Tag Archives: economy

Shorting America

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Helicopter Ben Bernanke, Chairman of the Federal Reserve Bank, in concert with the world’s other major central banks, stepped up to the bar and took action this morning. Worldwide, markets reacted positively to this sign of spine, actually, as Alan Greenspan might say, reacted with irrational exuberance. Whatever, the DOW climbed almost 500 points and all major indices were up a similar 4%. We here at RegenAxe are proud to announce that we have scooped the rest of the blogosphere. We have here a recording of Big Ben’s helicopter as it descended low over Zuccotti Park and hovered as Wall Street traders poured out from the surrounding buildings and let their cheerful voices be heard, almost drowning out the sound of the rotor blades. OWS (no octopi today) protesters were overwhelmed by the crushing onslaught of three-piece suits.

Irrational exuberance aside, not everyone was happy with the Fed’s surprise action today. Short sellers got caught with their pants down. They awoke to find the Fed holding on to their short hairs and in short that is not a pleasant position to find oneself. To them I say too bad, cry me a river. The stock market was intended to be a mechanism for corporation to raise capital, by publicly trading shares in themselves. It was never intended to be a Las Vegas style gambling house, where parasite investors can bet against American companies, nay the United States itself. It is alright to be a bear on Wall Street, if you believe that the market is in a downturn. Markets go up and they go down that’s what markets are supposed to do. Go ahead and sell. It is not alright to act bearish, if you do so to the detriment of the marketplace and for your own perverse gain. Various brokerages have or will pay fines for selling dubious securities and then turning around and betting against their own customers. This is an example of illegal activity, but on the sliding scale of human morality there is also immoral activity and that is where I place the practice of short selling. Just because you can place the bet, does not mean you should, “22, 22, 22, …”.

Not With a Bang, But a Whimper

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The work week ended, not with a bang, but a whimper. I was sick earlier this week and now Anne is showing the same symptoms that I had. I count myself fortunate that I was sick during the work week and that I have paid sick leave. It looks like Anne will be sick over the weekend, so it probably doesn’t matter that she has no sick leave. She could claim workman’s comp, or tell the sub-scheduler on Monday that she brought “some work” home with her, but since I am the vector for this mini-epidemic that probably won’t work well.

Work was more subdued this morning then it was after Wednesday night’s victory. I guess that is the difference between winning and losing. Today is a travel day, so there is no game today. Tomorrow the Cardinals and the Rangers play game three of the World Series in Arlington, TX. They are tied 1-1. I never made it inside the Ranger’s previous stadium, passing by it on the highway seemed close enough. I did tour their current stadium. Like Busch, it is built in the brickyard style, but unlike Busch it is closed in on itself, like a brick oven. No breeze ever wafts through it on a hot August night. That is why it is known as the hottest stadium in baseball and that has nothing to do with the Ranger’s hitting.

On Sunday, there will be two Saint Louis teams in the Dallas-Ft. Worth area. The Cards will be playing game four and the Rams will be playing the Cowboys. Similarly, last Sunday, the Cardinals were playing the Brewers in Milwaukee, while the Rams were playing the Packers in neighboring Green Bay. The Cards clinched the pennant, while the Rams lost. I would be glad to see the Rams take another knee as prelude to another Cardinal victory this Sunday. It seems like a fair trade, Saint Louis loves its baseball and everyone in Texas always cares more about football than baseball.

I had lunch today with Dan from work and the Perma-Bear. I got to drive and show off the Prius to them both. Over the summer, both the Perma-Bear and I made two different, but both quite green energy investments. I bought the hybrid and he had a home geo-thermal heating/cooling system installed. Between the two, I think that his geo-thermal system was both the smarter and greener investment. A while back, the Perma-Bear and I made a bet, a gentlemen’s agreement. He bet that gas at the pump (in Saint Louis) would hit $2 before it hit $5. I disagreed. He reminded me of this wager after I bought the Prius. Last month, when we spoke with our broker, I asked Pat about this bet. Usually quite loquacious, he fell silent for a while and thought. Finally, he answered with a no. “For gas to hit $2, oil would have to hit $50. I just don’t see that happening. Of the 1.2 billion Chinese, 300 million of them drive cars …”

We have another wager that is marked with a yellow Post-It on my cubical wall. It says that I am to ask him about my Starbuck’s index a year from now. The Perma-Bear believes that the Great Recession is really the Great Depression II and that just fearing a double-dip recession is being wildly optimistic. That’s fine, everyman’s entitled to his opinion, but then he brought up a PBS show on Chernobyl, twenty-five years after. Radiation has scoured mankind for miles around the accident site. Wolves and wildlife have returned. Soviet era buildings have decayed. Mankind’s apocalypse drawn real, abet on a scale smaller than the proverbial end of days. Fortunately, we glided silently into my parking place, before the final end drew too much nearer.

