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Now that the case against DSK is near falling apart, read this interview he gave weeks before being accused of raping the Sofitel maid again. In late April, Dominique Strauss Kahn said he could see himself becoming victim of a sex trap. In an interview with Liberation, a French publication, on April 28, he said he foresaw 3 main challenges ahead for him (the implied thing being, if he ran for President of France). "The money, women and my Jewishness." He said the challenges were "in that order," but he spoke about the big one first: Women. "Yes, I love women ... so what? [...] For years we talk about giant pictures of orgies," he told Liberation. "But I've never seen anything out ... Let show them!" Then he said he could see himself being set up because of his affinity for women. According to Liberation: DSK then talks about ending up in a men's room with Sarkozy, during an international summit, and asks him to stop the dirty tricks about his private life. Wanting to pose as a victim, DSK starts imagining "a woman (he might have) raped in a parking lot and to whom half a million or a million euros would be promised to make up such a story..." (Another translation of the paragraph says, "He said he could see himself becoming the victim of a honey trap.") Obviously, he was right to put the "women" challenge first. Here's what he said about the other two challenges: On the "money", he said his wife, Anne Sinclair, has "put away the need for ever" with his personal fortune. Finally, about his "judaicity", he expects that one of his quotes, already viral online, be used against him. According to Jewish Tribune, he had said years ago that "he gets up every morning wondering how (he can) be useful to Israel." "Stupid," he now says, "but I hadn't refuted it at the time" For more on DSK's likely defense, see here > Please follow Clusterstock on Twitter and Facebook. Join the conversation about this story » See Also:
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Good morning. Here's what you need to know. - Asian indices were mixed in overnight trading with the Nikkei up 0.53%. Major European indices are in the green and U.S. futures indicate a lower open.
- The ISM Manufacturing index for June will be released at 10 AM ET. Consensus is for a drop in reading to 52. Construction spending data for May will be released at 10 AM ET. Consensus is for a -0.3% month-over-month change. Follow the release at Money Game >
- Motor vehicle sales data for June will be released today, consensus is for 9.6 million domestic vehicle sales. Consumer sentiment for June will be released at 9:55 AM ET. Consensus is for a reading of 71.8. Follow the release at Money Game >
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Yesterday, word was leaked that Treasury Secretary Tim Geithner is considering quitting soon, which immediately triggered speculation about who would replace him. One of the names that came up? Facebook COO Sheryl Sandberg. Sheryl is one of the stars of Silicon Valley. At Facebook, she and Facebook communications head Elliot Schrage and a few other senior executives have helped move the company out of its awkward teenager phase and become a respected (and adult) global behemoth. Sheryl joined Facebook from Google, where she ran online sales and operations and helped start Google.org. And prior to Google... she was chief of staff for the Treasury Secretary. Sheryl is a fixture on lists of the world's most powerful women. She went to Harvard and then Harvard Business School. And she recently gave Columbia's graduates a swift, inspiring kick in the ass, urging women of the next generation to get out there and win where her generation had failed. Being Treasury Secretary these days is a thankless job, given the hatred of the Wall Street bailouts, the failure of financial reform, and the massive stimulus and support the government is still directing to the nation's big banks while giving Main Street the shaft. But if anyone could pull it off and not become an object of loathing, it would be Sheryl. Unlike Treasury Secretary Tim Geithner, Sheryl has enough distance from Wall Street that she could do the job without appearing to be a pawn of the big banks and alienating most of the country in the process. So if Sheryl wants the job--and that's a big "if," we would think--here's hoping she stays on that short list. Now Read: Dear Graduates: Women Of My Generation Blew It, So Now It's Up To You Please follow SAI on Twitter and Facebook. Join the conversation about this story » See Also:
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So I use Pandora on my Droid, and it's pretty reasonable. I haven't done anything complicated, or even created any mixes. And when I pick Bruce Cockburn Radio or Stevie Wonder Radio or Don Henley Radio or any of the other stations that are perfectly safe to play while at work, there will occasionally be tracks by other artists, but they're fairly similar: Stevie gets followed by Aretha, Cockburn gets followed by an instrumentalist or a McGarrigle sister, Henley gets followed by mellow Genesis or Peter Gabriel ("In Your Eyes") or Phil Collins solo.*
So I was very surprised when I launched Pandora from my laptop's browser today, still on the Don Henley station. Here are the first four songs it chose:
- Led Balloon, "Stairway to Heaven" (live, no less)
- Bon Jovi, "Wanted Dead or Alive"
- Lynyrd Skynyrd, "Sweet Home Alabama," and
- Queen, "We Will Rock You"
If I wanted to listen to a set list like that, I would just tune in one of the local mediocre commercial stations. At least their commercials are more interesting.
(Hint to investors: if a company only has one advert that it uses when the app is first used—even after the user clicked through and signed up—they have more of a problem with their business model than Patch.)
From what I can tell, we're back in the Built-to-Flip model of Internet investing.
The "Don Henley" station is now playing The Rolling Stones's "Paint It Black." Love the song, own the Decca collection they're linking it to. Not what I would expect to hear between Coldplay and Steeler's Wheel, though.
Paying $36/year to upgrade my account seems much more unlikely than it did even this morning. The next two songs were "Another One Bites the Dust" and this:
which was the second track by that band in an hour—matching the actual number of Henley/Eagles tracks played.
Either their algorithm is really dumb, or they assume all their listeners obsess over Axl's vocals on "I Will Not Go Quietly." Not the way to bet in the mass market.
*I have some standards: the latter would be an immediate thumb down, but I know why I'm getting it: after you let the Genesis-recorded Ode to Adultery ["In Too Deep"] play, Collins's sententious solve-hunger song ["Another Day in Paradise'] or the insufferable "Take Me Home" probably will be suggested sooner rather than later.)
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Saudi Women have successfully petitioned one automaker to stop selling cars in the country until the driving ban is lifted, according to Detroit Times Subaru, which sells a few hundred cars there a year, agreed to petition. "We're pleased to be recognized as a progressive company by the coalition," said spokesman Michael McHale. But in Detroit the Saudi Women had no luck. GM politely declined: "In each country, including Saudi Arabia, we have earned our customers' confidence by respecting the laws and customs of the local market and by not interfering in their internal affairs," said spokesman Klaus-Peter Martin. No word yet from other companies. Subaru pledged, however, to reach out to other automakers. Please follow Business Insider on Twitter and Facebook. Join the conversation about this story » See Also:
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Morgan Stanley has rolled out a new ETN that combines access to large cap U.S. equities with exposure to a futures-based investment in crude oil. The new S&P 500 Crude Oil Linked ETN (BARL) will offer returns of the S&P 500 Oil Hedged Index. That benchmark provides exposure to the S&P 500 Total Return Index along with positions in short-term NYMEX Crude Oil and ICE Brent Crude Oil futures contracts. BARL is essentially a combination of the S&P 500 SPDR (SPY), United States Oil Fund (USO), and United States Brent Oil Fund (BNO), all rolled up into one. It’s important to note that BARL provides equal exposure to both stocks and commodities; a $100 investment in BARL provides both $100 worth of exposure to the S&P 500 and $50 worth of exposure to both Brent and WTI futures contracts. So if the S&P 500 gained 10% and each oil position gained 10% between rebalancing periods, BARL could be expected to add 20% (the underlying index will rebalance on a monthly basis). Conversely, if the S&P 500 dropped by 20% during the month and crude oil futures lost 20%, the value of the note would drop by 40%. “We are pleased to provide this new ETN offering to clients,” said Nikki Tippins, Head of Equity Derivatives Sales for the Americas at Morgan Stanley. “An investment in Morgan Stanley S&P 500 Crude Oil Linked ETNs combines the returns of crude oil futures and large-cap U.S. equities in a single exchange-traded security.” Potential Uses BARL could potentially have appeal as an alternative tool for establishing exposure to large cap equities among investors expecting oil prices to climb steadily higher. Though investors with a bullish outlook on crude prices should note that BARL’s oil-linked component refers not to changes in spot prices but to a futures-based strategy revolving around near-term contracts. Contango in futures markets can cause significant gaps between the hypothetical return on spot oil and the actual performance realized through a futures-based strategy [Commodity ETFs: It Takes Two To Contango]. BARL could also be used as a more tactical tool: a shorter-term alternative to large cap U.S. equity exposure during stretches when oil prices are expected to show strength. Though investors should take note that BARL effectively offers leveraged exposure; each $1 invested essentially buys $2 worth of exposure: $1 in the S&P 500, $0.50 in WTI futures, and $0.50 in Brent futures. If U.S. stocks and oil prices move in the same direction, that can result in increased volatility in either direction. The inclusion of both WTI and Brent Crude contracts is an interesting feature. WTI has historically been the primary global benchmark, and WTI has generally traded at a premium to Brent (which is used more widely in Europe). But thanks to discrepant supply and demand conditions, the premium has flipped to a discount in recent months. Most analysts expected the inversion to be short-lived but Brent has continually traded higher than WTI, raising some questions about the future of the WTI contract as a widely-followed benchmark for oil prices [Three Forgotten ETFs To Play Oil]. The structure of BARL may result in a risk/return profile that is vastly different from a simple equity-only ETF focusing on large cap stocks. The underlying index beat the S&P 500 Index by a huge margin over the last year thanks in part to the huge run-up in Brent futures contracts. But over the last five years, the oil/equity hybrid index has trailed the S&P by a huge margin: | 1 Year | 5 Year | 10 Year | | S&P 500 Oil Hedged Index | 66% | -34% | 98% | | S&P 500 Total Return Index | 25% | 14% | 26% | | WTI Front Month Futures | 20% | -39% | 54% | | Brent Front Month Futures | 53% | -16% | 129% | | Source: morganstanley.com. Data as of 6/1/2011 | BARL Joins Hedged Gold ETN BARL is the second ETN in the Morgan Stanley lineup; in March the company launched its Cushing MLP High Income Index ETN (MLPY). That exchange-traded note is linked to an index that consists of 30 publicly-traded MLPs with an emphasis on current yield. MLPY currently has about $20 million in assets. UBS has offered an ETN that similarly combines equity exposure with a commodity hedge; the E-TRACS S&P 500 Gold Hedged ETN (SPGH) is linked to an index that delivers returns resulting from investments in the S&P 500 and near-term COMEX gold futures. [For more on the new ETN, see the BARL fact sheet. For updates on all new ETFs, sign up for the free ETFdb newsletter] Click here to read the original article on ETFdb.com.
