Miami Driving. It hit me this morning. The critical distinction between the commuter experience in Miami versus New York City (or any other major metropolitan city, probably) lies in the striking difference in approach - or attitude - toward the commute itself. You see, New Yorkers are problem solvers. (These are people who spend their free time on the subway doing crossword puzzles or sudoku...by contrast, in 2.5 years I have never seen anyone in Miami ever do a crossword puzzle. or sudoku.) New Yorkers see the commute as sport: they choose to approach it as a challenge...as a gauntlet to be run. Each and every day creates an opportunity for increased efficiency or for a better overall time. Hell, guys used to come into work bragging about a "great move" that shaved minutes, or out-elbowing someone through the turnstile to catch the train door, or discovering a new stairway that allowed for a quicker exit from Penn Station. You get the idea: New Yorkers worship at the altar of efficiency and problem-solving. In part, it helps make The City what it is. Here? There is no such approach. I see the northeastern commuter as a warrior, suiting up for battle each and every day, whereas the Miami commuter brings kitten posters to mind: Hang in there... or It'll get better. These are Garfield people, who accept their lot in life and could care less if they get to work sooner or later or even at all. The message is, the commute is a drag...I don't care. Where is the heart, people? Where is the attitude, the effort? How about rising to the challenge and actually - gasp! - making it better? Or, how about paying attention at all? (That would be a start.) From my perspective, this is incredibly frustrating. I seem to be the only person, day after day, who understands that you have to make it past that one light in order to catch all the others. I seem to be the only person who understands that cutting through the parking garage when it looks like I will miss the next light can save valuable minutes. I seem to be the only person who is actually not texting or talking on the phone during the morning commute. And I am certainly the only person who is actually ready to accelerate when the light turns green. Imagine that. (But hey, I also work in a building where I watch people walk the entire length of the parking garage ramp in order to take an elevator one floor down instead of simply taking the stairs...which are right next to where there parked. btw, stairs get no love in this day and age. I might have to do an entire future rant about people who actually take the elevator in between floors of the gym while they are there working out! I mean, huhn?). Anyway, go figure: in Miami, it is what it is...but some days, what "it is" is also waaay too much to handle for any sane person... (And do you know the punchline of this entire rant? How long is my commute that it could cause such vitriol? And also cause the certain knowledge that a texter will crash into me through absolutely no fault of my own and that there is no way I can even prepare for that or avoid it? Ahem...3.1 miles...which can actually take up to 30 minutes! Imagine what this blog would look like if I had a ten-mile commute.)
More. Since I am on a roll here, let's keep going. Here are a few other observations about Miami, its drivers, and its roadways. First (and I have never seen this in anywhere else - I just assumed all cities had a uniform infrastructure and copied one another), traffic lights in Miami are not hung over an intersection to give everyone the proper perspective and view of the lights. Instead, they are generally hung closest to each street approaching the intersection. That probably sounds vague, so let me say it this way: when you pull up to the white line at a Miami intersection, you can not see the traffic light unless you are in a convertible because it's directly overhead! The best view of the "light-change" is thus typically a car length back from the intersection, and most cars at the front either don't see the light change at all, or are too lazy to crane their necks upward to see what is above them. So in that sense, the infrastructure - the set-up of the roads - is not exactly helping the driving experience. Second, I may have a theory as to why people don't actually go at a green light. This has been puzzling to me. Half the time I can see what the person ahead of me is doing, and it's usually talking on the phone or reading the paper or taking a gulp of coffee instead of watching for the light. But the other half of the time, I see the brake lights release as they take their foot off the brake...and then...and then...and then...there is this 2-3 second pause before they hit the gas to accelerate. What does this mean? Is it that hard to shift your right foot off the brake and onto the gas? Does everyone in Miami have Parkinson's or something? Or can people possibly be that lazy? Hmmm, well...maybe not, actually. In trying to give Miamians the benefit of the doubt, I came up with this theory, which again stems from a structural issue: Up north, when one light turns red, there is a one mississippi, two mississippi, three mississippi pause before the perpendicular light turns green. (Which is presumably for smart safety reasons and adds a buffer in case someone blasts through the yellow-to-red coming the other way.) Every kid who tries to jump all the cars waiting at a light by pulling up alongside in the "right hand turn" lane knows this by the time they are 16-years-and-1-day old. But in Miami, there is no delay of any kind. When the other light goes red, yours goes green immediately. My theory is that people probably run - or at least "close shave" - red lights all the time in Miami...and as a result, the drivers here have built in their own slight safety delay when the light turns green in case some Porsche-driving d-bag late for his tee-time flies through the yellow-to-red light the other way and risks taking you out in the intersection. So ironically, not going at green may simply be a survival response to another terrible planning/design issue here since there is no "safety" delay at our intersections.
