Marriott, Hotel Downturn Analysis - Economist Video ($MAR)

I just watched a video on The Economist's Youtube channel about Marriott and the hotel industry so I thought I'd flood this post with some info. I did not know Marriott only owned 2% of their hotels and franchised out the rest. This Economist video titled "An Unlevered Hotel Chain" explained that Marriott did not lever-to-own hotels during Greenspan's cheap rate environment. They left money on the table but at least they are not handing over keys to secured lenders. The video also shows how RevPAR (Revenue Available Per Room) volatility affects both the owner and franchiser. "A 1% drop in RevPAR will lower franchise profits by 1% and ownership profits by 5%". Here is a snapshot of Marriott's Q1 performance from their 8K. RevPAR dropped 18% worldwide in constant dollars. Q1 Total debt net of cash = $2.8 Billion and EBITDA = $89 Million.

From the clip, here are quotes from Arne Sorenson, President of Marriott International on the industry today.
"These are probably the worst times we've ever seen in terms of year over year comparison for the hotel business. So we thought in the fall of 2001 after the events of 9/11 that they were sort of stunningly bad lodging environments for us. Interestingly today when we look at the way the global business is performing, the U.S is about as bad as it was in the 4th quarter of 2001 even without that significant terrorist event, and the rest of the world is significantly worse than it was in 2001."

Pimco's Mohamed El-Erian, Fed Not Raising Rates

Reuters News spoke with Mohamed El-Erian, CEO of Pacific Investment Management Co, on rate hikes going forward. On the video he said major moves in unemployment will keep the Fed on hold for the rest of the year. In the beginning they put up a snapshot of the January 2010 Fed Fund future. On June 5 it sold off hard (99.6->99.3) but since regained most of it's losses. He also thinks the FED will buy Treasuries and mortgage-backed securities again to lower yields. PIMCO must have some longs under pressure, or they just went long in size!!

Household Net Worth Down 1.3 Trillion During Q1, Equities Up!

That's a lot of dough. At least "the speed at which net worth shrunk slowed at the start of the year" (AP). During Q2 so far household "stock" net worth measured in $SPY (S&P 500 ETF) is up 21.5%, however those who rushed to buy $IEF (7-10 Treasury ETF) are down 8.3% since March 31. Things could all reverse tomorrow so be careful. Here's the full June 11, 2009 report (Federalreserve.gov) and a few articles. Is Soros's reflexivity theory currently at work?

U.S. household net worth falls to $50.4 trillion (Reuters)
Household wealth drops for 7th straight quarter (MarketWatch)
Household Wealth in U.S. Decreased by $1.3 Trillion (Bloomberg)

Q2 7-10 Treasuries Net Worth
Q2 SPY (S&P) Net worth


10Y-Treasury Yield Spikes, Will S&P Follow? (MOVE Index, Mortgages, TNX, SPY)

The 10 Year Note Yield and S&P 500 have been married since mid-March. In other words Treasury prices and equities have been in an inverse relationship since the rally in risk appetite commenced in March (treasuries -> equities). During the past month the combination of 0.25% rates, inflation expectations, green shoots, fiscal deficits and the questionable USD brought significant volatility into Treasuries. Check out the Merrill Lynch $MOVE index which measures implied volatility on 1-month Treasury options (SeekingAlpha). Treasury I-vol broke out of a long term downtrend and spiked in May. Also today's disappointing 10Y Treasury auction did not help. Watch to see if the 10Y Yield/S&P relationship decouples. If rates overshoot it could squeeze the already distressed consumer/business. At some point something has to give or the Gov has to intervene unless the black swan is a Q2 GDP spike driven by exports.

The 10 year yield directly affects mortgage rates and mortgage applications fell last week. Also oil is at $72 and gas is up 9% since Memorial Day. Would the market OD on green shoots if the Fed raised rates in November? (Debates: 1, 2, 3). Look at the Fed Fund futures curve.

The 10 year yield is at 4% resistance so watch that level. Could the $MOVE Index see spikes like the $VIX did in 2008?

$TNX and $SPX (Stockcharts.com)

Merrill Lynch MOVE Index (Bloomberg.com)
Bankrate - 30Y Mortgage Rate (Bloomberg.com)



Lloyd Blankfein: Recovery Will Feel Just Like This

Lloyd Blankfein, CEO of Goldman Sachs, was at the 2009 IOSCO Conference in Tel Aviv and Bloomberg put up the Blankfein video clip. He said Fiscal and central bank moves significantly reduced or "priced-out" the worst-case scenario and this complacency translated into higher asset prices, and you can see this on the $VIX:S&P (Volatility Index) chart below.

