Stand Up to NIMBY - and Create Jobs - Guest Post

Guest post by Llewellyn King for OilPrice.com

Stand Up to NIMBY - and Create Jobs

In Britain, they call it "DADA." It means Decide. Announce. Defend. Abandon.

In America we call it "NIMBY" - "not in my back yard."

It applies to all kinds of infrastructure construction, from airports to roads. But it is electric and gas utilities that feel the brunt of local opposition.

These localized forces of "no" have caused the buildup of a substantial backlog of infrastructure projects, not only for sexy green-energy technologies but also for the traditional needs of energy production and distribution - pipelines, power lines, replacement of aging equipment and the construction of new facilities to meet new loads and move the energy infrastructure into the 21st century.

It also includes old-fashioned technology - meters, switches, transformers - to get new green electricity to the consumer.

Ken Fisher Is Neutral On US Stocks!

He runs Fisher Investments which oversees $43 billion in assets. Read at Reuters.

Hussman: S&P Is Richly Valued With Shiller PE Ratio Above 24

John Hussman gave an update on the S&P cyclically adjusted P/E ratio in his weekly market comment. Will the CAPE revert back to the 5-25 range?

"Last week, the S&P 500 Index ascended to a Shiller P/E in excess of 24 (this "cyclically-adjusted P/E" or CAPE represents the ratio of the S&P 500 to 10-year average earnings, adjusted for inflation). Prior to the mid-1990's market bubble, a multiple in excess of 24 for the CAPE was briefly seen only once, between August and early-October 1929. Of course, we observe richer multiples at the heights of the late-1990's bubble, when investors got ahead of themselves in response to the introduction of transformative technologies such as the internet. After a market slide of more than 50%, investors again pushed the Shiller multiple beyond 24 during the housing bubble and cash-out financing free-for-all that ended in the recent mortgage collapse." [read full report with charts]

Productive Agricultural Land Turned Into Residential Roads To Nowhere (Videos)

I found an interesting YouTube channel that tours through the aftermath of the real estate crash. Since October 2009, EconCat88 drove through empty residential real estate developments (roads-to-nowhere he called them) and vacant commercial real estate in Ohio, Florida, Michigan, Indiana, Nevada, Arizona and Georgia, and uploaded 210 videos. He's not a big believer in the recovery. I found two videos showing farmland that was converted into residential subdivisions at the peak of the bubble. I embedded a video titled "Plant corn and wheat instead of adding to food inflation and the housing collapse", which was taken outside of Toledo, Ohio on 2/11/2011The next video was shot outside of Ft. Wayne, Indiana on 1/26/2011 showing a similar situation. After seeing these videos, I'm starting to think Gary Shilling is right that home prices need to fall another 20%.

Felix Salmon: Blogs Are Selling At 5-6x Revenues, AOL Bought Huffington Post At "Justifiable Price"

Felix Salmon, the business blogger at Reuters, thinks AOL got a good deal for The Huffington Post at $315 million (lower end of estimates). He said blogs right now sell for 5-6x revenues. So who buys Business Insider? Yahoo? Better yet, who buys Distressed Volatility for $1 billion. Kara Swisher of AllThingsDigital (a WSJ property) also appeared during the CNN segment.

State CAFR MuniTerminal (Annual Financial Reports)

I linked to state CAFRs (comprehensive annual financial reports) and archives after the jump. When you open the pdf, check out the general fund (and fund transfers), debt service fund, tax base (assessed and taxable property values), general obligation bonds and revenue debt outstanding, and tax ratiosThey should show trends as well. States and municipalities use GASB (Government) reporting which looks slightly different than normal. City CAFRs, which I'll provide in another post, are easier to dissect, but riskier credits, since they have "smaller economies, less resources and limited abilities to tax" (Chris Mier of Loop Capital). However, unfunded pension liabilities are running amok at both the state and local level.

From the Milken Institute report Ensuring State and Municipal Solvency:
As the recession drags on, states and municipalities find themselves in a deep hole. For the first time since the Great Depression, income, sales and property taxes have declined in unison. The cyclical challenges are clear: falling tax receipts, high unemployment, tepid investment returns, and overall economic uncertainty.

But even more daunting are the long-term structural issues that are simultaneously coming to a head: trillions of dollars in unfunded pension obligations, the escalating costs of other post-employment benefits (OPEB), record numbers of retirees poised to tap pensions and benefits, increasing longevity, and significant revenue/expenditure mismatches.

Borders Could File For Bankruptcy Next Week, Close 200 Stores, What Do You Put In These Empty Spots (BGP)

The nail is almost in the coffin for Borders (BGP). WSJ broke the Borders news hereBorders Nearing Bankruptcy Filing. In my opinion, it should be expected that 3 story buildings selling books, CDs and DVDs file for bankruptcy. Unless, like I mentioned before on Twitter, they convert these things into 3 story Lapstopistans (NYT) with cafes, a Fed-Ex center, private conference rooms? and turnstiles for the magazine section. There are so many people in college, web entrepreneurs, unemployed/underemployed people and business folks that do work from their laptop computers.

I've practically lived in these places during the past 5 years while studying or blogging, in a slightly active suburb of Detroit and Chicago. This past month, when I tried to set up shop in a Borders cafe, it was 100% full every time. So, should "Laptopistan" be considered retail or office real estate. Or do they merge. REIT Agree Realty (ADC) leases some space to Borders. I'm not sure if that's priced in or not. Click the label for recent posts on Borders.

On January 7 I did a post on Howard Davidowitz, retail commercial real estate and XRT option activity. Davidowitz, who's been consulting on retail commercial real estate for 30 years, sees a revolution in the whole retail real estate strategy during the next 5 years. From Bloomberg TV on 12/30/2010 with video below.

Whitney Tilson Covers Netflix Short, Price/Sales At New High 5.81 - NFLX

It was all over Twitter that Whitney Tilson (T2 Partners) covered his short position in Netflix ($NFLX). He released a report at Value Investing Letter explaining why.

