But, this dunk was somehow outdone just one day later by perhaps the biggest "posterization" in years by Blake Griffin on Kendrick Perkins.
Tuesday, January 31, 2012
But, this dunk was somehow outdone just one day later by perhaps the biggest "posterization" in years by Blake Griffin on Kendrick Perkins.
Monday, January 30, 2012
U.S. consumer spending was flat in December as households put the largest rise in income in nine months into their savings, potentially signaling slower consumption early in 2012. It was the weakest reading on spending since June, the Commerce Department said on Monday, and it followed two tepid gains in October and November.
Friday, January 27, 2012
Your EconomPic links for the past two weeks...
- GDP Print Okay, Composition Disappointing
- Durable Goods Grip It and Rip It in December
- The New (and Improved) Leading Economic Indicators
- European Manufacturing Feeling the Downturn
- CPI Steady in December
- Do Initial Claims Matter?
- China's Growth in Perspective
- Checking In on Capacity Utilization
- S&P 500 / VIX Matrix
- The Treasury Rally that Keeps on Trucking
- China Still Buying Treasuries
- The Impact of Low Rates Through 2014
- Apples Numbers Were B-A-N-A-N-A-S
- Existing Home Sales Rise
And your video of the week... a song I can't get out of my head. Gotye with 'Somebody That I Used to Know' (found it from this viral video cover of the song)
Peter Boockvar (via The Big Picture) details this quarter's GDP print (slightly edited / reformatted):
After three quarters (in a row) that averaged just 1.2%, fourth quarter GDP grew 2.8%, a touch below expectations of 3.0%, but Nominal GDP grew well below forecasts. Because the price deflator was up just 0.4% vs the estimate of 1.9%, Nominal GDP was up 3.2% vs the estimate of 4.9%.Details below... we can see the HUGE impact of inventory rebuild (potential is there for this to be a HUGE drag in Q1 '12) and the continued drag of local government (i.e. austerity measures).
- Personal Consumption rose 2.0% vs the forecast of 2.4%.
- Fixed Investment rose 3.3% (helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%).
- Trade was a slight drag on GDP growth and government spending was as well, led by a 12.5% decline on national defense spending.
- State and local government spending fell by 2.6%.
- Inventories added almost 2% to growth and, taking out this influence, Real Final Sales rise just 0.8% vs 3.2% in Q3.Thus, inventories were a large swing factor in the Q4 rebound. Bottom line, Real GDP was near estimates, but nominal GDP was the weakest since Q3 ’09 and Real Final Sales were the 2nd softest since Q1 ’10.
The below chart shows the longer term breakdown of GDP, showing the importance of consumption on growth. We can see the huge shift in consumption from goods (i.e. things) to services (i.e. outsourcing of "actions" to make out lives easier). Of note, for all the chatter about how large government has become, the Federal government (excluding defense) has not really become a larger as a component of GDP.
Thursday, January 26, 2012
New orders for U.S. manufactured goods rose in December and a gauge of future business investment rebounded, showing the U.S. economy ended the year with more momentum than previously thought.
Commerce Department data showed orders for durable goods climbed 3.0 percent last month. That was likely boosted by a surge in orders at aircraft builders like Boeing. Economists had forecast orders rising 2.0 percent.
The Conference Board’s gauge of the outlook for the next three to six months increased 0.4 percent after climbing 0.2 percent in November, the New York-based group said today. The median forecast of 44 economists surveyed by Bloomberg News called for a gain of 0.7 percent.
Changes in the components of the leading index were announced earlier this month. Instead of the inflation-adjusted money supply, the Conference Board used its own Leading Credit Index, which aggregates measures of the yield curve, interest- rate swaps and the Fed’s senior loan officer survey. The Institute for Supply Management’s supplier deliveries gauge was replaced by the group’s index of new orders.
Wednesday, January 25, 2012
Bloomberg details the latest from the Fed:
Chairman Ben S. Bernanke said the Federal Reserve is considering additional asset purchases to boost growth after extending its pledge to keep interest rates low through at least late 2014.
Policy makers are “prepared to provide further monetary accommodation if employment is not making sufficient progress towards our assessment of its maximum level, or if inflation shows signs of moving further below its mandate-consistent rate."
Unemployment is a structural problem, not a cyclical one, but the FED is still stuck in the past.
