Empiric Student Property Share Discussion Threads

[briarberry] 22/6/2009 13:22

June 22 (Bloomberg) -- Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.

Insiders of Standard & Poor's 500 Index companies were net sellers for 14 straight weeks as the gauge rose 36 percent, data compiled by InsiderScore.com show.

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Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies' prospects.

[briarberry] 22/6/2009 13:20

US States are living off federal stimulus money (bailout bubble money) but cuts are still likely...


With state revenues in a free fall and the economy choked by the worst recession in 60 years, governors and legislatures are approving program cuts, layoffs and, to a smaller degree, tax increases that were previously unthinkable.

All but four states must have new budgets in place less than two weeks from now - by July 1, the start of their fiscal year. But most are already predicting shortfalls as tax collections shrink, unemployment rises and the stock market remains in turmoil.

"These are some of the worst numbers we have ever seen," said Scott D. Pattison, executive director of the National Association of State Budget Officers, adding that the federal stimulus money that began flowing this spring was the only thing preventing widespread paralysis, particularly in the areas of education and health care. "If we didn't have those funds, I think we'd have an incredible number of states just really unsure of how they were going to get a new budget out."

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"They have done a fair amount of cutting and will probably do some more," said Ray Scheppach, executive director of the governors association. "But as they look out over the next two or three years, they are also aware that when this federal money stops coming, there is going to be a cliff out there."

...
While state general fund spending typically increases by about 6 percent a year, it is expected to decline by 2.2 percent for this fiscal year, Mr. Pattison said. The last year-to-year decline was in 1983, he said, on the heels of a national banking crisis.

[briarberry] 22/6/2009 02:05

Andy Xie still thinks the Fed will have to print, there's too much to summarize but here is his view on rising TNX...


Andy Xie: Tight Spot for Fed, Blind Spot for Investors

In the past few years, purchases by central banks around the world have dominated demand for Treasuries. Central banks have been buying because their currencies are linked to the dollar. Hence, such demand is not price sensitive. The demand level is proportionate to the U.S. current account deficit, which determines the amount of dollars held by foreign central banks. The bigger the U.S. current account deficit, the greater the demand for Treasuries. This is why the Treasury yield was trending down during the bulging U.S. current account deficit period 2001-'08.

This dynamic in the Treasury market was changed by the bursting of the U.S. credit-cum-property bubble. It is decreasing U.S. consumption and the U.S. current account deficit. The 2009 deficit is probably under US$ 400 billion, halved from the peak. That means non-U.S. central banks have much less money to buy, while the supply is surging. It means central banks no longer determine Treasury pricing. American institutions and families are now marginal buyers. This switch in who determines price is shifting Treasury yields significantly higher.

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The United States has no way out but to print money.

[briarberry] 21/6/2009 20:54

Ben Banky will have to fix this, it's likely to lead to deflation unless he does...

[briarberry] 21/6/2009 19:53

Ambrose Evans-Pritchard is looking at the signs of deflation, Ben Banky doesn't seem to be printing enough to keep rates down for consumers & house buyers...


We know that the Fed's balance sheet has exploded (to $2.07 trillion), but that is only half the story. Data from the St Louis Fed shows that the "monetary multiplier" has collapsed from a decade-average of 1.6 to the depths of 0.893. The "velocity" of money has slowed to a crawl.

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Tim Congdon – a hard-money Friedmanite from International Monetary Research – says the Fed is still not easing enough, perhaps because it is spooked by so much criticism or faces a mutiny by its own hawks. "If Ben Bernanke and his officials are listening to this sort of stuff and taking it seriously, they are making the same mistake as the Fed in the early 1930s," he said. The US "output gap" is near 7pc. That is a powerful lid on inflation.

The sin has been to let M2 money growth wither since January, to let bank lending contract at a 5pc annual rate, and to let 10-year bond yields rise to nearly 4pc. The Fed pays lip service to the Friedman-Schwartz theory of the Depression, but has not digested the lesson.

[briarberry] 21/6/2009 17:40

I guess the Fed must be worried about deflation as they are talking about refinancing mortgages at a LTV of 105% and even 125%...


Obama's Mortgage Refinancing Program May Be Expanded (Update1)

June 19 (Bloomberg) -- Fannie Mae and Freddie Mac may get permission to begin refinancing mortgages with loan-to-value ratios above 105 percent as the Obama administration seeks to boost participation in its anti-foreclosure programs.

"We're actively considering how to structure a program that makes sense over 105 percent," Federal Housing Finance Agency Director James Lockhart said yesterday. He said a ratio of 125 percent "is a number" that's on the table, though "not necessarily the number we're going to end up with.

[briarberry] 18/6/2009 23:09

only up to April

[briarberry] 17/6/2009 22:54

Russian Banks Face $213 Billion of 'Troubled Assets,' S&P Says

As much as 38 percent of all assets held by Russian banks, including restructured loans, may become problematic by the end of 2011, the credit-ratings service said in a report today.

