A resolution for 2010 and beyond: No more mindless, repetitive TV. I will not watch things I have recently seen, just for the sake of familiarity or passing the time. In other words, I hope to resist stopping on any of the Rocky movies...or Old School...or Hoosiers...or The Princess Bride...or Bull Durham when I am flipping through channels. "Inconceivable!" Why do I do this? I already know what is going to happen! I feel like this trait has gotten worse over time for me...somehow the familiarity of these types of movies is like "comfort food," but it needs to stop. I think it's actually eating away at my brain cells and making me dumber. If I can't find something new to watch, then I am not watching at all. And I am going to use a five-year (or thereabouts) threshold from the time of my last viewing (for movies I don't remember that well) as the cut-off point to start...
Rant: Why is sushi "less-than-spectacular" in Miami, and what does this have to do with The Economist magazine? Brielle and I love sushi, and we probably ate it once a week steady in NYC. But since moving to Miami, even the "best" restaurants (Nobu, Blue Sea at the Delano) have "eh" sushi. Why? Our corner spot on the Upper West Side at 93rd and Amsterdam (Yuki) blew the Miami spots away, to say nothing of the major NY spots like Kuruma Zushi, Blue Ribbon Sushi, et. al. There was just something missing...a flavor burst, a "pop"...in the local fare. It looked great, and tasted good, but did not have that extra something. I had an idea why, but it wasn't until I spoke to The Economist's delivery people on the phone that I thought I had a solid answer. Follow me here...I used to get The Economist on Fridays in Manhattan. That set-up the perfect weekend reading opportunity. In fact, I'd usually knock out a few articles early Saturday mornings while taking the 2/3 train down to Wall Street to play hoops with the guys... But, for some reason, The Economist shows up in my Miami mailbox on Mondays or Tuesdays. This is less than ideal, and I usually don't get around to reading it during the week. Thus I am always "a week behind." So I called up and asked why... Once the woman at the other end of my line "ran" my zip code, she said "ooooooh, you live in Miami..." "What does that mean?" I asked. She said, "well...Miami is a little...um...slow with deliveries. If your magazine gets there before Wednesday, it's not considered late. Nothing we can do, it's just Miami...sorry!" Hmmm. So let's get back to sushi. When we first moved here, I noticed everything seemed a bit...slower. Less hustle. Thus my initial hypothesis on sushi - considering it looked the same, felt the same, but was missing that extra burst of flavor - was that maybe delivery here was...well, slower. Maybe the fish sat on the back of the truck for a few hours while the guys took a siesta, I dunno... After all, little - if any at all- sushi is local to Miami. The Big 3 - salmon, yellowtail, tuna - are cold water fish, and have to be flown in. So despite the fact that we're surrounded by water, unless you are getting the grouper, chances are your fish is delivered from elsewhere. And now, after my conversation regarding a magazine delivery, I sort of had anecdotal evidence I might be right about the sushi here: I think it sits on the back of the truck for an extra hour or two, and somehow has less flavor as a result. So...take it from the Subscription Desk at The Economist: don't expect to be dazzled by the sushi in Miami. (Side note - there is one amazing sushi place here, called Matsuri. It's in a strip mall - not kidding - in Coral Gables and is NYC quality in terms of food and decor. I have no idea how they pull this off. You walk from a strip mall parking lot into what feels like a sleek midtown Manhattan spot. And the fish has that "pop." Love it there, but it's a complete mystery to me as to how they do this...)
Rant: The Hangover was wildly overrated. Seriously. Admit it. First, and most important, I think the studio made a major mistake in essentially previewing every single funny moment in the teaser for this film. For example, the Mike Tyson scene would have been ten times funnier if it actually caught me by surprise instead of being previewed. Remember the cameo appearance in Wedding Crashers by Will "Ma, the meatloaf!" Ferrell? Wasn't that much funnier because you had no idea it was coming? So why does a movie with as many good scenes as The Hangover give them all away in previews? Second, even if the previews had been "limited" and actually left something for the movie itself, I still don't see how this movie is any funnier than Old School or Wedding Crashers... Not to mention, hasn't this movie been done before? How different - really - is it from What Happens in Vegas Stays in Vegas? I dunno...I just did not get it. Entertaining...sure. Funny...a few times. But "OMG, rush to the movies and see this" or "funniest movie ever"...not a chance.
