sábado, 27 de dezembro de 2008

Cool Websites and Tools (#226)


from MakeUseOf.com by Aibek

cool websitesCheck out some of the latest makeuseof discoveries. All listed websites are FREE (or come with a decent free account option). No trials or buy-to-use craplets. For even more app reviews subscribe to makeuseof directory.

(1) EmbedIt - Offers an easy way to embed text documents and image files onto webpages (i.e. your blog or website). Read more: EmbedIt - URL & File Embedding Made Easy.
(2) LifePrint - Excellent resource for people who want to learn ASL (American Sign Language) online. The site provides you with quick lessons and resources for self-study. Read more: LifePrint - Learn ASL (American Sign Language) Online.
(3) LongURLplease - This little tool does one simple thing, it lets you reveal the actual URL behind the shortened link. Once installed, it will replace all shortened links (on the page) with the direct ones. For instance, a TinyURL link pointing to some Youtube video will be replaced with its Youtube address. Read more: LongURLplease - Reveals Shortened Links.
(4) Vloud - If you ever need to quickly amplify the sound level of one of your MP3 songs and don’t want to deal with complex amplifier tools, check out Vloud. It is simple online utility to make MP3’s louder. Read more: Vloud - Make Quiet MP3s Louder.
(5) Yahoo Glue - New service by Yahoo which combines different search results which includes images, news, information, videos and other results like reviews, songs, shopping items etc on a single page. The results include pages from YouTube, Yahoo Answers, Wikipedia and other sites. Read more: Yahoo Glue - All Search Results On One Page.
These are just half of the websites that we discovered in the last 3-4 days. If you want us to send you daily round-up of all cool websites we come across leave your email here. Or follow us via RSS feed.
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Commodity Performance 2008


from Fund my Mutual Fund by TraderMark

Quite a staggering table via Bespoke Investment's blog on the performance of commodities in 2008. What is so amazing is halfway through the year so many of these commodities were enjoying the performance of a lifetime; and within a few months many "enjoyed" the downfall of a lifetime. We caught much of the ride up, and 6-8 very painful weeks on the way down as the hedge fund delevering game began in earnest. The "round trip" when you calculate start of year to 52 week high and then drop from 52 week high is simply awe inspiring.

Lesson's learned here
  1. Don't ever believe hedge funds are not impacting markets to a huge degree
  2. "Group think" is alive and well in the institutional investment community
  3. When thesis ends, be ready to run for the door and try to squeeze out before the rest of the rats
Again, I'll point to a copper rebound as the most telling tale for any true global economic recovery. I still like the agriculture commodities the most from a long term perspective. Gold and silver has pulled back from a recent surge and a few names look interesting. (please note silver is relatively economically sensitive versus gold due to industrial use)

I always liked Silver Wheaton (SLW) over the years because it benefits from metal prices but without the mining risk - I never knew there was a parallel on the gold side but I have been reading about Royal Gold (RGLD) the past few weeks which seems to be a similar business model - the chart is hot hot hot.

As long as Silver Wheaton holds $5 it should be in good shape....

This is about as good of a chart as you can ask for... once RGLD broke $40 (October and December double top) it was off to the races.... I'd like to get some on a pullback to the 20 day moving average

No positions

Avril Lavigne

Tekzilla - Top Ten Computing Tips of 2008!

Carteira Gradual traz doze recomendações de ações para a semana


SÃO PAULO - A corretora Gradual divulgou sua carteira recomendada para a semana de 24 a 31 de dezembro, listando doze papéis de empresas que, segundo seus analistas, representam boas oportunidades de valorização no período.

Os analistas destacam que os sinais de recessão mundial provocaram perdas generalizadas, com os investidores realizando ganhos de curto prazo e reduzindo o ritmo dos negócios. Por causa disso, a corretora optou por incluir duas ações que considera defensivas na carteira: a Souza Cruz e AES Tietê, que chega substituindo a Transmissão Paulista.

Além disso, as ações de Telemar, Copasa e NET tiveram seus pesos elevados, enquanto, no sentido oposto, Petrobras, Itaúsa, Cemig e Usiminas viram sua participação diminuir.