Loss of Innocence

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Today was another down day on Wall Street. Yesterday, Ben Bernanke and the Federal Reserve reported a stern, nay, grim forecast for the economy in the near future. Wall Street reacted as expected and fell sharply from the opening bell and continued to decline throughout the day. By the end of the day, the Dow was down almost 400 points. I found this scenario particularly unsettling on a number of fronts. First, I lose money on days like today. My 401K declines in value. Second, this type of market behavior signals a fundamental weakness in the economy that has for many other Americans, much more immediate, real world implications. I know them, you know them too, and maybe you are one of them.

Mid-morning, into to this day’s settling gloom marched the Perma-Bear. I think that he lives for these down days. He certainly seems to enjoy them, although he denies this. I suspect that he is shorting America again, and consequently is making money on days like today. In the past, I’ve accused him of schadenfreude, but I don’t think that this is really fair, appearances aside. In 2008, when I first started working with him regularly, he was reading a history of the Great Depression during his lunch, sanguine reading to be sure, but by the fall of 2008, much more topical. My 401K got hammered back then, but eventually it bounced back, mostly. The hard financial lesson of 2008, combined with the instructions of the Perma-Bear, did teach me to closely monitor my investments. My days of buy and hold are gone.

I still cannot buy-in to the Perma-Bear’s déjà vu all over again view of our economy. I still refer to this economic turmoil as the Great Recession, and not the Great Depression II. George Santayana is often quoted or paraphrased, “Those who cannot remember the past are condemned to repeat it.” I believe Bernanke, Obama and the rest have also read similar Depression histories. They are all intelligent men, like the Perma-Bear is. They maybe wrong and he maybe right, but my money is on them. To this end, the Perma-Bear this month slapped a post-it note on my cubicle wall. He metaphorically threw down his gauntlet. A year from now, we will do a reckoning. I pray to God that the Perma-Bear is wrong and our economy is on the mend..

In line with this rather bleak post, the Sheldon was our last stop on last Saturday’s Fiber Crawl. In addition to the fiber arts exhibit there, in the adjoining AT&T Children’s Arts Gallery, there was another new art show. This exhibit included both writings and visual art forms. The title of this show is, “Lessons of the Past … Promises for the Future”. Its theme is the Holocaust. Josh Keen’s painting, “Loss of Innocence”, pictured above, is the signature art piece for this show. I found Mr. Keen’s art work to be both powerful and moving. His age only amplifies these feelings and makes this piece even more haunting.

It’s Labor Day, Let’s Play!

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Yesterday, I was walking across the parking lot, on my way into work, when I spied this guy walking in ahead of me. What I noticed about him, was his attire, shorts, T-shirt and flip-flops. This is taking business casual to a whole new level, I thought. About the time, he entered the building the company’s president came barreling out the same door, with a briefcase and suitcase in each hand. I drew up to the president just as he reached his car and asked him if we had a new dress code. This just elicited a smile. In truth, the other guy was probably coming into work on his day off; to attend to something or other that just couldn’t wait. Dressing down would only underscore his extra effort to his co-workers.

Friday is the last day of the work week, not Thursday, but pulling into the parking lot this morning, you could have been easily fooled into thinking that the weekend had already begun. By the time I left work on Friday, it was even emptier. A lot of people take time off from work around these holidays, because things quiet down around these weekends and they are right in thinking that they won’t miss any important action. I got lots of quiet seat time on Friday and was able to complete my week-long debugging effort on a new computer model and got it queued to run over the weekend before I left work.

I’ve spoken of the Starbucks Index before. My version of this popular economic index is very simple; I just count the number of people in line when I walk through the front door. At its nadir in the winter of 2008/2009 there was no line, and I just breezed up to the sales counter only to be attended to by the standard three baristas. These days it is a lot different and this difference was even more underscored when I returned from summer vacation. School was back in session by then, so the usual summer doldrums had ended. Anyway, today, the line was long, the index was through the roof and there were now four baristas instead of the previous three.

