California's San Bernardino County and two of its biggest cities, Ontario and Fontana, want to use the concept of eminent domain to forcibly buy underwater mortgages from investors, lower the loan principal to match the value of the property, and then resell the reduced mortgages. Proponents believe they have a strong legal case, but mortgage investors are unsurprisingly opposed. (See Shiller) [View news story]
Tack,
Could you imagine JFK suggesting something like this?
The idea that property rights as a Natural Law would not be respected in this country just shows how far we have strayed from the original vision - a vision which created the most prosperous, free, and successful country in the history of the world.
Denmark's central bank goes negative, cutting its deposit rate 25 bps to -0.20%. The benchmark lending rate is cut to +0.20%, also a reduction of 25 bps. Like Switzerland, Denmark is battling to keep the krone from strengthening against the euro, and bank depositors will now have to pay for the privilege of doing so. Earlier: The ECB cut its deposit rate to 0%. [View news story]
June ISM Manufacturing Index:49.7 vs. 52.0 consensus and 53.5 prior. Prices index 37.0 vs. 47.5 prior. Employment 56.6 vs. 56.9. Inventories 44.0 vs. 46.0. New orders 47.8 vs. 60.1. [View news story]
anony,
You are so tiresome and boring. Do you come on this website to learn or to taunt?
As an FYI, there were 82,000 jobs created in Dec 07 with a 5% unemployment rate which was the start of the last recession. The difference between where we are now and recession is infinitesimal and we are heading in the wrong direction. If we don't get a re-acceleration from here then we will get to recession - that's just math.
Stop making it personal or just don't respond to my posts.
In a note titled “Wall Street Proclaims the Death of Equities,” BofA Merrill Lynch strategist Savita Subramanian says the average equity allocation is at 49.3%. This is the first it's been below 50 in nearly 15 years, which suggests that sell-side strategists are now more bearish on equities than they were at any point during the collapse of the tech bubble or the recent financial crisis. For many, including Subramanian, this bearish sentiment is a contrarian sign that a turnaround is near. [View news story]
All you have to do is look at the chart on the attached link and reach your own conclusions. What it shows that the use of an "average" anything when it comes to financial data masks a lot of real information.
Especially since there are so many other competing ways to measure bullishness and bearishness that have track records and are systematic like Investors Intelligence - right now bullishness is about average.
So when a guy who's job is to sell stocks say buy stocks you might want to question his motives.
Just today for example on Mark Hulbert's Marketwatch column:
http://bit.ly/R55NyW "Too many jumping on bullish bandwagon Commentary: Huge — and alarming — jump in bullishness" CHAPEL HILL, N.C. (MarketWatch) — An unusually large number of stock market timers spent the weekend jumping on the bullish bandwagon. And that’s worrisome from a contrarian point of view."
So if your bullish stay bullish, if your bearish stay bearish. These tools are just sales tools to push a particular point of view.
June ISM Manufacturing Index:49.7 vs. 52.0 consensus and 53.5 prior. Prices index 37.0 vs. 47.5 prior. Employment 56.6 vs. 56.9. Inventories 44.0 vs. 46.0. New orders 47.8 vs. 60.1. [View news story]
anon,
You obviously don't spend much time interpreting data because there is a big difference between leading and lagging data.
The prior month's factory orders was a big negative so the overall numbers are flat for the last 3 months. Not to mention it is a May number which seems so long ago now in view of all the new data we have currently.
ISM New Orders is the leading indicator that matters. GDP still tracking at 1.5% this quarter and losing steam even after this report so maybe no recession in terms of zero growth but you can hardly tell the difference.
You can focus on history I will pay attention to the present :)
Automobile sales for June are coming in above expectations (Ford, GM, Toyota, Chrysler) and are strong enough that analysts are comfortably raising their annual industry-wide sales forecast to over 14M vehicles. For comparison, last year the industry turned over 12.8M vehicles and in the midst of financial chaos in 2009 only 10.4M cars were sold. Despite the solid numbers, economists are wary that sales could be related to a demand shock from an aging U.S. consumer fleet, instead of any general improvement in consumer confidence. [View news story]
It is a good number, however it is not a leading indicator. 2007 was a pretty good year for car sales compared to 2008 with a sales peak in December 07. Jan 2008 wasn't too shabby either. February 2012 looks to be higher than this month's numbers.
For those anticipating a recession, it doesn't change that expectation and for those that aren't well it doesn't change that perception either.
http://bit.ly/R3NSsr "For the full year of 2008, all of the Big Six automakers reported sales declines. In total, the industry sold 13.2 million vehicles for an 18 percent drop from 2007's 16.1 million."
