Malkiel

August Housing Numbers Across Various Indices Don't Yet Show Genuine Recovery

Construction costs are not a fixed target--like everything else in a recession we would expect materials to be discounted and labor to be willing to take lower wages, all resulting in lower construction costs. Given how high prices got during the bubble saying that "the level of housing prices may need to be a bit higher than it is now in order to sustain normal construction activity" is simply a guess without facts behind it...

Unemployment: We're Not Out of the Woods Yet

In the longest term, the post-industrial US economy needs to see several elements come into play which affect how downturns and investment are handled:

--employee ownership and investment need to be enhanced and unions need to be partnered into the boards of public companies so that decision-making in downturns will be biased toward maintaining the infrastructure rather than turning to desperate measures like offshoring for short-term financial gain;
--Shareholders need their rights strengthened so that management cannot get away with enriching themselves at the expense of the profitability of the enterprise (how many executive compensation packages exceed the entire quarterly or yearly profits of the company?)
--Shareholder loyalty needs to by boosted by shareholder-friendly arrangements like quarterly dividends; this can also be an important incentive for employees to accept company stock as part of their retirement and compensation packages.
--The public sector's valuable role as a "steady state" jobs engine fulfilling vital needs to be acknowledged and we need to find the comfortable level of taxation which should support it, without endless and futile ideological battling against it.

Measures such as the above are about giving the parties involved in the enterprise a vested interest in keeping alive the parts which will be needed during the recovery. If we want to move away from the obsession with short-term financial gains driving our economy then we need to change the culture of business by rearranging the relationships between the players...

Homebuyer Nirvana: Low Prices, Low Rates

In pure horsetrading terms, it is a good time to be in the market for a house. Problem is, some rules of the game have changed. Rumor has it that self-employed people without defined paychecks can't get mortgages right now because of the obsession with tight standards; bummer if you fall into that category, which many do. Also, and there's much confusion on this point, the only way to avoid a 20+% down payment requirement (which is unrealistic for most buyers, since you may recall we haven't been a nation of savers until last year) is to take out an FHA insured loan, which means you pay mortgage insurance until your equity hits 20% (not likely to happen for a few years even if you get a good price on the house). As for jumbo loans, well, anyone who's been trying to sell a house in the last 2 years has learned the hard way that the further your price is from what a median family income can afford, the less likely you are to ever be able to sell in bad times. Maybe you want a less expensive house which you can sell someday rather than a jumbo mortgage for a house you'll have to die in to leave?...

August Existing Home Sales: Down 2.7% to 5.1M/year vs. consensus of 5.4M and 5.24M in July. Sales remain 3.4% higher than a year ago. NAR's Lawrence Yun was upbeat despite the decline after four months of growth, but said the drop "demonstrates we can’t take a housing rebound for granted."

"Extending and expanding the tax credit also would help to keep other families from becoming upside down in their mortgages or risk foreclosure,” Yun said."

I'm not exactly sure how it would do that short of selling the house, but while we're on the subject, why has no one involved with the legislation considered the possibility that allowing SELLERS to claim a tax loss of some kind on their end of the transaction might be just as helpful as giving a tax subisidy to buyers? By letting sellers claim some percentage of their loss many sellers who are only slightly upside-down could perhaps lower their prices to meet market expectations, facilitating the trade-up trade-down aspect of the market which has more expensive homes hung up. My suggestion would be some formula that cuts off at a maximum loss of $8,000, mirroring the current buyer subsidy, but in a useful way for cash-strapped sellers. Mortgage lenders could enable sales by upside-down sellers by making them bridge loans tied to the tax break...

Run Up in Crude Prices Outpaces Baltic Dirty Tanker Index

"The reference is aimed at the product the ship carries"

Nonetheless, I'm impressed by our friend's dedication. I'm thinking I should take my next cruise on a tanker rather than one of those filthy cruise ships. I move the index be renamed the "nomuculus" index on account of there being no muck there to speak of due to his efforts...:)

Sirius XM Continues to Deliver on Q1 Promise of Expanded Programming Lineup

Some of you guys seem a little challenged in the astronomy department--an orbiting satellite is not glued to the sky in one location, it is passing over a wide swath of earth within a range of latitudes as the earth rotates below. Any Sirius satellite which can broadcast to the continental US can probably broadcast to most of China, the Middle East, and Europe. There are probably no issues other than licensing preventing them from broadcasting to those locations as they pass over...

Sirius XM Gives Shareholders Another Pill to Swallow

The SEC should have the power to review all changes to stock ownership and the right to reject the creation of any terms which are harmful to the marketplace as a whole. It's getting way past the day when the State of Delaware and the CEO's of companies can create conditions which are wildly unfair to shareholders and the market in order to sustain their respective privileged positions in it...

Examining the 'Sell in May, Go Away' Axiom

I don't think we need the pro forma tax and expense disclaimers any more--with so many types of nontaxable retirement accounts available through discount brokerages let's just make the assumption going forward in these type of arguments that a retail investor will (or at least should) always be buying and selling without tax consequences or substantial expenses.

Most investors big and small are down severely at this point in the 2009 calendar and I would expect them to stay in the game from May-Oct rather than go fishing...

Peak Oil as a Function of Earth's Volume

An awful lot of the energy use out there such as providing electricity, heat, and hot water to a modest size home can be shifted to easily scavenged sources such as wind, solar, and tidal. We are just moments away from the paradigm shift, but like the computer revolution we need a couple of key technical inventions to make it to market in order for the consumer to throw their money at the new paradigm. A couple of years of Obama stimulus money applied to revising the electrical grid would make it possible for home users in the US to sell power back to the grid from their solar or wind equipment, thereby jump-starting an industry. I can see what business Chrysler and GM should be looking at, and it ain't cars, it's making parts for the energy conversion of the planet...