More. Here's another good one. I also have a theory that non-native speakers here may very often confuse right and left when following directions. I have never, ever seen more cars brake to turn, realize it's not their turn, and then swerve across traffic to attempt to make the opposite turn at the same intersection. Yes, you read all that correctly. That happens here...a lot. Look, I have seen plenty of people pause to turn (let's call it a "left" for the sake of illustration), realize it's the wrong turn, and then straighten out and drive forward and make the next left turn. We've all done that. And I assume - in part - it's because most of us know we have to turn left, but just turned left too early...maybe at 14th street instead of 15th street or whatever. But very rarely have I ever gone to turn left and realized "oh wait, that was supposed to be a right." And IF that ever happened, my logical response would probably be to make that left regardless (but as a u-turn), then make another left to get back on my "main road" for a shot at turning right this time as I re-approached the intersection. But under NO CIRCUMSTANCE would I say "oh crap, I should be going right here and not left," then break out of my left hand turn and swerve across traffic to force the right hand turn. I mean, WTF? Again, I see this once a week in Miami. And I have no idea why.
Last driving observation. Dear Random Miami Driver: Why are turn signals so difficult for you? Is it that much of an effort? Does it require Herculean strength to flick that lever up or down in your car? Is it stuck? Or are you purposely trying to trick me... perhaps to get me to careen into the back of your car as you randomly smash on the brakes and violently turn either left or right at a whim? Or do you feel that driving is a private experience and thus your thoughts and movements are protected under the Constitution and thus not subject to public - and public safety - display? Is that it - are you just a Libertarian at heart? Please explain. Thanks, Ben. Seriously...I understand that turn-signaling is lax in many places. But I also know that in places like Rome I am only going 15mph down the little cobblestone street anyway and really it's not that big a deal. But in Big American cities, on Big American roads, and with Big American cars PLEASE use the damn turn signal! Do you really want someone to plow into the back of you? Don't you think the nanosecond flick of a wrist effort is worth staving off a potential pile-up? Again, I see a near-accident from lack of turn signals at least once a week here. And once again, I just don't get it.
Dumbing down of America. It's easy to rant against television - among other things - as causal to the gradual "dumbing down of America." It's easy to point the finger at an electronic box that fills in all the blanks for your mind (unlike books - which require you to translate the written word into mental images yourself) and promotes a type of mental atrophy that was outlined in a recent Newsweek cover story on the death of creativity. But I think it goes further than that. There is one particular aspect of television - especially cable television - that stands out to me that no one seems to question. Since roughly 1985 when MTV came on the scene, HBO came into its own, and cable TV exploded, the concept of playing the same movie over and over again became the norm in cable television programming. And - this is my theory here - the mindless repetitive viewing of those movies probably causes exponential "creativity atrophy" in all our brains. (While at the same time perhaps surprising the hell out of the cable companies. Can you imagine that first HBO board meeting when the Neilsen results or whatever measuring-stick they had came back and someone said "holy crap - we never thought we'd get away with this, but people actually watched the same movie three nights in a row!") Someone please tell me - how come this goes completely unnoticed in today's world? Remember, before cable TV (and VCRs, I suppose) we all watched favorite movies annually (!!)...The Wizard of Oz was on every year around Halloween...The Ten Commandments was on at Easter time...Singing in the Rain was on sometime in the spring...and I am sure there are other examples. And all of a sudden cable execs must have been shocked to discover that people will watch the same movie over and over and over again. But at what cost to our brains? Why do we watch things when we know exactly what is going to happen? For my part, as I wrote over New Year's 2010, I have tried to implement a five-year rule for myself when it comes to watching movies. In other words, if I have seen the movie within the past five years, I cannot watch it again. (And I am as guilty of this as anyone...I can't seem to pass by Hoosiers, Bull Durham, Trading Places, or any Rocky movie without stopping for at least twenty minutes. And - as much as I hate to say it - the same thing probably applies for Notting Hill, Serendipity, and Love Actually.) But no more mindless repetition! I feel like it literally makes me dumber by the minute - it kills my brain cells...and my time is better spent on a new movie, a new book, or any other new experience. (And I think about it with my daughter now too...we will have at least a five-year rule in the house when she gets older.) So my broader question remains, How is the socially-accepted norm of watching the same movie over and over and over not making us all intellectually lazier (and dumber) than previous generations?