Observation: While being "worked on" in physical therapy the other day (still working out the kinks from a torn achilles and subsequent surgery), I realized that maybe "therapy" is too kind a word for it. Therapy brings to mind warm baths, scented massages, and happy thoughts. No offense to physical therapists, but I could never categorize any of my 100+ sessions over the years as anywhere near warm, fuzzy, or happy. Here's a more accurate term: physical agony. I think this might catch on. For example,
Ben: Hey, what's new?
Guy at gym: Oh man, pulled a muscle...need to get it worked on...
Ben: Sorry to hear that, but I know a great Physical Agonist...you want the number?
Guy: Definitely...a good PA is really hard to find...
Observation: I recently read the Michael Lewis book The Blindside (haven't seen the movie yet...) and particularly loved the first couple of chapters that frame the "blindside" concept and its importance in today's pass-happy football. In fact, the book argues, before Lawrence Taylor - and in particular before his seminal Monday Night Football sack of Joe Theismann - it was simply known as "the left side." Anyway, the book brought back the memory of 80's football and "one bar" players like Theismann and most kickers/punters. Remember those helmets? It was great... nothing said "I do not want any physical contact nor to be touched" like the ol' one bar. I always wondered, were those guys mega cocky (as in, my line will protect me, I will never get hit, thus one bar is all I need) or just mega wimpy (I run from all contact and barely need a helmet at all)? It's a shame there isn't a modern equivalent of the one bar in school or the workplace. It would let you know - right off the bat - what you are dealing with... If I walked into a doctor's office and he was wearing the "one bar," I would know his deal and walk right back out. No harm, no foul. There's gotta be a away to put this into practice...
Disclosure: Some people ask about the work terms I use... the "trading words" and what they mean. Here's a breakdown of a few of them, and I apologize for making the assumption that most people know these terms as well as many finance folks know them.
"Sell short"...as in "I am a short seller of that guy", or "I am short that idea." To sell something short is to profit from it going down. In other words, if you think that Apple will pull its iPhone from AT&T's service, you might expect AT&T to go down due to the potential revenue loss from iPhone users. Thus you might want to sell short shares of AT&T in order to profit from them going down. This sounds confusing, but is really easy to do, and if you want the technical explanation of exactly how this works, drop me a line. But for now just know that if you are short a stock then you expect - and want - it to go down. Thus if one of your friends says "let's go to that seedy bar where all the criminals hang out" late one Saturday night, you might respond "uh...I am short that idea, dude." Similarly, you might be short the NY Jets heading into this weekend's playoffs...
"Treat me subject"...as in, if someone asks you if you are coming over for their Sunday BBQ, you might respond "treat me subject, need to ask the wife." In trading terms, treating someone subject literally means "you can consider me a go to buy/sell...subject to final approval from my boss." In other words, it's an indication of positive action, with an out clause. Or, it's another way of saying, "I am 90% in, but if something crazy happens at the last minute, please know I had good intentions and I am not a flaky schmuck." It's important that this term not be abused - it doesn't mean you reserve the right to be wishy-washy. Instead, it's a genuine promise of solid intent, with a wildcard reserved for things unknown (or beyond your control)...
"Hit the bid"...as in "as soon as the guy showed interest in my car and asked me if $5000 worked, I hit the bid." To step back a second, "hitting the bid" is what sellers do and "take the offer" is what buyers do. (Side note: it sometimes drives me a little crazy when people say "what did you offer for the house?" You don't "offer" if you are a buyer...you "bid." The seller "offers.") So in general terms, "hitting the bid" means aggressively accepting something before someone else beats you to it. For example, if a young lady in Manhattan approaches you and a buddy and generally asks to dance, you might "hit the bid" before your buddy does. Make sense? Inversely, if someone says "I can't eat this, who wants my last cookie," you would "take the offer" before someone else did.