Articles:
Goldman’s Blankfein Says Market Gains Reflect Government Aid (Bloomberg)
UPDATE 1-IOSCO-Goldman CEO Blankfein sees long recession (Reuters)
IOSCO-Goldman Sachs CEO urges convergence of rules (Reuters)


Blankfein Remarks on Asset Prices (Bloomberg Video)
VIX:S&P (Yahoo Finance)


It is interesting that all of these TARP recipients are making moves in the market. Read posts about $SPY (S&P ETF) activity at zerohedge.blogspot.com where TD provides Bloomberg Terminal snapshots of block trades. TD also shows SPY Indication of Interest activity which has been getting heat from regulators. Very interesting to see WTF goes on behind the scenes! ZH posts are very informative and entertaining.

Market (Lack Of) Action Charts
Intraday SPY Indication Of Interest Update
Goldman Now Dominating Dark Pool Trading; Who Is Sigma X?
Proudly Gunning Every Market Upswing Since TARP
Goldman Sachs Principal Transactions Update: 741 Million Shares
SLP Brokers Taking Their Role Not Too Seriously, Others Gunning Market
SPY Block Trading Update

Peter Schiff on Daily Show With Jon Stewart, Yes He Was Right

Peter Schiff was right about the recession coming. It's funny how people were laughing in his face on TV. Here he is on the Daily Show with Jon Stewart.

The Daily Show With Jon Stewart
Mon - Thurs 11p / 10c
Peter Schiff
www.thedailyshow.com

Daily Show
Full Episodes

Political Humor
Newt Gingrich Unedited Interview


NYSE Bullish Percent Index 6/2009 - $BPNYA (Charts)

I'm going to check out the NYSE Bullish Percent Index, a breadth indicator that measures the percent of NYSE stocks showing a point & figure buy signal. Stockcharts.com explains it all: NYSE Bullish Percent Index, P&F charts and pattern alerts. They also show which stocks are buys based on signals.

P&F charts smooth out price movements to make support and resistance levels more convincing. From investopedia.com, P&F charts "filter out non-significant price movements". Readings above 70% are considered overbought and readings below 30% are oversold. If the Index crosses back above 30% it is considered a buy and back below 70% is a sell. Of course there are exceptions during extremes.

Check out the relationship between the NYSE Bullish Percent Index and each top and bottom in the S&P 500 since late 2007. The Bullish Percent Index improved drastically from the October low of 2.76% and also diverged with the March S&P lows and printed higher highs (2.76->12.11%) which was a distressed buy signal. It closed at 74.83 today. Watch for $BPNYA to break below 70% as that could be a signal to sell or position shorts. However in this crazy environment you never know what will happen. The index could hit extreme highs. For more information on this index go to
Investopedia
.

NYSE Bullish Percent Index (Stockcharts.com/$BPNYA)


Here is the S&P 500 P&F chart. The column of X's broke through triple top resistance and pierced early '09 highs. Watch to see if we close below 932 (I believe that's where the X hits) and print a column of O's. Until then the S&P will keep defying gravity or trade in a boring channel.

Oakland, California Denies Bankruptcy Rumors, General Fund Drying Up

I just got this link to Mish's blog on Twitter so I thought I'd check out what the deal is. Below is Oakland, California's June 30, 2008 CAFR (Comprehensive Annual Financial Report) filed at Oaklandnet.com. It looks like their General Fund is drying up with an $83 million - $100 million deficit expected on July 1. Police, fire and debt service payments are squeezing their general fund which could lead to cost cuts/police layoffs. Eastbayexpress says they need a $67 million police grant. What happens to muni bond holders in a bk??
City of Oakland Denies Bankruptcy Rumors (CBS5 VIDEO)
Budget woes have Oakland mulling bankruptcy (sfgate.com)
Bankruptcy not immediate option for Oakland (Mercury/Oakland Tribune)
Oakland faces $115M budget deficit (ABC7 SF)
Oakland Officials Discussing Bankruptcy (Listen to Podcast)(KGO Newstalk)
Oakland Considers Bankruptcy (East Bay Express)


From their CAFR look at revenue/expenses on the public safety line. They need that grant!