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The one big economic report still coming today is the US ISM Manufacturing Index. After several weak regional Fed manufacturing reports, many have guessed that the number would come in sub-50, showing contraction. And yet some news this week (Chicago PMI, KC Fed) has lifted the hopes of the bulls. Currently the official survey estimate is for a reading of 52, down from 52.5 last month, but still showing growth. From Deutsche Bank: In light of the Chicago news, we are raising our ISM forecast significantly from where we were previously. As we wrote in the US Daily Economic Notes earlier this week, the Chicago PMI has nearly twice the weight in a regression-based estimate of the ISM relative to the combined weight of the NY and Philadelphia Fed surveys. Our new ISM forecast is 53.0 versus a pre-Chicago forecast of 49.5. Remember that based on what we had seen in the NY and Philadelphia Fed surveys, we had assumed Chicago would come in at 53.0. More importantly, regardless of this morning’s ISM results, recent economic data from Japan point to a sharp increase in the ISM next month. Please follow Money Game on Twitter and Facebook. Join the conversation about this story » See Also:
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The dollar iis mixed today, but is set the finish the week on soft footing. The euro's resilience is noteable today in the face of the disappointing news stream. However, it has not convincingly violated the downtrend line (connecting the early May and early June highs) and comes in near $1.4540-50 today. The short-term momentum indicators I use to monitor intraday price action suggests there it is likely to rise above there today, perhaps on the back of a disappointing ISM report.
Recall that ealrier this week, German and France reported simply horrifc retrail sales and household consumption respectively. China's PMI was poor (50.9 vs 52.0 in May). US data has been generally disappointing, but some minor regional surveys and yesterday's Chicago ISM were stronger than expected. The key report next week is the US employment figures and there is little reason to expect a robust report. This stands in contrast to the ECB, which most likely will hike rates next Thursday.
European PMIs were across the board poor. It is the third consecutive month the euro zone PMI for manufacturing has fallen. Ireland, Spain and Italy were below the 50 boom/bust line. Norway and Sweden also reported greater weakness than expected, as did the UK. Perversely, the BOE may find some consolation in the fact that the price component fell sharply from 71.4 to 60.9, which is the lowest since Dec 2009.
News that the Eurogroup meeting on Sunday has been replaced by a video-conference is not a big deal--modern technology vs oil consumption--not bad initiative necessarily especially in light of the push back over the EC's insistance on a budget increase. However, more important, German banks have balked big time against the Finance Minister's plan. It appears that only about 20% of German Greek sovereign obnd exposure would be rolled by the private sector.
Although the ECB has insisted this is a private sector burden sharing, the Germany has seen fitting to allow two landesbanks to participate. If German banks have agreed to about 2 bln euro roll, the landesbnaks seem prepared for about 1.2 bln euro roll.
Japanese data were mixed. Household spending unexpected fell (surprising after firm retail sales), though the year-over-year contraction eased to -1.9% from -3.0% in April and -8.5% in March. Unemployment unexpectedly fell to 4.5% from 4.7%. The reluctance to spend and the self-restraint slowly seems to be ebbing. Consumer confidence, jobs and industrial all improved.
Deflation forces are ending as core CPI remains positive for the second consecutive month. The headline Tankan survey results were poor, but the expectations for the next were the Sept report are better. Capex plans were also improving. In terms of the dollar-yen rate, large Japanese manufacturers lowered their forecast to about 82.60 from 84.20.
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The Project on Government Oversight has, in my opinion, proven itself as the finest “nonpartisan independent watchdog that champions good government reforms”. POGO’s work is superb. I check their site daily. America needs more of what POGO does. What do they really do? POGO digs deeper and works harder on promoting our prized virtues of truth, transparency, and integrity. How do they do it….? Provoking accountability is about building a more effective, accountable, open, and ethical federal government. Since 1981, POGO has provoked accountability in the federal government by conducting investigations and working with policymakers to enact reform. You can help by spreading the word. America needs your help. America needs POGO’s help. Get involved. Link to POGO and you can ‘provoke accountability’ as well. Spread the word. Larry Doyle Isn't it time to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook? Please get your friends and colleagues to do the same. Thanks!! I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved. Read more posts on Sense on Cents » Please follow Clusterstock on Twitter and Facebook. Join the conversation about this story »
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 This week, Minister for Health James Reilly warned that hospitals will not be able to hire enough junior doctors by July 11. Here a junior doctor working in an Irish hospital, who wishes to remain anonymous, describes the situation on the wards.
JULY 11 IS QUICKLY becoming the doomsday of Irish healthcare. The changeover – when new doctors arrive, ex-interns flee to the new world, and emergency departments throughout the country finally crumble beneath the sheer weight of patients on trolleys. The reality is that we will struggle on, as we have for so many years – understaffed, overworked, denied overtime payments in some institutions. It is the junior doctor who will bear the shortcomings of our health system in the months and years to come. Who would want to stay in an environment so destined for failure? Understaffing is a hot topic, but not a complex one. When you don’t have enough doctors to do the job, the doctors who are there work longer and harder. They work more hours and more nights on call – a rota where you were on call one in every six nights might becomes one in three.The European Working Time Directive (EWTD) dictates by law that no doctor should work longer than 12 hours without a rest period. But this just isn’t possible if, after a night on call, there aren’t enough doctors to staff the facility. You stay for the next day, and you can’t really argue with it. You could enter the hospital at 8am on a Thursday and leave at 8pm on Friday night, with two hours’ sleep. This is a reality in many hospitals where the EWTD simply cannot exist because of understaffing. The situation will worsen on 11 July. Where the EWTD is in practice, junior doctors face different problems, again due to understaffing. If you work a week of nights, for instance, sleeping during the day after working the night (how selfish) – your regular team of five junior doctors, or non-consultant hospital doctors (NCHDs), are reduced to four. If two doctors are rostered for nights, or if someone is on leave, it becomes trickier still. But you just work harder and longer to fill the gaps, and get on with it. Every junior doctor has a horror story. I once worked an 80-hour shift with about six hours sleep in total. I was a hero for half a day and then someone else stole the limelight. But on the whole, it’s not that bad. It can be a difficult lifestyle, but we knew this before we entered the profession. It does of course depend on where you work – some hospitals are notorious for long hours and ridiculous on-call rotas, features of an understaffed department. ‘The patient is more likely to die’ But is it just hard work, or is it dangerous work? Understaffing can be genuinely negligent in some cases. For example, cardiac arrest is a situation where understaffing simply isn’t an option. Or so you would think. Let me re-tell a worrying anecdote from one particular hospital. Staff are often moved around depending on where they are needed the most. Junior doctors working nights may be moved from less busy, more remote areas of the hospital to the emergency department. But if there is a cardiac arrest in that remote area, they are absent. The anaesthetist, too – who usually leads a cardiac arrest team – could be absent if working in the operating theatre. This can leave only two people to run a resuscitation – not enough, particularly when one of them will be an intern who may just be starting out on the job. The patient is more likely to die, thanks to substandard resuscitation. A friend of mine had a horror story. She had just started on an oncology (cancer care) rotation as a new intern. This was a rotation that was notorious among the senior house officers (SHOs) for being incredibly difficult – so it was always a post that was hard to fill. While my friend was an intern with oncology, they were short an SHO all the time. She was often left alone on the wards, and described nightmarish days running from ward to ward dealing with acutely unwell cancer patients, some of whom were critically ill. Patient care no doubt suffered. Training is another issue. As NCHDs we’re supposed to be part of an ongoing medical education programme, with formal structured teaching. This is not possible if doctors are stretched to fill a couple of positions at once. You may not be able to attend teaching because of commitments to ward jobs. You may be after a night on call – do you stay for teaching, or go home and sleep? Or if you are part of an EWTD setup, you may have fled the hospital for your ‘rest period’. If you sleep, you miss out on training. Poor training is bad for us professionally and in terms of our confidence as medics. It’s also bad for patients who may be exposed to substandard doctors. Training also requires us to pass professional exams. Understaffing simply doesn’t equate with successful study – longer hours, more on-call, more tired, and less chance of getting a week of study leave. Ultimately, most junior doctors want good training – this will trump everything at the end of the day. But more often than not, Irish training programmes are too unstructured to compete with international standards. So it is with this uncertain future that many of us will battle on. But suppose you’re hit with that woeful hospital – there is no teaching programme, you’re too busy with menial tasks to actually learn anything clinical, and you might not even get paid for your overtime. Typically these are severely underfunded peripheral hospitals with Third World facilities. But it is actually the huge Dublin hospitals where junior doctors are the worst affected, as their catchment areas far surpass the facilities and staff available. It’s really only word of mouth that you can rely on to help you avoid these hospitals. I feel sorry for the unsuspecting foreign doctors who are landed with a nightmare job. It’s no surprise, then, that I’m emigrating – soon to become a statistic, an enemy of the state because I am leaving emergency departments in tatters. But do I feel bad about it? Not really. I’ll be back at some stage with good training and some idea of how a functioning health system works – two things that I may not get if I stay in Ireland. Please follow Business Insider on Twitter and Facebook. Join the conversation about this story » See Also:
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GSM technology turns twenty today. GSM gave birth to the mobile phone industry and despite the advent of 3G and 4G is still huge. Nokia Siemens notes that GSM has 4.4 billion subscribers around the world, and adds one million new subscriptions added every day, at a rate of nearly 12 a second. Not only that but mobile has a tremendous impact on the world, particularly when it comes to developing countries. As we said, huge. An anniversary worth celebrating. (Hat tip to Horace Dediu on Twitter) Meet The iPhone 4's Biggest Threat → Please follow SAI on Twitter and Facebook. Join the conversation about this story » See Also:
