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GaltMachine

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  • Weighing The Week Ahead: Expecting Too Much From Jackson Hole? [View article]
    Hopefully you are correct but that will cause a sell-off if no announcement is made.
    Aug 26, 2012. 04:02 PM | 1 Like Like |Link to Comment
  • General Motors (GM) has grand plans to see the new Cadillac ATS rise to the top of the compact luxury segment. In the hopes of refreshing the Cadillac image to appeal to a younger market, the new model features a new rear-wheel-drive platform and the latest tech gadgetry along with its still-powerful V-6 engine. The ultimate goal for GM is to see the Cadillac brand unseat the dominance of the BMW (BAMXY.PK) 3-Series. [View news story]
    A BMW is an aspirational vehicle for most people which includes me.

    I finally got my first BMW, a 550i, and I have never have owned anything close to it in the past. I love it but I am sure I would have also loved any other high-end car. The difference is that owning a BMW is like saying "you have arrived/made it" and it still has a relatively hip image overall. Mercedes is a great car but still gives you that old person feel no matter how exciting the look of the car and its driving appeal.

    Brands and their positioning have a lot of power beyond the concrete physical aspects of the vehicle and this is where GM won't have a chance until they can create that same type of desire and psychic fulfillment.

    In some ways it is similar to the AAPl cult for its buyers. Really hard to displace someone from buying a bimmer once they have their mind set on it.

    Cadillac once had this positioning but not anymore.
    Aug 24, 2012. 03:18 PM | Likes Like |Link to Comment
  • July Durable Goods: +4.2% vs. +1.9% expected, +1.6% prior. Ex-transport -0.4% vs. +0.4% expected, -1.1% prior. [View news story]
    bbro,

    That's why it pays to look at the details.

    I was totally confused by the market action this morning as I would have expected a big positive reaction in the futures to this number and it did not happen.

    I was surprised by your first post above and yet it seems to be the way the market was looking at it as well.

    Anybody thinking they could trade on this data has to be scratching their heads. Thanks for the clarification.
    Aug 24, 2012. 10:35 AM | Likes Like |Link to Comment
  • July Durable Goods: +4.2% vs. +1.9% expected, +1.6% prior. Ex-transport -0.4% vs. +0.4% expected, -1.1% prior. [View news story]
    Tack,

    CNBC has done exactly that quoting Reuters:

    "US Durable Goods Surge in July on Boeing Orders
    Published: Friday, 24 Aug 2012 | 8:34 AM ET Text Size
    By: Reuters

    New orders for long-lasting U.S. manufactured goods surged in July, but a second straight month of declines in a gauge of planned business spending pointed to a slowing growth trend in the factory sector."

    However, it includes the same warning as everyone else.

    I am not "cherrypicking" anything.
    Aug 24, 2012. 10:17 AM | Likes Like |Link to Comment
  • July Durable Goods: +4.2% vs. +1.9% expected, +1.6% prior. Ex-transport -0.4% vs. +0.4% expected, -1.1% prior. [View news story]
    bbro,

    I know that. That wasn't the point. The article from Bloomberg says the same thing. They are hardly doomers. I also don't think Roubini is a hack either regardless of his moniker.

    I am not cherrypicking anything just providing links from 3 diverse sources. CNBC reports it this way:

    "US Durable Goods Surge in July on Boeing Orders
    Published: Friday, 24 Aug 2012 | 8:34 AM ET Text Size
    By: Reuters

    New orders for long-lasting U.S. manufactured goods surged in July, but a second straight month of declines in a gauge of planned business spending pointed to a slowing growth trend in the factory sector."

    The reversal of the Qantas orders is a done deal so yes it will affect the durable report next month. That's not crazy but it is known data and probably expected.
    Aug 24, 2012. 10:10 AM | Likes Like |Link to Comment
  • July Durable Goods: +4.2% vs. +1.9% expected, +1.6% prior. Ex-transport -0.4% vs. +0.4% expected, -1.1% prior. [View news story]
    bbro/Tack,

    This is how this report is being covered by Bloomberg:

    http://bloom.bg/Nq3S4D
    "Demand for U.S. capital goods such as machinery and communications gear dropped in July by the most in eight months, indicating companies are pulling back on investment.