Confira as recomendações para a semana:

PetrobrasPETR4R$ 43,7899%20%
ValeVALE5R$ 42,4568%15%
CopasaCSMG3R$ 33,4378%10%
TelemarTNLP4R$ 51,5652%10%
NETNETC4R$ 22,8465%10%
ItaúsaITSA4R$ 13,3265%5%
CemigCMIG3R$ 44,0283%5%
UsiminasUSIM5R$ 59,90138%5%
BM&FBovespaBVMF3R$ 8,5053%5%
AES TietêGETI4R$ 21,6949%5%
B2WBTOW3R$ 51,93124%5%
Souza CruzCRUZ3R$ 50,1613%5%
*Preço-alvo com base na cotação de fechamento do dia 23 de dezembro de 2008

quarta-feira, 24 de dezembro de 2008

End of an Annus Horribilis for Finance

In a world that has gone madoff, as this year's Nobel Prize winner Paul Krugman puts it, we are witnessing the return of the very notion of risk, whereby we start to recon that there is no such thing as "pure alpha" without some kind of "hidden beta". We have learned that everything - including liquidity - eventually comes at a price. And we are now realizing that many of the Wall Street mavericks with six figures salaries and stratospheric bonuses are not the fascinating geniuses and "beautiful minds" that we were idolizing, but a mere bunch of rogue mercenaries devoid of any sense of ethics or collective responsibility.
The emperor is naked and so are his knights, dark and white altogether. Ironically, many hedge funds, which as their name purportedly indicates were supposed to hedge against risks, were actually engaged in the same race of blind yield generation and risk complacency that sealed the fate of some of the most reputable financial institutions down the Street.
The whole financial sector turned out to be a huge ponzi scheme set out by the few with the silent complicity of the many, including politicians from all parties, regulators from all public bodies, central bankers that printed money for free, rating agencies whose reputation is now tarnished by the conflict of interest at the heart of their business, and last but not least, corporate leaders, that were more worried about their stock option plans and golden parachutes than about the viability and long term growth prospects of their companies.
In a way, we are paying now for the consequences of three decades of deregulation starting from the phasing out of Regulation Q in 1980 in the United States and going through to the subsequent endorsement of the Washington Consensus at the international level, which profoundly altered the nature and scope of the Bretton Woods institutions (IMF, World Bank). The current financial system regulation could be described at best as "the parable of the blind guiding the blind", as illustrated in the eponymous painting of Pieter Bruegel the Elder.
Take the Basel Committee which was set up in the nineties to avoid the accumulation of bad debt in OECD banks' balance sheets. It was so successful that it led to the development of a whole new generation of financial products aiming at putting all the risks off-the-balance sheet, away from regulatory oversight. The same could be said with the development of the Credit Default Swaps (CDS) which transferred credit risk attached to junk bonds from specialized investors to "main street" insurance companies, happy to earn more from this activity than from their traditional actuarial based business model. We know how the story ended, with the in extremis bailout ofAIG and the fall of the so-called monoliners.
In a world of free capital flows, there is a need for a global regulation of these capital flows. The fact that this basic truth has been finally put on the global agenda at the G20 summit in Washington is an encouraging step in the right direction. But we are still far away from a comprehensive solution to the problem of regulatory loopholes and regulatory arbitrage as long as rules differ substantially depending on whether you are "legally" based in New York or in the Cayman Islands. Indeed, offshore finance is a second word for regulatory arbitrage.
Now, that the financial crisis has spread to the real economy, governments around the world are shifting their attention from the desperate calls of a handful of financiers to the much vocal ills and ires of their broad constituencies. However, it would be a dramatic mistake to let the financial reform momentum fade away. The stakes are high and yes, the time of half measures is definitively over. The world expects the new US administration to show determination and a real leadership on these pressing issues, even if it comes at the price of reining in one's own perception of sovereignty and independence.
Yes, we can. Let us do it now.

Chart of the Day 23/12/2208

For some perspective into the all-important US real estate market, today's chart illustrates the US median price of a single-family home over the past 38 years. Thanks, in part, to low long-term interest rates, the trend from 1991 to 2005 was impressive. Not only did housing prices increase at a rapid rate, the rate at which housing prices increased – increased. That brings us to today's chart which illustrates how housing prices have dropped well below their accelerated upward trend and 29% from the 2005 peak. It is worth noting that housing prices are currently decreasing at a rapid rate. In fact, the rate at which housing prices have been decreasing has been increasing.