That's it for now.
All the Best, Ben
Tuesday, July 27, 2010
Futures are ~70bps higher as market momentum is driven up through the 200-day moving average (S&P500) by positive earnings overnight from European banks UBS (+8% pre-market) and Deutsche Bank (+6%). Further, there is speculation overseas that softer rules on banking and liquidity from the Basel Committee on Banking Supervision will help bank earnings going forward. Yesterday the
panel agreed to allow certain assets – including minority stakes in other firms – to count as capital. They also set a leverage ratio to apply to banks globally for the first time, but it will not become binding – and could surely see adjustments – by 2018. As a result, global financials are leading worldwide markets higher this morning. Basel ’s consumer confidence poll was also better-than-expected. Additionally, this morning’s CaseShiller Home Price Index for May (year-over-year) was higher than expected, at +4.6% vs. the +3.85% expectation. In other earnings news, solid results across the board today: Corn Products (CPO; +14%) is higher on earnings, DuPont (DD; +5%) beat estimates and raised guidance, defense contractor Lockheed Martin (LMT; indicated higher) beat and announced a buyback, retailer Office Depot (ODP; +5.5%) beat analyst’s expectations, engineering giant Fluor (FLR; +2.5%) beat numbers, and steel stock AK Steel (AKS; +4.5%) also beat. In other news, US-born Robert Dudley will replace BP CEO Tony Hayward on October 1st. Apple is expected to make a surprise announcement at some point today. Fed’s Beige Book due tomorrow afternoon. Loved this technical commentary from BofAMLCO this morning: “1110.70 is unchanged on the year. 1122.50 is the 100 day moving average. Buy the dips till earnings end. After that we'll be stuck with election doom and gloom. So enjoy this moment in time.” Also note that the DJIA has enjoyed three-straight days of triple-digit gains for the first time since 2008. Hmmmm. Germany
Regarding yesterday’s market-sparking guidance from FedEx, Mike O’Rourke offered some valuable perspective on it all last night:
We have discussed the influences of sentiment and expectations all month, and today provided two excellent examples of expectations imbalances within the markets. The first is FedEx. On June 15th, FedEx shares closed at $83.01. On the morning of June 16th, the company announced earnings and provided initial guidance for 2011 of $4.70 per share below street expectations of $5.07. The stock dropped nearly 6% that day despite a very upbeat conference call by management. A sloppy broad market fueled an additional sell of FedEx shares over the next couple of weeks. As the market bounced so did FedEx and last week the rally continued on good earnings news from competitor UPS. Today, a mere 6 weeks after that initial guidance, FedEx raised 2011 expectations to $4.90 per share based upon Q1 looking 15% better than expectations. FedEx Shares closed today at $83.39, higher than the June 15th close. It is remarkable that the company has managed to bring expectations down by $0.17 and subsequently wind up with a higher share price. For the time being since the revision has been upward, as have those of the competition, the market will likely expect future announcements to go in the same direction. One might be tempted to call this chicanery, but we have seen them do the same exercise in reverse in the past. Regardless, the actions and results merit being mindful of them.