Kind of weird to calculate the 3 month average with the negative month in between but when you look at the report we basically have zero growth over the last 3 months. The year over year still looks pretty strong but last year was the tsunami year so hard to know whether there is a distortion there. I am guessing unless we get some acceleration from here the future comps will be tough.
It is weird that this is a report for May and we are now in early July somehow this seems already so dated especially in view of the massive dropoff in the ISM New Orders component.
June's report while once again dated should be interesting.
Pimco's Total Return ETF (BOND) continues to be a juggernaut, now with $1.7B AUM and a return of 3.81% in the 4 months since launch. Its far bigger and less nimble brother (parent), the Total Return Fund ($250B AUM) has returned just 1.99% during the same time frame. [View news story]
Can anyone explain the difference in returns?
Seems like another argument in favor of smaller sized investment funds.
This is interesting from the website:
"Q: Do BOND and the Total Return strategy mirror each other? Gross: Our flagship Total Return strategy and its new ETF counterpart have many similarities, and a few key differences. They share the same overarching objectives and investment strategy, rely on the same investment process and have much the same flexibility. However, there are some differences in terms of portfolio holdings. For example, in line with regulatory requirements, the ETF won’t use options, futures or swaps. Other factors, such as the timing of cash flows, can also influence portfolio construction. Beyond these, though, the management approach and philosophy of BOND and the Total Return strategy will be nearly identical, and I will be managing both.
Q: Any other differences between BOND and Total Return to note? Gross: Both BOND and the Total Return strategy are benchmarked to Barclays Capital U.S. Aggregate Index, which includes corporates, mortgages and Treasuries. While we can’t comment on specific return expectations, I will say that we believe that a broad opportunity set, coupled with the ability to be nimble as market conditions change, supports better potential for excess returns. I think it would be reasonable to anticipate some short-term divergence between the ETF and Total Return. However, the similarity of their approaches means that over longer periods we would expect outcomes to be well in line with each other."
ICSC Retail Store Sales:0.2% W/W, vs. 2.0% last week. +1.4% Y/Y, vs. +2.7% last week. Severe storms has led to decline in chain-store sales with 1.4% being the the lowest rate since January last year. [View news story]
Second Quarter 2012: The Beginning Of An Earnings Collapse [View article]
James,
My favorite part of your article below. It is interesting that when the US economy is weak bulls/permabulls always discuss the converse of this metric as the reason why you should buy!buy!buy!
Now all I hear is crickets.
"But sluggish US growth is only a small part of the story.
Most US investors have a very provincial mind-set. Few seem to grasp that well over 35% of S&P 500 revenue and near 50% of S&P 500 earnings come from non-US sources.
The rest of the world is decelerating at a much more dramatic rate than in the US. A major recession in Europe is now a virtual certainty. And expected growth rates from Asia to Latin America are being slashed to levels consistent with a "hard-landing" scenario."
June ISM Manufacturing Index:49.7 vs. 52.0 consensus and 53.5 prior. Prices index 37.0 vs. 47.5 prior. Employment 56.6 vs. 56.9. Inventories 44.0 vs. 46.0. New orders 47.8 vs. 60.1. [View news story]
Josh,
People forget the unemployment rate was 5% in December 2007 and then fell to 4.9% in Feb 08.
Employment is a lagging indicator and it is important to recognize the difference between leading and lagging when assessing the direction of the economy.
Components of the LEI and their weightings (big emphasis on manufacturing for those that are unfamiliar with the calculation):
Leading Economic Index Factor 1 Average weekly hours, manufacturing 0.2781 2 Average weekly initial claims for unemployment insurance 0.0334 3 Manufacturers' new orders, consumer goods and materials 0.0811 4 ISM® new orders index 0.1651 5 Manufacturers' new orders, nondefense capital goods excl. aircraft 0.0356 6 Building permits, new private housing units 0.0272 7 Stock prices, 500 common stocks 0.0381 8 Leading Credit Index™ 0.0794 9 Interest rate spread, 10-year Treasury bonds less federal funds 0.1069 10 Avg. consumer expectations for business conditions 0.1551
June ISM Manufacturing Index:49.7 vs. 52.0 consensus and 53.5 prior. Prices index 37.0 vs. 47.5 prior. Employment 56.6 vs. 56.9. Inventories 44.0 vs. 46.0. New orders 47.8 vs. 60.1. [View news story]
anony,
"So the ISM could go to 40 and the economy would keep expanding as the manufacturing sector is insignificant."
Do you really believe this?
If manufacturing experienced this decline it would mean the services component would also follow (as it did in Dec 07) which is why the official LEI places so much emphasis on manufacturing so you really are ignoring this at your peril.
California's San Bernardino County and two of its biggest cities, Ontario and Fontana, want to use the concept of eminent domain to forcibly buy underwater mortgages from investors, lower the loan principal to match the value of the property, and then resell the reduced mortgages. Proponents believe they have a strong legal case, but mortgage investors are unsurprisingly opposed. (See Shiller) [View news story]
Could you imagine JFK suggesting something like this?