So what is it then? Corporations!Let me explain: right now, one appealing factor of home buying/selling decisions is that interest rates are very low – you can afford to buy more house. If I think that interest rates are going to remain low for a long period of time, I will be in no hurry to lock in this low rate on the debt I’m borrowing – I will be in no hurry to go out and buy a house.
Industrial orders in the 17-nation euro zone fell 1.3% in November after a 1.5% rise in October, the European Union statistics agency Eurostat reported Tuesday. Compared to November 2010, orders fell 2.7%, the agency said. Economists had forecast a 2.3% monthly decline and a 2.8% year-on-year fall.Since the European crisis re-emerged in mid-summer, the European core has seen a rather sharp drop off in new industrial orders, while Emerging Europe (and the UK / Ireland) have shown strength (note that Greece didn't release data for November, but was down 5% from July through October).
Tuesday, January 24, 2012
Apple’s results highlight this simple fact: no one knows nothing. The most followed (and analyzed) company in the world was able to exceed even the most bullish analysts’ estimates by a wide margin. If this can happen, then it should remind us that anything, good or bad, can happen in the markets. Any one telling you they know something will happen for certain, just remind them about Apple 2012 Q1 results.Now to the blow out earnings.... just a part of the exponential growth the firm has seen over the past eight or so years.
Friday, January 20, 2012
Sales of previously owned U.S. homes rose for a third month in December to the highest level since January 2011, a sign the housing market ended last year with momentum.
Purchases increased 5 percent to a 4.61 million annual rate, the National Association of Realtors said today in Washington. The pace was less than the 4.65 million median forecast of economists surveyed by Bloomberg News. The gain helped push down the inventory of homes for sale last month to the lowest level since 2005. Purchases in 2011 climbed 1.7 percent from a year earlier as prices fell.
Historically low mortgage rates and a pickup in employment may be giving Americans the confidence to purchase homes that have fallen in value. At the same time, another wave of foreclosures may inhibit a faster recovery in real estate as more distressed properties are put on the market.
Thursday, January 19, 2012
CNN Money details:
Inflation overall held steady last month, as declining gas prices balanced out higher prices for other items.
The government's key measure of inflation, the Consumer Price Index, showed prices were virtually unchanged from November to December. It marked the second month in a row CPI has barely moved.
In the past 12 months, prices rose 3%, a slowdown from a 3.4% annual inflation rate in November. The numbers are seasonally adjusted.
Fox Business details:
New applications for unemployment benefits dropped to a near four-year low last week, a government report on Thursday showed, pointing to continued improvement in the labor market.
The Labor Department said initial claims for state unemployment benefits dropped 50,000 to 352,000, the lowest level since April 2008 and the biggest drop since September 2005. The prior claims data was revised up to 402,000 from the previously reported 399,000.
Wednesday, January 18, 2012
I feel like a broken record, but once again the mainstream media and fear-mongering finance blogs get the Chinese Treasury holdings data wrong. Here's Zero Hedge:
Today's TIC data confirmed what Zero Hedge readers have now known for quite some time: namely that foreigners are selling US paper. And while we have used contemporaneous Custody Account data from the Fed to present that in the past 7 weeks foreigners have sold a record amount of bonds, we now get confirmation via TIC that in November the selling continued, especially at the biggest non-Fed holder of US paper, China, which saw its holdings down to $1,132.6 billion, the lowest in the past year.
The pace of growth in Chinese purchases of Treasuries has declined rather dramatically (in percentage terms). This may prove to be a smaller issue for the U.S. in terms of Treasury demand (the smaller percent is off a larger base, so in $$ terms the growth is still significant), but it may reflect the difficulty China may have growing their export driven economy at the scale required to prevent social unrest, as global aggregate demand has waned.
Tuesday, January 17, 2012
"It’s a bit stronger than I thought as well, actually. It is a bit of a blow for the hard landing guys, given inflation has come down so much as well. And policy makers are moving away from restraints and flirting with some sort of stimulus. If I was a hard landing guy, I would not be feeling very excited this morning."