Market Outlook 24/12/2008

Market Outlook

The World Will Only End Once

Fellow Investor,

Scan any newspaper in any part of the world, and you always see disaster looming on the horizon. In the financial world, economists are often accused of predicting 10 of the last seven recessions. But the pessimism of the practitioners of "the dismal science" pales in comparison to the predictions of doom and gloom in the world's media.
The world, it seems, is always on the verge of coming to an end. I remember my second grade classroom had dozens of copies of Stanford professor Paul Ehrlich's "Population Bomb", which predicted that hundreds of millions of people would starve to death in the 1970s and 1980s. Think of all the apocalyptic predictions just over the last decade -- AIDS, Y2K, and the SARS virus. I remember reading a headline in London in 2003 about a study that predicted that 50,000 people would die from "mad cow disease" in the United Kingdom alone -- just about as many Americans died in the Vietnam War. This past summer, physicist Stephen Hawking wanted to hold an "end of the world" party upon the launch of the European Large Hadron collider, which some had predicted "could destroy the Universe." But Hawking wisely held off, assuming the media would misinterpret his tongue in cheek exercise.
History is littered with experts who predicted the end of the world -- and got it wrong. In today's London Financial Times, Michael Spinaker quotes the philosopher Bertrand Russell, who predicted in April 1961 that if the great powers did not change their policies, "it is in the highest degree improbable that any of you here present will be alive 10 years hence." At that same forum, Russell also quoted an article by an overconfident albeit gloomy C.P. Snow who noted that: "Within at the most 10 years, some of these bombs are going off. I am saying this as responsibly as I can. That is a certainty."
The World Will Only End Once: Why Did Experts Get it So Wrong?
The Greeks turned to Oracles to predict the future. In Roman times, soothsayers read animal entrails. These days, the experts we turn to tend to be Nobel Prize-winning economists and academics. While we may smile at the Greeks and Romans, the irony is that thinking you know, too much -- about, say, "scientific" financial engineering -- only gives you more misplaced self-confidence to screw up and to do so in a much bigger way. The most sophisticated hedge funds in the world invested with Bernie Madoff, their psychological denial triumphing ostensibly sophisticated financial understanding.
So why are we so bad at prediction, even as we are psychologically addicted to it? The world is a complex place. And the elephant in our collective psychological room is that the future is impossible to predict. Psychological studies have shown that few things can drive you nuts faster than the feeling that you've lost control. That's why we also tend to seek patterns where no such patterns exist (like technical analysis), as well as to confirm our pre-existing beliefs (what psychologists call "confirmation bias."). We gain psychological solace from an explanation -- whether it has any basis in truth or not.
It takes exceptional self-confidence to argue against ideas that both made people rich and won their progenitors a fistful of Nobel Prizes. Even in the face of overwhelming evidence, like the disgrace of "modern finance" as a risk management framework in 2008, we'd rather cling to widely accepted explanations even when experience suggests they may be wrong. And this tendency applies to supposedly "objective" areas like science. It took the Roman Catholic Church until October 31, 1992, to concede that the Earth was not stationary as Galileo had argued in 1633. You can only hope that today's business school textbooks espousing modern finance will move more quickly.
The World Will Only End Once: Does It Even Matter if You're Right?
Here's what's even more distressing. It doesn't seem to matter whether the experts got it right or wrong. There were, of course, a handful of Cassandras who predicted correctly that subprime lending, securitization and financial engineering would end in disaster. Yet it's unclear how many of these Cassandras profited from their accurate insights.
While virtually all of the Cassandras who warned about imminent collapse of the U.S. real estate market and the historic implosion of Wall Street's greatest financial institutions analyzed the problems correctly, their recommendations to protect you from the coming catastrophe have mostly gone terribly wrong. Prior to the onset of the crisis, the Cassandras boasted that their advice would "crash-proof" your portfolio. Yet the foreign markets they recommended, whether China, Brazil, Russia or Japan, offered no safe haven. The commodities markets in which they parked their money tanked even worse. And instead of collapsing, the much-reviled U.S. dollar -- the Cassandras' metaphor for American decline -- replaced gold as the ultimate safe haven in times of crisis.
And does "getting it right" really make them smart or insightful? The answer is more ambiguous than you'd think. Consider the case of the top-performing financial newsletter of 2008, Arch Crawford's Crawford Perspectives, which gained 42.4% through December of this year. Crawford's winning strategy? Technical analysis leavened by a liberal dose of astrology. Yes, chart reading and star gazing beat Nobel Prize-winning modern financial theory in the toughest year in recent financial memory. In case you're wondering (and I know you are), Crawford is cheerfully optimistic about the stock market, predicting an explosive year-end move which should extend well into January. Then, after a corrective phase into late February, he predicts a much stronger and more lasting advance.
The World Will Only End Once: What Is To Be Done?
So how should this impact the way you manage your portfolio? Top traders (and not just lucky ones) know that during times of uncertainty, it's best to pull in your horns, and bet selectively on a handful of ideas until the dust settles. As George Soros pointed out in his recent congressional testimony, thousands of hedge funds forgot the #1 rule of hedge fund investing: "Don't lose money." While that advice turned Soros into a billionaire, it's too simple to win him a Nobel Prize. Yet common sense trumps complexity yet again.
Here is a final thought for you to consider over the holiday season until The Global Guru returns in 2009 after taking a holiday break next week:
"Don't worry about the world ending today. It's already tomorrow in Australia."

