Given emerging data in 2012, it's becoming increasingly clear that the post-war automobile era in the United States is now in well-articulated decline. Accordingly, it makes sense to note the beginning of a long-term supertrend that is just getting started: the resurrection of America’s rail system. At Seattle’s historic King Street Station (a classic example of early 20th Century railroad architecture), a nasty looking dropped-tile ceiling – which hung above travellers for decades – was removed late last year to reveal ornate plasterwork as the building undergoes extensive renovation. These cosmetic (and structural) alterations are part of a wide-ranging upgrade to the entire Cascades passenger rail service that runs from Vancouver, British Columbia, to Eugene, Oregon. In Tacoma, for example, a new station will either be built or renovated, and part of the Cascades line will be re-routed from its current shoreline path more directly through that city. Elsewhere, bridges are being rebuilt, track is being upgraded, and other infrastructure improvements are underway as part of the $500 million program to resurrect more efficient, faster inter-city rail in the 466-mile Amtrak route through this part of the Pacific Northwest. These changes will not bring European-style high-speed rail to the United States. Indeed, in many similar projects across the country, top speeds of 125 mph will characterize new system capability, rather than the average speed actually maintained from city to city. However, the incremental improvements now underway will become the platform for the next phase of investment, as Americans are increasingly persuaded to limit their car ownership and make rail transport part of their lives once again.
Tired of idiotic "expert assessments" how the destruction in the aftermath of Sandy is good for the economy and "creates wealth" (just ask these people or these how much wealthier they feel with their house halfway still underwater, or with not a bite to eat)? Then read the following brief summary by David Rosenberg what the real and full impact of Rosie on the US will be: "the surprise for Q4? A negative GDP print."
When one thinks of dumpster diving in the "developed world", one usually starts with Greece, and ends with Spain (where this activity has been so pervasive, lately even the dumpsters have been on lock down). Certainly, Manhattan's Lower East Side is not one of the places that immediately comes to mind. Sadly, now that the city's more Bohmeian neighborhood has been without power and food for 3 days running, and the prospect of electricity being restored is still dim, the local residents have no choice but to do what their insolvent peers from across the Atlantic do every day (even as the capital markets fool themselves that all is well because Draghi said so). For a candid look at how the other part of Manhattan lives now, watch the clip below.
Today's entire stock market action was contained in the span of an hour starting with the open, following a series of economic data which, as was to be expected, couldn't possibly disappoint several days ahead of the election. Sure enough, after everything came in mostly in line or beat, ES ramped from its recent support level just north of 1400 to a high of about 1424, in no more than 60 minutes, and meandered there for the balance of the day where it also closed, on above average volume. What is interesting is that unlike yesterday, when the ramp took place in the overnight, ES-driven session, following which it fizzled all day, today it finally allowed retail investors to jump in alongside the first of the month capital flows. Needless to say, equities were once again in a vacuum of their own, with the EURUSD sliding, TSYs broadly unchanged, and that one time biggest driver of market upside, Apple, unable to stage any break out.
First, The Economist, now the man who owns the terminal that global finance uses each day to chat with one another, and occasionally to check the real time price of ESZ2 (if certainly not quite as much this year, and last, as desired). Mike Bloomberg's driving catalyst to chose the way he did? Climate change. Because to some it is the economy, to others: the number of cloudless sunny days in St Barts. The question for employees of Bain now: do they immediately disconnect their BBG terminals, or wait until next Wednesday.
After an almost uninterrupted period of decline over the last few years, US home prices now have some positive momentum. For one, the S&P/Case-Shiller index of property values in 20 cities has seen its highest increase in more than two years. In addition, JP Morgan CEO Jamie Dimon recently stated that his bank was seeing a surge in mortgage applications. And perhaps most importantly, the National Association of Realtors has reported that the nation’s inventory of homes on the market has dropped to its lowest level since March 2006, while the median home price is 11.3% higher than a year ago. These are definitely good signs for housing. But remember, nothing goes up or down in a straight line. Just like a stock market that suffers a serious crash, housing has been due for an upward correction. But it is a false premise to conflate ‘rebound’ with full blown ‘recovery’. The market could just as easily improve, then decline once again in a few months’ time. Positive data is great, but doesn’t necessarily portend long-term growth.
The plight of the infamous, and quite inflammable, Fisker Karma (not to mention its now defaulted battery vendor A123) has been extensively documented on these pages in the past. Today, we bring it up again, to observe a curious extra feature which its proud buyers may have been unaware of. It appears that, as Jalopnik reports, the car only free government loans with a 0% (or even negative) IRR hurdle rate could conceive, is now the first one to proudly announce it is the only one of its type that merrily burns down... while submerged underwater. We fully expect that the next generation of Fiskers will charge at least $995 for this non-optional standard feature. In other news, perhaps it is time for Karma to issue yet another comprehensive total recall of all of its cars due to "fire risk" - the last one seems to have missed a spark plug or two: they can say this is a recall for the risk of "burning down alive while fully submerged undewater."