    Possible U.S. tax increases and spending cuts and a global economic slowdown are hurting companies such as Caterpillar Inc. and Deere & Co., indicating manufacturing will no longer be a driver of the expansion.
    Bookings for non-military capital equipment excluding planes slumped 3.4 percent, a Commerce Department report showed today in Washington. Total orders for goods meant to last at least three years jumped 4.2 percent, paced by a 54 percent surge in demand for civilian aircraft."

    This tweet from Dr. Doom, Roubini:

    "Nouriel Roubini ‏@Nouriel
    Dismal capex report: core capital goods orders are falling at a 9.3% 3months over 3months SAAR rate. Capex is contracting at very rapid pace"

    Apparently the negative revisions to last month's core data are the issue they are focused on.

    Zerohedge's take:
    http://bit.ly/Nq3TW5
    "Today's Durable Goods number was blistering, if only on the headline. Coming at $230.7 billion, it was up a whopping $9.4 billion or 4.2%, on expectations of a 2.5% increase. The reason for the surge: the volatile transportation segment, which rose 14.1% to $80.4 billion. This is entirely due to Boeing aircraft orders, which rose to 260 this year compared to 10% of that a year ago, which however, as Quantas reminded us yesterday, can and will be promptly reversed (see: "Boeing hit by 'biggest-ever 787 order cancellation'"). In other words next month will be a headline disaster. So what happened beneath the headline when excluding volatile series: well - Durable Goods ex-transportations decline -0.4% in July, missing expectations of a +0.5% print, with the June number revised down from -1.1% to -2.2%. It gets worse: Nondefense capital goods excluding aircraft tumbled in July, and imploded to -3.4%, crashing below expectations of a -0.2% print, with the previous print revised from -1.4% to -2.7%). This means that indeed the brief blip higher in economic activity in the summer was largely transitory and was purely a byproduct of seasonal adjustment. Expect cuts to Q3 GDP forecasts to commence imminently by the sellside lemmings."

    Wow, I have never been more confused by a report then this one.
    Aug 24, 2012. 09:51 AM | Likes Like |Link to Comment
  • July Durable Goods: +4.2% vs. +1.9% expected, +1.6% prior. Ex-transport -0.4% vs. +0.4% expected, -1.1% prior. [View news story]
    bbro,

    What does this mean?

    "Inventories of manufactured durable goods in July, up
    thirty of the last thirty-one months, increased $2.7 billion
    or 0.7 percent to $369.3 billion. This was at the highest
    level since the series was first published on a NAICS
    basis and followed a 0.3 percent June increase."

    Not sure if that is an issue that's why I ask. Seems like a pretty strong report but ex-transport not so hot.

    You are the expert on this data. What do you think?
    Aug 24, 2012. 08:38 AM | Likes Like |Link to Comment
  • Don't Worry About Profits As A Percent Of GDP [View article]
    Gary,

    "talking about an (American) population which is mathematically challenged enough as it is"

    One of my favorite pieces of financial trivia is what I call the math of losses.

    Start with $100 lose $50 and you have a 50% loss. If you then subsequently produce a 50% gain you still only have $75. This is the type of basic math that eludes people and explains why even after the market is up 100% they can still be down in their portfolio. People then cynically conclude that the market must be "rigged" because they can't do basic math.

    Another one is the use of averages in returns.
    Start with $100
    Year 1 100% return (100 x 2 = 200)
    Year 2 50% loss (200x -.50 = 100)
    Average Return 25%/yr
    Absolute/Geometric Return 0%

    Your point is extremely well taken. Mathematical illiteracy is like the old adage of a fool and his money.

    Thanks for the response.
    Aug 23, 2012. 04:51 PM | 1 Like Like |Link to Comment
  • Don't Worry About Profits As A Percent Of GDP [View article]
    "A singular focus on profits can be disastrously simplistic for the long term investor."

    It's not the absolute %age level of profits that matter but rather the rate of change and the direction of change that matters. It is at the extremes in both directions such as today where margins and profits are at record highs that present the most risk.

    The lessons you might draw from this discussion and the charts presented is that the time to buy is when profits as a percentage of GDP collapses precipitously in a relatively short period of time. This makes sense because assuming most normal business cycles the process of having those profits recover is the basis for the next bull market. It is also precisely the most terrifying time to buy!