Nicholas A. Vardy
Editor, The Global Guru

Crude Oil: A Gusher Of An Opportunity

By Nico Isaac
Over the last two weeks, oil prices have seen more ups and downs than a Cirque De Soleil trapeze swinger. On Friday December 5, prices swan dove to a four-year low after clocking in their second largest weekly loss in energy trading history. And, according to the mainstream experts, oil's woes -- which are intrinsically linked to the global economic slump -- had only just begun.
"It doesn't matter what the price is at this point," began a December 6 Wall Street Journal. "It's just 'get me out of any position I have." – AND – "After the jobless number, any bulls left in the oil market will become extinct." -- Bloomberg
Turns out, oil bulls did NOT go the way of the Dodo. Quite the opposite: On Monday, December 9, crude prices turned up in a powerful three-day winning streak to their highest level in two weeks.
After tacking on a dramatic 10% gain, oil prices then slipped from their December 11 peak and tumbled to a fresh, four-year low.
Which begs the question -- Random behavior OR planned routine? According to the mainstream experts, the answer is "A." In their words: "There seems to be no rhyme or reason to prices." – AP.
(Staying On Crude Oil's Down-Up-Down SideEnergy Specialty Servicereveals where the next big move in crude oil could be. Act now for the complete story.)
EWI's Energy Specialty Service editor Steve Craig disagrees. No matter how volatile the twists and turns in oil prices -- Steve has been able to spot the underlying Elliott Wave pattern at large.
Case in point: ONE day before oil hit its all-time peak on July 11, 2008, the July 10 Specialty Service acknowledged the downside potential in the market’s near-term future and wrote:
“Two key topping indicators are still evident – extreme bullish sentiment and relentless media attention. Possible third and fourth signs – volatility and cries for more government regulation of commodity trading – are nearing their heads… It all points to a very mature uptrend.”
As for crude's most recent swings, Steve has remained one step ahead. To wit:
The December 5 low: December 4 Daily Energy Specialty Service forecast presented this bullish case: "I am looking for a credible ending pattern… Once the bottom is in, a substantial advance should unfold" in wave four.
The December 11 high: December 11-12 Intraday Energy Specialty Servicewrote: "The recent rebound looks corrective and complete, so we'll continue with the outlook for a fifth wave down. Resistance is at 50.39, which would be an 'ideal' price for this rebound to end."
The best part I saved for last: The latest Energy Specialty Service forecast presents the following chart of Crude prices since the year 1859 -- when the first commercial oil well was drilled in the United States. (Some Elliott wave labels have been erased for this publication)
This historical close-up provides the most comprehensive and objective evaluation of crude’s long-term trend out there.
The picture can be seen in its entirety, along with in-depth analysis on every time frame in the latest forecasts of the Energy Specialty Service. In Steve Craig's own word: “I’m anticipating a volatile, gut wrenching, fear-laden”move in Crude Oil.