The idea that property rights as a Natural Law would not be respected in this country just shows how far we have strayed from the original vision - a vision which created the most prosperous, free, and successful country in the history of the world.
Denmark's central bank goes negative, cutting its deposit rate 25 bps to -0.20%. The benchmark lending rate is cut to +0.20%, also a reduction of 25 bps. Like Switzerland, Denmark is battling to keep the krone from strengthening against the euro, and bank depositors will now have to pay for the privilege of doing so. Earlier: The ECB cut its deposit rate to 0%. [View news story]
Second Quarter 2012: The Beginning Of An Earnings Collapse [View article]
"You do realize we hit about 11 in 2009 right?"
I think the analysis refers to Shiller's CAPE. This did not hit 11 nor has it come close to doing so at this point in time.
John Mauldin's article last week discusses this in detail for those that are interested:
http://bit.ly/LzNbUs
June ISM Manufacturing Index: 49.7 vs. 52.0 consensus and 53.5 prior. Prices index 37.0 vs. 47.5 prior. Employment 56.6 vs. 56.9. Inventories 44.0 vs. 46.0. New orders 47.8 vs. 60.1. [View news story]
You are so tiresome and boring. Do you come on this website to learn or to taunt?
As an FYI, there were 82,000 jobs created in Dec 07 with a 5% unemployment rate which was the start of the last recession. The difference between where we are now and recession is infinitesimal and we are heading in the wrong direction. If we don't get a re-acceleration from here then we will get to recession - that's just math.
Stop making it personal or just don't respond to my posts.
Thanks
In a note titled “Wall Street Proclaims the Death of Equities,” BofA Merrill Lynch strategist Savita Subramanian says the average equity allocation is at 49.3%. This is the first it's been below 50 in nearly 15 years, which suggests that sell-side strategists are now more bearish on equities than they were at any point during the collapse of the tech bubble or the recent financial crisis. For many, including Subramanian, this bearish sentiment is a contrarian sign that a turnaround is near. [View news story]
Especially since there are so many other competing ways to measure bullishness and bearishness that have track records and are systematic like Investors Intelligence - right now bullishness is about average.
So when a guy who's job is to sell stocks say buy stocks you might want to question his motives.
Just today for example on Mark Hulbert's Marketwatch column:
http://bit.ly/R55NyW
"Too many jumping on bullish bandwagon
Commentary: Huge — and alarming — jump in bullishness"
CHAPEL HILL, N.C. (MarketWatch) — An unusually large number of stock market timers spent the weekend jumping on the bullish bandwagon. And that’s worrisome from a contrarian point of view."
So if your bullish stay bullish, if your bearish stay bearish. These tools are just sales tools to push a particular point of view.
June ISM Manufacturing Index: 49.7 vs. 52.0 consensus and 53.5 prior. Prices index 37.0 vs. 47.5 prior. Employment 56.6 vs. 56.9. Inventories 44.0 vs. 46.0. New orders 47.8 vs. 60.1. [View news story]
You obviously don't spend much time interpreting data because there is a big difference between leading and lagging data.
The prior month's factory orders was a big negative so the overall numbers are flat for the last 3 months. Not to mention it is a May number which seems so long ago now in view of all the new data we have currently.
ISM New Orders is the leading indicator that matters. GDP still tracking at 1.5% this quarter and losing steam even after this report so maybe no recession in terms of zero growth but you can hardly tell the difference.
You can focus on history I will pay attention to the present :)
Automobile sales for June are coming in above expectations (Ford, GM, Toyota, Chrysler) and are strong enough that analysts are comfortably raising their annual industry-wide sales forecast to over 14M vehicles. For comparison, last year the industry turned over 12.8M vehicles and in the midst of financial chaos in 2009 only 10.4M cars were sold. Despite the solid numbers, economists are wary that sales could be related to a demand shock from an aging U.S. consumer fleet, instead of any general improvement in consumer confidence. [View news story]
For those anticipating a recession, it doesn't change that expectation and for those that aren't well it doesn't change that perception either.
http://bit.ly/R3NSsr
"For the full year of 2008, all of the Big Six automakers reported sales declines. In total, the industry sold 13.2 million vehicles for an 18 percent drop from 2007's 16.1 million."
Great chart from Calculated Risk on SAAR:
http://bit.ly/R3NSIM
May Factory Orders: +0.7%; vs. consensus of +0.1%, -0.6% prior. Inventories +0.5%. Shipments +0.7%. [View news story]
It is weird that this is a report for May and we are now in early July somehow this seems already so dated especially in view of the massive dropoff in the ISM New Orders component.