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It's always fun to read the Post's editorials on economic issues, since you never know what you might find. For example, it recently told readers that reducing the annual cost of living adjustment for Social Security beneficiaries by 0.3 percentage points annually (i.e. 3 percent after 10 years, 6 percent after 20 years, and 9 percent after 30 years) "won't hurt." Today we get the Post's assessment of the Fed's QE2 policy. It praises the policy for preventing deflation, which it says was a risk at the time the Fed started the program. Actually, it is hard to see how deflation was a serious risk in the fall of 2010 or much impact of QE2. The core inflation rate has been pretty constant over this period, running in the range of 1.0 to 1.5 percent, with nominal wage growth running close to 1.6 percent. The Post also makes a common mistake in viewing deflation as some sort of grave economic threat. There are good reasons for wanting a higher inflation rate (e.g. 3-4 percent) as economists across the political spectrum have argued. Most importantly it would reduce the real interest rate at a point where the nominal interest is already stuck at its zero lower bound. In this context, a lower inflation rate is worse than a higher one, but crossing zero holds no special magic. In other words, it is bad news if the rate of inflation falls from 0.5 percent to -0.5 percent, but there is no reason to believe that this decline in the inflation rate is any worse than the drop from 1.5 percent to 0.5 percent. The Post may be thinking about the sort of rapid deflation that was seen at the start of the Great Depression, when prices were dropping at near double-digit rates. That kind of deflation makes any sort of economic planning almost impossible, but there was little risk that economy would see rates of deflation go that high. The other oddity in the Post's piece is that it blames QE2 for the run-up in commodity prices: "But the negative consequences of QE2 — all of them also foreseeable — have canceled out some of the positives. Perhaps the most important of these was a commodity price boom, caused by the fact that many investors used the Fed's freshly printed money to speculate on grain or oil. The winnings accrued to a wealthy few, while the U.S. middle class coped with higher prices for groceries and gasoline." There are two big problems with this story. First, much of the recent run-up in commodity prices is likely to be enduring, driven by rapid growth in China and elsewhere in the developing world. I don't know anyone betting on a return to $40 a barrel oil. However the other part is even more bizarre. Speculators did not need QE2 to speculate. The Post's editorial writers are probably too young to remember, but back in 2008, before the collapse of Lehman, most commodity prices were even higher than their recent peaks. The Fed was in a tightening phase at that point. Given that we saw a much larger speculative bubble just three years ago, when the Fed still had relatively tight monetary policy, why would anyone think that the current bubble was primarily due to the Fed's actions? Oh well, that's why it is always fun to read the Post's editorials on economic issues. Read more posts on CEPR » Please follow Politics on Twitter and Facebook. Join the conversation about this story »
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Within two days of meltdown in Fukushima, the British government organized a coordinated PR response to protect the nuclear power industry. Emails obtained by the Guardian warn of potential backlash against nuclear, especially if people start comparing Fukushima to Chernobyl. "This has the potential to set the nuclear industry back globally," wrote one official at the Department for Business, Innovation and Skills. "We need to ensure the anti-nuclear chaps and chapesses do not gain ground on this. We need to occupy the territory and hold it. We really need to show the safety of nuclear." Britain has in fact not joined Germany, Japan, Italy and others in abandoning nuclear power. Please follow Business Insider on Twitter and Facebook. Join the conversation about this story » See Also:
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OpenSearchServer, a French startup that builds an open source enterprise search product, has raised €200,000 or almost $300,000 from top French angels including Kima Ventures, the world's most active angel fund, and Vente Privée founder Jacques-Antoine Granjon. Enterprise search is a billion-dollar plus market according to Gartner Group, and it's itself part of the much bigger trend of "Big Data." As people and companies generate more and more insane amounts of data, there's going to be tons of money to be made gathering it, securing it, analyzing it, etc. OpenSearchServer is interesting because it's an open source solution, which is potentially disruptive to the big enterprise search providers, who right now are big companies like IBM, Microsoft, Oracle and SAP. Not a sexy consumer startup, but nonetheless something important and interesting. Kate Moss And A Bear With Chainsaws: Tour Vente Privée's Incredible HQ → Please follow SAI on Twitter and Facebook. Join the conversation about this story » See Also:
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Consumer spending has been pretty uninspired so far this year, contributing to GDP growth below expectations. In a note, Goldman's Jan Hatzius argues that the consumer will re-accelerate in the back half. We summarize his three reasons: - Gasoline prices have fallen sharply, by about $.50/gallon. This will help the consumer. Says Hatzius: "We estimate that the gasoline shock has pushed the level of real consumption about 0.3% below the baseline"
- House prices are stabilizing. Says Hatzius: "...Four alternative indicators of US house prices: the seasonally adjusted Case-Shiller index; the CoreLogic index with a seasonal adjustment provided by Haver Analytics; the seasonally adjusted FHFA index; and the median price of existing homes with a seasonal adjustment estimated by ourselves. All four indicators showed a substantial drop between mid-2010 and February/March 2011. Since then, however, all four indicators have looked somewhat better, with smaller seasonally adjusted declines in the Case-Shiller and CoreLogic series and small seasonally adjusted increases in the FHFA and median price series."
- Household balance sheets are "healing." Delinquencies are decreasing. Debt service burden has fallen. Credit standards are loosening.
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For a trading methodology to be successful, it has to be complete. That means covering every aspect of the process – what needs to be done day in and day out, week in and week out, and so on. Early on, many traders begin with an enthusiastic focus on just one area of the program, like signal generation or rules testing, without considering the other equally important elements. Think of it like an engine: If you are missing even one critical piece, the engine does not work. Put all the parts together, though, and the engine roars into life. By our way of thinking, there are four key components of a successful trading program: Target, Track, Execute, and Manage. Each plays a specific role, and the four component division can be applied to many different trading styles. Now let's look at each one in turn… Target Targeting is the practice of identifying potentially good trades. A classic example of this is running through nightly screens – looking for patterns that highlight candidates long or short. (We covered elements of the screening process in PTS Part I.) The targeting process can range from the very simple – for example, signal generation via basic mechanical trend following program – to the highly complex, in which a wide variety of fundamental and technical inputs are used to determine a good trade. Targeting usually gets plenty of emphasis. Entry points are a natural focus for beginning traders, i.e. "When should I buy or sell." But it can still be useful to think about the targeting process as a standalone aspect of the trading program, because there is so much potential for efficiency and enhancement in this area. Track The tracking process comes into play when a vehicle has been targeted, but the time is not right to pull the trigger just yet. It may be that a viable idea still needs time to ripen or come to fruition. It may be that market conditions or price action are not quite right. It may be that a scenario has to catalyze first, or a level has to be broken, before the trigger can be pulled. All these things represent a mismatch between the time when a potential trade is identified, and the later time when it makes sense to act. Tracking procedures represent the ability of a program to stay on top of time-delayed ideas — potential future trades — as market scenarios unfold. The basic concept of tracking, which we'll discuss more at a later time, is to create a stable of potential trades, where one has awareness that a certain area looks promising, and mechanisms are needed for (1) continuing to evaluate and / or (2) paying attention so one does not miss the optimal time to act. Another way to think about tracking is ranking trading ideas not just by conviction, but also by timeliness. A near-term example might be looking for short candidates when it's clear that end-of-quarter window dressing is over. Medium term might be, “if the commodity complex bottoms out it could be a good time to buy X.” An even further out idea might be, “what are some strong candidates for the next bubble cycle,” and so on. You need mechanisms for tracking these ideas in their respective time frames, so as not to be the trader who says "Oh man, I saw that coming weeks / months / years ago… but it took too long and I missed it." That is what the tracking process is for. Execute Executing on a trade has to do with the nitty gritty details of actually making a move. For example, you have decided that ABC stock is a buy or XYZ currency is a sell. How do you execute the trade? How many shares or contracts do you put on? What is your planned risk? What vehicle or exchange will you use? Will you use options? The underlying? A combination of both? Will you enter at market or with a stop limit? How large will the position be? All these things are a function of execution. Once you have targeted potential trading ideas, and then tracked them to the point of pulling the trigger, execution covers the logistical details of the what, when, how and how much. Execution is a vital aspect of the process that all too often gets neglect. Many traders put little thought (or not enough thought) into factors like volatility, position sizing, initial risk points, and the best way to express a trade. These things matter a great deal, wholly apart from deciding what to buy or sell. Manage ‘Manage’ refers to both individual trade management and total portfolio management. On the individual trade level, your decision making process is not over once the trade is on. You begin (hopefully) with an established risk point. But as time unfolds and markets evolve, you may want to tighten that risk point, or adjust your size on the trade. As the trade moves in your favor, you will want to have some form of discipline for reducing risk moving forward. And if things are unfolding according to plan, you may want to pyramid the position. This is all part of position management. On a broader level, management applies to the entire portfolio. (We have discussed this in respect to horizontal and vertical exposure.) Especially in the "risk on / risk off" environment of recent years, for example, having ten positions on can be like having one big position. You must be aware of correlations. Consider how the different trades in your portfolio are like pieces of a puzzle. You have to look at how all the individual pieces fit together, and what the puzzle looks like as a whole. Portfolio management also comes significantly into play in your execution on new trades. Often times position size will be based (or SHOULD be based) on not just the conviction you have on the trade, but the positions you already have in play, the total portfolio risk you are willing to take, the general state of your equity curve, and so on. Management is having a plan for managing both individual trades, on a trade by trade level, and the portfolio as a whole where all the trades interact. Putting it all together None of this is rocket science. But we find it can be helpful to think about one's trading methodology as a multi-part process. Breaking out these four components and examining each one individually can yield good returns. It is also common for traders to have different strength and weakness profiles. One might be strong on targeting but weak on management. Another might be great at execution but not so hot with tracking, and so on. Examining one's methodology from these four perspectives can give a sense of where to get the most “bang for the buck” from improvement efforts. This goes back to the theory of constraints idea — the chain is only as strong as its weakest link, or limiting constraint. You will often do best by drilling down on the one area or constraint where improvement gives maximum ROI to the whole operation. We put the four components to work every day via the Mercenary Live Feed, the venue where we make our day to day decisions. All the trades placed in the Live Feed are an example of integrated Target / Track / Execute / Manage considerations, as we make our decisions with real money in real time. To see the four components in action, you can find out more about the Live Feed, sign up for a 14-day free trial, or simply click a box below. Read more posts on Mercenary Trader » Please follow Money Game on Twitter and Facebook. Join the conversation about this story »
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Atrios is annoyed at David Wessel, and rightly so. I’d summarize Wessel’s column a bit differently: it’s roughly “Some people thought from the beginning that the stimulus should have been much bigger. Hahaha! Also, it turns out that the stimulus was too small, so we need some more.” This is actually a fairly familiar thing from my years as a pundit: the surest way to get branded as not Serious is to figure things out too soon. To be considered credible on politics you have to have considered Bush a great leader, and not realized until Katrina that he was a disaster; to be considered credible on national security you have to have supported the Iraq War, and not realized until 2005 that it was a terrible mistake; to be credible on economics you have to have regarded Greenspan as a great mind, and not become disillusioned until 2007 or maybe 2008. Read th erest of this article at The New York Times. Please follow Business Insider on Twitter and Facebook. Join the conversation about this story » See Also:
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 (This guest post by by Derik Andreoli, Senior Analyst Mercator International, LLC appeared at The Oil Drum. It is licensed under a Creative Commons Attribution-Share Alike 3.0 U.S. License.)