terça-feira, 23 de dezembro de 2008

7 Essential Money Lessons for Kids


By Dayana Yochim 

Mounting research shows that we have nothing short of an entitlement epidemic gripping today's youth. The books Generation Me and Generation Debt (by two different authors, no less) make rather fitting bookends: narcissistic entitlement at one end, and financial ruin at the other.
As the season of giving brushes elbows with the cabal of commercialism, we're presented with -- to borrow from the classic education vernacular -- an ideal "teaching moment."
But exactly how do you persuade material boys and girls to enjoy giving as much as they love getting? Here are seven tips to help instill some big-heartedness in the little ones.
1. Teach them to value every dollar. Tired of playing shopping-cart bad cop? Give your child spending power by turning the yes/no verdict over to Junior. Children who are free to spend their money on whatever they want (provided it doesn't require gunpowder, gasoline, or a parental signature on a safety waiver) are more thoughtful and less impulsive -- after a while, at least.
2. Make dollar decisions tangible. Even adults have a hard time visualizing mounting debt or increased savings. Help your children grasp such concepts with visual cues: Illustrate important allocation lessons of short-term and long-term savings and charity with separate piggy banks for each (or a single one designed specifically for this purpose), or even with a running tally on a whiteboard.
3. Pull back the curtain on retail marketing tricks. Kids don't like being told what to do. Show them that advertisers are bossier than Mom and Dad are with a set of interactive lessons on common marketing mind tricks, available at pbskids.org/dontbuyit.
4. Reward savings behavior. According to sharesavespend.com, our kids today spend five times as much money as we did at the same age (adjusted for inflation). Reverse the trend by rewarding responsible cash conduct. Set up a kiddie version of a 401(k) and offer to match money that they sock away for themselves and others (e.g., $0.50 for every dollar they save for themselves; a dollar-for-dollar match for money they raise for a good cause).
5. Let them pick a charity. Get online together and find a cause they can relate to. (Trycharitynavigator.com and worldvision.org.) Or find a local charity and take your kids there to see firsthand how their bequests will help. Have them deliver the donations (cash, toys, clothes, etc.) themselves.
6. Get them excited about stocks, not stuff. The stock market (and the passage of time) can also reward the little ones in a big way. Engaging kids in investing pursuits is easy: Just explain that when they buy a share of stock, they become part owners of the company, not just a customer. (A seat on the board, however, may have to wait until after they're old enough to drive.) Every moment of every day, they're presented with investment opportunities, from breakfast (Kellogg (NYSE: K)) to lunch and snacks (Kraft (NYSE: KFT)and Coca-Cola (NYSE: KO)), to entertainment (Disney (NYSE: DIS)), a weekend stroll at the mall (Urban Outfitters (Nasdaq: URBN) and Gap (NYSE: GPS)), or taking in a movie (Netflix (Nasdaq: NFLX)). And if saving money to buy more stock replaces saving money to buy more stuff, even better.
7. Show your gratitude for your family's gifts every day. The most powerful illustration of the good that comes from giving is gratitude. Share how grateful you are to be able to afford that flat-screen TV and how much you appreciate gifts (tangible and intangible) from others. Talk to them about how you are paying it forward, and openly share the joy you get from helping others. Being thankful is a lesson worth revisiting year-round.
Finally, call Junior over to the computer, and together, you can help other kids become smart about money. The Motley Fool's annual charity drive, Foolanthropy, is aimed at eradicating financial illiteracy.
This year's Foolanthropy drive supports DonorsChoose.org, a nonprofit organization that provides a way for people to make a difference in public schools. Through Foolanthropy's partnership with DonorsChoose.org, you can help fund specific projects dedicated to financial literacy. The drive will run from now through Jan. 20, and at the conclusion of the campaign, the Fool will kick in $10,000 for the cause. 23 projects have been funded thus far, reaching a total of 1,885 kids.

How Eating Slowly Will Help You Lose Weight [Food]


from Lifehacker by Kevin Purdy

There are a lot of factors in losing and maintaining a healthy diet and weight, but the HealthAssist blog points out that eating slowly might play a larger role than you realize.
Along with the general knowledge of your body needing more time to figure out it's full than most rush-rush meals allow for, "insulin resistance" and other factors suggest eating more slowly is something to strive for.
Portion size and eating speed seem to be part of the reason for the famous “French paradox” — the relatively low incidence of heart disease and overweight in France as compared to the United States, despite the generally high intake of calorie-rich foods and saturated fat. It is well documented that the French take longer to eat than Americans, despite the French eating smaller portions. Recently Japanese researchers found strong positive correlation between rate of eating and body mass index (BMI) and obesity

Having recently been kept from lunch until about 2:30 p.m. by travel delays, I was surprised at how one sandwich and a tiny Diet Coke, eaten during a leisurely conversation, managed to tide me over, despite my usual preference for the over-stuffed specials and the like.
How do you manage to fit a slow meal into a busy day? Or do you see calories as calories, regardless of their intake speed? Tell us your take in the comments.Photo by Bombardier.