June's report while once again dated should be interesting.
Pimco's Total Return ETF (BOND) continues to be a juggernaut, now with $1.7B AUM and a return of 3.81% in the 4 months since launch. Its far bigger and less nimble brother (parent), the Total Return Fund ($250B AUM) has returned just 1.99% during the same time frame. [View news story]
Seems like another argument in favor of smaller sized investment funds.
This is interesting from the website:
"Q: Do BOND and the Total Return strategy mirror each other?
Gross: Our flagship Total Return strategy and its new ETF counterpart have many similarities, and a few key differences. They share the same overarching objectives and investment strategy, rely on the same investment process and have much the same flexibility. However, there are some differences in terms of portfolio holdings. For example, in line with regulatory requirements, the ETF won’t use options, futures or swaps. Other factors, such as the timing of cash flows, can also influence portfolio construction. Beyond these, though, the management approach and philosophy of BOND and the Total Return strategy will be nearly identical, and I will be managing both.
Q: Any other differences between BOND and Total Return to note?
Gross: Both BOND and the Total Return strategy are benchmarked to Barclays Capital U.S. Aggregate Index, which includes corporates, mortgages and Treasuries. While we can’t comment on specific return expectations, I will say that we believe that a broad opportunity set, coupled with the ability to be nimble as market conditions change, supports better potential for excess returns. I think it would be reasonable to anticipate some short-term divergence between the ETF and Total Return. However, the similarity of their approaches means that over longer periods we would expect outcomes to be well in line with each other."
ICSC Retail Store Sales: 0.2% W/W, vs. 2.0% last week. +1.4% Y/Y, vs. +2.7% last week. Severe storms has led to decline in chain-store sales with 1.4% being the the lowest rate since January last year. [View news story]
Housing And Second-Half Growth [View article]
Pretty big assumption.
Housing And Second-Half Growth [View article]
"This year we have generally built about 200,000 houses more than last year. "
Is this "projected" incremental completions or actual completions?
I don't see how this number follows from the NAHB dataset:
http://bit.ly/QX7azB
http://bit.ly/LsR5i2
Last year it looks like 305,000 homes were completed and the current run-rate for this year looks like it is on track for 360,000-370,000.
Are you perhaps including multi-family stats in your calculation?
Thank you.
Second Quarter 2012: The Beginning Of An Earnings Collapse [View article]
My favorite part of your article below. It is interesting that when the US economy is weak bulls/permabulls always discuss the converse of this metric as the reason why you should buy!buy!buy!
Now all I hear is crickets.
"But sluggish US growth is only a small part of the story.
Most US investors have a very provincial mind-set. Few seem to grasp that well over 35% of S&P 500 revenue and near 50% of S&P 500 earnings come from non-US sources.
The rest of the world is decelerating at a much more dramatic rate than in the US. A major recession in Europe is now a virtual certainty. And expected growth rates from Asia to Latin America are being slashed to levels consistent with a "hard-landing" scenario."
June ISM Manufacturing Index: 49.7 vs. 52.0 consensus and 53.5 prior. Prices index 37.0 vs. 47.5 prior. Employment 56.6 vs. 56.9. Inventories 44.0 vs. 46.0. New orders 47.8 vs. 60.1. [View news story]
People forget the unemployment rate was 5% in December 2007 and then fell to 4.9% in Feb 08.
Employment is a lagging indicator and it is important to recognize the difference between leading and lagging when assessing the direction of the economy.
Components of the LEI and their weightings (big emphasis on manufacturing for those that are unfamiliar with the calculation):
Leading Economic Index Factor
1 Average weekly hours, manufacturing 0.2781
2 Average weekly initial claims for unemployment insurance 0.0334
3 Manufacturers' new orders, consumer goods and materials 0.0811
4 ISM®
new orders index 0.1651
5 Manufacturers' new orders, nondefense capital goods excl.
aircraft 0.0356
6 Building permits, new private housing units 0.0272
7 Stock prices, 500 common stocks 0.0381
8 Leading Credit Index™ 0.0794
9 Interest rate spread, 10-year Treasury bonds less federal funds 0.1069
10 Avg. consumer expectations for business conditions 0.1551
June ISM Manufacturing Index: 49.7 vs. 52.0 consensus and 53.5 prior. Prices index 37.0 vs. 47.5 prior. Employment 56.6 vs. 56.9. Inventories 44.0 vs. 46.0. New orders 47.8 vs. 60.1. [View news story]
"So the ISM could go to 40 and the economy would keep expanding as the manufacturing sector is insignificant."
Do you really believe this?
If manufacturing experienced this decline it would mean the services component would also follow (as it did in Dec 07) which is why the official LEI places so much emphasis on manufacturing so you really are ignoring this at your peril.
Good luck.