"Why We Covered Our Netflix Short
By Whitney Tilson and Glenn Tongue, Managing Partners, T2 Partners LLC

In mid-December, we published a lengthy article on why Netflix was our largest bearish bet at the time. With the stock up nearly 25% since then, one might assume that we’d think it’s an even better short today, but in fact we have closed out our position because we are no longer confident that our investment thesis is correct. There are three primary reasons for this:" (continue reading at VIL)

In other NFLX news, its price/sales ratio (5.81) broke above the March 2004 high (5.57) and revenues have been growing since 2001. Want to see something interesting? Take a look at NFLX price/sales and quarterly revenue going back to 2002.

Live Video From Tahrir Square, Cairo With #Egypt Tweets Streaming

Watch protests at Tahrir Square (Cairo, Egypt) live via CBSNews LiveStream or MSNBC. The live Twitter search widget has the #Egypt hashtag. If videos are down visit Al Jazeera English (LiveStation). You don't see revolutions everyday (actually recently we have).

Bernanke Q&A Session With Paul Ryan Discussing Price Stability

Rep. Paul Ryan questions Ben Bernanke on QE2, fiscal policy, U.S. inflation, the steep yield curve, commodities, emerging market inflation and his exit strategy. CNBC Video after the jump.


St. Joe Explores Options With Stock Trading at 3x Book Value ($JOE)

Florida homebuilder St. Joe ($JOE), which is 30% owned by Bruce Berkowitz's Fairholme Fund (FAIRX) and trading at 3x book value, is exploring strategic alternatives with Morgan Stanley "to enhance shareholder value". Berkowitz and Charles M. Fernandez (President of Fairholme) are on the board of directors. From the press release:
WaterSound, FL - February 8, 2011 - The St. Joe Company (NYSE:JOE) today announced that its Board of Directors has unanimously decided to explore financial and strategic alternatives to enhance shareholder value.

The Board intends to consider the full range of available options including a revised business plan, operating partnerships, joint ventures, strategic alliances, asset sales, strategic acquisitions and a merger or sale of the Company. The Board of Directors has retained Morgan Stanley & Co. Incorporated to assist it in the evaluation of these alternatives. The Company noted that there can be no assurance that the exploration of strategic alternatives will result in any transaction.

Britt Greene, St. Joe's President and CEO, said, "We have engaged Morgan Stanley to undertake a comprehensive and thorough review of all available alternatives, and our Board and management are committed to taking the appropriate and necessary actions to enhance value for St. Joe shareholders."

Chart Showing Internet Advertising Revenues in 1996

I was trying to find information on 1-800-Music-Now (remember you could buy music through your phone?) and came across internet advertising statistics. We've come a long way. From The Economist on 5/8/1997:
"Total Internet advertising revenues last year were just $267m (see chart 6), compared with $33 billion spent on television advertising in America alone—even though top Internet sites have television-sized audiences of a million viewers a day. America Online, with 8m subscribers the biggest Internet service provider, has more viewers than any cable television network or newspaper, and all but the world’s two most popular magazines. So where is the big advertising money Internet media companies are expecting? Waiting and seeing: the market is too new for advertisers to be sure they will get their money’s worth."

source: economist.com

Bernanke's Testimony to House Budget Committee on Inflation, Fiscal Policy (2/9/2011, C-SPAN Video Link)

Congress Questions Fed Chairman on Inflation | C-SPAN (Video, 2/9/2011). Bernanke's testimony:
Chairman Ben S. Bernanke
The Economic Outlook and Monetary and Fiscal Policy
Before the Committee on the Budget, U.S. House of Representatives, Washington, D.C.
February 9, 2011

Chairman Ryan, Ranking Member Van Hollen, and other members of the Committee, I am pleased to have this opportunity to offer my views on the economic outlook, monetary policy, and issues pertaining to the federal budget.

The Economic Outlook
The economic recovery that began in the middle of 2009 appears to have strengthened in the past few months, although the unemployment rate remains high. The initial phase of the recovery, which occurred in the second half of 2009 and in early 2010, was in large part attributable to the stabilization of the financial system, the effects of expansionary monetary and fiscal policies, and the strong boost to production from businesses rebuilding their depleted inventories. But economic growth slowed significantly last spring and concerns about the durability of the recovery intensified as the impetus from inventory building and fiscal stimulus diminished and as Europe's fiscal and banking problems roiled global financial markets.

Israel Set To Join the Rich Countries Club (Natural Gas Discovery) - Guest Post

From Noble Energy Presentation
Guest post by OilPrice.com (with added map)

Israel Set To Join the Rich Countries Club

From Israel, there is good news and bad news.

The good news - and it is huge - is that Israel will soon be awash in natural gas. Gas discovered on the country's outer continental shelf will turn the country from being hydrocarbon-deprived to being a net exporter.

Indeed, Israel is set to become so rich that it is laying the groundwork for creating a sovereign wealth fund for overseas investments in order to protect the country from inflation and the shekel from getting too strong.

The bad news is that with Hezbollah poised to control Lebanon's government, Iran has de facto arrived on Israel's northern border. Even without an Iranian nuclear weapon, this is a grave deterioration in Israel's security.

Already Lebanon has asked the United Nations to guarantee that Israel does not violate the integrity of Lebanon's outer continental shelf, where Iran plans to help Lebanon drill for gas.

Geology is about to change the political geography of the world's most combustible neighborhood.

VIX Made a New Low This Morning (14.86), Futures Curve Update

At 9:32 this morning, VIX cash tumbled to 14.86, below the April 2010 low (15.23), but quickly recovered. It closed at 15.84. Was that a mini VIX flash crash? It hit a low of 8.23 in December 2006. Jamie Tyrrell of OptionMonster gave an update on the VIX futures curve in the video below. VIX contango is tightening and in the 20s.

The VIX (Volatility Index) "is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices." (CBOE). Click the image for a larger view, courtesy of FreeStockCharts.com.

AOL Buys Huffington Post For $315 Million (Animation)

AOL bought The Huffington Post for $315 million. They also bought TechCrunch recently. NMAtv reported on the story below.

Mike Ryan of UBS: S&P Earnings To Hit 165, S&P 2,450 By 2020 (Video)

This post is for the bulls. Michael Ryan, head of UBS Wealth Management Research, was on CNBC today. Here are a few of his thoughts on the market and economy from the video (not from an official transcript). See the video below.
U.S. Will Remain Dominant Power In World: "We still think that the U.S. equity market will continue to do well. Remember U.S. corporations will continue to benefit from the environment here in the U.S., but also the ability to leverage some of the strong growth prospects outside the U.S. because of the fact that they are really multi-national corporations with a global footprint."