Monday, January 16, 2012
- One month forward return of the S&P 500
- One month change in the VIX index
- S&P 500: Less than -1.0% = Red, -1.0% to 1.0% = Yellow, Greater than 1.0% = Green
- VIX: Less than -2.5% = Red, -2.5% to 2.5% = Yellow, Greater than 2.5% = Green
Sunday, January 15, 2012
The WSJ reports on the Treasury Rally that Won't Die:
According to investment-research firm Morningstar, a portfolio of U.S. Treasurys with an average maturity of 20 years—the quintessential safe haven—rose 28% last year, even better than its 26% jump in 2008. You would have to go back to 1995 to find a better year.
More confusing still: Last year's surge came in the 30th year of a historic rally. Since 1981, long-term Treasury bonds have returned 11.03% annually, 0.05 percentage point better than the Standard & Poor's 500-stock index.
- Five year annualized GDP growth is only 2.2% (i.e. we are trending down)
- The Fed has made it clear they won't be raising short-term rates anytime soon / they have taken significant Treasury supply out of the market with quantitative easing programs
- Deflationary pressures / potential shocks from Europe remain
- Investors continue to flee risk assets into "safe" assets
Friday, January 13, 2012
Model Building / Data Mining
VIX as a Predictor of Equity Returns
Consumer Credit Set to Be a Positive Contributor to Growth
Confidence among U.S. consumers increased more than forecast in January, reaching its highest level in eight months on signs the labor market is improving.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 74 from 69.9 at the end of December. The median estimate in a Bloomberg News survey called for 71.5. The measure has increased 9.9 points in the last two months, the biggest such gain since April-May 2009.The Interloper and I have had some discussion regarding consumer confidence and the impact (if any) on forward equity returns. Looking at the data, it became clear that on average consumer confidence is a lagging, rather than leading, indicator for equity returns (great chart here and can be seen in the table below in the average columns).
There does however appear to be pockets of opportunity at extremes.
The table below outlines the average three month forward S&P return against the three-month change in the Michigan Confidence index and the absolute value of the index since 1979. While the data is limited for each "box" (and in some cases, there were no data points), it does show that the S&P 500 has performed very well on a going forward basis when:
- Confidence Levels are low (less than 70) and stabilizing (between -5% and 5%)
- Confidence Levels are high (greater than 85) and slightly falling (-10% to 0%), indicating potential "buying the dips" opportunities
Note we are currently up 22% in three months to that 74 level, which would indicate stability in equity returns going forward if the table is to be trusted.
Thursday, January 12, 2012
Peter Boockvar (via The Big Picture) details:
December retail Sales were light relative to expectations, rising just 0.1% month over month headline and falling 0.2% ex auto’s vs up 0.3% for both that was expected. Sales ex auto’s and gasoline were flat vs an expected rise of .4% and also taking out volatile building materials, sales fell 0.2%.November was revised up slightly for all categories but not enough to offset the December weakness relative to expectations. Sales weakness was seen in the 3.9% drop in electronics sales after just a 0.5% rise in Nov. Department store sales fell after zero growth in November and online retail sales fell 0.4% after a 1.7% rise in November.
Wednesday, January 11, 2012
Tuesday, January 10, 2012
Consider a hypothetical portfolio that switched in and out of the Wilshire 5000 index according to whether the VIX was above or below 20 — investing in the market on a given day if the VIX closed the previous session below that level, and otherwise staying in cash. This portfolio would have produced an 8.9% annualized return since 1990, when the CBOE’s data for the VIX commence, in contrast to 8.5% for buying and holding. (I chose 20 as the threshold level for illustration purposes only; it is not far from VIX’s median level over the last two decades.
The WSJ details:
The level of consumer credit outstanding increased by $20.37 billion to $2.478 trillion, the Federal Reserve said Monday. Economists surveyed by Dow Jones Newswires had forecast an $8.0 billion increase.
In percentage terms, the increase was the biggest since October 2001 and a big driver of the gain was revolving credit, which includes credit-card debt. It increased by $5.60 billion to $798.27 billion.
Nonrevolving credit also surged, rising $14.78 billion to $1.679 trillion. The increase was fueled by federal government, a category that includes student loans and has been increasing a lot over the past year–a sign high joblessness in the U.S. has led many people to go back to school.
Monday, January 9, 2012
When Steve Jobs passed away, I commented:
The 5 iPods, 3 iPhones, iPad, and 2 Macs currently in my home attest to the fact that I believe Steve Jobs' was brilliant. And at times he was more than a "computer guy" and truly inspirational.