Then there was Friday’s jobs report. This was dismal news to say the least and was especially disappointing news on the eve of Labor Day. One guy at work though was not disappointed. This would be my friend, the Perma-Bear. He views everyone one of these downturns as clear evidence that this Great Recession is really the Great Depression II. If history truly does repeat itself and if we really have learned nothing in the intervening seventy years, then the economic pain and suffering of the last few years is only the preamble to the true misery yet to come. This is what he believes. I chose not to believe him, because he speaks of too dour a future. So, instead I take delight in poking him on the markets’ up days and avoiding him on their down ones. If on a down day I find myself cornered, I resort to a Pollyanna attitude and bite my tongue, so as not to sing, “The Sun Will Come out Tomorrow”.

The Starbucks (SBUX) Index

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Maybe economists just have overactive imaginations or maybe in that mind-fogged, early morning queue at the coffee shop, they just have too much time on their hands.  Either way they seem to be susceptible to the percolation of coffee based economic theories.  I must confess that I too have fallen prey to these same speculations and have blogged about them in the past.

The Great Recession, as our recent economic difficulties have come to be known, has served as a wakeup call for many of us.  Its shock effect coincided with the beginning of my association with the individual that I have dubbed the Perma-Bear.  As his name implies, the Perma-Bear has been somewhat less than optimistic about the economy, but I cannot say that he has been any less correct either.  2009’s steady drumbeat of bad economic news eventually drove me to formulate my Starbucks Index as a leading economic indicator and a sign of better times to come.  For my Starbucks Index, I simply count on a daily basis the heads ahead of me in line when I first get into the store.

I frequent my neighborhood Starbucks so much so that only the newest-of-new baristas there don’t know my name and more importantly, my drink order.  In the fall of 2008, when our economy fell into freefall, I began to notice that the morning lineup for coffee had begun to get shorter and shorter.  It seemed to disappear altogether about the same time that economists now say that the economy had hit rock bottom.  By the spring of 2009, I could breeze through the coffee shop’s front door and walk right up to the register unimpeded.  The manager, Aaron, and his two latté ladies would all be waiting to attend to my order.  It was both frighteningly surreal and yet somehow compelling too.

In the intervening months what was once just wishful thinking has now grown into a reality.  This morning’s visit to my Starbucks, had today’s Starbucks Index showing clear indications of a recovering economy.  To add icing to this already baked in the cake economic indicator, the Perma-Bear had a similar experience at his local Starbucks.  We both experienced parking difficulties, due to the burgeoning crowds of patrons and our parallel morning coffee rituals took both of us longer than normal to perform.

In way of researching this post, I typed “Starbuck Index” into Google.  I got hits on three notable business news outlets, The Economist, CNBC and the Wall Street Journal.  The Economist’s Starbuck Index dated from 2004, so had nothing to do with the recession, but instead dealt with international exchange rates as reflected in the price of a latté.  CNBC’s index was postulated at the beginning of the recession, as was mine, but they never went any further with it.  The Journal’s Starbuck Index used anonymous credit card data to track the Average Dollar Transaction Amount or how much someone was willing to pay for a cup of joe.  Their article showed that this transaction amount followed the same trends as Non-Farm Payroll Dollars or how much working people earned, for the last two years.  Their graphed index even showed spikes in the last two year’s Decembers.  Does a Starbuck Index require a seasonal adjustment?

The Perma-Bear later pointed out that an index that tracked average dollar amounts could be skewed during the holiday shopping season by the purchase of gifts.  Looking down at my Starbucks’ shopping bag with two pounds of Holiday Blend in it, I had to agree with him.  Some economists might point to events like the Dow’s 350+ point climb in the last two days as an encouraging sign, but I’ll just stick with my Starbucks Index and continue to count heads in line at the local Starbucks, besides the coffee is better there than at work.

Playing a Zero Sum Game

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My country, the United States of America, is a country blessed with many riches.  It possesses a land endowed with many natural resources.  Americans are a strong, hardworking, God-fearing and generous people.  The American form of government has been designed to nurture the American way of life, preserve our liberty and foster the pursuit of happiness.

So what went wrong?  Why do most Americans feel that our country is on the wrong track now?  I offer the following three excessive expenditures as examples of American excess.  These examples typify the squandering of our nation’s capital that is now a plague upon our country.

  • $4B was spent on the 2010 elections, far more than has ever been spent on a non-presidential election.  The Supreme Court allowing corporate spending on elections facilitated this cost growth.  For this increased capital outlay, we still have the same number of governors, congressmen and senators that we had before the election.  They are just newer and more expensive.
  • The $2.5B for the Spread Network’s high-speed, straight as a line connection between New York and Chicago represents a three milliseconds time advantage in the ongoing arms race of high frequency trading.  I’m sure that this is going to help my 401K savings.
  • Why pay $500+ for a cup of coffee?  I mean really, even if it was some sort of fancy latté, that is way more than the $4 that Starbucks charges.  Don’t worry, I’ll eventually go off on this topic too.