Unlock Secret Features On Your Digital Camera - Systm

segunda-feira, 22 de dezembro de 2008

A Daily Snapshot Of Market Moving Developments

Overseas Overnight Market action Outside of Japan, which rallied 1.6% on speculation that the BoJ would buy corporate debt to ease credit risk, equity markets across Asia were weaker across the board. The Hang Seng sank 3.3%, or -505 points, to 14,622. India's Sensex was off 1.7% while China's Shanghai Composite dropped 1.5%. The Korean Kospi, however, fell just 0.1%. In Europe, equity markets are trading lower and off about 0.8% in the aggregate. US equity futures, however, are pointing to a higher open across the major indices. Bonds are trading mixed across the globe, with yields down 2-4 bps in Europe but up a bp in the US. JGBs were down a bp to 1.2%. On the commodity front, we see that gold is rallying, up $6.50 an ounce to $844.75.

On the data front

This is a truly global recession. We learned overnight that Japanese exports collapsed 26.7% year-over-year in November; that's the biggest drop on record. Shipments to the US plunged at an unprecedented 34% year-over-year rate. Meanwhile, imports into Japan sank 14.4% year-over-year in a sign of weakening domestic demand. A similar story out of Thailand, where exports dropped 18.6% in what was the biggest drop in at least 16 years. In China, interest rates were cut for the fifth time in three months. The key one-year lending rate was cut 27 bps to 5.31%. The reserve requirement was cut 50 bps to 15.5% for big banks and 13.5% for smaller ones. Chinese policymakers are trying to head off social unrest. Take a look at page A8 of today's WSJ, "China Faces Unrest as Economy Falters." For a read of how another BRIC nation has hit a wall in the face of a deepening global recession, turn to page A10 of today's WSJ, "India's Textile Industry Unravels."
Across the pond, signs of deflation abound. Germany's import price index dropped 3.4% MoM in November on top of a 3.6% drop in October. This was well below the consensus estimate, which was looking for a 2.5% decline. In France, producer prices plunged 1.9% in November on top of a 0.9% decline in October, well below the consensus, which was looking for a 0.9% drop for the month. Meanwhile, European industrial orders dropped 4.7% MoM in October on top of a downwardly revised 5.4% decline in September. This took the year-over-year rate to -15.1%, which is the the worst on record. We also see that German consumer confidence remained essentially unchanged at 2.1 in January from 2.2 in December.

The next bailout: commercial real estate

Now that the auto-makers have secured a $17 billion bailout, the next group heading to Washington for government assistance is property developers. Take a look at the front page of today's Wall Street Journal, "Developers Ask US For Bailout as Massive Debt Looms." Developers are warning policymakers that office complexes, malls, hotels and other commercial real estate are headed into default and bankruptcy. According to Foresight Analytics, some $350 billion of commercial mortgages will be due for refinancing over the next three years. And, with credit virtually unavailable, borrowers will have give up the property to lenders.

Whiffs of deflation in pharmacies

Take a look at page B3 of today's WSJ, "Pharmacies Fight Tough Battle on Generic Prices." In response to a discount prescription drug program from Wal-Mart, retail pharmacies like CVS, Caremark, Walgreen's and Rite Aid have started to aggressively promote their discount drug programs.

Breaking News Today's events

It is quiet today with no economic data released. Tomorrow, we'll get the final take on third quarter GDP, which is expected to remain at -0.5% QoQ annualized. The U of M index of consumer sentiment is due as well and expected to drop to 58.7 in December from 59.1 in November. New home sales are expected to drop again to 415,000 units annualized in November from 433,000 in October. Existing home sales are up too and expected to drop to 4.93 million units annualized in November from 4.98 million units in October. On Wednesday, we'll get the personal income and outlays report. Personal income expected to come in flat in November while spending is expected to drop 0.7% MoM in November on top of a 1% decline in October. The core PCE price index is expected to drop to 2% YoY in November from 2.1%. Durable goods round out the week and are expected to drop 3% MoM in November after a 6.9% collapse in October. Ex-transportation orders look to drop 2% too after a 5.4% plunge in October.

Making it up as he goes along

The latest news out of the Obama economics camp is that the upcoming fiscal plan will create 3 million jobs instead of the 2.5 million pledged just a few weeks ago. It begs the questions: How does the government "create" jobs anyway? What jobs? Where will they come from? Doesn't the government really help create and nurture the backdrop for the private sector to generate employment and economic growth? See "Obama Expands Recovery Plans As Outlook Dims" on the front page of the Sunday NYT. Indeed, 3 million jobs sounds good and makes for front page headlines, but it would be useful to see a line-item list of where these bodies are going to come from and whether they have the skills to build new ports, medical infrastructure, mass public transit infrastructure and expanded electricity grid and "green" technologies.