Apple WWDC 2009 Full Keynote Video - MacBook Pro, iPhone, Mac OS

The 2009 Apple WWDC (Worldwide Developers Conference) Keynote video is up at Apple.com. Here is the full Quicktime Movie link or you can find the link at Apple.com. Schiller first talked about the thin 15 inch MacBook Pro with the revolutionary lithium-polymer battery which allows up to 7 Hours of battery life. It's the fastest notebook they've ever made with speeds up to 3.06 Ghz using the Intel 2 Duo Core processor with 6MGs of Level 2 Cache. Everybody clapped when he said it allowed up to 8GBs of memory with 1066 MHz DDR3, 500GB hardrive. It costs $2,000 fully loaded or the minimum is $1699. The 13inch MacBook Pro looks good too and starts at $1,199. These people are geniuses. They also talk about the iPhone 3G S and Mac OS Snow Leopard.

"Watch Philip Schiller, Senior Vice President of Worldwide Product Marketing, unveil the new iPhone 3G S, the new MacBook Pro family, and Mac OS X Snow Leopard."


Apple WWDC 2009 Keynote Video


Also: What is inside the MacBook Pro 13"? Disassembled at ZDNET.

The Green Shoot Revolution!

Hat tip Zero Hedge

Does VIX to SPY Converge or Diverge Here?

It all comes down to one moment and a final fear vs. complacency decision will determine if the S&P can reach 1,000. Either volatility spikes and $SPY corrects or fear premium is sold and $SPY moves to 100. $VIX is the measurement of implied volatility on S&P index options.


VIX to SPY

Roubini Dismisses Green Shoots Sees Complacency

Here's Roubini at the St. Petersburg International Economic Forum talking about the outlook for banking regulation. I couldn't find the video on clipsyndicate so here's the full video at Bloomberg.com. You can also find a nice write up at Business Insider.


S&P Testing 2002 Bear Market Rally High

Last historical relationship chart, for now. The S&P is testing the 2002 bear market rally high. If you look at the 2002 double bottom "W" formation it rallied to 964 on 8/23/2002 (Bigcharts.com interactive chart). The SPX last week hit a high of 950. Not that this resistance line means much but it could be on the minds of traders or Bots.

Notice that the long term RSI and MACD is still well below the zero level, however a bullish cross could bring some upside momentum and knock this thing to 1,000. Also from the chart the monthly rate of change to the upside seems to be abating.

So Mr. Market are you consolidating or is it correction time? Don't be a b-otch $VIX!

S&P 500 (Bigcharts.com)

Blogger "Operation Aborted" Error on Internet Explorer

I thought maybe I could get some help if I do a blog post about the "Internet Explorer Cannot Open The Internet Site", "Operation Aborted" Blogger issue. Also the error occurs pre-Disqus comment installation on January 11, 2009. It briefly loads but then comes up with the "operation aborted" message. Is it related to my Stocktwits, Twitter Counter, Disqus or Feedjit traffic widgets I have installed? Is it an Internet Explorer issue? Or is the Google comment system confused. I do not have the "Google Follower" widget on here so that is not the problem. BUT... I am now logged into google comments and my pages seem to work again. WTF? Any idea on what is going on here? Thanks. Examples below -DV

Charts Comparing 1974, 1982, 2002 Market Bottoms To Today, 80s Recovery

Digging into historical charts here. I know nothing repeats itself but I feel bits and pieces do. I am providing charts of market bottoms during the 1973, 1982 and 2002 recessions and comparing them to today. I guess you could say the 1983 bottom and sharp recovery looks similar to the March lows. In early 1982 the SPX double bottomed at 105 and capitulated just below that level which shook out all longs. Was the 666 low in early March capitulation??

From Wikipedia:

"According to Keynesian economists, a combination of deficit spending[citation needed] and the lowering of interest rates slowly led to economic recovery. From a high of 10.8% in December 1982, unemployment gradually improved until it fell to 7.2% on Election Day in 1984.[5] Nearly two million people left the unemployment rolls.[31] Inflation fell from 10.3% in 1981 to 3.2% in 1983.[1][32] Corporate earnings rose by 29% in the July-September quarter of 1983, compared with the same period in 1982. Some of the most dramatic improvements came in industries hardest hit by the recession, such as paper and forest products, rubber, airlines, and the auto industry.[31]"

Use that Wikipedia data with caution. Also I found an article and Reagan's radio address from 1982. "Year Of Economic Recovery in 1982" (Evening Independent January 4, 1982), Reagan Radio Address to the Nation - Program for Economic Recovery (May 1, 1982).