This is from yesterday’s Hedgeye commentary, but is worth reading nonetheless (bold is mine, interesting timing of Q3 GDP):
"My job is to make sure we can borrow to finance."
-Timothy Geithner, July 25, 2010
Treasury Secretary Timmy Geithner told Meet The Press host David Gregory yesterday. Timmy has already told us that he "isn't an economist." He's not a mathematician or risk manager either. He's simply a professional politician who is doing his job. US
In another article by Bloomberg's Daniel Kruger this morning titled "Deficits Don't Matter as Geithner Growth Gets Lowest Yield", Timmy expanded upon his aforementioned job description explaining that "if you look at financial markets, say, look at how much the Treasury is paying to borrow today, there is a lot of confidence, not just of Americans but investors around the world, that we're going to find the political way to do it... there's no alternative for us."
There may not be an alternative to marking-US-interest-rates-to-model, yet... but the days of seeing American politicians borrow from their citizenry's long term future in order to finance their short term political agendas are numbered. Borrowing short to lever yourself up long of debt doesn't work.
Geithner must not realize that his financial outlook and fiscal policies contradict one another. If US economic growth were to, as he said yesterday, "gradually strengthen for the next year or so", what in God's good name are US bond yields doing at all time lows?
This is already getting priced into political polling expectations, but Timmy and the Administration of Groupthink Inc. will meet their maker come the fall (unless they change the reporting date, Q3 US GDP is going to be reported 4 days before the mid-term elections and we think that US GDP growth will slow sequentially). I think global risk managers already get that, but do they get how this game of
currency and interest rate manipulation ends? US
Without reviewing his entire book this morning, one way to start answering the question of how this gigantic game of over-leveraged countries playing a Fiat Fool version of Monopoly ends is reading Richard Duncan's, "The Dollar Crisis."
Originally published out of Asia in 2003,
's International Bestseller has recently been revised and updated, but it gets a real-time update that is marked-to-market by the US Dollar, deficit, and debt balances every day. The upshot of Duncan 's answer is that this game will not end well. Duncan
SOA beats by 5c. UA beats by 4c. TEVA beats by 4c. VECO beats by 18c. STFL cuts WMT to Hold. ZRAN cut to Hold at NEED. CITI cuts AFL. CNL, PCG upped at GSCO. ETR, NTR cut at GSCO. ARMH lower on earnings. BMI beats by 34c. ENR higher on earnings. IDTI beats by 3c. LM misses by 1c. BCAP sells stake in
IHG LN overnight. MAS misses on revenues. BMOC cuts PCL. PLT beats by 10c. SAP beats by 3c. VLO reports 23c better. VLTR beats by 3c. DBAB cuts WERN. X lower on earnings.
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
UNISYS CORP 26.14 +9.14% 23500
LEXMARK INTL-A 37.74 +8.42% 53796
TELLABS INC 8.29 +6.42% 362940
CUMMINS INC 82.16 +5.54% 68940
REGIONS FINANCIA 7.48 +5.5 % 1292247
OFFICE DEPOT INC 4.99 +5.5 % 48490
COVIDIEN PLC 41.59 +5.18% 100
DU PONT (EI) 40.80 +4.64% 147829
AK STEEL HLDG 15.81 +4.01% 675456
VALERO ENERGY 18.24 +3.87% 377013
US STEEL CORP 47.04 -3.78% 457705
LEGG MASON INC 28.99 -3.62% 31883
MASCO CORP 11.50 -3.6 % 30726
INTL GAME TECH 17.34 +3.58% 200
BIOGEN IDEC INC 56.13 -3.04% 100
UNUM GROUP 22.98 +2.96% 100
Today’s Trivia: What was designated as the very first “national monument” in the
? United States
gave Saddam Hussein a Key to the City in 1980. Detroit
Best Quotes: For those who like to play around in their P.A., here’s some advice from a Bloomberg editorialist…
Four Rules to Remember in the Age of Austerity: Matthew Lynn 2010-07-26 23:00:00.0 GMT
July 27 (Bloomberg) -- One thing has become clear during the sovereign-debt crisis: Governments everywhere are going to be cutting their spending savagely over the next five years.
