Crocodilian

Apple to Open 50 More Stores - Let's Be Careful, Steve

Why is Apple opening more stores?

Because they're _way_ better at selling Apple products than, say, Best Buy.

I was skeptical of the Apple Store idea when they rolled it out. Let's just say that they've proven that they were right.

And it makes sense to do deals on commercial real estate today, when Apple can drive a terrific bargain. Not many other companies with $20+ billion in the bank and sterling reputations are looking for retail space at the moment, are they?

Christmas Comes Early: Key Retailer CDS / Equity Relationships

@Gary A
" I agree, sales taxes are tanking. I wouldn't believe the government spending numbers at all. It doesn't add up. This author is either banking on more lying stats or he is quite naive. "
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No, sales taxes are not "tanking". They're reported monthly, and there's no "fudge" possible-- they're real dollars being paid by real merchants against their sales tax liabilities, and they're up, year over year.

This data is reported state by state-- let's look at California:

Current sales tax data from State of California Department of Finance

2008 January through October: $6.3 Billion
2009 January through October: $6.4 Billion

So, far from "tanking" California sales taxes are up, year over year. If you look at them month by month, there's a dramatic improvement with 2009 . . . the early months were terrible, and October was pretty good, despite the expiry of the auto sales incentives.

Given that California is one of the worst-hit states economically, that should give you some confidence. You can examine the data yourself at the California Department of Finance website:
www.dof.ca.gov/HTML/FI...

Gold: The 'Lousy' Investment that Outperforms

The "outperformance" of gold in the period analyzed here is historically anomalous-- the 10 year period of 1999 to 2009 saw the collapse of a massive equities bubble. And gold in 1999 was at a multi-decade low. Looking at other ten year period would show a very different result.

One basic observation about gold: when it has recently _been_ a good investment-- then it usually won't be for some time again.

Saving the Global Economy: Try a Dollar Peg to the Renminbi

"Despite its recent financial woes, the U.S. remains the only actor on the world stage that can break down the barriers impeding the natural flow of capital around the world."
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It is hard to see what leverage the US has to do this. We are a major debtor, facing very large continuing financing needs; this is not a position of strength.

"And we need fiscal and regulatory changes to encourage savings and investment in the United States."

The savings rate in the US has increased dramatically in the last 18 months. It has gone from negative, to positive %5-7. That's a dramatic change.

"The United States should instead establish a fixed parity for the dollar with the currencies of its largest trading partners, starting with China."

China sets the dollar renminbi rate, not us. They're sitting on about $2 Trillion in US$. We're sitting on essentially zero Renminbi reserves (the Renminbi can't be held outside of China). Exactly _how_ can we execute a Renminbi peg when we have no Renminbi to sell?

Confidence and Trade: Spin vs. Reality

@Wildebeest
"We're still no closer to determining a lag time though. When the quarter ends how long does a business have to submit its sales tax revenues? From what you described they make monthly prepayments but what is the deadline for the final payment of the quarter?"
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Not sure where your confusion lies. For California, the October numbers, reported in early November, are for sales in October. So the "lag" from cash register to reporting would be 35 days or so for a sale on the first of the month, to five days or so for a sale that occurred on the last day of the month.

Speaking from experience, State finance departments are highly insistent on prompt and full payment of sales tax receipts, because its an area of abuse.

Confidence and Trade: Spin vs. Reality

@wildebeest
"So, in the context of my question, how long does it take before sales tax at a cash register gets recognised as sales tax revenue by a (state) government."
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Again, its the State departments of finance that are doing the collecting and reporting-- all you're seeing at the Census is an aggregation, but the collecting methods and timeliness aren't the same.

Looking at California, if you followed the link that I provided to California Department of Finance
www.dof.ca.gov/HTML/FI...

you'd see that they're reporting monthly. The way California does it, you file a quarterly sales tax payment, but you do monthly "prepayments" (with some kind of penalty if your prepayments are too far below what you actually owe).

So the California data is monthly, and fresh: they've just reported October 2009. Looking back, I can't see that there were big revisions of quarterly over monthly data in the past.

But that's just California-- you'd have to look at other states and how they collect their data to see what they do.

Confidence and Trade: Spin vs. Reality

@Mark Anthony
" Thanks very much for the data and for the link. I was looking for it. You provided some useful information. What a shame that Karl could not cite an actual number or cite a URL link in his article. How useful is it if you are unable to cite numbers or provide sources. Don't talk about it if you don't have the numbers."
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Thanks, I'm a big believer in looking at the numbers. Here's a bit more from California, which has good reporting of cumulative sales tax receipts

2007 -- January to October
$6.7 Billion

2008 -- January to October
$6.3 Billion

2009 -- January to October (eg, latest data for this year)
$6.4 Billion

So, basically, 2008 was a disaster, and we've stabilized and started to increase, in sales taxes, anyway. If you look at the 2009 data by month, as the year goes on, the sales tax numbers improve.