Upon exiting the most recent Opec summit, the visibly frustrated Saudi Oil Minister, Mr. Ali Naimi, proclaimed it to be “one of the worst meetings we have ever had.” In the lead up to the meeting, oil traders had come to believe that Opec would increase production quotas to cover the shortfall of light, sweet Libyan crude going into Europe’s peak demand season. This led traders to the conclusion that tight markets would loosen (relatively), and as a consequence, oil traders bid down the price for ‘paper barrels’ (oil futures) by a couple of dollars. While hindsight may be 20/20, foresight is rarely better than 50/50, and in this case, the market was wrong. Opec failed to revise production quotas, and upon learning of this decision, traders quickly bid the price back up. A couple days later, Saudi Arabia announced that they would break with Opec by lifting production above their allotted quota. Oil traders reacted by bidding the price back down, and in the end, prices had settled back to previous levels as if the summit had never happened. But the story isn’t over until all the holes in the plot have been filled, and all the nagging questions answered. Why, for instance, would Saudi Arabia announce that they planned to lift production above Opec’s stated quota? Why not just covertly lift production? After all, when it comes to the Middle East, oil markets are deliberately opaque, and in fact, Opec quotas are regularly flouted. Furthermore, from a purely financial perspective, such bold announcements make no sense at all. If we assume that Saudi Arabia exports somewhere around 6.25 million barrels of oil per day, we can easily calculate that at $100 per barrel, Saudi Arabia nets a daily petro-income of $625 million. If they were to covertly lift production by 200,000 barrels per day (as they and other Opec members have done in the past), Saudi income would increase by $20 million. By announcing their intentions to lift production, however, the price slid $3 per barrel, and the Saudi daily income was reduced by roughly $19 million per day, a 3% decline (assuming exports at 6.25 mbd). To maintain a stable income under this scenario, Saudi exports would need to be lifted by roughly 200,000 barrels per day. Hence, the Saudi announcement makes little sense from a business perspective. Of course the Saudi Arabian Oil Company is more than a business, it is the fulcrum of Saudi Arabia’s geopolitical power, and being the only nation with significant spare production capacity provides the Saudis with a point of leverage which they use to their political advantage. And there is no more important time to manipulate these geopolitical levers than now. Saudi Arabia is not immune to the wave of populist uprisings sparked by high food prices, high unemployment, and corruption that has crashed onto the shores of Egypt, Libya, Yemen, Bahrain, Syria and so on. In fact, Saudi Arabia shares a common border with Egypt, Yemen, and Bahrain, and is situated just across the Arabian Gulf (Persian Gulf in the West) from Iran. While geographically proximate to Shia-ruled Iran, Sunni-ruled Saudi Arabia could hardly be more distant in ideological/theological terms. The Shia-Sunni rift dates back to the death of the Prophet Muhammad and the disagreement over successorship which followed. The Shia believed that the leadership should stay within the family while the Sunnis believed that a group of elites should decide who the rightful successor should be. Over the years, Sunni and Shia elites have fanned the flames of division for political gain, and the fire has become so hot that there is little hope that the flames will be extinguished any time soon. Though the majority of the Saudi population is Sunni, Shia predominate in the oil-rich Eastern section of the country. Similarly, Shiites comprise the majority of the populations of Kuwait, the UAE, and Bahrain, yet these border states are, like Saudi Arabia, ruled by Sunnis. This is of particular concern because the flames of the populist uprisings are being stoked by Shia- dominated, Shia-ruled Iran that hopes that the populist uprisings will create a power vacuum that will be Shia-filled. This is why Saudi Arabia sent troups into Bahrain. This is also why Yemen President Ali Abdullah Saleh was evacuated to Saudi Arabia after being wounded in a rocket attack after months of peaceful protests gave way to violence. The threat of regime change in such a geopolitically charged environment also explains why Riyadh has committed to doling out over $130 billion for housing and social programs aimed at easing rising domestic tensions (and why the Saudis require high oil prices to balance their federal budget). In order to buttress their regime, Saudi rulers have maintained ties with the U.S., despite the entrenched divisions between the House of Saud and the United States. These divisions are rooted in the U.S. support of Israel, and the U.S. overthrow of Saddam Hussein which resulted in the installation of the first Shia government in Iraq. On the other side of the coin, access to oil is why the U.S. has supported, and continues to support, the Saudi rulers and similar regimes in the MENA region despite known links to al Qaeda and other extremist groups. Preserving the power relations that secure the flow of oil further explains why in October of last year, the U.S. penned an arms deal worth $60 billion (the largest single deal ever) with Saudi Arabia and have been training an elite Saudi military force tasked with protecting vital oil infrastructure. Perhaps more importantly, the rising threat to the House of Saud has, in fact, granted the Saudis an important bargaining chip in the debate over the establishment of an internationally recognized Palestinian state. Riyadh has threatened ‘disasterous consequences’ should the U.S. veto the UN recognition of a Palestinian state. Such a recognition, however, would significantly weaken U.S.-Israeli relations, and one might go so far as to interpret this as a divide-and-conquer strategy. At any rate, for these and other reasons, the Saudi-U.S. relationship remains tenuous at best. To bring this back to point, regime preservation explains why Mr. Naimi left the June Opec meeting visibly frustrated, proclaiming it to be the worst meeting ever, and why Saudi Arabia announced that they were going to break with the Opec quota system. Though the decline in oil prices brought about by the Saudi announcment hit their own bottom line, it also hit Iran’s bottom line. This is a small price to pay, however, given that Mr. Al Naimi’s words and actions buttressed the U.S.-Saudi relationship while at the same time driving the wedge between the U.S. and Iran ever deeper. But don’t take my word for it, consider instead the reaction of Congressman Edward Markey (D) who proclaimed, “Opec, led by Iran and Venezuela, has snubbed its nose at the United States and the rest of the western nations.” Of course the situation in Syria highlights the fact that Iran faces a similar threat to the one faced by Saudi Arabia. In both countries, domestic discontent and a yearning for democracy threatens to topple the ruling regimes. Consequently the U.S. finds itself confronted with competing objectives and mired in the complexities of Middle East geopolitics. We feel compelled to support the pro-democracy movements, but require the unperturbed flow of oil out of the region. We need look no further than to Libya to see that regime change – be it to a functioning democracy or from one authoritarian regime to another – threatens the flow of oil. Hence reconciling these competing objectives requires finesse and more than a bit of luck. Bringing this argument full circle, while the most recent Opec meeting had little lasting impact on oil prices, the real story is found in the analysis above. A troubling truth is revealed by considering Mr. Al Naimi’s words and actions in the context of the ongoing MENA crisis. As an x-ray reveals asymptomatic osteoporosis, Mr. Naimi’s words and actions reveal just how fractured and fragile the Middle East has become, and by extension just how perilous our economic recovery remains. Please follow Business Insider on Twitter and Facebook. Join the conversation about this story » See Also:
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Listening to a government-sponsored radio news broadcast this yesterday, I heard Barack Obama talking about his plans for closing up the nation’s larger-than-Greece’s federal budget deficit (don’t forget that the states are also running deficits by underfunding public employee pensions) by eliminating tax breaks for corporate jet owners. I did a little research and found out that he was talking about a regulation that allows new aircraft to be depreciated more rapidly than the 7-year standard. This article explains the issue reasonably clearly. The depreciation schedule tweak was put in as a favor to aircraft manufacturers and their mostly unionized work forces. It makes new aircraft relatively more attractive than used aircraft. As U.S. companies such as Cessna and Bell lose market share to more innovative foreign manufacturers, however, many of the benefits are going to foreign or foreign-owned aircraft makers. As I wrote in my economic recovery plan for the U.S., I’m personally in favor of allowing businesses to depreciate capital goods on whatever schedule makes sense for them. It avoids the bizarre situation of a company being cashflow-negative and still owing tax. President Obama made it sound as though the change would raise a lot of revenue for the federal government. The reality is that changing the rules wouldn’t raise an additional dime from companies that already own planes. Nor would the rule change change the total amount that a company can deduct for an aircraft used for business. Tweaking the rules means that the federal government gets tax revenue possibly a little sooner or later than it would have otherwise. With interest rates down around 1.5 percent for 5-year Treasuries, the value to the Feds of getting the money sooner is low. The final problem with Obama’s plan to raise big $$ via this rule tweak is that aircraft sales in the U.S. are very slow. Since the U.S. economy isn’t growing and aircraft last a long time, there is little practical need for a lot of new corporate jets. Obama’s plan would help accountants and tax lawyers, but it is hard to see how it would have a significant effect on federal tax revenues. Furthermore, the way that he phrased it in his speech was misleading to citizens who would have concluded that somehow the federal government was ladling out cash for corporate jets in the same way that it does for energy efficiency, electric cars, ethanol, etc. Obama proposed to close one of the world’s largest government spending gaps by changing the depreciation schedule on a small and shrinking class of capital equipment purchases. Please follow Business Insider on Twitter and Facebook. Join the conversation about this story » See Also:
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Investors have used the European action on the Greek crisis as a convenient excuse to rally from an extremely oversold short-term market. However, Europe’s serious problems with its Southern tier nations are far from over at the same time that both the U.S. and global economies are slowing significantly with no sustained recovery in sight other than a possible temporary uptick from an alleviation of the Japanese supply-train problems. All that the “bailout” of Greece accomplishes is the adding of further debt burdens on a nation already in trouble as a result of too much debt. At the same time it saddles Greece with a severe austerity budget that will sink its economy and make it even less likely to ever be able to ever pay off the debt. Essentially the European nations are lending Greece the money to pay off the banks that made the ill-advised loans to begin with. In addition, since the funds will be loaned in tranches depending on Greece’s actual implementation of specific austerity measures, the problem will remain in the news for some time to come. Investors have focused so much on the Greek crisis that they have virtually overlooked the current weakness of the European economy. Spain’s retail sales were down 6.6% in May from a year earlier. German retail sales in May were down 2.8% in April and down 4% since September. French retail sales were down 1% in each of the last three months. Keep in mind, too, that these are all nominal numbers not adjusted for inflation. At the same time the ECB has hinted strongly that another rate hike was likely next month, putting even more pressure on economic growth. It’s also highly probable that the need to “save” Greece and prevent contagion to Ireland, Portugal, Spain and Italy is having a negative pull on Europe’s wealthier nations. The rest of the global economy looks fragile as well. In numerous recent comments we have focused on the slowdown in U.S. growth. Japan is already in recession. Together the U.S., Europe and Japan have about 50% of the world’s GDP. The current conventional wisdom looks to strength in the emerging nations’ economies as a bulwark against a global tailspin. However, the dependence of emerging nations’ economies on the developed nations has been proven time and again and is still true today. Furthermore, leading emerging nations such as China, India and Brazil are undergoing serious inflation, leading them to tighten monetary policy and slow down their growth. At the same time both monetary and fiscal policy are out of ammunition. We have now reached a point where further stimulus will not help while austerity will tank the economy. In our view investors are unduly optimistic as they were in late 2007 when they dismissed the impact of subprime loans on the economy and earnings. Despite the slowdown, earnings estimates have not come down. Estimates for 2011 S&P 500 operating earnings are about $100. The last time estimates were at this level was early 2008. Actual earnings for that year eventually came in at about $50 and reported (GAAP) earnings were $15. We think that the market has been in the process of making a top since March and that the next important move will be down. Please follow Money Game on Twitter and Facebook. Join the conversation about this story » See Also:
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We’ve gone from the chamber of commerce small business mixer to the social networking sites like Facebook, Twitter and LinkedIn. And we’ve learned a lot along the way. How is your social networking going? Let’s review some links below then share your own thoughts on social networking and how it works for your business. Self-develpmreht Do you keep a calendar? Keeping up your social media networking is perhaps the hardest part of what you do. Basic social skills are easy when some one’s invited you to an event. But what if it’s just you and your computer? Small Business Trends In-House Social New trends bring social media in house. Getting social networking into the hands of collaborative employees is the focus of a new business networking platform called Jive. Follow the link above to learn more. Forbes Google It’s a bird, it’s a plane. No, it’s actually Google+, the search engine’s new foray into social media. And Google is really hoping it will make you forget all about a thing called Facebook. But will it? Inc.com Google goes social. Here’s a first look at the new Google+ from CNET TV. While the functionalities look pretty cool, it’s a bit early to determine what impact if all this new social tool might have where Facebook is considered. CNET TV Business Networking Why business networking is really about sex. Blogger Martin Lindeskog gives us a preview of a book on the relationship of gender to business marketing. To what degree do these gender issues extend to online social networking. Stay tuned to find out. Ego Sole Trader Social networking for new business. It’s really not new. Networks is what you do face to face talking to peope about your product. Now a new survey suggests many businesses globally are moving into the social realm. MarketingProfs.com From Small Business TrendsSocial Networking in Your Small business Read more posts on Small Business Trends » Please follow War Room on Twitter and Facebook. Join the conversation about this story »
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The British tabloids and people on twitter are mocking this 'robot-like' video of Labor Leader Ed Miliband. Miliband gives nearly identical responses to a series of questions about the massive UK strikes. Some combination of the following phrases: "These strikes are wrong at a time when negotiations are still going on... But parents and the public have been let down by both sides because the government has acted in a reckless and provocative manner... After today's disruption I urge both sides to put aside the rhetoric and stop it happening again."