I have included two pictures with this post that aptly symbolize the greatness of the American spirit, its ingenuity and its past accomplishments.  While the United States squanders it capital with political squabbling, financial wrangling and lattés.  The once third world is striving to put us in the second back bench of the world economy’s Econoline van.  Americans be prepared to be bounced!

I heard on NPR (this phrase represents a whole new blogging opportunity in itself) that China now has 4,000 miles of high-speed rail transportation and in the next few years it is projected to have the majority of the world’s high-speed rail.  Meanwhile we as a people, pay more for our politicians, allow fat cats to skim off the cream from our 401K savings and sometimes pay too much for coffee.

I like a good cup of coffee as much as the next guy, maybe even more than the next guy.  I have a pretty heavy Starbucks habit.  I’m not proud of it, but neither am I ashamed of it either.  You see folks; this whole rant is just preamble to my announcement that I had an automobile accident on Thursday morning.

It wasn’t much of an accident.  My passenger side mirror clipped the driver side mirror of a parked car.  It tore it clean off and with no damage to my car.  I pulled into a parking space, just a couple of cars up from the offended vehicle, as I would have anyway on an ordinary workday’s Starbucks run.  I wrestled with the devil, but left a note.  I had to double-check my cell’s number.  I never leave it, so I don’t know it.  I Starbucked and then jetted off to work.

It was only after that I got to work that I thought and then kicked myself.  I should have taken pictures, at least for the blog if for nothing else.  I ended up filing my claim on my iPhone and my insurance company’s app asked for pictures (stupid, stupid, stupid).  My deductible is $500, hence the $500+ latté.  I spoke with the offended party and exchanged information.  At the end of the day, I spoke with a representative of my insurance company.  After taking my recorded statement he absolved me of all responsibility, until our next contract.

Now Hiring, All Positions

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This placard in the window of the Manhattan Café announced the Café’s employment opportunities.  Located near the intersection of Hanley and Wydown this restaurant’s sign immediately caught my notice.  I had just stepped out of Starbucks, latté in hand, when I spied this sign.  I iPhone-o-graphed the announcement and emailed it to the Perma-Bear, just to tweak him.  Call me bad, call me vindictive, but please don’t call me wrong.

Way back in 2008, only two years ago, George Bush was still president and Barack Obama was only the President elect.  Bush was pushing passage of the TARP, Obama concurred and congress went along too.  The banking system was saved, but unfortunately, so were the bankers.

If Obama had acted with Bush as FDR had acted with Hoover then he would have acted to scuttle TARP.  The banking system would have collapsed and we would all be speaking of the two Great Depressions, the last one and this one.  President elect FDR rebuffed Hoover’s entreaties.  This allowed the depression to worsen and once elected FDR profited from his increased political capital and was able to enact the New Deal.  FDR went on to four terms, but the economy was not fixed until the advent of World War II.

FDR made the politically correct decision, Obama made the correct decision.  Obama and the Democrats took it on the chin this month, in part because their economic remedies had not yet borne fruit.  If those remedies had shown more success before this month’s elections then the Democrat’s political outcome might have been different, because as we all know, “It’s the economy, stupid!”

However hopeful is the wording of this small business’ placard it in no way can represent a turning of the economic tide.  The Perma-Bear was right in pointing out to me that these café job opportunities wouldn’t benefit me in the least, if I ever happened to lose my position. It is barely even a ripple in the tide, but it is not the only ripple in our economy’s turbulent sea.

This week’s jobs report was unexpectedly positive, so was last month’s too.  Imperceptibly at first, but with gathering gusto employment is beginning to improve.  Since January the private sector has added 1.1 million jobs.  This is only a dent in the 11 million jobs that have been lost, but it is still a dent.

Manhattan Café’s placard has no effect on my employment opportunities and neither does Google’s announcement of an across the board 10% raise to all of their employees.  Google gave this raise to help prevent competitors from raiding their employees.  Both employers, Google and Manhattan Café, are outside of my employment bandwidth on the spectrum of job opportunities.  It is comforting though to see after so many years of job erosion, the first few layers of job accretion being settled.  Now, how’s that for mixed metaphors?  ;-)

My point is, is that the economy is starting to recover.  The twin threats of a double-dip recession and even worse, stagflation, seem to be receding.  Recognizing and even better publicizing continued economic improvement will begin to create a snowball effect.  The daily drumbeat of negative news can be counteracted through citizen news.  Worry, but if you see happy, share.