They may do it under the direction of the International Monetary Fund, like
. Or voluntarily, like the Greece U.K. and . Or slowly and reluctantly, like the Germany One way or another, it has to happen. You can’t run deficits of 10 percent of gross domestic product or more forever. U.S.
But what does that mean for investors?
stock market has already priced in earnings shocks from companies that have run into trouble because of reduced government spending. And, in most developed countries, the cuts are only just starting. We’ll see a lot of corporate-profit declines across Europe and the U.K. in the next couple of years. U.S.
To survive that you need to short companies that depend on government spending; think about the regions that will avoid the worst of the pain; and focus on businesses that can save the government some money. Follow those simple rules, and your portfolio should make it through the years of belt-tightening.
There is already plenty of evidence from the
about the impact that the austerity drive can have on share prices. Cable & Wireless Worldwide Plc, the telecommunications provider, said last week that spending cuts by David Cameron’s new coalition government would lower earnings. Its shares dropped 17 percent on the day. Last month, Connaught Plc, which maintains social housing, told shareholders the same message. Its shares dropped as much as 41 percent on the day. U.K.
It’s no great surprise that austerity drives will hit a lot of companies hard. State spending accounts for 30 percent to 50 percent of the economy, depending on which country you look at.
Start hacking away at half of your GDP, and a lot of people will find life much tougher.
So how should you steer your portfolio through the age of austerity? Here are four principles to keep in mind:
One: Keep away from government contractors. In the last decade, the state has outsourced a lot of its work. There have been big contracts awarded -- and, as we know, governments are very bad at getting value for money, so most of those contracts came with fat profit margins. Likewise, defense companies will do it tough -- wars are a real luxury when you need to cut public spending by a quarter. You don’t want to be holding shares in companies such as defense manufacturer BAE Systems Plc in that kind of environment. All of them are going to suffer.
Clear them out of your portfolio -- then short them.
Two: Focus on regions. Government spending is always concentrated in particular areas, either because they are poor, or because it is where the governing party’s voters happen to live. In the
U.K., that is Scotland, Wales and the north of , the heartland of the Labour Party, which held power for the last 13 years. But every country has a region of high public spending. Avoid them, because they will be hit hardest. But other places such as prosperous England and the south-east of the country will do fine. Invest in businesses that focus on those places and you won’t regret it. London
, take a look at Ocado Group Plc. The online grocery retailer got a rough ride in its initial public offering last week. Yet the wealthy shoppers of the south-east of U.K. who make up its core market are going to get through the austerity drive better than most people. England
Cheap New Ways
Three: Look for better mousetraps. Governments won’t just be able to cut their way out of trouble. The deficits are just too big for that. They will have to innovate as well, finding new ways of doing the same things more cheaply. The private sector is much better at that than the public sector. So look for companies in health care, education or outsourcing that can come up with new, more-efficient ways of doing things. They will have plenty of demand for their services.
One example. Capita Group Plc, which provides a criminal- records service for the U.K. Home Office, is pitching money- saving ideas to the British government. If they are good, they can expect an enthusiastic reception.
Four: Don’t forget about growth. The historical record shows that times of austerity are also ones of great entrepreneurial energy. During the 1930s, new industries such as consumer electronics and plastics were created. In the turbulent mid-1970s, the personal-computer industry was born, as companies such as Microsoft Corp. and Apple Inc. were founded. When times are hard, a lot of smart people don’t have any choice but to set up their own business. And they will have to do it on the cheap as well, which is usually the best way.
So don’t be too defensive. Even amid austerity, there will be some terrific new companies getting started. It is a good time to be looking for businesses to back.
Where should you be looking? How about Nathaniel Rothschild’s new mining company, Vallar Plc, which has just listed its shares in
? The best brand name in global finances should be able to open a few doors, and resources are a growth industry. London
Some of those investments may do well, others badly. But stick to those four principles and your portfolio should survive just fine. Ignore them, and you can expect to get burned.
(Matthew Lynn is a Bloomberg News columnist and the author of “Bust,” a forthcoming book on the Greek debt crisis. The opinions expressed are his own.)