Three Stocks That Pay Monthly Dividends

Corporate management has been steering the building of American capitalism for so long that it's hard to even imagine what corporate governance and stock investment would look like if the shareholders were really treated as the owners of the enterprise, the Board members did their jobs in overseeing management, and managers were hired hands, not carpetbaggers elevated to the status of "super-shareholders" through sweet stock and option payouts. Can you imagine how much enthusiasm there would be for stock investing if most American corporations paid out quarterly or monthly dividends? Then the private 401k system of retirement envisioned by the movement conservatives could actually work. The go-go investing crowd which has been in control since Gordon Gekko's time posit the theory that dividends waste capital a company should be using to build the enterprise, but their idea of building the enterprise seems to always consist of hired ceo's telling tethered Board members that they really need to overcompensate new hires with massive blocks of stock and options, which can be cashed in at the expense of the shareholders in the marketplace. The system is designed to allow savvy insiders to take advantage of retail buy-and-hold investors. Shareholders need to insist that they receive their share of the wealth up front in the here and now from dividends and bonds, and institutional shareholders need to separate the interests of their customers from the social class interests of their ceo golf buddies...

Apple: Steve Jobs Is Fine, and We Still Hate Netbooks

Beware of companies that engage in heavy spin, a leading indicator of tendency toward self-deception and/or hiding things from the consumer, both losing propositions. As bad as Microsoft has behaved during their Vista disaster, the crock of bs being dealt out here by the Apple corps is even more arrogant and brazen. The netbooks and their hardware configurations are brilliant market penetration strategies which would once have been the type of innovation Apple would have brought to market first. Everybody knows you aren't going to use an iphone in place of a laptop--readability and ergonomics are permanent barriers to excessive miniaturization. Either Apple is sincere in foolishly believing they can ignore this trend, or their dissing of the configuration is unnecessary credibility-damaging posturing as they bide their time.

Apple has blown a golden window of opportunity over the last year to capture serious market share. It's more important to get their OS on many desktops than it is to keep selling the OS on proprietary desktops which are so expensive that they can never capture market. Whoever controls the most-used software controls the internet, a not-inconsequential prize. Windows 7 is going to create a buying sensation among the public which has held off their computer purchases and if it loses back all its recent gains in market share Apple may be forced to change its business model and finally admit, as Pete Najarian said recently, that they're really essentially a software company...

Sirius XM's Internet Future Looks Bright

Matthews, are you aware that "terrestrial" radio has been using music without paying for decades? It goes back to a very old court case in which the radio industry got a ruling that their playing of music constituted "free advertising" for the music industry. When conventional radio plays a song, it's the songwriters who get paid royalties, hence the squabbling which goes on among famous musicians about getting their name added to songs as the "writer". There's absolutely no reason why the same logic shouldn't apply to internet radio (as opposed to satellite, which is subscription), but there's also the possibility that terrestrial radio could lose its questionable privilege and have to pay under the same model as internet broadcasting. It's a house of cards waiting to fall, but in the end everyone will pay some kind of royalties, and terrestrial radio will not be owned forever by the right-wing radio moguls who have decided to take new music off the air altogether, despite it being available to them for pretty much free. Stay tuned...

As Newspapers Change Strategy, Internet Content Is Reaching Critical Mass

Pressure from competition isn't going to kill print media any more than than downloads are going to cause the CD and DVD to go away, because they serve niches that don't entirely overlap, and there will be profitability for somebody in serving the niche, even if it's a reduced ecosystem that doesn't support the dinosaurs any more. In suburban Connecticut markets failing statewide dailes are being replaced by free papers (usually weeklies) supported by advertising which focus on local news with a smattering of national articles taken from wire services. Rural and suburban areas have always been media-starved and local advertisers need outlets which are more appropriate for them than the world-wide web. The central distribution and publication model is what's obsolete about print media, not the presence of the internet, which after all is unavailable to 1/3 of the population. If newsmagazines like Time or newspapers like the NY Times were sending their content to be published locally at regionally distributors in a reduced-size format (or if someone cleverly invents a vending machine that prints the copy on-demand from digital files at, say, airport lobbies and newstands) you'll see print media stabilize and find its appropriate place in the new order. And when a major player like the NYTimes starts giving away netbook computers with multi-year subscriptions and wireless access like some kind of cell phone subscription with NYTimes-related proprietary content and advertisers embedded in the software then you'll know they get it about how to compete in the new information order in ways the consumer will relate to...

Comparing Returns on Real Estate to the Stock Market

While it's obviously anecdotal, the professional investment classes and media seem entirely unprepared for the possibility of Dow 4000, though the free-fall conditions we are in make that more likely than just possible...

The High Dividend Stock Investor's Collapsing Dollar Survival Guide, Part 1

It's amusing to see how dangerous a little knowledge can be. Wachtel is a CPA, not to my knowledge an economist or political scientist, so the judgement about "The Ayatollahs ... (correctly) view[ing] Obama’s desire for “dialogue” as weakness," is typical right-wing hot air without any substance, and the usual stereotyped complaint "that the U.S. Government is planning to print a lot more dollars in order to revive its banking system and its economy" ignores the fact that the private banking system was "printing dollars" for decades with its synthetic promissory notes, and now that all those fake dollars have evaporated we are more likely to a have period of deflation as real assets are sold off at fire sale prices to pay off debts. Maybe the market can't bottom until all the Reagan babies on Wall Street have their dogmas burned away by the new economic reality and are ready to jump back into the market as it will be structured in the new American social democracy under construction...