See for yourself: Please follow Business Insider on Twitter and Facebook. Join the conversation about this story »
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The New York Times ran a piece on two court decisions that states were not obligated to maintain cost of living adjustments in pensions. It would have been appropriate to provide more background to these rulings. In effect the courts were saying that contracts with workers do not have the same standing as other contracts. It is almost inconceivable that the courts would allow a state government to unilaterally cut its contracted payments to a supplier or other government contractor. The media have often (wrongly) asserted that differing positions on various issues reflect distinct views of government. This arguably is such a case. On the one hand, there are people who believe that the government should re-write rules to protect the interests on the wealthy, on the other hand there are people who believe that the government should act to benefit the vast majority of the population. At one point the article asserts that: "Ever since the stock market crash of 2008 wiped out many people's retirement savings, officials have had a hard time persuading taxpayers of the virtues of covering the cost of inflation-adjusted pensions, which typical taxpayers no longer get themselves." If officials have spent a lot of time, "persuading taxpayers of the virtues of covering the cost of inflation-adjusted pensions," it has not received much coverage in the media. The most obvious basis for the case would simply be that this is a contractual obligation to the states' workers. It would be interesting to see polling data on the issue of whether states should meet such contractual obligations. It is worth noting that government officials have openly pushed the sanctity of contracts in other contexts. For example, when he was head of President Obama's National Economic Council Larry Summers argued for the importance of the sanctity of contract in the context of the bonuses going to AIG executives. Many of the top executives of the company, which was saved from bankruptcy by a massive government bailout, had bonuses that ran into the billions of dollars. It is likely that the vast majority of the public did not support giving bonuses to these executives. (Bankruptcy voids contracts.) However, these bonuses were paid. The article also includes the inaccurate assertion that: "Social Security benefits are adjusted for inflation, but the adjustments can go both up and down." This is not true. There is no provision for lowering benefits. Read more posts on CEPR » Please follow Politics on Twitter and Facebook. Join the conversation about this story »
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Firework displays and other civic events have been limited for several years following a collapse in muni revenue. This year's Independence Day may have fewer fireworks still due to a confluence of natural disasters. Daily Mail has a roundup of cancellations: Texas Symphony Orchestra's Don Hill, whose annual fireworks display has been cancelled for the first time in 35 years because of drought, said: 'We're heartbroken'.
Authorities in Arizona, still clearing up following a sweep of wildfires, have banned the use of pyrotechnics in a host of cities.
Over in New Mexico, where wildfires have burned more than 700,000 acres this season and threaten the nearby nuclear testing complex, Governor Susana Martinez said there was 'absolutely no reason to buy, sell or use personal fireworks.'
Officials in tornado-hit Joplin, Missouri, have banned fireworks in the area where debris is being removed because of the amount of combustible material there.
In Mobile, Alabama, burn bans forced city leaders to move the public fireworks display from Battleship Memorial Park to a barge in Mobile Bay.
Chicago has banned its July 3 fireworks at the Taste of Chicago food festival because the city faces a substantial budget shortfall.
And in Massachusetts town Old Sturbridge Village, hit by floods and tornadoes, has also cancelled its events. Please follow Business Insider on Twitter and Facebook. Join the conversation about this story » See Also:
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In what will likely be seen as model for city pension reform, the Atlanta City Council has approved a major overhaul of the city's pension system, making it the first major U.S. city to tackle the growing pension crisis. City officials voted unanimously to approve the sweeping changes, which will help pay off the city's $1.5 billion unfunded pension liability and save about $25 million annually. According to the Atlanta Journal Constitution, the new plan requires all police officers, firefighters and city employees to contribute an additional 5% of their wages to the city pension system and reduces the cost-of-living adjustment for future employees to 1%. Most future city employees will receive a much smaller pension and be put in a 401(k) style plan. The reform staves off a potential fiscal crisis and allows the city to continue providing essential services. Atlanta's unfunded pension obligation was 20% of the city's annual budget and and the liability was projected to grow to $4.5 billion in 10 years if left unchecked. Atlanta's pension reform could provide a boost to other cities looking to address ballooning employee benefit costs, including Los Angeles, Pittsburgh and San Francisco. Please follow Politics on Twitter and Facebook. Join the conversation about this story » See Also:
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We mentioned the UK PMI slippage in our roundup earlier, but we just wanted to bring you the charts for some perspective. The index is now at a 21-month low (full report here). 
A big tail-off in new orders are to blame 
The UK's economic mess is pretty well documented by now. David Cameron's campaign of austerity has sapped demand, and it hasn't even accomplished anything in deficit reduction yet. For awhile we were reporting on the daily dose of UK economic disaster, but it got to be repetitive and tiring. This just confirms that nothing has changed yet on that front. For our full PMI roundup, see here. Please follow Money Game on Twitter and Facebook. Join the conversation about this story » See Also:
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The markets had one week of good news, with various "risk" assets rallying, and selling in areas like Treasuries. In its latest FX Pulse note, Morgan Stanley has a word of caution. There's still plenty of evidence that the fuel for the boom is running low. It's still likely that the world is going into tightening mode, and when this happens, risk currencies come off. Now to be sure, they're talking about currencies here specifically, but given the inter-correlation of everything (from the aussie dollar to oil to silver ot US equities, etc) the lesson could be applied broadly. This chart, regardless, is telling, showing the aussie dollar against a measure of global liquidity. 
So figure that Asia is still in a tightening cycle, QE is coming to an end, and per Morgan Stanley (and everything else) the European solutions are likely to prove temporary, and you have a good case for not getting too long on risk at this stage. Please follow Money Game on Twitter and Facebook. Join the conversation about this story » See Also:
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It’s becoming a tradition. Yet again, the British manufacturing sector disappointed and dropped to 51.3 points. Growth is grinding down to a halt. Early expectations stood on a small rise to 52.2 points. GBP/USD is losing ground quickly. GBP/USD is now at around 1.6000, down from 1.6070 before the release. It is still holding on to minor support at 1.60. Note that the move began a little before the official release. Leaks are quite common with these releases, but the downwards move continues also afterwards. Read the rest of the article GBP/USD Falls on Another Weak Manufacturing PMI Read more posts on ForexCrunch » Please follow Money Game on Twitter and Facebook. Join the conversation about this story »
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The “surge” in yields this week has many pointing to the end of QE2 as the beginning of the awakening of the bond vigilantes or even the beginning of the collapse of the mythical “bond bubble”. But I went to find this “surge” in yields or “collapse” in the bond market and I had to pull out the trusty magnifying glass again. As you can see below, Treasury yields are surging so much that you have to magnify the move by 10X just to see it on a long-term chart. More hilarious is the fact that yields aren’t surging due to some bond vigilantes or fears that we are Greece as some fret over the debt ceiling. Yields are surging at the same time equities surge, the risk on trade re-emerges and investors realize that the end of QE2 doesn’t mean the end of the world (most hyperinflationists still have no idea why this is even hilarious). Just one week ago I said this was no time to panic about Greece, debt ceilings or even the macro picture (yet): “Personally, I don’t think we need to panic just yet. The China slow-down is far from overshooting to the downside and the Europeans simply can’t afford to let the situation spiral out of control. There is too much to lose. The European politicians have invested too much time and money into this Euro project to allow it to just crumble now. China is a much bigger question mark. Their economy is a black box of central planning and irrational government intervention. One thing is certain – inflation almost always resolves itself in the form of recession. The question now is how deep will the Chinese economy slide and how much will it hurt US corporations? I think buy and hold investors are silly to wait around and find out. In the meantime, I think the markets look more attractive than they did in May when I said we should all be hedging risk and/or selling. …So, while I was bearish a few weeks ago I have moved towards a more bullish posture now. So, just to be clear, I am not long-term bullish, but I am short-term bullish.” Investors were overreacting to all the bad news and becoming excessively negative. This week’s very tiny move in yields is not a sign of the end of days. It’s just a sign that too many big ____ swingin’ bond traders got caught flat footed. So put that magnifying glass away and wipe off your forehead. This is as much a non-event as the end of QE2. 