[briarberry] 17/6/2009 22:53

China - I remember reading a couple of newsletters last year that said that official Chinese GDP data was always overstated, so yeah I think this might be true...


Zero Hedge

Just released, a new and highly relevant Weekly Strategy report out from Albert Edwards of Societe Generale. Not only does Edwards, who was previously vilified then praised for calling the 1997 Asian Bubble, see a significant drop in equities before the end of the year, his main concern is every optimist's greatest green shoot: China.

Many have highlighted that the GDP seems inconsistent with other data such as electricity output. This latter series remains weak. In May it declined 3.2% yoy and by 3% on the smoothed basis.

If China is doing so well how come Chinese company profits in the year to April are down some 30% yoy ? (see chart in pdf (2nd link below))



Expect new lows in equity markets in H2. Is China the hidden Achilles heel?


comments...

Gord 2 hours ago
Pettis is probably the best blogger out there on all things China -



excerpt from his latest:

"The bad news is that, according to a release today by the Ministry of Commerce, foreign direct investment in the mainland dropped 17.8% year-on-year in May for the eighth straight monthly fall. Honestly I don't think this is such a big deal except to the extent that it gives us a "businessman's" view of economic prospects in China that is very different from the economic-recovery view so popular in the Chinese (and foreign) press, although of course it may simply reflect the desire abroad for cutting exposure and cutting capacity.

Much more interesting to me is the trade data. According to an article in Thursday's People's Daily:

China's exports and imports shrank for the seventh month in row in May, the General Administration of Customs said on Thursday. Exports fell 26.4 percent in May from the same period a year ago to 88.758 billion U.S. dollars. Imports were down 25.2 percent to 75.36 billion U.S. dollars. The trade surplus was 13.39 billion U.S. dollars."


China Small Caps Spark 'Bubble' Concerns on Valuation

[briarberry] 17/6/2009 17:11

sign of the times...


FedEx posts bigger loss, issues gloomy outlook - The nation's second largest package shipper

FedEx and bigger rival UPS Inc. are viewed as bellwethers of the economy because they transport a wide variety of goods from factories to retailers and consumers.

Fourth-quarter revenue for the FedEx Express unit dropped 25 percent as the unit moved fewer packages and fuel prices rose.

In the freight segment, revenue dropped 28 percent with pricing among trucking companies staying highly competitive and shipping demand weak.

[briarberry] 17/6/2009 01:04

The S&P500 @ 900 has a PE of 16 but only IF profits return to normal...


On normalized profit margins, sustainable S&P 500 earnings are slightly above $60 on the index. That's certainly higher than the 7 bucks of net earnings that companies in the index have reported over the past 52 weeks, but unfortunately, even at current prices, the S&P 500 is near 16 times normalized earnings.

What does he mean by "normalized" earnings? The level of earnings US companies would generate at average profit margins.



(yeah stocks don't seem cheap but then again you read about people who are pricing stocks up for hyperinflation, so who knows ?)

[briarberry] 16/6/2009 16:33

Housing starts, the May pace of 0.532 million units annualized was down 45.2 percent year-on-year.

[briarberry] 16/6/2009 15:56

more records...


Industrial production -1.1% in May after a downwardly revised -0.7% decline for April while capacity utilization dropped to 68.3% from 69.0%, which is the lowest level since records began in 1967.

Manufacturing output was biggest drag, declining -1.0% in May after a -0.6% decline in April. In turn, the factory operating rate hit a historical low of 65% in May, which is the lowest since records began in 1948

[briarberry] 16/6/2009 01:09

U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America's lending portfolio, in another sign that consumers remain under severe stress.

Delinquency rates-an indicator of future credit losses-fell across the industry, but analysts said the decline was due to a seasonal trend, as consumers used tax refunds to pay back debts, and they expect delinquencies to go up again in coming months.

Bank of America-the largest U.S. bank-said its default rate, those loans the company does not expect to be paid back, soared to 12.50 percent in May from 10.47 percent in April.

In addition, American Express, which accounts for nearly a quarter of credit and charge card sales volume in the United States, said its default rate rose to 10.4 percent from 9.90, according to a regulatory filing based on the performance of credit card loans that were securitized.

Credit card losses usually follow the trend of unemployment, which rose in May to a 26-year high of 9.4 percent and is expected to peak near 10 percent by the end of 2009.

If credit card losses across the industry surpass 10 percent this year, as analysts and bank executives expect, loan losses could top $70 billion.

[briarberry] 16/6/2009 00:59

In a ghastly day for Europe's lenders, Moody's downgraded 25 Spanish banks as rising defaults eat into reserves.

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The ECB's report said eurozone bank losses would reach $649bn by late 2010: split between $218bn on securities, largely written down already; and $431bn on loans, where the real damage lies. The banks have written down $150bn of loan losses so far.

[briarberry] 15/6/2009 16:59

I wasn't expecting this after reading prior reports from experts, posts 2145 + 2158 above (although I guess this report is out-of-date as it's from April?)...