Let's do the math

We have 1.2 million unemployed construction workers. We have 123,000 unemployed architects and engineers. We have 83,000 unemployed machinery workers. We have 145,000 unemployed transportation-related workers. So that brings us to barely more than 1.5 million of a labor pool the government can tap into for all the new building activity. But the bulk of the joblessness is in financials (up to half a million), retail/wholesale (1.2 million), leisure/hospitality (1.3 million) and health/education (1.2 million). And if investment bankers, shopkeepers, bell captains and medical chart technicians have anything in common it is that they don't have much experience in shovel-ready activities.

Urban renewal in Obama's fiscal package

As an aside, we published a report two weeks ago highlighting the need for urban renewal as part of Obama's fiscal package - and it looks like somebody in Washington shares our view. See "Top Democrat Seeks to Boost Mass Transit's Share of Funding" on page A4 of the weekend WSJ. This is a secular theme. Another place we can see Obama's infrastructure program touch is the nation's levees, where repairs have lagged. See the front page of today's USA Today for more, "Most Levee Repairs Lagging."

Deflation risks are intact

Households have lost over $7 trillion in terms of net worth in the year ending 3Q, and it looks like this wealth destruction will top $10 trillion when the 4Q Fed flow of-funds data come out (that already exceeds the entire $4 trillion loss during the tech wreck). For a great synopsis, see "A Deflation Maelstrom In the Making" on page 11 of BusinessWeek. Friday's WSJ (page B1 - "Retailers Drop Prices to Avert a Flop") was filled with stories of how merchants are discounting more now than they were on Black Friday. Macy's has cut the prices of its diamond earrings from $800 a pair to $249 and the GAP just sliced another 60% off its already discounted clothing prices (as Bloomberg News reported over the weekend) and we are supposed to be consumed about deflation fear. Really? As a sign of how consumers are delaying their purchases in anticipation of even lower prices, only 47% of shoppers have completed their holiday activity versus 53% a year ago. We regard this as evidence that deflation expectations are creeping in.
And one of the conditions for deflation is, of course, wage flexibility, and everywhere we look, we see an increasing number of companies cutting back on their wage bills. FedEx is just one example - slashing wages for 35,000 employees by 5% (that is 16% of the company's workforce), including a 20% base pay cut for its Chairman and CEO (plus no company contributions to 401k plans in 2009). We also see that Nortel, Eastman Chemical, Newell Rubbermaid, Agilent Technologies, Atlas World Group, and AK Steel Holding have all cut wages and salaries in the past few weeks. According to Watson Wyatt Worldwide, another 6% of companies also plan to cut wages and benefits and 23% intend to reduce the size of their staff in 2009. Also have a look at the front page of "In Need of Cash, More Companies Cut 401(k) Match" - again, the labor market is definitely deflating. Not only that, but these cuts to 401(k) contributions are going to accelerate the process towards rising personal savings rates in coming quarters and years - again, a highly deflationary development and we are not sure that there is an appropriate response to this given that the savings rate is already at rock bottom levels of around 2%.
Moreover, the national labor market has frozen to such an extent that labor mobility has contracted significantly - see "Data Show Drop in Americans On the Move" on page 27 of the FT. Also have a look at front page of today's New York Times, "More Companies Cut Labor Costs, Without Layoffs." Companies are implementing four-day workweeks, unpaid vacations, wage freezes and pension cuts but keeping their headcount. Finally, take a look at page 13 of today's Financial Times, "Christmas Shutdown in Silicon Valley." What is usually limited to traditional manufacturing industries like auto has now hit tech. Companies across Silicon Valley are shutting down until after the holidays to cut back on spending. In spite of the forced time-off, some workers will be required to use up part of their holiday entitlement or if they don't have vacation days, take unpaid leave.

Historians may title this era GDII

As we said, historians may look back on this era and title it GDII: After all, look at how people are behaving - one of the newest fashions is renting movies about the Great Depression, or that have a similar theme like the "Grapes of Wrath" and "It's a Wonderful Life". See "Reality Can be Escaping, Too" on the front page of the Sunday NYT's Week in Review section.

Consensus still loves equities and despises bonds

See Barron's for more on the 'groupthink' theme - every single strategist surveyed (outside of us) sees the 10-year note yield backing up next year from current levels (page M12). The consensus is 3% for the end of 2009. As for equities, the Roundtable (see page 23) is at 1,045 for the S&P 500 (which would be +15 from here). Nobody is lower than 975 (Rich B's prediction) so +10% is at the low end of the entire spectrum. Health care was cited as a 'favorite sector' by 10 of the 12 pundits, and at least one of utilities/staples/telecom showed up on the top list of two-thirds of the respondents. So the view seems to be that we are going to have a bounce next year, led by ... the defensives. Interesting.

