see also 5 Things Not to Buy on Black Friday (WSJ) • Oh, crap: Former Fed Chief Greenspan Sees No Bubble in Dow 16,000 (Bloomberg) • Some Big Public Pension Funds Are Behaving Like Activist Investors (DealBook)   Continued here

Here’s What You Probably Ate Yesterday (by Region) Posted: 29 Nov 2013 05:00 AM PST I love this way to look at regional US food preferences, via the Economist:     Source: Economist

Charlie Pellett, Voice of New York Subway Posted: 29 Nov 2013 03:00 AM PST Charlie Pellett is a veteran news anchor and reporter for Bloomberg Radio. He is based in New York City. Pellett joined Bloomberg in 1992, serving as a member of the original Bloomberg Radio and Bloomberg Television anchor teams. Pellett’s voice has been designated as the official “voice” of the New York City subway system. Every day, riders can hear him imploring them to “stand clear of the closing doors.”

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