"He faded on me"...as in, "he told me he'd help me move the sofa, but he faded on me." This refers to a buyer or seller who backs away from a verbal agreement to transact. This is generally a douchebag move. If a broker says to me, "the seller offers you 100k at $10" and I say "done, I buy 100k at $10," sometimes the phone will ring right back (never a good sign) and the broker will say "uh...Ben, he faded on us." That means the guy initially pledged to be a seller at $10, I acted fast and locked in the deal, and he panicked when he saw the stock moving up quickly (so maybe the stock was already at $10.10 by the time all parties got off the phone) and he backed away from the trade. Happens less than you think - good traders know their reputation means something, and even when you mis-time a trade and might not buy as low or sell as high as you want, you need to accept the trade and make good on your word. In "regular life," if you have a friend who fades on you a fair amount ("he bailed again..."), then he's probably not a friend.
Rant: Holidays and birthdays always remind me how much I hate posed photos. Some people - my in-laws, for example - love posed photos. But I go the other way. To me (insert "sarcasm font" here), nothing says "capture the moment" like "hey you guys, quietly talking and sharing a moment...let me steal that moment away from you by interrupting you, asking you to smile, and rearranging you." I mean, seriously? Why break away from a drink, a conversation, a moment in order to arrange a photo around it? Dear photographer: you are not "capturing the moment" but instead you are "capturing my annoyance at having that moment taken away from me by the necessity to pose." To me, this is kind of disingenuine and sometimes shallow...after all, why do you think people who fake their way through life are called "posers?" Why try to create something larger than the event or the moment itself by posing us in it? As soon as we are posed, it's no longer that "real moment" anymore! In my opinion, candid shots are much preferred...and aren't they the best pictures at the end of the day, anyway? Is this coincidence? Look, it's one thing for someone to pass by and ask a conversant group of people to look at the camera... That takes two seconds and it's the lesser of evils, for sure. Generally, it's done and forgotten and later when you are sent the photos, or see them on Facebook or Flikr, you probably say "totally forgot about that - great photo..." And sure, we can take one group shot at the beginning or the end of the event. But the arranging or the "multi-take" drives me especially nuts: "now you and your mom...now with dad...now just the girls...the cousins only!...now the siblings...one more...ok, really one more...ok, just one mooooore..." Holy crap! Stop! This just becomes a staged event, and in hindsight it reminds me not of the great event itself, but instead of the incessant calls of "cheese" and "wait, one more..." and the forced fake smile that hurts your cheeks to hold it for thirty seconds. And then, when it's all said and done everyone generally turns back and says "wait, what were we talking about?" Moment = gone! So I say enough with posed photos. They have had their time. (Which by the way - in my opinion - may be happening naturally... Ever notice how people's pics on Facebook - other than the candids - are usually some megasarcastic crazy face or smile? It's generally a face that mocks the camera, and mocks the photo-taker in some subtle way. The drama of the fake face seems to hyper-expose the photo as altogether silly. It becomes a parody of itself. Likewise, there's a reason that all those "normal" posed photos from years past are ending up - with great success - on sites like Awkward Family Photos. Side note: after posting this, my in-laws will now probably never speak to me again...)
That's all for now folks... Happy 2010 and check back for more soon... Ben
Tuesday, January 5, 2010
Futures flat this morning as markets pause ahead of today’s economic data, including November Factory Orders (10am), Pending Home Sales (10am) and December U.S. auto sales. Overseas,