Watch Social Media Week New York Live

Since it is hot right now, watch Social Media Week New York live on Livestream from 2/7-2/11/2011.

Soros On State Deficits, US Stock Market and QE2 Ending (Davos 2011 - CNBC)

George Soros, founder of $27 billion hedge fund Soros Fund Management, was on CNBC in Davos, Switzerland on 1/26/2011. Watch the interview after the jump. Here are a few quotes from the interview.

1) On U.S. States and Municipalities: "This going to be the drama of the next year or so. The State's can't run deficits. And they do have very big deficits. They can't increase taxes because that's very strongly resisted. So they'll have to cut services and also put pressure on the unions to renegotiate the deals they have. So, State's can't go bankrupt. You can't do what you could do for General Motors and get rid of the accumulated liabilities. So, how do you to do it. It's going to be a lot of pain and conflict."

[Regarding State bankruptcy, some policymakers are trying to change the Federal law. Read these posts: Is State Bankruptcy Law In Play?First GM, now states? Pros and cons of bankruptcy. Also Illinois just raised income taxes.]

S&P Has Two Strikes, Is It 2000 and 2007 All Over Again? (SPY Chart)

First, an interesting read at Comstock Partners:
"It's 2000 and 2007 All Over Again

The stock market is at a highly vulnerable point, both fundamentally and technically. Fundamentally, the current rate of economic growth is unsustainable and the valuation of the S&P 500 is significantly above its long-term average. Technically, the market is overbought and is losing momentum. We cite the following points."
(read more)
Now look at the SPY chart from 1990 to last Friday.

Look At Light Crude Oil and S&P Gap ($WTIC vs. $SPX Chart)

LOOK AT THIS GAP PEOPLE. How does it close. An oil spike, S&P crash or a different variation. Should've charted out the ratio.

$WTIC (Light Crude Oil) vs. $SPX (S&P 500)
Courtesy of StockCharts.com

Watch Boiling Water Turn Into Snow In Mid-Air, Birth Of An Island (Videos)

Science Volatility: I thought I had to post something today. How about some science videos. Watch someone in Northwest Canada, in -30 celsius weather, throw boiling water into the air and watch it turn into snow (h/t Capitalogix). The second video shows a volcanic eruption under the ocean and just barely breaking above sea level. If the eruption was stronger it could have formed an island but waves pushed it away (h/t Paul Kedrosky via BBC). Videos after the jump.

Waste and Scrap Carloads Correlate With Economic Growth (GDP), Weekly Chart Update

via Weekly Railfax
Track weekly North American rail traffic data and trends (via AAR) at railfax.transmatch.com. At the bottom they provide a chart of waste and scrap material carloads (4-week rolling average). According to this Bloomberg infographic, "shipments by train of waste and scrap have a higher correlation with economic growth than coal or copper". There's an 82% correlation between waste carloads and GDP.

"The correlation coefficient between carloads of waste and year-over-year growth in gross domestic product from the first quarter of 2001 through the same period of 2010 is 0.82, according to Bloomberg calculations." (Bloomberg)

The 2010-2011 waste and scrap chart just spiked and is matching the cyclical rise/fall from Q3-2009 to Q1-2010 (so far). When comparing waste and scrap shipments during Q2-2009 and Q2-2010, you can see the divergence, which accounted for the soft-patch in GDP growth during Q2-2010. Click on the chart above for a bigger view and watch this indicator going forward.

From CNN Money on 8/10/2010:

"NEW YORK (CNNMoney.com) -- The U.S. economy sputtered to a near stop in the second quarter, according to new estimates from the government released Friday, although the slowdown wasn't as bad as many had feared.

The nation's gross domestic product, the broadest measure of economic activity, was revised sharply lower to an annual growth rate of 1.6% in the three months ending in June. The initial reading had been for a 2.4% growth rate in the period."

What about this statistic. Could the U.S. ship waste and scrap just to feed China's growth?

"According to data provided by the U.S. International Trade Commission, Chinese imports of U.S. cast-offs (scrap metal, waste paper, and the like) surged by an eye-popping 916 percent over the 2000-2008 period, with most of that expansion occurring after 2004." (US News

Robert Shiller at Davos: Everything is Overpriced (Stocks, Bonds, Real Estate)

Robert Shiller, Professor of Economics at Yale and co-founder of the Case/Shiller Home Price Index, was interviewed by Henry Blodget in Davos, Switzerland. Listen to the CinchCast at Business Insider. Shiller thinks housing could resume its downward trend and said everything is overpriced.

"It seems like everything is overpriced: stocks, bonds, and real estate. And index bonds were given a negative yield recently; maybe they’re coming back. Nothing looked attractive." (Business Insider)

Recent posts on Robert Shiller:

Robert Shiller Sees S&P 500 At 1,430 In Year 2020! CAPE Ratio (January 3, 2011)

Home Prices Make New Lows In Six U.S. Cities, Shiller On The Trend-Video (December 29, 2010)

Ben Bernanke's Speech at National Press Club with Q&A (2/3/2011)

Ben Bernanke, Chairman of the Federal Reserve, gave a speech at the National Press Club today. Text from the Q&A session can be found at Reuters or Business Insider. I found the full speech video at CSPAN.org.

Chairman Ben S. Bernanke
At the National Press Club, Washington, D.C.

February 3, 2011

The Economic Outlook and Macroeconomic Policy

Good afternoon. I am pleased to be here at the National Press Club, and I'm especially glad for the opportunity to have a conversation with journalists who write about economic policy from our nation's capital. Your job is not easy, but it is essential. Virtually every American is affected by developments in the economy and in economic policy. But contemporary economic issues can be highly complex, and few nonspecialists have the time or the background to master these issues on their own. The public must therefore rely on the diligent reporting, clear thinking, and lucid writing of reporters determined to go beyond dueling bumper stickers and sound bites to help people understand what they need to make good decisions, both in their personal finances and at the polls. These are weighty responsibilities, and the journalists I know take them very seriously.