    James Montier of GMO covered this issue in great detail in:

    "What Goes Up Must Come Down!"
    http://bit.ly/RajFte
    Aug 23, 2012. 02:55 PM | Likes Like |Link to Comment
  • July New Home Sales: 372K vs. 362K expected, 359K (revised) prior. [View news story]
    bbro,

    Absolutely :)

    The big question of the day still is whether deflation is our future. The FED still seems terrified of the prospect and is acting accordingly.

    The Chinese slowdown is a blackbox of uncertainty but one thing is sure if they start to build up excess inventories of finished goods they will dump them further putting downward pressures on prices.

    I am not an inflationista but I do see long-term inflation after deflation which is why I see the worst of all worlds for average Americans - high prices for what they use everyday and deflation in everything else.

    I hope you are right for everyone's sake.
    Aug 23, 2012. 11:41 AM | Likes Like |Link to Comment
  • July New Home Sales: 372K vs. 362K expected, 359K (revised) prior. [View news story]
    bbro,

    You are assuming a normal inflation-induced business cycle recession here. What if we get a tip into recession with deflationary pressures?

    This is the potential outcome of the credit crisis induced recession of the 2008 period.

    That's why it would be so left-field if it happened.
    Aug 23, 2012. 10:19 AM | 1 Like Like |Link to Comment
  • July New Home Sales: 372K vs. 362K expected, 359K (revised) prior. [View news story]
    This was actually a better improvement than the headline based upon the prior month's revision (which is a rarity) but it basically matches the high from the year in May.
    Aug 23, 2012. 10:16 AM | Likes Like |Link to Comment
  • A comparison chart of U.S., EU, and China PMIs shows the supposed decoupling - in which the U.S. economy stayed strong while the EU and China deteriorated - is becoming less so. [View news story]
    I wish the chart were extended a bit to cover more early years.

    Certainly seems like a worldwide manufacturing recession is staring us in the face.

    This could be cyclicals under pressure over the next couple of quarters. Might be good some opportunities.
    Aug 23, 2012. 09:42 AM | Likes Like |Link to Comment
  • FOMC Minutes: Support is growing for additional action "fairly soon," unless there is clear strengthening of the economic recovery. QE3 is among possible actions, but other options discussed included extending the announced period of ZIRP, or reducing interest rates on reserves. [View news story]
    klarsolo,

    This is what happens when the SA people change the comment without showing it as an "update/edit". I wasn't the only one originally confused by this.

    I guess the editor caught their mistake because my excerpt was a direct quote from the blurb :)
    Aug 22, 2012. 04:14 PM | Likes Like |Link to Comment
  • More on Existing Home Sales: The median home price rose 9.4% Y/Y thanks to higher-end homes representing a bigger slice of the home sale pie. NAR spinmeister Lawrence Yun is worried about low inventory, not demand, and calls for builders to build and Fannie, Freddie, and the banks to push their stable of foreclosed homes onto the market. [View news story]
    "The median price of an existing home jumped 9.4 percent from a year earlier, the biggest 12-month gain since January 2006, to $187,300 from $171,200 in July 2011, today’s report showed."

    This is a pretty big deal but I have to admit a bit of confusion as to why it hasn't been picked up by any of the other house price tracking indexes like Corelogic, FNC, Zillow, etc. Corelogic is a repeat sales index so in theory when they release their next report it should show a big jump.

    http://bit.ly/NIeBZo
    "CoreLogic June Home Price Index Rises 2.5 Percent—Representing Fourth Consecutive Year-Over-Year Increase
    August 07, 2012, Santa Ana, Calif. –

    ––Pending HPI Forecasts Year-Over-Year July Increase of 2.0 Percent––
    The CoreLogic Pending HPI indicates that July home prices, including distressed sales, will rise by at least 0.4 percent on a month-over-month basis from June 2012 and by 2.0 percent on a year-over-year basis from July 2011. Excluding distressed sales, July house prices are also poised to rise by 1.4 percent month-over-month from June 2012 and by 4.3 percent year-over-year from July 2011. The CoreLogic Pending HPI is a new and exclusive metric that provides the most current indication of trends in home prices. It is based on Multiple Listing Service (MLS) data that measure price changes in the most recent month."

    If this number is predictive the 2% forecast above will be blown out.
    Aug 22, 2012. 02:30 PM | Likes Like |Link to Comment
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