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We said something similar on this day last month, but the latest batch of PMI data is confirming that the world economy is still rolling over. The capper on the day -- ISM for the US -- comes out at 10:00. Expectations are for a 51.1, but plenty expect to see a negative reading. Please follow Money Game on Twitter and Facebook. Join the conversation about this story » See Also:
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OK, I’ve been putting many hours into Google+. In just the few days that it’s been released I’ve followed 2,723 people, written many dozens of posts there, and have thoroughly used the product. I’ve also tried to get some normal users into the product, starting with my wife (we argued for 45 minutes about it) and I’ve come to some conclusions. Here’s the biggie: Your mom won’t use Google+. How can I state that so clearly? Easy. Most “average users” are locked into Facebook and aren’t willing to consider a new social tool until they hear about it from their friends. Since most of the people who are on Google+ so far are geeks, insiders, social media stars, journalists, and other people (Google admitted tonight they are only accepting people who have strong social graphs so that they can both make sure everyone has a good first experience as well as test out some of the technology before opening it up to a wider audience) the chances normal people (metaphorically speaking, your mom) won’t hear about Google+ from normal users for quite a while. By then I’m sure Facebook will react (ie, copy) Google+’s best features (Facebook already has called a press conference for next week where they are going to announce something “awesome”). This will mean that normal users, who aren’t really going to get involved at this point in Google+’s life, won’t feel the need to switch. So, what is Google+ for then? It’s for us! Come on now, we geeks and early adopters and social media gurus need a place to talk free of folks who think Justin Bieber is the second coming of Christ. That’s what we have in Google+ right now. Do we really want to mess that up? Plus, let’s just be honest here. There are pieces of Google+ that are mighty geeky. Let’s start with how to bold and italicize text. Do you have a pretty editing window like, say, exists on Quora? No way. To bold text you surround that text with asterisks. *Like this* GEEKY ALERT! Italicize? Put underscores around the text. Strikeout? Put hyphens around it. And that’s just the little thing. Let’s talk about the big thing. Circles. Now, heavy and passionate users of social media, like myself, really love things like lists and groups. Why? Because we want to spend hundreds of hours making sure our social graphs are really organized. Normal people do NOT do this. They just want to friend their 20 real-life friends and 30 family folks and be done with it. Average/normal users want the system just to bring them fun stuff without doing any work. See, if you put the average Silicon Valley geek in front of a TV and tell him to sit on the couch and watch TV for four hours they won’t know what to do. They will start building databases of their favorite shows, start figuring out how to optimize their DVRs so they can fast-forward through commercials faster, and stuff like that. Normal/average users? They just want to watch TV and drink beer. So, you getting where I’m going with this? Google+ is for the passionate users of tech. If you just want to sit back and have the system do all the work (which means it’s not perfect, but it’s good enough for most people) then Facebook is gonna be where you stay, especially since your friends are gonna lock you in for quite some time. But if you want to really be able to choose who you listen to, then Google+ is much better. Oh, and that’s not even considering the new “Hangout” videochat feature. Damn that thing is cool. You can have 10 people call into a room and it lets you all talk to each other. I haven’t used Skype since that shipped. Anyway, it’s clear Google has turned a corner. They have now proven to everyone that they can do social and get on the playing field. But they haven’t yet proven that they can convince your mom to use it and that’s just fine with me. That all is a long way of saying that I really love Google+ and I don’t care what the average user thinks of it. I’m getting a ton of utility out of it and I am having a blast with it. Hope to see you there soon, but please leave yo momma over on Facebook, OK? Read more posts on Scobleizer » Please follow SAI on Twitter and Facebook. Join the conversation about this story » See Also:
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OK, I’ve been putting many hours into Google+. In just the few days that it’s been released I’ve followed 2,723 people, written many dozens of posts there, and have thoroughly used the product. I’ve also tried to get some normal users into the product, starting with my wife (we argued for 45 minutes about it) and I’ve come to some conclusions. Here’s the biggie: Your mom won’t use Google+. How can I state that so clearly? Easy. Most “average users” are locked into Facebook and aren’t willing to consider a new social tool until they hear about it from their friends. Since most of the people who are on Google+ so far are geeks, insiders, social media stars, journalists, and other people (Google admitted tonight they are only accepting people who have strong social graphs so that they can both make sure everyone has a good first experience as well as test out some of the technology before opening it up to a wider audience) the chances normal people (metaphorically speaking, your mom) won’t hear about Google+ from normal users for quite a while. By then I’m sure Facebook will react (ie, copy) Google+’s best features (Facebook already has called a press conference for next week where they are going to announce something “awesome”). This will mean that normal users, who aren’t really going to get involved at this point in Google+’s life, won’t feel the need to switch. So, what is Google+ for then? It’s for us! Come on now, we geeks and early adopters and social media gurus need a place to talk free of folks who think Justin Bieber is the second coming of Christ. That’s what we have in Google+ right now. Do we really want to mess that up? Plus, let’s just be honest here. There are pieces of Google+ that are mighty geeky. Let’s start with how to bold and italicize text. Do you have a pretty editing window like, say, exists on Quora? No way. To bold text you surround that text with asterisks. *Like this* GEEKY ALERT! Italicize? Put underscores around the text. Strikeout? Put hyphens around it. And that’s just the little thing. Let’s talk about the big thing. Circles. Now, heavy and passionate users of social media, like myself, really love things like lists and groups. Why? Because we want to spend hundreds of hours making sure our social graphs are really organized. Normal people do NOT do this. They just want to friend their 20 real-life friends and 30 family folks and be done with it. Average/normal users want the system just to bring them fun stuff without doing any work. See, if you put the average Silicon Valley geek in front of a TV and tell him to sit on the couch and watch TV for four hours they won’t know what to do. They will start building databases of their favorite shows, start figuring out how to optimize their DVRs so they can fast-forward through commercials faster, and stuff like that. Normal/average users? They just want to watch TV and drink beer. So, you getting where I’m going with this? Google+ is for the passionate users of tech. If you just want to sit back and have the system do all the work (which means it’s not perfect, but it’s good enough for most people) then Facebook is gonna be where you stay, especially since your friends are gonna lock you in for quite some time. But if you want to really be able to choose who you listen to, then Google+ is much better. Oh, and that’s not even considering the new “Hangout” videochat feature. Damn that thing is cool. You can have 10 people call into a room and it lets you all talk to each other. I haven’t used Skype since that shipped. Anyway, it’s clear Google has turned a corner. They have now proven to everyone that they can do social and get on the playing field. But they haven’t yet proven that they can convince your mom to use it and that’s just fine with me. That all is a long way of saying that I really love Google+ and I don’t care what the average user thinks of it. I’m getting a ton of utility out of it and I am having a blast with it. Hope to see you there soon, but please leave yo momma over on Facebook, OK? Read more posts on Scobleizer » Please follow SAI on Twitter and Facebook. Join the conversation about this story »
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Thanks to a surprisingly solid reading from the Chicago PMI yesterday, many investors are growing increasingly optimistic that the economy has bottomed out in the near term. The reading crushed analyst expectations by close to eight points and many speculate that renewed production in the automotive sector may have been a large reason for the boost. Due to this speculation, many investors look to have their eyes on today’s Motor Vehicle Sales report for further clarification on this trend. Motor vehicle sales have been extremely rocky as of late, largely due to the weak domestic economy and supply problems stemming form the Japanese tsunami in March. Thanks to these events, sales have plummeted from a seasonally adjusted annualized rate of about 10 million cars down to just over nine million in last month’s reading. However, investors are looking for supply problems to ease this month and all analysts expect a gain in sales for June. In fact, the consensus estimate suggests a 500,000 increase, potentially signaling that the auto industry is getting back on track. Thanks to some new ETFs that have launched in the past few months, investors have two direct options in order to be on the automotive industry. Both CARZ and VROM both represent funds that could be on the move today thanks to their focus but we look for a commodity product to be especially under the microscope as well. Close to 50% of the world’s platinum output is used in autocatalysts in cars so further car sales could help to post the price of the metal significantly. That is why we look for the ETFS Physical Platinum Shares Fund (PPLT) to be today’s ETF to watch [Precious Metal ETFs: Physical vs. Equity Exposure]. PPLT is by far the most popular product tracking the commodity of platinum, with close to $750 million in AUM. The product holds physical bars of the metal in secure vaults in Europe so the fund can be thought of as more of a pure play than some of its futures-based counterparts that do not necessarily track spot prices. Since commodity prices are often more volatile than broad equity funds, we look for PPLT to be on the move more so than either of its counterparts that target the car industry [see more on PPLT's fact sheet]. Unfortunately for holders of this fund, PPLT has not been immune to the general commodity decline over the past few months as a stronger dollar and fears over a slowdown have hit this precious metal hard. Despite gaining roughly 12% over the last 52 weeks, PPLT has fallen sharply over the near term, losing 5.2% in the past month and close to 2.7% in the past two weeks alone. Thanks to these stiff losses, investors will likely look at today’s important data release as a way to possibly help break PPLT out of its rut and push it back towards the solid performance that it experienced in 2010. Should car sales manage to rise past the expected level or even hit the 10 million mark, look for PPLT to surge on the day. If, however, investors see further weakness in sales and if figures should show a decline from the previous month, investors will likely sell-off PPLT to start the second half of the year [Commodity ETFs: It Takes Two To Contango]. [For more ETFs to watch sign up for our free ETF newsletter.] Disclosure: No positions at time of writing. Click here to read the original article on ETFdb.com.
