The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Succinct summation of week’s events:

Positives:

1) Initial Jobless Claims fall to 358k, 12k less than expected and the 4 week average drops to 366k, the least since May ’08
2) Job Openings in monthly BLS data rise to match the highest since Sept ’08
3) MBA said avg 30 yr mortgage rate falls to new low of 4.05% and refi’s jump 9.4%
4) German Factory Orders in Dec rise a bit more than expected
5) China’s PPI moderates to a gain of just .7% y/o/y, the slowest rate since Nov ’09
6) Indonesia unexpectedly cuts rates to 5.75% while RBA and SK sit pat

Negatives:

1) Greece on brink, AGAIN, unemployment rate in Nov hits 20.9% from 18.2% in Oct
2) German exports in Dec, the main driver of their economy, falls 4.3% m/o/m vs an expected decline of just 1%, German IP falls 3% vs est of flat from Nov
3) Euros being redeposited with the ECB overnight remain around 500b, matching the amount borrowed under the LTRO
4) BoE votes for more QE, brings asset purchase program up to 325b pounds. The most famous English economist, John Maynard Keynes once said this in a book of his, “Lenin is said to have declared that the best way to destroy the Capitalist System was to debaunch the currency. By continuing a process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…while the process impoverishes many, it actually enriches some…Lenin was certainly right…The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose,”
5) US inflation expectations in TIPS continue to drift higher
6) Feb UoM confidence moderates 2.5 pts after Jan jump of 5,
7) Avg gallon of gasoline at the pump rises to most since Sept.

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To see a certain category of spending provisions, click on one of the following: Accountability | Aid to People Affected by Economic Downturn | Aid to State and Local Governments | Business | Education | Energy | Health Care | Other | Science and Technology | Transportation and Infrastructure

Too see full list click here

Source: Pro Publica

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My morning reads:

• Different Measures of Unemployment, but Consistent Story is Visible (Northern Trust Investments) see also The Jobs Report and the “Missing 1.2 Million” (New Yorker)
• House Insider Bill Passes With New Backers (WSJ)
• Why Millions Won’t Get Help From Big Mortgage Settlement (ProPublica) see also Foreclosures to Climb Before Bank Deal Helps U.S. Housing Market (Bloomberg)
• Is an Earnings Peak Coming? (Crossing Wallstreet)
• Buffett: Bonds Are Among Most Dangerous Assets (Bloomberg) but see Gross Raises Holdings of Treasuries to Highest Since 2010 (Bloomberg)
• Everything is connected (Research Puzzle)
• Europe Bulls Reap Rewards (WSJ) but see Greek death spiral accelerates (Telegraph)
• Phone Hacking Decision Making: Dinner at Rupert’s (Businessweek)
• How Sonos Outshines Apple in Home Audio (NYT)
• If You’re Fat, Broke, and Smoking, Blame Language (Mother Board)

What are you reading?
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Sentiment Survey Should Be Convincing

Source: WSJ

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FT Alphaville gives us the Cliff note version of the national mortgage fraud bank settlement — available in easy to follow graphic or text form:

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Here is the breakdown:

Under the agreement, the five servicers have agreed to a $25 billion penalty under a joint state-national settlement structure.

Nationally:

• Servicers commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction. Servicers will likely provide up to an estimated $32 billion in direct homeowner relief.

• Servicers commit $3 billion to an underwater mortgage refinancing program.

• Servicers pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).

• Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards.

• An independent monitor will ensure mortgage servicer compliance.

• States can pursue civil claims outside of the agreement including securitization claims as well as criminal cases.

• Borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.

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Early relief that we can finally put the Greek drama behind us morphed into a European markets sell off. EU finance ministers are still holding back final approval of yet another rescue package. Greece’s commitments to get their fiscal house in order are leading to frustration with the country’s bickering politicians.

In Asia, continuing signs of the slowing China economy added to concerns. Some China Bears have been forecasting a crash, and the Shanghai and Hong Kong markets have performed poorly the past few years — peaking near 32,000 in September 2008, diving to March 2009 low of 11,500. The Hang Seng is still off by 33%, hovering around 21,000.

Is this a consolidation phase, or the beginning of the end of the bull market? I am positioned for the former, but cognizant of the potential for the  latter.

More shortly . . .

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I was speaking to a friend who is a well known, well regarded Technician. She stated: “I dont know anyone who is bearish . . . Even Nouriel Roubini flipped bullish.”

I thought that was an interesting observation.

While I am not sure who is bearish (Hussman, Shilling, Edwards, Faber, Belkin & Rogers) I do think this rally is rather hated, and has been for many quarters.

Here wee are with stocks making multi-year highs.

“Buy Strength” I was always taught . . . “Sell weakness.” Yet it seems no one wants to buy strength — people want to buy lower.

~~~

That’s our open thread for tonight: Where are the Bears? And what does this mean for the next 12 months of equity action?

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My afternoon train reading:

• The Top Twelve Reasons Why You Should Hate the Mortgage Settlement (Naked Capitalism)
• Mutual Fund Investors Should Crack Down on Closet Indexers: (Bloomberg)
• The logic of a Thomson Reuters takeover of the Financial Times (Guardian)
• Corporate profits aren’t what they seem (Chron)
• A First for UBS: Bonus Clawbacks (WSJ)
• The Recession of 2007–2009 (Bureau of Labor Statistics)
• Floyd Norris: No, Eeejits, People Are Not Leaving the Labor Force (Economix)
• Mitt Romney and the enthusiasm gap (Washington Post)
• Hit record: Less Posts, More Traffic (Open Salon)
• Why Planned Parenthood Had To Fight Back So Hard (TPM)

What are you reading?
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click for larger graphic

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Source:
States Negotiate $26 Billion Agreement for Homeowners
NELSON D. SCHWARTZ and SHAILA DEWAN
NYT, February 8, 2012
www.nytimes.com/2012/02/09/business/states-negotiate-25-billion-deal-for-homeowners.html

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My (belated) morning reads:

• Why Wall Street Should Stop Whining (Rolling Stone)
• To Envision Dodd-Frank’s Future, Look to Its Predecessor SOX (DealBook)
• Andy Xie: The outlook for the global economy is gloomy and leaders lacking vision are to blame (Caixin)
• Black Helicopters Hover Over Economic Reality (Bloomberg) see also Bernanke Says 8.3% Unemployment Understates Weakness in U.S. Labor Market (Bloomberg)
• The insiders are selling heavily (Market Watch)
• Wall Street Places Big Bets on Troubled Securities (DealBook) see also Goldman Snags Old AIG Bonds (WSJ)
• Records tumble at Christie’s art sale (Reuters)
• States With Top Foreclosure Rates Push U.S. Mortgage Accord to Completion (Washington Post) see also States Negotiate $26 Billion Agreement for Homeowners (NYT)
• Albert the (financial) Populist (Alphaville)
• Ferraris Out of Fashion in Italy as Police Nab Tax Evaders (Bloomberg) see also Honda Aims to Reclaim Its Luster (NYT)

What are you reading?

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U.S., Banks Agree on Foreclosure Pact

Source: WSJ

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