We don't understand why so many are bearish on rates

What we truly don't understand is why it is that so many folks are bearish on interest rates when in fact we need a sustained period of very low yields to help blaze the trail for the next sustainable economic expansion: After all, isn't it good news that, because of Mr. Bond's strength and resolve, we now have the benchmark 30-year fixed-rate mortgage at the lowest level in at least 37 years (5.27%)? Mortgage rates are now down 7 weeks in a row (it does the beg the question, however, as to why it is that mortgage applications for new purchases slid at a 20% annual rate in November and are off in 9 of the past 10 months). And despite the best affordability ratios in 35 years, what did we hear from Lennar last week - that its order book collapsed 46% in the past year and backlogs are down 67%. Maybe the classic affordability ratios that use conventional mortgages don't tell the complete story - because nonconventional mortgage rates have lagged with jumbo loans still costing 6.9%.

Homebuilders pressuring Washington for a bailout

As the bailouts pile up, we thought that the best read of the weekend was from the Weekend WSJ - see page W1 ("Is the Medicine Worse than the Illness?"). And now we see that the homebuilders are pressuring Washington to provide first-time homebuyers with a $22,000 tax credit. It's as if there is now a pervasive belief that there is a bottomless pit of cash ready to be put to use to correct all the excesses of the past decade from financials, to autos to builders. It's amazing that we could have let so many tech companies go belly up in the last cycle but have gone this route of accelerating rescue packages this time around. At least in the last cycle, we were running balanced budgets as opposed to trillion-dollar deficits. What does concern us is the risk to civil liberties when bankruptcy judges can alter contracts, the government can force banks to accept public capital injections (Jamie Dimon said on CNBC he didn't want or need Paulson's help), the government by fiat can bring mortgage rates down as opposed to market forces, the government tells lenders how to price their credit card business (since when did a piece of plastic become a right instead of a luxury?).

The major risks for 2009

We continue to believe that trade protectionism, competitive devaluations and military conflicts are the major risks for investors for 2009 - this is, after all, the most broadly based global recession (according to the IMF, not just us) in the post-WWII era: Ecuador defaulted on its foreign debt. Since the G20 meeting in Washington in October, five of those countries - Russia, India, Indonesia, Brazil and Argentina - have announced their intentions to raise import tariffs or otherwise restrict trade. Russia has announced plans to raise tariffs on autos; India has already lifted duties on iron, steel and soy; Brazil and Argentina are putting together a case within Mercosur for boosting external tariffs. Vietnam just raised taxes on steel imports to 12% from 8%. The EU said it may reimpose duties of 79% on a paper-binder component in retaliation against China. French President Sarkozy has established a $7.5 bln fund to invest in domestic companies so as to avoid foreign takeovers. China has reinstated export rebates and now we see that US steel, textile and paper markets intend to file complaints against Chinese imports, and did anyone notice that this auto-bailout excludes foreign companies?
It's all about self-preservation. We think that for anyone who missed it, the article on the front page of Friday's NYT is a worthwhile read ("After 30 Years, Economic Perils on China's Path"). Russia also cannot be regarded as a stable data point either as it just posted its first monthly budget deficit in November and the sovereign debt was just downgraded by S&P for the first time in a decade (Friday's WSJ reports says "public panic is one of the Kremlin's greatest fears"; the NYT reports that "as Beijing worries about strikes and mass layoffs even in some of the its most prosperous areas, official tolerance of political dissent has seemingly narrowed".) Gold will be an important hedge against policy missteps
Gold, in our opinion, is going to be important hedge against such policy missteps in 2009; and not only gold, but security of supply and government procurement policies may end up putting a floor under the beleaguered commodity complex earlier than a lot of folks think. As the chart below attests, there is a pretty good link between government spending as a share of GDP and the CRB index, because governments don't buy clothing or jewelry but they do buy "material".
And as for gold, the chart looks good against a vast majority of currencies and has broken out against Sterling. See chart below.
Chart 1 - Gold in sterling terms
As we said before, the new growth engine for the economy is government spending, which is already on the rise and set to take out the prior high of over 23%. After all, when you are in trouble, you go to family members for help first. Uncle Sam.....?
Chart 2 - KR-CRB Spot Commodity Price Index

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