is set to borrow more from banks as it seeks to lower its budget deficit after cuts to its credit ratings. Bullish comments out of BofAMLCO today: The HY bond market finished the year in spectacular fashion registering a 3.1% return in December (as measured by BofA-ML's HY Master II; H0A0). For the full year, index returns reached 57.5%, its highest ever. The distress ratio - measured as a proportion of bonds in the index with spreads over 1,000bp - dropped to 17.9% in HY, the lowest level for this metric since May 2008. As HY traditionally leads equity, these developments jive well with BofA-ML's bullish outlook for the Greece equity market in 2010 which calls for a 12mo target of 1275 on the S&P, implying 12% return from current levels. We are positive on the Airlines, and the Autos, both notes are tied the economic recovery. Amidst all the bullishness and froth, however, Morgan Stanley’s Asia Chairman Stephen Roach sees a 40% chance of a double dip recession for 2010. He also said US monetary policy makers should start to exit emergency stimulus measures now if the economic recovery is indeed as strong as they say it is. See quote section below for the full text. In corporate news, BRK/A – which is the top KFT shareholder at 9% - voted against the proposed KFT capital raise needed to help buy U.S. CBRY LN. KFT also announced it would sell its North American pizza brands to Nestle for $3.7B, affectively taking Nestle out of any Cadbury bidding. GOOG releases its smartphone today – early reviews are quite positive. Rumors continue to circulate that AAPL will release its tablet device later this month. Note that – according to BofAMLCO - financials represent 25% of all shorted stocks in the S&P1500 and continue to be in an oversold condition. WSJ reports personal bankruptcy filings were up over 30% year-over-year for 2009. BBERG reports apartment prices fell for a third consecutive quarter as the decline from the peak reaches 21%. Franklin Templeton’s Mobius sees emerging markets off as much as 20% as a wave of IPO supply floods the markets. The IMF sees commodity prices moving higher in their 2010 outlook. Manhattan
Solid summary of “Opening Day: 2010” from BTIG’s Mike O’Rourke last night:
The past seven weeks of consolidation must have had investors chomping at the bit to start putting money to work. The S&P 500 posted its best performance in 8 weeks. While we are encouraged by the positive performance, celebrations should be moderate. The first day of trading in 2009 kicked off with a 3% gain, and while the year finished nicely, it was a painful ride for the index to add another 23%. Another minor short term concern is the level of bullishness in the weekly AAII Sentiment data. The reading from last week is 68% bullish, which is close to the sell signal threshold of 70%. The reading has not been this optimistic since the 70.7% reading tallied in late February 2007. Coincidently, that reading was registered just before New Century went bust, which we deem to be the inaugural event of the credit crisis. At that time, the S&P 500 registered a 3.5% down day, which was a big move back then. If you recall, during the previous year, 2006, only 2 sessions registered single day changes greater than 2%. If investors purchased the S&P 500 when sentiment dropped below the 30% bullish threshold, they generally caught good rallies, even during the recent bear market. A two decade low in bullish sentiment was registered at 21% the week of March 6th last year. Needless to say, this is generally a very good timing indicator and should not be taken lightly. The holiday schedule likely provided some distortion to the poll so we are waiting for this week’s reading, which is due on Thursday.
BCAP cuts FNF. CSFB ups POT, IPI. CITI cuts SPW. JEFF cuts BFRM, HMSY. ACH positive comments out of MSCO. BCAP initiates AIB, IRE with UW. GSCO cuts
ASIA. BSQR renews distribution agreement with MSFT. JEFF cuts CBY. CELL lowers guidance. CRH lowers guidance. BCAP initiates RBS, CS at Equal Weight. JPHQ cuts CXO. BCAP initiates HSBC, DB with OW. CSFB ups ERIC. cxls 50M swine flu vaccines (GSK). LAD, AXL, BIIB, TGI upped at BofAMLCO. MSCO initiates PALM with OW. PETD cut at JPHQ. RAJA ups PSYS. MSCO ups QCOM. THC rated Conviction Buy at GSCO. JPHQ cuts XCO. GSCO upgrades RSH. BARD ups AVY. BofAMLCO cuts AAI. BARD cuts FSP, GAS, PNY, SLGN, TE, XEL. France
Brightpoint PreMarket (yest close/premkt/% change/volume):
S&P 500 PreMarket (last/% change prior close/volume):
TENET HEALTHCARE 5.95 +9.17% 154048
RADIOSHACK CORP 20.91 +5.77% 16250
INTERPUBLIC GRP 7.20 -4.38% 10000
SLM CORP 11.90 +3.12% 200
BIOGEN IDEC INC 55.15 +2.82% 19480
KRAFT FOODS INC 28.14 +2.59% 287271
HOSPIRA INC 52.05 +2.22% 428
Today’s Trivia: Where is the only active diamond mine in the
? United States
Yesterday's Answer: According to Amnesty International,
Finland – perhaps due to the popularity of hunting – has the most guns in Europe, per capita.