Doping cyclists, UK banks which manipulate every possible thing they are involved with, and now embezzling one-time baseball millionaire greats with bloodied socks... Is nothing sacred anymore?
And for a second there we thought financial publications were supposed to at least pretend they are impartial. It appears that is not the case. Now we eagerly await to learn whom Playboy, the National Enquirer, and TMZ endorse...
It just is not Barclays' year. After being exposed (so far the only one) as a ringleader in a massive LIBOR-rigging scandal which cost Bob Diamond his job, yesterday the British bank added insult to injury, after the Federal Energy Regulatory Commission (FERC) fined it $470 million - the largest penalty ever levied by the energy regulator, and even larger than the bank's LIBOR fine - for getting caught doing what Enron got caught doing about a decade ago: manipulating California's electricity markets. Although while the former ended up being the biggest corporate bankruptcy at the time, led to the end of one of the nation's largest auditors and sparked a scandal so great it was all corporate America spoke for about for the next year, this time the news has come and gone, and nobody cares. Perhaps this is to be expected: in a time when none other than the central bank intervenes each and every day in every single market to preserve the "wealth effect", habituation to epic corporate manipulation of every imaginable kind is perfectly normal.
First it was news that Europe's weakest link may be broken following a Greek court doing the unthinkable, and actually enforcing the constitution, and now we learn that in addition to at least one definite defection from the Greek coalition government - PASOK (as reported earlier), the entire party is now on edge as its leader, former PM Evangelos Venizeloz seeks to quell a "rebellion" ahead of next week's vote which will hardly make the government any more popular in the eyes of the general population. From Kathimerini: "PASOK has plunged into turmoil as one MP and a prominent official quit the party following a fractious vote on the government’s privatization bill on Wednesday. The draft law paving the way for the sell-off of a number of utilities and ports passed narrowly and the failure of 17 PASOK MPs to support the legislation led to party leader Evangelos Venizelos, who failed to take part in the vote himself, calling an urgent meeting with his 33 lawmakers on Wednesday evening." Why is this relevant? Because two days ago, as reported, the third member of the ruling coalition: the Democratic Left, which mans 16 votes, announced it would vote against the Troika demands. This leaves the coalition with 160 votes on a matter in which it needs a majority. Should Pasok's 17 votes also be in danger of pulling out (assuming nobody from New Democracy votes no), then one can see why Greece may once again hold the fate of the Eurozone in its hands just as the US is voting for its next president and hardly needs more European drama.
While Europe continues to plan and scheme, content in the knowledge that Greece can do nothing to derail plans of status quo preservation, especially ahead of next week's critical parliamentary vote that will see the country imposing even more austerity on its people (see the great profile in the AP today in "Hit by crisis, Greek society in free-fall"), Greece has just decided to pull a "Karlrushe Kardinals who say Nein" move, and as Reuters reported moments ago, the entire process may be scuttled by none other than yet another court, this time in Greece:
- GREEK COURT SAYS PLANNED PENSION CUTS, RETIREMENT AGE INCREASE SOUGHT BY EU/IMF LENDERS MAY BE UNCONSTITUTIONAL
What this means is that suddenly Greece once again has all the leverage (recall that last year the mere threat of a Greek moratorium cost G-Pap his job), a development which in June sent Europe plunging on fears that Greece may vote itself out of the Eurozone, leading to a Grexit, the return of the Drachma, redenomination, collapse in risk levels, the apocalypse and other bad things.
Hedge Fund "gating", or the forced administrative limit on how much money hedge fund investors can redeem at any given moment, is one of those bad memories that most wish could remain dead and buried with the peak of the credit crisis, when virtually every hedge fund was swamped with redemption requests as impatient LPs couldn't wait to get what was left of their money back. However, the problem for hedge funds, in addition to underperforming the market substantially for a 5th year in a row, with almost all hedge funds now returning far less than the broader market (which continues to successfully defend the 1400 barrier every day) especially after October when the two biggest hedge fund darling stocks GOOG and AAPL finally reincountered gravity, is that their LPs have once again gotten restless and are now again actively seeking their money back from underperformers. Sadly, it was thus only a matter of time before the "gates" returned. As of this weekend they have.
For a few months there, we were worried that GM may have actually found a (government-funded) natural subprime buyer of its vehicles after the company managed to keep its channel stuffing in check for several months. Those fears ended today with the company's October car sales report, according to which GM sold 4.7% more cars, or 42,759 in absolute terms (from 153,005 to 195,764) in October than September, below expectations of a 7.8% increase. So far so good. What however will hardly get any mention from Government Motors cheerleaders is that GM auto inventory at dealers as of October 31 was a record 739,034 (a massive 98 days of supply), an increase of 49,700 from October's 689,334. In other words, the entire incremental rise in sales, and then some, was due to the firm stuffing dealers with even more inventory than they can possibly handle!
- ISM Manufacturing: 51.7, Exp. 51.0, Last 51.5
- Consumer Confidence: 72.2, Exp. 73.0, Last 68.4
- Construction Spending: 0.6%, Exp. 0.7%, Last -0.1%