Today, I will provide a brief update on the economy and how I expect it to evolve in the near term. Then I will turn to the implications for monetary policy. Finally, I will briefly discuss the daunting fiscal challenges that we face as a nation.

The Economic Outlook
The economic recovery that began in the middle of 2009 appears to have strengthened in recent months, although, to date, growth has not been fast enough to bring about a significant improvement in the job market. The early phase of the recovery, in the second half of 2009 and in early 2010, was largely attributable to the stabilization of the financial system, the effects of expansionary monetary and fiscal policies, and a strong boost to production from businesses rebuilding their depleted inventories. But economic growth slowed significantly last spring as the impetus from inventory building and fiscal stimulus diminished and as Europe's debt problems roiled global financial markets.

"Devil's Bargain" by Bill Gross of PIMCO (February 2011 Investment Outlook)

"Devil’s Bargain
  • Money has become the economic and political wedge for profound changes in American society.
  • Perhaps the most deceptive policy tool to lessen debt loads is the “negative” or exceedingly low real interest rate that central banks impose on savers and debt holders.
  • Old-fashioned gilts and Treasury bonds may need to be “exorcised” from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint."
Read full report at PIMCO.com

Live Streaming Tweets On #Egypt Anti-Government Protests

I embedded a Twitter search widget monitoring the hashtag #Egypt. They are the the top tweets scrolling live.

Wikileaks Founder Julian Assange on 60 Minutes, WikiRebels Documentary (Part 1)

Watch Julian Assange, founder of Wikileaks, on 60 Minutes after the jump. Find the transcript and extras at cbsnews.com. Assange hacked into the U.S. Military's internet for two years in the 1990s. Watch the WikiRebels documentary (part 1 via SVT/Swedish Television) after the 60 Minutes video.

Baltic Dry Index Down 60% On Excess Shipping Capacity (BDI, CCI and Shanghai Composite Comparison)

Since my previous post on BDI vs. Copper on 1/6/2011, the Baltic Dry Index has continued its descent toward the December 2008 low. Remember the good old days? In late 2008, when the credit freeze started to thaw, the BDI bottomed first, then commodities and then the stock market. I'm not sure if the same pattern holds true today. There are a bunch of moving parts that affect freight rates. The BDI is down 60% from the November 2010 peak, and it appears to be due to excess shipping capacity (tonnage) and potentially growth concerns out of China.

"“Even given the increased demand for iron-ore from China, there is far too much (ship) tonnage available,” said Simon Penn, a strategist at UBS." (WSJ/The Source)

"The increasing amount of ballasters appearing in the Atlantic trading region from Asia are not being met with many fresh minerals or grain orders, said one broker." (Lloyds List DCN)

"Maritime sector still in distress: 37% more capacity in two years, UAE tops the orderbook" (Emirates 24/7)

Dry Bulk 2011: Working Through the Glut (TheStreet.com)

Iron-ore port inventories, new vessels coming to sea, China inflation (tightening) and Australia shipment disruptions due to floods (and now Cyclone) could all be factors as well.

Oil Price Could Doom Obama (Guest Post)

Guest post by Llewellyn King for OilPrice.com

Oil Price Could Doom Obama

Like death and taxes, the price of oil is always with us. And like taxes, it may be President Barack Obama's worst nightmare at election time next year.

Among forecasters, there is a sharp division between those who see an inexorable rise in the price of oil and those who believe it will stabilize about where it is now.

The hawks see gasoline streaking ahead to $4-a-gallon this year and $5-a-gallon in 2012.

Others say demand will collapse and it won't go that high. The Energy Information Administration is very conservative in its forecasts and it gives very high prices only a 10-percent chance of coming about.

James Simons' Speech at MIT (Renaissance Technologies, Medallion Fund Founder)

James Simons, founder of Renaissance Technologies, gave a speech at MIT on 12/9/2010. He started the Renaissance Institutional Equities Fund (RIEF) and Medallion Fund that use proprietary trading algorithms. Renaissance is one of the most successful hedge funds. From Wikipedia: "Since 1989, the company's $5 billion Medallion Fund has averaged 35% annual returns, after fees." According to a document at Market Folly, the Medallion Fund made a 21%-98% annual return from 1993-2004 and made 80% in 2008 and 39% in 2009. Decent..

Tom DeMark On CNBC Predicting a Market Top, 11% Decline (1/26/2011)

Source: CNBC
On 1/26/2011 on CNBC, Tom DeMark, creator of the DeMark Indicators, said "we see at least an 11% decline from current market, if not more. Everything is aligning such that the market could experience a precipitous decline as early as tomorrow."

According to DeMark's chart of the S&P 500, there was a 13, or "major turning point", at the 2009 low and now when using the daily and weekly time series. The snapshot is of the "combo weekly".  Watch the video for more charts. According to Bloomberg, Steven A. Cohen (SAC Capital) and John Burbank (Passport Capital) are partners in Demark's firm, Market Studies. Watch the full interview after the jump.

Keep Eye On Crude Oil Futures If Unrest Spreads to Middle East (Dennis Gartman on CNBC)

CLH1 March 2011 Crude Oil Future
On CNBC's Fast Money last Friday, Dennis Gartman said Crude oil futures could rise if social unrest in Egypt spreads to the Middle East. He said to watch WTI specifically (West Texas Intermediate Crude Futures). Quotes of crude oil futures are at CMEGroup.com. Crude oil futures from March 2011 to February 2012 are in steep contango (89.93-98.67). Consumers and businesses globally (except oil producers) probably won't like oil above resistance right now (imho). Dennis said check out Canadian oil producers like Suncor ($SU). See the video and the April oil future after the jump (March is to your left)

Israel and Saudi Arabia CDS Spike On Friday, Keep Eye On Contagion Risk

via Bloomberg
According to CDS quotes on Bloomberg.com, Israel Government 5Y CDS (credit default swap) spiked 17% to 145 basis points ($145,000 to insure $10 million of debt against default) on Friday 1/28/2011. Keep an eye on the protests in Egypt for potential contagion risk, as well as oil prices.

I also see that Saudi Arabia 5Y CDS jumped 48% on Friday to 109.83 basis points (CMA Datavision) and Egypt CDS spiked as well (Zerohedge). You can't trade CDS on Scottrade but they are interesting to watch.