Best Quotes: Double-Dip Risk Seen in ‘Stall Speed’ Recovery: Stephen Roach (2010-01-04 20:00:00.0 GMT)
Jan. 5 (Bloomberg) -- Where there was despair a year ago, today there is hope. Policy makers have been successful in putting in a bottom to the most wrenching crisis and recession of the post-World War II era. Yet the outlook remains uncertain. That’s because the bottoming process, however encouraging, does little to inform us about the character of the coming economic recovery. There are four key reasons to remain skeptical about the vigor and sustainability of any rebound in the global economy:
First, the financial crisis itself is far from over. The latest International Monetary Fund estimates put the potential for worldwide writedowns of toxic assets at approximately $3.4 trillion; so far, realized markdowns have been only about half that amount. This points to further earnings impairments for financial institutions and concomitant restraints on their lending capacity.
Second, the breadth of this global recession was staggering. At its low point in March 2009, 75 percent of the world’s economies were contracting. Typically, the figure is closer to 50 percent. This means it will be much harder to turn around this recession-torn world.
Third, the demand side of the global economy is likely to be restrained by a protracted pullback of the over-extended American consumer. In the face of a massive labor market shock to jobs and wage earnings, together with the bursting of property and credit bubbles, the consumption share of the
economy is likely to fall by five full percentage points of gross domestic product -- from its current record of 71.2 percent to the pre-bubble norm of 66 percent. This should reduce trend growth of real consumption from the almost 4 percent pace of the pre-crisis decade to 1.5 percent to 2 percent over the next three to five years. No other consumer in the world is capable of filling this void.
Fourth, the supply side of the global economy suffers from massive imbalances, especially China-centric developing
Asia. While, on the surface, post-crisis resilience of the Chinese economy has been impressive, it turns out that 95 percent of the 7.7 percent GDP growth realized in the first three quarters of 2009 was concentrated in the fixed investment sector, which already accounts for an unheard of 45 percent of GDP. By compounding its existing imbalances, to say nothing of funding this stimulus by a record surge of state-directed bank lending, risks a serious misallocation of capital and a worrisome deterioration of bank loan quality. China
Considering these powerful headwinds, I expect trend growth in world GDP to average about 2.5 percent over the next three years -- the weakest recovery of the modern era. Significantly, such an outcome would be very close to the “stall speed” for a $70 trillion global economy, meaning that a shock could easily trigger a relapse, or the dreaded double dip. While seemingly sacrilegious in these days of froth, the theory of the double dip is hardly controversial. Normally, in a cyclical upturn, the release of pent-up demands provides an ample cushion of cyclical resilience, enabling an economy to withstand periodic shocks. By contrast, a recovery lacking that cushion is far less capable of warding off the unexpected blow. Right now, of course, these concerns ring hollow. Fueled by a temporary boost from the inventory cycle, the hopes and dreams of a vigorous, or V-shaped, recovery suddenly seem credible. But as the inventory dynamic fades -- it always does -- and the weak state of underlying demand re-emerges, a post-crisis recovery could quickly become vulnerable.
Two potential shocks would play right into that vulnerability, the first being a failed exit strategy from the Great Stimulus. Policy makers are not lacking in tools or tactics to withdraw the extraordinary fiscal and monetary stimulus that has been put in place to save the world. Unfortunately, they are lacking in political will. The odds are high that
’s Federal Reserve will once again embrace an “asymmetrical” exit strategy -- quick to slash the federal funds after the onset of a crisis but slow to normalize policy settings in recovery. This would be a replay of the delayed normalization of 2002-2006, which played a key role in fueling new bubbles and imbalances, setting the stage for the Great Crisis. America
A second possible shock would be heightened trade frictions and protectionism, especially a Washington-led outbreak of
bashing. With the China unemployment rate likely to remain higher than 9.5 percent heading into the mid-term congressional election of 2010, the Chinese currency issue has once again become a bi-partisan lightning rod. If U.S. Washington imposes trade sanctions, the Chinese would undoubtedly reduce their appetite for dollar-denominated assets, with severe implications for the dollar and probably real long- term interest rates in the U.S.
No one can predict shocks. But the theory of the double dip is very clear in one important respect: Shocks can deal lethal blows to anemic recoveries. That remains a real risk in this still fragile post-crisis climate. In contrast to the denial prevalent in today’s ebullient financial market climate, I would assign about a 40 percent chance to a global double dip at some point in 2010.
(Stephen Roach is chairman of Morgan Stanley Asia and author of “The Next Asia.” The opinions expressed are his own.)