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The month begins with modest selling. Europe is down across the board, although not with any vigor. It's just a drift. Everyone's tired after the crazy, news-filled week. US is down. Most commodities are down. Silver is looking to break back below $34. While today isn't expected to be wildly news-driven, by the end of the day we will get a big slew of PMI numbers. Chinese manufacturing PMI came in a little bit weak. Italian PMI just came in negative, crucial since there's so much interest in the country's sovereign debt situation. The US ISM later will be closely watched. Please follow Money Game on Twitter and Facebook. Join the conversation about this story » See Also:
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Here are some interesting investment ideas for investors who believe that Ron Paul and Barney Frank's Marijuana Bill will pass the House. Personally, I think there are far too many vested interests and lobbyists in Washington for something as obviously pro-American, Democratic, and Libertarian as this bill is to actually pass; but in a desperate attempt to make the nation's politicians appear human the bill will likely head towards a Hail Mary vote anyways as a Mea Culpa of sorts which everyone can agree on voting against before it ever gains serious attention. While I commend both Ron Paul and Barney Frank for taking a bipartisan and unbelievably patriotic lead on this tremendously important issue, I have to put my investor and odds-making hat on to begin viewing the investment landscape a bit differently now that pot may be made legalized. While the analysts say this will never pass, one day a truly Democratic society as great as ours' must embrace all cultures and ways of life -- is it fair to make a religious, medicinal, spiritual, and healthy endeavor a crime simply because some people don't understand this substance?
What someone else does with their free time is not my concern, and clearly Marijuana has not stopped people like Steve Jobs, Peter Lewis of Progressive, George Soros, Andrew Lahdke, and many other great investors and entrepreneurs from making their marks in American business history. Why should a behavior as harmless as smoking an herb turn someone into a social or economic outcast? At least being Gay, African American, a Single Mom, Hispanic, Asian, or Mentally Handicapped does not stop Americans from finding meaningful employment or carry severe jail time. The Draconian treatment of the use of something much less harmful than alcohol which has proven medicinal qualities seems to me to be highly Un-American, inhumane, close-minded, thick-skulled, and downright mid-evil in its hypocrisy and stupidity. To see the so-called conservatives laughing this out of the Legislature is incredible considering that conservatives are supposed to stand for small government, states rights, free markets, and fiscal restraint. Marijuana prohibition is one of the most economically wasteful and morally corrupt policies in the United States because this "war" simply hands criminal drug organizations illicit profits instead of making the industry similar to that of Tobacco or Alcohol which can be highly regulated and taxed. What is clear to me is that so called conservatives in the legislature are simply either on the payroll of Mexican cartels or are incredibly unintelligent.
As the Christian Science Monitor recently reported,
“No longer can reform advocates be laughed off as a bunch of Cheech and Chongs,” says Tom Angell, media relations director for Law Enforcement Against Prohibition an international organization of criminal justice professionals who claim first-hand awareness of the waste and harms of current drug policies. “Hopefully having this national debate will help more people to understand that marijuana prohibition harms public safety by giving drug cartels and gangs a huge source of tax-free profits, just like alcohol prohibition did for Al Capone and his colleagues during the 1920s and 30s,” says Mr. Angell.
http://www.csmonitor.com/USA/Politics/2011/0624/Dramatic-change-to-marijuana-laws-What-bill-before-Congress-would-do
VOXX -- Trading at just 7.4X earnings, 4.9X EV/EBITDA and for only 43% of book value, we think Audiovoxx is a good investment whether or not the Paul-Frank Bill (not to be confused with Dodd Frank) passes or not. Audiovoxx makes basically all of the components involved in the "Pimp My Ride" shows for automobiles as well as car security, satellite radio, universal remote, and diversified electronics industries. The company has been, well, mildly profitable at best over the past few years but we think an increase in stoners or just a gradual acceptance of their culture would be a bog boost to the company's top line, which may or may not eventually translate into bottom line growth. We like the stock regardless of the passage of Paul-Frank.
IMAX -- Imax is a name that I have been bearish on in the past, but with the passage of the Paul-Frank Mary Jane reform bill we think this stock could trade, well, much "higher." IMAX is by no means a cheap stock, but the company has plenty of momentum behind it and we like the theatre and movie industry in general given that we think a recession (or extension of the current depression) is in the cards. With that said, we cannot figure out why studios are handing their content out for free via Netflix, Hulu, and Redbox when there are still thousands of retail locations trying to sell product via Blu Ray and DVD -- the format is not the problem, just the pricing (DVD is still a digital diskette, after all, needing only one set top box and we wonder what the studio chiefs and media are smoking -- hint it's probably not the reefer). Stoners are no stranger to job losses and unemployment yet they always find a way to catch the latest flick. If Paul-Frank passes, we think IMAX shorts should be covered immediately. If Dodd-Frank passes, well, we will try to figure out if anyone has actually read the entire bill in question and we also think that it will hurt gold and silver prices while helping small cap value investors to get rid of entitled, bloated managements who earn overinflated salaries and pay packages more often than not. All in all, I am a fan of Barney Frank (and will vote for Ron Paul), but I don't like bailouts as a rule -- whatever happened to "if you break it you buy it." Right now, if a bank makes a losing trade, we all pay for it.
PEP -- Nothing says "munchies" like a can of Pepsi and a bag of Dorito Chips. As much as Wall Streeters claim to be straight laced front row of the class nerds, most of them spent many of their years in high school sucking down Mountain Dews and pulling down hits from the old waterpipe. Then again, if you were in upper management at Lehman you may have had to hit the bong for upward mobility as part of your job description, though we cannot discriminate against those who openly laud the chronic in the fund management industry. Just look at Andrew Lahdke -- he certainly hit the nail on the head regarding Wall Street's prejudicial view of potheads. Pepsi shares are likely fairly valued here, but their brand identity is a siren call to pot heads around the world and legalization will surely only help sales of their products as stoners will have extra money to buy Pepsi products and the gangsters and cartels will be out of power across the globe.
DPZ -- Domino's is a company that I have not followed for some time, though their pizza has improved markedly over the years. I like their core value proposition and think that their model is somewhat recession proof. Again, if weed is legalized I think DPZ will get a boost to earnings as stoners will be paying much less for their addictive activities (the price of pot will plummet) and will be able to go out and buy products from real companies. What skeptics need to grasp is that this is a huge boost to the economy -- pot heads won't have to spend their entire paychecks with the Mexican Mafia if this passes. (not that there is anything wrong with the Mexican Mafia -- I have a family that I love, after all, and am certainly not a snitch) DPZ seems reasonable at current prices with a 16.88 PE and a forward PE of only 14.45X. The company has also reduced its debt in recent years and sports an EV/EBITDA of only 10.8X, which is pretty good considering it has been a private equity shop play-thing over the years like a Wendy's or Burger King.
PSUN -- Pacific Sunwear has been hit hard in recent months with the stock down some 65% or so from recent highs. The company has been plagued with losses as the "tweenyboppers" have been growing up and are now dressing in Abercrombie and other hideous, more preppy attire. If Paul-Frank passed, I would think PSUN could be a solid turnaround candidate with their surfer oriented lifestyle brand and low price to book value ratio. In fact, I am interested in this stock with or without Ron-Frank because PSUN is trading for a small discount to tangible book value which may give it some pop appeal similar to the run that WTSLA displayed back in 2004 and 2005 -- back when Lady Gaga was still in high school and Paris Hilton was still considered to be a lady of virtue. (I know it seems like a million years ago to me too....)
APOL -- "Learn how far your mind can take you, at Apollo College": well, apparently, not far enough. Now that Federal regulators and former students have cracked down on this company and others in the online college space for not delivering on their promise of a better future, we think the stocks could actually rebound a bit if the suits and rules reform dies down. Sure, the idea of going to college in your pajamas is appealing, but as far as getting a job out of the deal, well, that's another story altogether. If Marijuana is legalized, however, we expect enrollment to grow here as students will inevitably be able to take classes on growing weed online from this purveyor of "higher" education.
KKD -- Although Krispy Kreme stock is about as rich as its doughnuts right now, we think the legalization and taxation of the "chronic" would provide a strong revenue and bottom line boost for this company. At 50 times earnings, KKD is certainly not a cheap stock. That said, we would not go short the name until Ron-Frank is officially laughed out of the House of Representatives. Personally, I find it funny that a bunch of States-Rights, supposedly pro-liberty Tea Party members are going to vote down legalizing Marijuana which has saved many a cancer patient from intense pain and is something most of them have smoked in the past. That said, politicians are total hypocrites in general by and large and these spineless so-called libertarian Tea Party Republicans (a group I admire for standing up against Nanny State politics) will likely vote down Paul-Frank even though they will vote for shrimp on treadmills, Dodd-Frank, making gold and silver OTC trading illegal, and sentencing the Liberty Dollar guy to 15 years in prison for making collectors coins.
JACK -- One thing I can remember clearly from high school is that stoners love "Jack in the Crack." It's as if Jack in the Box was invented for them and by them, and I think any lean toward full on legalization could be a huge boost for these shares in the future. JACK seems reasonably priced at current levels with a 12X forward earnings multiple and an EV/EBITDA of just 8.83X. If Sardir Biglari starts buying the name and shaking the tree, we would become especially bullish given his long term track record of making money for his shareholders. We liked what he did with Steak and Shake (the previous insular management didn't care for their shareholders one bit) and will be looking to make the same type of moves in the future with our funds group. Jack is very cheap on a price to operating cash flow basis, and if stoners don't have to fund massive wars and murders in Northern Mexico we feel they will have more money left in their pockets to spend at plaes like Jack in the Box. One thing is certain, we live in a full blown Nanny State so the bill will almost certainly not pass the House. Jack looks to be a good long term investment either way to us, but we would be more bullish on the U.S. stock market in general if weed was made legal.
HOG -- Harley Davidson is not a cheap stock or a particularly profitable business right now, but the company does see some incremental benefits from higher gas prices and would stand to gain market share if pot were legalized and more discretionary income was left in the hands of pot smoking Americans. In addition to greater discretionary income, jails and prisons would be freed up of low level stoners and these pot heads would likely hit the road on their new Harleys at some point in the future -- a "win win" for the bankrupt states and for the banana republic Feds who have to print more money to fund their profligate spending.
PFE -- Visine would take a hit if marijuana was legalized as there would really be no reason to hide those blood shot eyes from authority figures. Additionally, the prescription drug market in general would likely lose a good deal of revenue as Marijuana has several medicinal qualities that could likely compete with the legal drugs handed out by doctors and psychiatrists on a daily basis. Okay, just one more reason that America, home of the free land of the brave, will never let pot be legal during my lifetime -- the real drug kinpins in this country get FDA approval before selling their dope. Pfizer seems reasonable at current levels from a free cash flow perspective and even if pot legalization passes, I think the stock could reward investors over time. That said, pot could seriously compete with major pharmaceutical companies so watch these developments closely.