Watch Live Coverage Of Egypt Anti-Government Protests Online

Watch live coverage of anti-Government protests in Egypt at Al Jazeera (English) http://english.aljazeera.net/watch_now/.

If for some reason the live stream doesn't work watch it at LiveStation.com http://www.livestation.com/channels/3-al-jazeera-english-english.

$SPY, $FXI, $VIX Option Activity, SPY Chart Analysis (S&P, China and Volatility Futures)

Watch VIX, FXI and SPY option alerts courtesy of optionMONSTER TV (Volatility Sonar Report and RMBrenna). To your left (click for larger view) I put up a 6-month chart of $SPY. There was big red volume today on the 1.7% sell off. The riots in Egypt, earnings, economic data or market exhaustion all could have been catalysts. SPY's Relative Strength Index (RSI) took a sharp fall on Friday, closing at 52.88. The RSI was above 70 for a month. Watch the uptrend line and 50 day moving average for potential support or violations. Maybe the trader believes SPY will find support at the 50DMA like it did in November, before February expiration. Lastly, on 1/26/2011 Tom Demark (DeMark Indicators) told CNBC that the market could fall by 11%. The S&P lost 1.79% today. Seems like yellow lights are flashing. We shall see.

Marc Faber Breaks Down U.S./Emerging Markets, Gold, Treasuries and Economy (1/25/2011)

Marc Faber (Gloom Boom Doom Report) on BloombergTV 1/25/2011 (video after the quotes).

U.S./Emerging Markets: "And now we have a change, where I think for a while the U.S. may outperform, may not go up, but it may go down less than emerging markets."

"In the longer run, for sure, U.S. Treasuries and most Government bonds are a suicidal investment. But there's a shorter term time frame. And I think for the next 3 months or so we have a situation where stock markets have become way overbought and emerging markets in January, most of them failed to make a new high above the November/December highs. And that is a negative sign."

Chart Updates: UUP/SPY Ratio and UUP/SPY Versus US Dollar Index

UUP/SPY (US Dollar ETF/S&P 500 ETF) is very close to testing the May 2008 low of 0.167. It is currently at 0.17. Also check out the relationship between UUP/SPY and $USD (US Dollar Index) since May 2008.  (UUP/SPY)/$USD started to decouple in the beginning of 2010, just before the Euro Zone crisis hit (UUP volume in 12/09). It's interesting that the US Dollar Index has made two (or for the time being 3) higher highs since May 2008, while $UUP tested the May lows twice (see last chart). $UUP is based on the "Deutsche Bank Long US Dollar Index (USDX®) Futures Index™" (link). I thought these relationships were interesting. I'd say that UUP/SPY support level is important to hold, as well as UUP support in general. The UUP/SPY chart only goes back 3 years.

David Stockman and Moody's Warn About U.S. Budget Deficit, National Debt

David Stockman, former Budget Director under the Reagan administration, thinks the U.S. is "borderline" bankrupt and bond vigilantes are "just around the corner". The national debt hit $14 trillion in January and we're running a "$100 billion deficit" a month, he said. The national debt is expected to hit the debt ceiling in a few months. Watch the Bloomberg clip after the jump.
"One of these the days the global bond market or currency market is going to have a huge upset, a Greek moment, and then it will be too late because of the massive scale of what we're doing."

"It's not a matter of defaulting, it's a matter of what we have to pay to the global bond market in order to carry and add to this huge debt we already have."

Also from Reuters today: "Moody's Investors Service warned on Thursday that lack of U.S. government action on the budget deficit increases the likelihood of a negative outlook on the country's top AAA credit rating".

Borders To Get $550 Million Refinancing From GE Under Certain Conditions (BGP)

Borders could get a $550 million senior secured credit facility from GE Capital, Restructuring Finance if they meet certain conditions. The stock was up 34% at $1.08 in after hours trading. Publishers have by February 1, 2011 to "exchange missed payments for notes" (1 2 PublishersWeekly).
"ANN ARBOR, Mich., Jan. 27, 2011 /PRNewswire via COMTEX/ -- Borders Group, Inc. (NYSE: BGP) today announced that it has received a commitment from GE Capital, Restructuring Finance to provide a $550 million senior secured credit facility that, upon completion, including the obtaining of $125 million of additional junior debt financing via the conversion of vendor payables and/or external sources, will provide Borders with the financial flexibility and an appropriate level of liquidity to move forward with its strategy to reposition its business model and the Borders brand. GE Capital provided its financing commitment following a comprehensive review of the company's strategic plan to restructure its business model by focusing on core business areas in order to improve profitability and cash flow".

Conditions.
"The new $550 million senior secured credit facility, once funded, will mature in 2014, and will replace the company's existing revolving senior credit and term loan facilities.

The commitment provided by GE Capital is subject to certain conditions, including:


Peter Schiff On Inflation, Oil, Gold/Euro and U.S. Markets (1/24/2010)

Peter Schiff on Tech Ticker

Fed: Progress Toward Objectives Has Been Disappointingly Slow

FOMC Statement 1/26/2010: "Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow."

Release Date: January 26, 2011

For immediate release

Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.

Tepper: Dean Foods Undervalued, Cautious and Optimistic on Stocks (DF, SPY)

David Tepper, who runs the $15 billion hedge fund Appaloosa Management, was back on CNBC on January 21. On September 24, 2010, Tepper correctly predicted the stock market would rise on better economic data or Fed support (QE2). Both ended up happening.

