Big Apple

Subdued headline inflation hides the inimitable rise of prices across the country; but ConvergEx's Nick Colas examines the pace of inflation in four large cities across the US – Boston, Chicago, New York and San Francisco.  All are home to multitudes of urban working professionals, share the same currency and have similar macro economies, though, Colas notes, the trend of price increases varies considerably (particularly with regards to NYC vs. the rest).  The cost of living is up in all four cities since 2008.  Incomes, too, are generally higher – although not in New York, likely a result of the Big Apple’s unique micro economy. Comparatively, New Yorkers have experienced the steepest price increases in transportation (higher cab and subway fares give this category a boost) and groceries, meanwhile rent, dinners out and cocktails continue to be more and more costly.  So what gives?  Rising inflation despite lower incomes?  The answer lies in the tug of war between less cash pay on Wall Street and a very active foreign investment market that is driving up real estate prices.

This is just the latest revelation in the stealth inflation and food fraud theme we have written about frequently in recent months.  The non-profit group Oceana took samples of 1,215 fish sold in the U.S. and genetic tests found that that 59% of those labeled tuna were mislabeled. It seems that “white tuna” should be avoided in particular as “84% of fish samples labeled “white tuna” were actually escolar, a fish that can cause prolonged, uncontrollable, oily anal leakage.”  Oh and if you live in New York City or Southern California, you should pay particular attention if you're heading to Sushi!!

Bottom line? $100 an hour is the minimum wage for a person with a family in NY. The Prez is offering $9.

In a world in which the NSA has access to everything, including - soon - one's bank accounts, because "the government is there to protect you", it was only a matter of time before the logical extension of abdicating all privacy was enforced in the city that never sleeps, and which ended up with 24/7 vigilant "alarm clocks" in the form of unmanned aerial vehicles, aka drones, "for the sake of security." From RT: "The head of the New York City Police Department announced this week that the largest local law enforcement agency in the United States might soon rely on spy drones for conducting surveillance. During an open conversation held Thursday between Reuters editor-in-chief Stephen Adler and NYPD Commissioner Ray Kelly, the chief of police confirmed that New York’s boys in blue aren’t entirely opposed to acquiring an unmanned aerial vehicle for the sake of security. “We’re looking into it," Kelly reportedly told an audience at the 92nd Street Y Thursday evening. “Anything that helps us.”

It’s my understanding that Synthes has another headache on its hands.

Everyone is safely home, tucked in and patiently waiting for the perfect storm to rage and ravage the Big Apple. Everyone - including the algos in just over 1 hour. Everyone.... except for Friday's "ramp the market in the last hour or else" workhorse - NYFed analyst/trader Kevin Henry...

It would be like Congress dropping stink bombs on Times Square.

All you need to read.

From the BBC: "Facebook has started testing a system that lets users pay to highlight or promote posts.  Facebook said the goal was to see if users were interested in paying to flag up their information." That’s their plan? That’s Zuckerberg’s big idea? Get users to pay to post premium content!? Did the well-circulated hoax that Facebook planned to get users to pay for use just turn out to be true? If they proceed with this (unlikely) it seems fairly obvious the world would say goodbye Facebook, hello free alternatives. The truth is that Facebook is a toy, a dreamworld, a figment of the imagination. Zuckerberg wanted to make the world a more connected place (and build a huge database of personal preferences), and he succeeded thanks to a huge slathering of venture capital. That’s an accomplishment, but it’s not a business. While the angel investors and college-dorm engineers will feel gratified at paper gains, it is becoming hard to ignore that there is no great profit engine under the venture. In fact, the big money coming into Facebook just seems to be money from new investors — they raised eighteen times as much in their flotation yesterday as they did in a whole year of advertising revenue. For an established company with such huge market penetration, they’re veering dangerously close to Bernie Madoff’s business model.