Foreign demand for US financial assets falls

Foreign demand for long-term US financial assets falls in April; China, Japan cut holdings

WASHINGTON (AP) -- Foreign demand for long-term U.S. financial assets fell in April as both China and Japan trimmed their holdings of Treasury securities.

The Treasury Department said Monday that net purchases of stocks, notes and bonds obtained by foreigners fell to $11.2 billion in April, from $55.4 billion in March.

China, the largest holder of U.S. Treasury securities, trimmed its holdings to $763.5 billion in April, from $767.9 billion in March. Japan, the second largest holder of Treasury securities, reduced its holdings to $685.9 billion, from $686.7 billion a month earlier.

Treasury Secretary Timothy Geithner traveled to Beijing earlier this month to assure the Chinese government that the Obama administration is determined to get control of an exploding U.S. budget deficit, which is projected to hit a record $1.84 trillion this year.



so which one is right ?

[briarberry] 14/6/2009 19:50

Eurozone production's record fall

Industrial production in the 16 states that use the euro fell a record 21.6% in April, compared with the same month last year, according to Eurostat.

It was worse than had been expected and followed March's figure of 19.3%. The month-on-month fall was 1.9%.

[briarberry] 14/6/2009 19:41

Iraq has the second largest liquid oil reserves in the world...


Iraq wants to buy Lockheed fighter jets, Boeing helicopters and Abrams tanks made by General Dynamics Corp. to rebuild its military. The nation was the second largest potential buyer of U.S. military equipment last year, behind Israel, according to a March report by the Arms Control Association, a Washington think tank.

The Pentagon notified Congress it planned to sell $74.5 billion worth of U.S. military equipment to 25 countries in 2008, nearly double its proposed arms sales from 2007. Iraq accounted for $18.7 billion of that total.

"Weapons could be the single biggest U.S. export item over the next 10 years," said Loren Thompson of the Lexington Institute.

[briarberry] 14/6/2009 16:16

Chinese, world trade...

Exports fell 26.4 percent in May from the same period a year ago to 88.758 billion U.S. dollars, compared with a decline of 22.6 percent in April. Imports were down 25.2 percent to 75.37 billion U.S. dollars, according to the General Administration of Customs.

[briarberry] 13/6/2009 23:17

SnPee P/E ratio now stands at more than 100...


Yet there are several ways to calculate P/E's - and current economic circumstances make some methods particularly hard to apply.

For example, a classic technique takes the current price level of the S.& P. 500 and divides that by the earnings of the companies in the index over the preceding 12 months, using generally accepted accounting principles, or GAAP. Based on these figures, the S.& P. has had an average price-to-earnings ratio of 12.6 at the end of bear markets since 1938.

But this is no ordinary downturn. Because corporate losses in the fourth quarter of 2008 equaled profits registered in the previous two quarters, the market's overall P/E, based on GAAP earnings, now stands at more than 100. That's pricey by any definition.

Because profit growth can be so unreliable in a severe recession, some strategists prefer to gauge stock prices by using so-called operating earnings, which exclude one-time write-offs like the expenses associated with closing down a factory or a company division.

Based on operating earnings, the P/E of the S.& P. 500 is a much more palatable 22 today. But that's still considerably higher than the average of 19 for the past two decades.

What's more, there are concerns about how quickly the market's P/E has grown.

It's not uncommon for market valuations to rise in the latter stages of a recession, because stock prices tend to move in anticipation of a recovery. That means prices - or the "P" in the P/E ratio - often recover before earnings do. But they don't usually expand this fast.

Ned Davis Research, an investment consulting firm in Venice, Fla., looked at market valuations after bear markets since 1929. The firm found that in the first three months after bear markets, the market's P/E tends to climb by about 10 percent. And the multiple has traditionally expanded 22 percent in the first six months after a major market downturn.

But since March 9, when the recent rally began, the P/E of the S.& P. 500 has jumped nearly 40 percent.

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Ned Davis Research assesses the individual P/E ratios for every stock in the index. Then it determines the median P/E for the whole group - in other words, it finds the midpoint, such that half of the stocks in the index have a higher P/E and half have a lower one.

Based on this technique, the P/E of the S.& P. 500 is now at 15.6. That's well above the reading of 12 in March, but still slightly below the market's historical median of 16.5.

[briarberry] 11/6/2009 18:50

China's Commodity Buying Spree

Strong buying by China has helped lift commodity prices around the world this spring, but growing evidence suggests that a sizable portion of this buying has been to build stockpiles in China, and may not be sustainable.

At least 90 large freighters full of iron ore are idling off Chinese ports, where they face waits of up to two weeks to unload because port storage operations are overflowing, chief executives of shipping companies said in interviews this week. Yet actual steel production from that iron ore is recovering much more slowly in China, and Chinese steel exports remain weak.

Commodities and shipping executives describe Chinese stockpiling in recent months of a range of other commodities as well, including aluminum, copper, nickel, tin, zinc, canola and soybeans. Starting in April, China began stockpiling significant quantities of crude oil.