Tepper is still optimistic on the U.S. market through 2012 based on earnings estimates. If 2012 S&P EPS hits 100+ with a 14-15 multiple, that's 1,400+ on the S&P. We are at 1,300. However, Tepper thinks there are downside risks:

President Obama's State of the Union Video (1/25/2011)

Watch the State of the Union video via Whitehouse.gov (1/25/2011)

Read: Ambac vs. EMC, St. Joe Squeeze?, John Paulson Makes Money, Cotton, Domino's, Post Office Closures, Market Pullback

Headlines for 1/25/2011

JP Morgan Sold Investors MBS Covered By "SACK OF SHIT" Loans... Then Shorted All Those With Exposure: A Goldman-AIG Redux (Zero Hedge) *Lawsuit: Ambac vs. EMC Mortgage (formerly part of Bear Stearns who's now part of JP Morgan)

E-mails Suggest Bear Stearns Cheated Clients Out of Billions (The Atlantic)

Bank of America Sued for Countrywide's Mortgage Sins, Again (Daily Finance) *New York Insurance Company, TIAA-CREF vs. Countrywide (now part of Bank of America)

No Audit At All: Deloitte and Bear Stearn (Francine McKenna at Forbes.com)

Cotton Is Pulled to Another High $1.6789 (WSJ)

Paulson Posts More Than $1 Billion in Citi Gains (Financial Times)

Interesting posts regarding a potential St. Joe short squeeze. In the end, does JOE need to take impairment charges or not? Einhorn thinks the company is worth $7-10 per share!.

Fairholme, Brookfield, GGP and St. Joe’s (Valueplays.net)

St. Joe ($JOE) May Be Ripe for a Short Squeeze in 2011 (Morningstar)
SAC acquired a 5.3 percent stake in Domino’s Pizza ($DPZ) (New York Times/DealBook)

S&P, Treasury Yields Rising In Tandem, 30-Year Yield Testing Descending Channel Resistance

Since August 2010, the S&P and 30y Treasury yield have been rising in tandem. TNX was a little late to the party. QE2 (Federal Reserve buying Treasuries) was the catalyst for higher yields and equities. So the goal was to get everyone to sell their bonds and buy equities? Although borrowing costs are now higher, at least household net worth is up from the equity rally.

The second chart is of the 30-Year Treasury Yield Index (TYX). It is bumping up against resistance in a descending channel that goes back 25 years. Watch the Yield/SPX relationship going forward. I also threw up a snapshot of the Fed's Treasury buying schedule from January 24 to February 10, 2011. Good day.

Robots Are The Next Tech Revolution (See Videos)

Will Robots powered by Google (or Qwiki?) be the next technological revolution? Look at these humanoid robots. These robots are future household and company assistants. Videos below:

1. HRP-4" Humanoid Platform for Robotics
2. Honda ASIMO
3. ACTROID-F in AIST Open Lab 2010 02
4. Telenoid Robot
5. DIRK the homeless roboter - ARS Electronica 2010 - repairTV

Qwiki TechCrunch Disrupt Presentation, Founder Interviews, Looks Like The Future

The Qwiki "information experience" looks interesting (http://www.qwiki.com/). They take static information and turn it into a multimedia rich, interactive experience. I embedded the 2010 TechCrunch Disrupt presentation (they won), Mashable interview with CEO/Founder Doug Imbruce and a YammerInc interview with CTO/Co-Founder Louis Monier (who also founded Alta Vista in 1995). From their website:

"Qwiki's goal is to forever improve the way people experience information.

"Whether you’re planning a vacation on the web, evaluating restaurants on your phone, or helping with homework in front of the family AppleTV, Qwiki is working to deliver information in a format that's quintessentially human – via storytelling instead of search."

"We've all seen science fiction films (or read novels) where computers are able to collect data on behalf of humans, and present the most important details. This is our goal at Qwiki – to advance information technology to the point it acts human."

They have samples out. Here are popular topics, natural wonders, artists and cities (check out a Black hole). This looks like the future, in a way. I like it. One day robonauts powered by Qwiki and Google will be personal assistants imo.

QE2 Explained, Fed Buys Treasuries From Banks (Marketplace Video)

To prep ya'll for the potential of QE3. Paddy Hirsch, Senior Editor at Marketplace, explained how QE2 (quantitative easing part 2) works in the video below (from 10/07/2010). In summary: The Fed buys Treasury bonds from the banks which, in turn, gives banks a fresh wad of cash reserves to lend. As money gets lent out, it's supposed to stimulate the economy. I'd like to see a video explaining how QE2 makes stocks rally. I'm posting a chart comparing Treasury yields and the S&P next.

Jon Stewart Segment On States And Municipalities (Daily Show Video)

On The Daily Show a few days ago, Jon Stewart mentioned how States and local municipalities are taking drastic cuts and raising taxes to close budget deficits. Watch the video after the jump. Here are few headlines he brought up, and you can understand why: Camden lays off nearly half of its police force (Philly.com), Ariz. governor moves to cut 280,000 Medicaid recipients (Modern Healthcare), Cutting class: Do Texas high schools really need senior year? (KVUE.com), Detroit Public Schools proposal would close nearly half its schools by 2013 (upping classroom count and abandoning closed buildings would save $12.4M) (Detroit News).

Jimmy John's Not Happy About Illinois Tax Hike, Fitch Gives "Stable" Rating To Illinois

JimmyJohns
ILLINOIS: Jimmy John's, Beelman Truck Co., CouponCabin and Amazon are not happy about the Illinois income tax hike. Fitch, however, upgraded Illinois' credit rating to "stable" from "negative". Remember when Meredith Whitney talked about State arbitrage?

Tax hike lifts state’s credit rating (Crain's Chicago)

Jimmy John's founder contemplates moving headquarters out of Illinois (The News Gazette)

Listen to an interview with Jimmy John's founder, Jimmy John Liautaud, on WDWS-AM (1/19/2011). He is not happy at all.

Beelman Truck Co. owner on tax hike: Illinois is 'one of the worst states to do business' (BND.com)

Amazon, CouponCabin Threaten As Illinois Moves To Tax Internet Sales (Forbes)

Other reading: O'Hare bond rating depends on relationship with airlines, S&P warns (Crain's Chicago)

Photo credit: Wikimedia

Is State Bankruptcy Law In Play?

Read this New York Times article by Mary Williams Walsh: Path Is Sought for States to Escape Debt Burdens (1/20/2011).
"Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.

Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign." (read more at NYT)
Related:

Bankruptcy code won't cure what ails U.S. states (WestLaw News & Insight)

On the GOP, bankrupt states and government unions by James Pethokoukis (Reuters)

Misunderstandings Regarding State Debt, Pensions, And Retiree Health Costs Create Unnecessary Alarm (The Center on Budget and Policy Priorities)

Newt's remarks at the Institute for Policy Innovation (Newt.org)

Gingrich seeks bill allowing state bankruptcy to avert bailouts (Pensions and Investments)

A Bankruptcy Law—Not Bailouts—for the States by Law Professor David Skeel (Wall Street Journal)

Default and bankruptcy in the municipal bond market (part one) (Self Evident)

Default and bankruptcy in the municipal bond market (part two) (Self Evident)

Google Launching Groupon Competitor, Larry Page Now CEO (GOOG)

Google Offers via Mashable
Interesting day yesterday for Google (GOOG). Here's what happened.

1) They beat earnings estimates

Google Announces Fourth Quarter and Fiscal Year 2010 Results and Management Changes (Google Press Release)

Instant view: Google profit beats, Page becomes CEO (Reuters)



2) Co-founder Larry Page replaced Eric Schmidt as CEO (remains Executive Chairman)

Schmidt Named Executive Chairman of Google as Co-Founder Page Becomes CEO (Bloomberg)

Power Shifts Atop Google (WSJ)

Google’s Management Shift: What Now for M.&A.? (DealBook)

Presidents Obama, Hu Meet with Business Leaders (Video/Text)

Attn: Business Leaders: "President Obama and President Hu of China meet with American and Chinese business leaders at a roundtable meeting in the Eisenhower Executive Office Building". Video and transcript after the jump. Enjoy.

President Hu and President Obama Joint Press Conference Video/Text (1/19/2011)

President Obama and President Hu Jintao of China held a joint press conference in the East Room of the White House on 1/19/2011 (from Whitehouse.gov). Video and transcript after the jump.

Stocks Near Top Says Market Timer Tom DeMark, Sees 11% Fall

Tom DeMark, creator of the DeMark Indicators at Market Studies, told Bloomberg on 1/18 that stocks are near a top. He currently serves as "special advisor" to Steven Cohen who runs the $12 billion hedge fund SAC Capital. The Bloomberg article said Cohen and John Burbank of Passport Capital were partners in the firm. Protect yourself! From Bloomberg:
U.S. stocks are within a week of “a significant market top” that is likely to precede a drop of at least 11 percent in the Standard & Poor’s 500 Index, said Tom DeMark, creator of a set of market-timing indicators.

DeMark’s Sequential and Combo indicators, designed to identify market tops and bottoms, are giving a sell signal on the main U.S. stock benchmark for the first time since mid-2007, he said in a telephone interview." [read more at Bloomberg]

Benzinga interviewed Tom DeMark on 5/20/2010.

Niall Ferguson at Aspen Ideas Festival (ForaTV Video)

Harvard's Niall Ferguson was at the Apsen Ideas Festival on July 8, 2010 speaking at a lecture (with Mort Zuckerman) titled: The Financial Crisis: Will It Lead to America's Decline? The full video can be found at Fora.tv (hat tip zero hedge). In summary, Niall thinks the catalyst for America's decline could be the credibility of fiscal policy. That makes sense. He said to watch when the cost of servicing the debt exceeds the defense budget, which could occur in the next 5 years. On a positive note, Niall said there's a way out for the United States: 1) technological innovation and 2) entrepreneurship. Niall even brought up the possibility of a new Dark Age if the U.S. declines: "When the Roman Empire in the west collapsed, civilization collapsed." "I'm talking about how your daily life is affected. What happens when the aqueducts stop working, metaphorically. What happens when the roads are no longer maintained? That's what happened in the post-Roman world and I don't think the post-American world would be so very different." Wow, so municipalities shut down during the dark ages. Would there still be Facebook?

Rising Energy Prices Could Cause 2008 Redux (Margin and Credit Squeeze)

Oil analyst, Gregor Macdonald, was featured on Max Keiser's show on 1/14/2011 and it's a must see. He mentioned how lower oil production and higher energy prices could affect the credit markets, global stock markets, U.S. economy and oil revenues. Who remembers 2008? Here's a quote by Gregor from video #2 (embedded below):

"As energy prices rise, it crowds out all consumption outside of energy and food purchases. And that will soon enough make global stock markets choke" (due to "margin compression from U.S. corporate profits" and the "declining ability for OECD consumers to increase consumption outside of energy and food")

Commercial Property Price Index Still At 2002 Levels (Moodys/REAL)

Commercial real estate prices are still around 2002 levels and in a sideways channel (3-months delayed). The Moodys/REAL Commercial Property Price Index (CPPI) rose 1.3% to 1.11 in October 2010 (month/month), but it's still down 42% from the 2007 peak (1.91). The index started at 1.0 in year 2000. Find apartment, industrial, office and retail property price indexes at web.mit.edu. Apartments have outperformed all segments. MIT also has a "Transactions-Based Index (TBI)" that uses data from NCREIF.


CPPI All Properties/National


CPPI Apartments/National

Carl Icahn Comedy On Drexel, Texaco/Getty, US Steel In 1980s (Videos)

Famed hedge fund manager / "shareholder activist", Carl Icahn, did stand up financial comedy at Caroline's Comedy Club in Manhattan in 2003. He talked about trading options back in the day, doing business with Drexel Burnham Lambert in the '80s, Leon Black (Apollo IPO coming?), trying to take over US Steel, David Roderick, the Texaco/Getty Oil lawsuit (funny stuff) and Joe Jamail. Read these interesting articles and watch the videos after the jump.

THE BIGGEST BOSSES 47. DAVID RODERICK USX A CEO AS TOUGH AS STEEL (Fortune Magazine, 1987)

"this was followed by a takeover proposal from raider Carl Icahn. By most accounts the company won the strike. Roderick, 63, punctured Icahn's balloon by piling up $3 billion in debt due if the company changed hands. He used the money to restructure the company yet again"....