I _am_ troubled by the personal income numbers, which still look lousy. Personal income tax was $11.3 billion YTD in 2007, its running $9.5 Billion YTD in 2009. That's a BIG drop. That said, the capital gains tax picture has to be brightening somewhat-- and you won't see that for another quarter or two (eg someone who bought Bank of America in March is sitting on giant gains-- but they don't show up as tax receipts until after he sells and pays estimated tax)

Confidence and Trade: Spin vs. Reality

@Wildebeest
What *is* the actual delay between tax collection by business and tax receipt and recognition by government (and by the census bureau). eg. do businesses report weekly, monthly quarterly?
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Sales taxes are collected by States, not by the Federals-- there is no "the government" here, there are many different governments. The Census Bureau, for example, has nothing to do with sales tax receipts.

Let's take a look at what the State of California is reporting about their sales tax receipts:

Their comment about October 2009 was
"Sales and use tax receipts were $53 million below the month’s forecast of $2.22 billion. September represents the second prepayment for third quarter taxable sales.

This is actually a _huge_ improvement from six months ago

The numbers from March 2009:
"Sales and use tax receipts were $334 million below the month's forecast of $2.688 billion."

and better than a year ago

October 2008
"Sales and use tax receipts were $212 million below the month’s forecast of $2.249 billion."

In other words, sales tax receipts are recovering to trend in California -- which is one of the hardest hit states, obviously.

All data from California Department of Finance, available here:
www.dof.ca.gov/HTML/FI...

Tibman's 'The Murder of Lehman Brothers'

The "Murder" of Lehman Brothers? Anyone consider that it might be suicide?

Let's see: buy illiquid complex securities of doubtful quality, and leverage them 40 to 1, much of it with overnight money.

What could possibly go wrong with a plan as brilliant as that?

Charlie Gasparino: Another Crash 'Has to Happen Again'

Oh woe is us, "another crash has to come".

Sure.

"I don’t know when it’s going to happen, but if history is any guide, it has to happen again"

It will. So what?

Amid all the people being blamed, I don't see the feckless and ignorant American voter, who has consistently made clear to the people that he elects that he wants "more stuff, and someone else should pay for it, some other time, but no, not me, not now".

The root of our trouble was the collusion of voters and leaders in the biggest fudge of them all, the "implicit guarantee". What is an implicit guaranty? You think anyone would let you sign for a loan with an "implicit guarantee"?

Agency-Backed Mortgage REITs at a Crossroads

Thank you for the post. I'd be curious to hear more. I've listened to the NLY and AGNC conference calls, and they've both been profitable investments for me, but I confess to being fuzzy on the differences in strategies.

Can you point to the way you look at reports to discern strategy? These are not the most transparent of entities.

Inflation by Stealth

author writes:
"So for now, inflation is like a ninja stalking our economy. It's lurking in the shadows but can't easily be seen."
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Yes, because we're busy fighting off the far more pressing danger of a deflationary depression. Is there a risk of inflation from the measures taken to keep our economy from imploding? Sure there is: but we have good tools for fighting inflation if it occurs., and right now, we have a much more pressing problem.

The world is generally beset with too much industrial capacity, too much debt, asset prices that still look too high, and end user demand that's very suspect.

In that circumstance, the immediate risks of inflation are quite low-- what's going to drive it?

Remember, its not just money supply that determines the risk of inflation, its (money supply)*(velocity of money), which stands equal to (price of goods)*(quantity of goods). This is called the "Exchange Equation" in economics, and what it tells you is that if velocity of money has collapsed (and it has), even a large increase in money supply won't have an impact on prices.

Are Investors Seeking Protection from the Wrong Currency?

The fault lies in Beijing. Freeze one part of a three body system, and you'll get what we've got: a dollar that falls sharply against the only other currency trading in volumes sufficient to absorb flows, the Euro. This is bad for the Europeans, not great for the US, and not a long term solution for the Chinese either (because as they redeploy into Euros, they're doing so at valuations that are clearly too high)

The world is stuck with Beijing's policy preference: they want massive exports in order to sop up excess labor supply at home, and will keep their currency too cheap in order to achieve this.

So if the dollar can't fall against its Yuan peg, it will fall against the only other currency where China might sock away export revenues.

Spectrum Pharma: Zevalin Has Blockbuster Potential

Very hard to have a new blockbuster drug for NHL . . . given that the current first line therapy, Rituxan, works very well, has been used for a decade.

author writes: "If there is a SHIFT in the STANDARD OF CARE treatment for NHL, then a majority of doctors will likely implement RIT into the first-line treatment."

That's a big "if".

Oncologists use what they know. At this point, they have a good drug, which they know well. The most likely scenario for Zevalin is as a second line drug for relapsing patients. Each addition to a drug regimen adds considerably to cost and to the potential for complications. Most community oncologists avoid the the complicated multidrug protocols common at research hospitals if they can . . . in this case, they can.

Here's Why Asia Must Eventually Ditch the Dollar

"China is set to use the ASEAN meet to sell the idea of making the Yuan an international currency. "
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No, they're not. The PRC leadership has shown zero interest in losing control over their own currency. Being a reserve currency means that massive amounts are held by foreign central banks, and these foreign banks have an associated power.

The Chinese are not willing to let the Renminbi be fully convertible, much less a reserve currency.

Moreover, they're not willing to let the Renminbi float, either. Its obvious to anyone looking at purchasing power parity that the Yuan is dramatically undervalued, but the Chinese have been steadfast in preventing its appreciation. As a fully convertible currency, they'd have to let the Yuan float-- meaning the loss of millions of export jobs, a political risk they are as yet unwilling to run.