ConvergEx's annual analysis of Super Bowl economics shows that, when the time and place is right, prices can soar like a Hail Mary pass to clinch the playoffs.  Yes, the face value for tickets is unchanged in the last year - $800 to $1,200.  But the street price for a ticket to the big game will set you back at least $2,000, and the average ticket is running closer to $4,000.  The good news, sort of, is that there has been no inflation for the “Cheapest” seats since last year, when they were also two grand.  And that is despite a smaller stadium this time around (68,000 versus +80,000).  A signal about the stagnating confidence of the high end consumer?  Perhaps. Nic Colas goes to note that to get into Super Bowl #1 would have cost you all of $12.  That was in Los Angeles in 1967.  And the best seat in the house.  From there stated ticket prices went to $50 in 1984, $100 in 1988 and $500 in 2003.  Now, the prices printed on the ticket for the Indianapolis game this Sunday are between $800 and $1,200.  As the accompanying chart shows, this is an inflation rate of around 8,900% for the period, versus 687% for the Consumer Price Index. One thing we know – next year it won’t be a problem to set a new street price for the Super Bowl, regardless of whatever the economy may bring.  It is in New Orleans.

As of Q3 2011, the citizens of less than 20% of the countries involved in Nielsen's Global Consumer Confidence, Concerns, and Spending Intentions Survey were on average confident in their future economic confidence. Not surprisingly, Nic Colas of ConvergEx points out, six were in Asia, the least confident were in Eastern and Peripheral European nations, and furthermore overall global consumer confidence remains 9.3% below 2H 2006 (and 6.4% below Q4 2010) readings as the global economy still has a long way to get its 'mojo' back. Colas points to the fact that 'confidence is an essential lubricant of any capitalist-based system' and one of the key challenges that worst hit Europe (and other regions and nations) face is capital markets that are assessing the long shadow of the Financial Crisis of 2007-2008 and the ongoing European sovereign debt crisis impact on the world's Consumer Confidence.

Some fireworks go off.

Sometimes observing the counterclockwise rotation on Jim O'Neill's Koolaid-O-Dispener knob from 10 to 1.5 is the most gratifying thing that can happen to a person. Which is precisely what the most recent weekly report by the man who was sanctimoniously relegated to managing Goldman's most unprofitable division, GSAM, present: a bleak world in which the perpetual twisting of reality by the Man Utd fan has lost all credibility. To wit: "On Thursday lunch time, I joined some Goldman Sachs colleagues for a lunch with some leading macro hedge fund investors, most of which I had enjoyed a similar lunch with last October. The mood this time couldn't be more different. I guess it is kind of understandable given the recent run of data, the markets and the apparent policy impasse in DC on fiscal matters. But it seemed to me it was all a bit over the top. The general mood around that lunch table was gloomy, whether it was about the US, Europe or China, both with respect to data and policy options. I was regarded as a raving lunatic for suggesting it was possible that US unemployment might fall below 6 pct by the end of 2013." Hmm, whoever could possibly conceive of the man whose predictive track record is only better to DB's Joe Lavorgna, as a raving lunatic. Anyway, more importantly, even O'Neill is now forced to admit that in the off case that he has OD'ed on the Keynesian-spiked red substance, that the Fed will have no choice but to launch into another round of easing, something which is pretty much a given for everyone else, and would indicate that the US economic depression, which started almost 4 years ago never ended, but was briefly interrupted by bear market rallies inspired by dollar dilution: "while a QE3 would clearly involve “externalities,” it seems obvious to me that if the recent weak US data is for real, then there is a good chance that the Fed would deliver on something more." Naturally O'Neill then goes on to explain why even a negative GDP print which may be in the cards for Q3 is absolutely nothing to worry about. Lastly, there is always next year's Champions' League for Manchester United...

If you have not made your year by now you are dead meat. Many of 2011’s big moves have occurred, and there aren’t going to be many fireworks for the rest of the year. Many asset classes are about to settle down into boring, predictable trading ranges. Unless you want to short the Euro. Stocks, gold, and silver are topping. (FX), (SPX), (GLD), (SLV), (TLT)

On Apple and Heebner cleaning house, whether he did it for liquidity reasons or not, the writing is on the Wall for Apple and the days of no competition high margin iPhone sales are over. Android is in town and has already taken over the lead. Add to that the fact that the equity markets are rather iffy to begin with, people are still heavily indebted and Apple caters to those who pay premiums, and the Apple sale was a no-brainer. Of course, I explained this in detail a month ago, but I guess it took time for the filings to come to light.