Houston Lawyer Joe Jamail Sued the $10.5-Billion Pants Off Texaco and Stands to Pocket a Record Fee (People Magazine, 1986)

1) Carl Icahn wants to own US Steel
2) Carl Icahn settles the Texaco/Getty Oil lawsuit (hat tip Livermore Report)

US National Debt Above $14 Trillion, Debt Ceiling In Play Soon ($14.29T)

The U.S. National Debt is a serious issue right now. On 1/13/2011 the U.S. Treasury reported that Total Public Debt Outstanding hit 14,007,216,975,377.59 ($14 Trillion). $9.3 trillion was held by the public and $4.6 Trillion was intergovernmental (source: TreasuryDirect.gov). According to the real-time U.S. National Debt Clock at USDebtClock.org, the National debt is at $14,049,024,219,550. The main problem right now is there's a debt limit in place. Last year Congress raised the debt ceiling to $14.29 Trillion and it is expected to hit that level in May. So Congress will be making major moves in the next few months. I found an interesting fact sheet from the Heritage Foundation that explains what is going: The Debt Ceiling: Time, Options, and Action:
Congress Has Time: Gross federal debt has reached $14 trillion. Ongoing deficit spending (projected at $1.4 trillion for 2011) means the ceiling of $14.29 trillion will initially be reached around mid-March. Treasury’s traditional financial toolbox and revenue surges in April and June should delay the final moment of reckoning to mid-May and possibly as late as July.


Reads: David Rosenberg Likes Muni Bonds, Assange Gets Swiss Bank Info, Hu Visiting U.S.

Articles/Videos 1/17/2010

Apple Media Advisory (Steve Jobs Press Release) - BusinessWire

Barron's 2011 Roundtable - Barron's

David Rosenberg Says This Is A Fantastic Time To Buy Beaten Down Muni Bonds - Business Insider

Argentina farmers in grain export quota strike - BBC

Albert Edwards: "I Have Been Wrong – I’ve Been Too Bullish" (SocGen) - Zero Hedge

The Financial Crisis: Will It Lead to America's Decline? (Niall Ferguson, Mort Zuckerman at Aspen Institute) - Fora.tv (ht Zero Hedge)

Apple In Germany Falls 8% On Steve Jobs' Medical Leave (APC.F Chart)

Steve Jobs, Apple's CEO, is taking a medical leave and Time Cook (COO) is filling in. Here is the media release from Steve Jobs. Apple's stock on the Frankfurt Stock Exchange fell 7.96%. U.S. markets were closed for Martin Luther king Day.  Click the chart for a larger view (APC.F, Apple Inc. - Yahoo Finance).

"Apple Inc. Chief Executive Officer Steve Jobs took a leave of absence as his health deteriorates from battling a rare form of cancer and the effects of a liver transplant he had almost two years ago, according to a person with knowledge of the situation." (read more at Bloomberg.com)

Nasdaq 100 E-Mini March 2011 Future -1.13%, 2293.75
S&P 500 E-mini  March 2011 Future -0.35%, 1285.25


*UPDATE: ES (S&P) +0.29% and NQ +0.36% at 3:30am eastern. Carry on as usual? We'll see what happens tomorrow. AAPL is 19.74% of the Nasdaq 100 ETF, QQQQ.

Gary Shilling: Commodities Clearly In A Bubble

Gary Shilling thinks "commodities are clearly in a bubble" and "stocks aren't there yet, but we could be if things keep up at this rate". He also talked about Inventory/Sales and the savings rate, which he thinks could hit double digits. At what level is bubble territory on the S&P? SPX EPS 107x12 = 1,284, 107x15 = 1,605 or EPS 107 x 18 = 1,926? It is currently trading at 1,293. See the interview with Tom Keen after the jump.

Tunisia, Algeria Protests Due To Unemployment, Rising Food Prices and Politics (Videos)

If you've been following the news recently, Tunisia's ex-President, Zine Al-Abidine Ben Ali, fled the country as violent protests hit Tunis, the nation's capital. Rising food prices, high unemployment and political corruption are to blame, according to the articles below and Al Jazeera English / Euronews videos. Tunisia has a 14.7% unemployment rate and 23% for higher education graduates. Algeria also saw protests and a protestor mentioned rising sugar prices.

Global Agriculture: Adecoagro Files $400 Million IPO (AGRO)

This company will be interesting to watch, especially if the agricultural commodities (and renewable energy?) trend sees another leg higher. If interested, look at the Economist commodity-price index (one month and one year % change) from January 13, 2010. And as you know, rising food prices are causing people to riot in Tunisia and Algeria. Will monetary tightening in emerging markets cool down commodity inflation? Gary Shilling thinks commodities are in a bubble. If interested, the ticker symbol is AGRO according to the DealBook article.
"An agriculture company backed by the billionaire George Soros on Thursday filed to go public in an offering of more than $400 million.

The company, Adecoagro, based in Luxembourg, but with extensive farm holdings in South America, is selling 21.4 million common shares".....
(Read More)

From their website: "Adecoagro is currently one of the leading companies in the production of food and renewable energy in South America. Present in Argentina, Brazil and Uruguay, our main activities include the production of grains, rice, oilseed, dairy products, sugar, ethanol, coffee, cotton and cattle meat."

Photo from website.

New Jersey Gov. Chris Christie vs. Teachers (Town Hall Videos, CNBC)

Below are New Jersey Town Hall videos and a CNBC squawk box video featuring New Jersey Governor Chris Christie. It's getting serious. Christie was featured on 60 Minutes a few weeks ago, along with analyst Meredith Whitney, talking about New Jersey's financial situation and munis in general. These are old videos, but it shows the real life affects of spending cuts due declining state revenues, a stressed tax base, deficits, debts and a State aid squeeze.
"Governor Chris Christie responds to a teacher's question during a town hall meeting at Raritan Township. Discusses the teachers' union and the need for shared sacrifice. September 8, 2010.

MUB Breaks Dec 2010 Low, SEC Looking At Muni Bond Disclosures

On Friday, MUB, the National Municipal Bond ETF, took out the December 2010 low of $96.59 and closed at $96.26. Big red volume is making lower highs (not sure that means much or not), the RSI (relative strength index) is at 26.31 (it hit 10 in December) and the MACD is still in downtrend mode. See the chart after the jump. Last Wednesday Meredith Whitney gave an update on the muni market on CNBC.

According to Charlie Gasparino on Fox Business, the SEC is looking at muni bond disclosures.

"The Securities and Exchange Commission is ramping up its efforts to monitor disclosure problems in the municipal bond market, worried that cities issuing municipal debt are failing to properly disclose budget problems and other issues, thus affecting the price of bonds purchased by small investors, Fox Business has learned." [read more]