CXW -- One stock to sell if pot is made legal is Corrections Corporation of America. There is no other offense which lines the pockets of private prison companies more than weed possession -- marijuana crimes make up something like 40% of all inmates in prisons across the country. Therefore, if pot were made legal (which it won't be) look to go short on CXW and GEO.
So there you have it, my trading ideas for the passage of Paul-Frank, which should happen but obviously won't happen -- we are no longer a Democracy as much as a Plutocracy and too much money is made keeping it illegal for change to actually occur in the United States. So, until then, try not to trade under the influence.
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California has voted a law that would compel Amazon to collect sales tax from its affiliates. So Amazon nuked its affiliates. Now California wants Amazon to collect sales tax anyway, says KQED. Amazon says it won't do it. California says they'll send Amazon the bill for the taxes anyway. The unstoppable force that is Amazon is meeting the unmovable object that is huge state deficits. It's going to be fun to watch. Don't Miss: The Future Of Amazon → Please follow SAI on Twitter and Facebook. Join the conversation about this story » See Also:
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A great deal can be learned about the government's response to this crisis, as well as the mistaken policies that necessitated it, by analyzing a speech delivered by Ben Bernanke on 21 November 2002. At that time, Bernanke was a Governor of the Federal Reserve. The speech, to the National Economists Club, was titled "Deflation: Making Sure 'It' Doesn't Happen Here". In light of subsequent events, Bernanke's comments expose his misunderstanding of the state of the US economy, and, in particular, the forces driving it. This is important because the policies he advocated in that speech are the ones that have been employed in this crisis. Those policies were conceived as a solution to an economic situation Bernanke did not understand. Consequently, they will not cure the imbalances that caused the New Depression. In the short run, their effect will be palliative at best. Over the long run, unless combined with new policies to restructure the US economy, they will only exacerbate past mistakes and permanently undermine American prosperity. Bernanke gave this speech soon after the collapse of the NASDAQ bubble, when deflation threatened the US for the first time since the 1930s. His ideas about how to prevent deflation are important if we are to understand his ideas about curing it. He began by stating, "I believe that the chance of significant deflation in the United States in the foreseeable future is extremely small …" He went on: "A particularly important protective factor in the current environment is the strength of our financial system: Despite the adverse shocks of the past year, our banking system remains healthy and well-regulated, and firm and household balance sheets are for the most part in good shape." At the end of 2002, the US banking sector was not healthy, and it was certainly not well regulated. Within five years of those remarks it began to collapse, pulling the global economy down with it. Nor were household balance sheets in "good shape". American households had never been more indebted. As for corporate balance sheets, who can say what condition they were in, given the long series of accounting scandals involving Enron, WorldCom, Fannie Mae, Freddie Mac, and many others? The Fed governor went on to discuss the causes of deflation and its relationship to aggregate demand: "The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand—a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending—namely, recession, rising unemployment, and financial stress." Next, Bernanke suggested it would be far better to prevent deflation rather than to be forced to cure it once it had taken hold, as it had in Japan: "The basic prescription for preventing deflation is therefore straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending, in a manner as nearly consistent as possible with full utilization of economic resources and low and stable inflation." According to Bernanke, then, deflation is caused by a collapse in aggregate demand and can be prevented by using monetary and fiscal policy "to support aggregate spending". But he does not address the question of why aggregate demand would collapse in the first place. Nor does he explain why the economy cannot be righted by market forces but instead must rely on government intervention to hold off deflation. These questions are too important to overlook. Deflation took hold in the US in the 1930s and in Japan in the 1990s because policymakers in those countries failed to prevent credit bubbles from forming there in the 1920s and the 1980s. Credit bubbles cause aggregate demand for goods and services to expand far beyond the point that can be sustained by the underlying income of society. That is why aggregated demand collapses when the credit bubble pops. Therefore, it must be understood that deflation is the consequence of misguided government policies that allow the formation of credit bubbles. Bad policies were responsible for the NASDAQ bubble. Its collapse produced the deflationary pressures Bernanke was discussing in 2002. Bad policies are also responsible for the deflationary threat now confronting the US following the rise and fall of the housing credit bubble. Bernanke ended by describing what the Fed could do to cure deflation in the "unlikely" event that prevention did not work and the overnight federal funds rate fell to zero: The following excerpts convey most of his recommendation on the subject. "We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. … “Of, course the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior). Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. … “Yet another option would be for the Fed to use its existing authority to operate in the markets for agency debt (for example, mortgage-backed securities issued by Ginnie Mae, the Government National Mortgage Association). … “Historical experience tends to support the proposition that a sufficiently determined Fed can peg or cap Treasure bond prices and yields at other than the shortest maturities. … “If lowering yields on longer-dated Treasury securities proved insufficient to restart spending, however, the Fed might next consider attempting to influence directly the yields on privately issued securities. Unlike some central banks, and barring changes to current law, the Fed is relatively restricted in its ability to buy private securities directly. However, the Fed does have broad powers to lend to the private sector indirectly via banks, through the discount window. Therefore a second policy option, complementary to operating in the markets for Treasury and agency debt, would be for the Fed to offer fixed-term loans to banks at low or zero interest, with a wide range of private assets (including, among others, corporate bonds, commercial paper, banks loans, and mortgages) deemed eligible as collateral. … “Each of the policy options I have discussed so far involves the Fed's acting on its own. In practice, the effectiveness of anti-deflation policy could be significantly enhanced by cooperation between the monetary and fiscal authorities. A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices." While most of those measures were not required in 2002-03, they have been put into effect since 2008. Their purpose is to prevent a contraction of aggregate demand after a credit bubble has burst. This policy is inherently flawed because it fails to recognize that the bubble (and the aggregate demand it created) could not be kept inflated indefinitely by the private sector because the private sector did not have sufficient income to sustain it. It is no cure to use aggressive fiscal and monetary policy to inflate a new credit bubble to replace the one that just burst. The second bubble will be no more sustainable than the first. The policies employed to prevent deflation and support aggregate demand after the NASDAQ bubble burst were only a mild version of those laid out in Bernanke's 2002 speech. Aggressive fiscal and monetary measures were implemented that pumped up aggregate demand by fueling the US property bubble. That approach worked in the short run: the US experienced no significant deflation at the time. Over the long run, however, those policies made matters very much worse. If private-sector income was insufficient to support the NASDAQ credit bubble in 2001, how could anyone have supposed that it would be sufficient to support the much larger housing credit bubble a few years later? Yes, as Bernanke pointed out, "Indeed, under a fiat (that is, paper) money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero". That is certainly true in the short run, but what is the exit strategy? Given the scale of government intervention required to prevent complete economic collapse during the last three years, at this rate, a continuation of the fiat-money bubble-blowing strategy will soon end in nothing less than total collectivization of society. The policy response to the New Depression has not cured the causes of the economic breakdown, it has merely nationalized the cost of attempting to perpetuate them. Once the bubble began to collapse, there was no realistic alternative to nationalization. Nationalization has kept the patient alive. A radically different policy will be required, however, if the patient is actually to be cured. Having dropped $2.3 trillion of helicopter money so far, Washington still does not understand any of this. QE 2 ends today. Expect to hear a loud hissing sound as the global credit bubble begins to deflate. The next round of helicopter money is very likely to begin before the end of the year. Regards, Richard Duncan
for The Daily Reckoning P.S. The Corruption Of Capitalism is now available on Kindle. For more of my perspectives, you can visit my blog on economics in the age of paper money at www.richardduncaneconomics.com. Helicopter Money originally appeared in the Daily Reckoning. The Daily Reckoning provides 400,000+ readers economic news, market analysis, and contrarian investment ideas. The Daily Reckoning features articles by Addison Wiggin author of Empire of Debt and Bill Bonner author of Financial Reckoning Day and The Idea of America. Read more posts on The Daily Reckoning » Please follow Money Game on Twitter and Facebook. Join the conversation about this story »
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ISN'T THIS A FITTING ARTICLE, PHIL THIS GUY WAS YOUR PRIOR HERO... CLICK HEREThere is a big difference between how you should approach writing your company's website if you are a business-to-business company versus how you should write for a business-to-consumer company website. If you are writing a B2B website think clarity, content and following completion of those two, then tackle the issue of image. When prioritized in a different manner, your bounce rate is going to be significantly higher, while your conversion rate will prove significantly below that of other organizations in your vertical. Furthermore, if you are writing a business-to-business website, keep in mind that within two to three seconds of the visitor getting to your website, they should know exactly what you do. Despite this formula being straightforward, many B2B websites prioritize formats that are visually catching and have lots of add-ons, but remain vague in content. When this happens, that pretty layout becomes unappealing to the visiting decision-maker who does not have time to weed through the beauty to get to the necessary information. Then What To Do About Style? It is at this juncture where website writing and the related design for a business-to-business driven site gets more complex. Obviously, if you are a business-to-business firm, you do not want to have 100% of your information available for the casual reader. The website visitor ought to have some interaction with the site, which makes the balance between image and information evermore crucial. What percentage between image and information works best? A B2B website functions best when the balance between image and information is roughly 70% information-focused and 30% image-focused programming in mind. The image aspect (e.g. pictures, designs and other aesthetics) must come into play right off the bat when someone lands on the website. After these initial seconds, your site then has to transition and be content- or information-driven from that point forward. Think "image for the first few seconds," and once your firm passes the first-impression test, the visit is going to immediately be information-driven. Here are some tips to ensure you have the aforementioned ratio in the manner necessary: 1. Write the content yourself first, then outsource the design. It is always best that your design is based off of your content and not the other way around. Come to terms with the fact that you are the best content writer for your website and you know (not anyone else) what is needed and what drives your buyer. Only after content writing is done properly should work be done on the aesthetics of the site. 2. Play around with the content, keeping close tabs on Google Analytic s's bounce rate, time spent on site and number of pages viewed per visitor, after writing a 300+ page recruitment and staffing website, I suggest you feel comfortable enough with content to put aesthetics into play. If you do both content and aesthetic changes at the same time, you could find yourself with a very high stress level and a very low conversion rate, not to mention high programming costs - because the aesthetics need to be constantly adjusted. 3. See what other firms in similar spaces (though not direct competitors) have done to balance out this ratio. Never copy: use what these firms have done as a basis of what routes you think may be best. In closing, your website is the face of your company. Therefore, treat its formulation with the utmost importance and urgency. Doing so will show you an outcome that is not only satisfactory, but is highly advantageous. Please follow War Room on Twitter and Facebook. Join the conversation about this story »
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