How often do we wish more things were hand made? Oh, we talk about that all the time don't we? I wish it was like the old days. I wish things had that human touch. But that's not true. There are more hand made things now than there have ever been in the history of the world. Everything is hand made. I know. I have been there. I have seen the workers laying in parts thinner than human hair. One. After another. After another. Everything is hand made.
Source: This American Life
Sunday, January 8, 2012
Since the US economic recovery started in mid-2009, a whopping 97 percent of the new jobs — all but 43,000 of 1.4 million positions created — have gone to the guys, according to data released yesterday by the National Women’s Law Center, which analyzed jobs data between June 2009 and December 2011.
Friday, January 6, 2012
How Do We Grow From Here?
Leading Economic Indicators Rise in November
GDP Revised Down to 1.8% on Weaker Consumption
Something Positive for the New Year
BLS: Employment: Positive, But No Blow Out
ADP: Is this the Employment Figure We've Been Waiting For?
Manufacturing / Services
Manufacturing Data Starts 2012 On a Positive Note
ISM Services Expands in December
Confidence Upswing Continues
Consumers Don't Care About Savings Rates
Breaking Out the 0.1%
Even More Perspective on Housing
Some Perspective on Housing
What a Year it Was!!!
Auto Recovery Perspective
Gingrich Sliding in Polls... Phew!
And your video of the week... M83 with Midnight City
Thursday, January 5, 2012
Is this finally an employment figure that shows we are out of the weeds? Not so fast per Peter Boockvar (via The Big Picture):
ADP said private sector job adds totaled 325k in Dec, a blowout compared to expectations of 178k and compares with 204k in Nov. Job gains were mostly led by small and medium sized businesses in the service providing sector but we also saw job gains of 52k in the goods producing area of which 22k were created in manufacturing and 26k in construction. Bottom line, it’s great news to see this level of job gains in the private sector but Macroeconomic Advisors, which compiles the data, did say December seasonals may have had ‘idiosyncratic’ influences of the report. Dec ’10 also saw a big jump from the prior few months only to fall back in the months after.
ISM reports what respondents are saying:
- "Year-end uptick in activity." (Finance & Insurance)
- "Business is stabilizing — some good signs in the private sector for commercial construction." (Construction)
- "Some additional proposal requests, but clients continue to delay decisions on capital spending. Expect first quarter 2012 activity to be sluggish." (Professional, Scientific & Technical Services)
- "Automotive industry growth seems to be outpacing the rest of the economy." (Information)
- "Demand increasing gradually." (Wholesale Trade)
- "Business is holding steady. Outlook for December and first quarter 2012 is good." (Retail Trade)
Wednesday, January 4, 2012
Countering earlier concerns about a double-dip recession, U.S. auto sales wrapped up a skittish 2011 on a positive note, surging in the final weeks of the year, with Detroit’s automakers helping drive the overall market to its highest level since the start of the long economic downturn.
Overall sales of new cars, trucks and crossovers increased by 10.2% during 2011, largely paced by a surge in demand for domestic brands.
Tuesday, January 3, 2012
First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.How do you grow the tax base? Two ways, increase the tax rate and/or (with fixed rate debt) grow nominal national income. My view is that an increase in taxes is inevitable, so let's move on to some components of national income to determine areas of "opportunity".
ISM details what respondents are saying:
- "Slow Q4 — lots of destocking and inventory reduction going on." (Chemical Products)
- "Business seems strong, but likely due to tax advantages of purchasing capital expense items." (Machinery)
- "Our business is stable with a very good outlook for 2012." (Miscellaneous Manufacturing)
- "Food prices seem to have peaked as demand is starting to wane." (Food, Beverage & Tobacco Products)
- "All auto demand remains strong." (Fabricated Metal Products)
- "Continued conservative hiring, with tight discretionary spending controls due to slower growth expectations for 2012, driven by Euro zone sovereign debt concerns and lack of viable U.S. legislative process through the 2012 election." (Computer & Electronic Products)
- "Business beginning to slow down (seasonal), but will finish with a very strong year." (Plastics & Rubber Products)
- "Business is steady today around the world." (Transportation Equipment)
- "Market has definitely slowed in the last month, and is expected to remain so this month." (Wood Products)