"Our Children and Grandchildren are not merely statistics towards which we can be indifferent" JFK

Friday, December 31, 2010

Rising Rates Reveal Debt Reality (Michael Pento)

By: Michael Pento
Thursday, December 30, 2010

The Fed's lucky streak of luring bond investors with low interest rates may be drawing to a close. Nevertheless, the extended period of low borrowing costs has bred a new breed of investor. To the bulls and bears, we can now add the ostriches – those who bury their heads in the sand of declining debt service ratios while refusing to face up to intractable levels of total US government debt. If these ostriches were to actually look at the numbers, they would realize that it is their investments which are made of sand.

As the issuer of the world’s reserve currency, the US government has enjoyed the benefits of low interest rates despite its inflationary practices. When we run a trade deficit with a country like China, they have a strong incentive to 'recycle' the deficit back into our dollars and Treasuries. This practice has hidden what would otherwise be much higher borrowing costs and much lower purchasing power for the dollar. This artificial price signal allows people like Paul Krugman to claim that the Obama Administration’s stimulus programs should be much larger. Because our yawning fiscal deficits have not driven bond yields significantly higher, he sees no reason to curtail spending. Krugman wants to spend like its World War III, and then has the nerve to call those worried about the budget mindless zombies!

Krugman is just one partisan Democrat shouting at mirrors, but the misunderstanding has struck the right-wing as well. Last week, in a debate with me on CNBC’s The Kudlow Report, Brian Wesbury, Chief Economist of First Trust Advisors and writer for The American Spectator, claimed that our $9.3 trillion national debt is of little consequence because our GDP is a far greater. However, he failed to note that our $14.7 trillion of GDP only yields about $2.2 trillion in revenue for the Treasury. To fully access that entire GDP, the government would have to raise all tax brackets to 100% without producing any reduction in output or decrease in revenue. This is, of course, preposterous. As was demonstrated in the 1970s, even small increases in marginal tax rates have a substantial negative impact on output. A healthier appraisal would center on the fact that our publicly traded debt is now 422% of our annual tax revenue.

Wesbury did mention that if the government could not raise revenue to pay off the bonds, it could simply monetize the debt with few significant consequences. Apparently, paying back one's creditors in worthless paper is not technically "default" to an economist.

So neither Krugman nor Wesbury, both intelligent, highly educated economists, see our current course leading to imminent crisis. Unfortunately, both have been led astray by the low debt service ratio which has masked our economy's underlying insolvency. To see through the haze, you have to look at the numbers behind this so-called “deleveraging consumer” and then look at the debt of the nation.

The data point most utilized by those who espouse the idea of a healthy consumer is the household debt service ratio (DSR), a metric that relates debt payments to disposable personal income. This figure peaked at 13.96% in the third quarter of 2007; it has since dropped by 15%, to 11.89%. It is hard to see this as a significant amount of deleveraging, especially when looking at longer term trends. But it gets worse! Most of that modest decline is simply a function of lower interest rates, which have made debt easier to bear. Total household debt has gone down much less. This figure peaked at $13.92 trillion in Q1 2008, and has since declined only 3.5% to $13.42 trillion. How’s that for deleveraging?!

It's also worth noting that back in the first quarter of 2008, most homeowners were sitting on a pile of home equity to offset that debt. Today, most of the equity has vanished, yet the debt still remains.

When looking at the national debt, the situation is even more depressing. At the end of 2006, total debt held by the public was $4.9 trillion. According to the Treasury Department, the average interest rate paid on that debt was 4.9%. Therefore, the annualized interest payment at that time was $240 billion. At the end of 2010, our publicly traded debt has increased to $9.3 trillion, but the average interest rate on that debt has plummeted to just 2.3%. So, despite an 87% increase in debt in just a 4-year time span, the annualized debt service payment actually fell 11% to $213 billion. Krugman and Wesbury look at this and see progress.

Meanwhile, the average maturity on our debt has declined to 5.5 years. Compare that with the UK's gilts, which average about 14 years, or even to Greece's bonds, which average about 8 years. Falling interest rates and reduced durations have merely given the illusion of solvency to the US as compared to these other ailing sovereigns.

By 2015, our publicly traded debt is projected to be at least $15 trillion. Even if interest rates simply revert to their average level – not a stretch, given surging commodity prices and endless Fed money printing – the debt service expense could easily reach over $1 trillion, or about 50% of all federal revenue collected today. Just imagine what would happen if rates were to rise to the level of Greece, nearly 12% on a 10-year note, as opposed to our current 10-year yield of just 3.5%. I bet Athens, Georgia wouldn't look much better than its namesake. Don’t forget: as interest rates rise, GDP growth slows, sending the debt-to-GDP ratio even higher.

Earlier this year, it wasn’t the nominal level of debt that suddenly sent euroland into insolvency, but rather a spike in debt service payments. Right now, the US national debt is the biggest subprime ARM of all time. Much like homeowners who thought they could afford a mortgage that was 10 times their annual incomes, Messrs. Krugman and Wesbury are blinded by deceptively low current rates of interest. These ostriches won't poke their heads up to see the writing on the wall: low rates and quantitative easing cannot coexist for long. As rates continue to rise, the reality of US insolvency will be revealed.

Thursday, December 30, 2010

NAR attends DOL Seasonal Adjustment Seminar & Lobs out +3.5% Pending Home Sales Figure

Yippee, NAR lobs out a +3.5% Pending Home Sales (M-O-M) Figure to Please Wall Street. Lawrence Yun (the Stuart Smalley of the Real Estate Industry) announces a seasonally Pending Home Sales Index (PHSI) of 92.2 for November 2010. Lawrence neglected to mention the "not seasonally adjusted" PHSI reading of 76.2 down 9.3% from October 2010. For the month of November, the magic of seasonal adjustments added 16 points to the PHSI.

Yeah, yeah, there are months in which the not adjusted figure was greater than adjusted, however since November 2009, the seasonal adjustments added 21.2 points to the not adjusted. Head's likely rolled in April 2010 when the not adjusted figure was 22.5 points higher than adjusted (probably an intern error). NAR Chart: Adjusted and Not Adjusted

Washington, DC, December 30, 2010

Pending home sales rose again in November, with the broad trend over the past five months indicating a gradual recovery into 2011, according to the National Association of REALTORS®.

The Pending Home Sales Index,* a forward-looking indicator, rose 3.5 percent to 92.2 based on contracts signed in November from a downwardly revised 89.1 in October. The index is 5.0 percent below a reading of 97.0 in November 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said historically high housing affordability is boosting sales activity. “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” he said. “But further gains are needed to reach normal levels of sales activity.

“If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume,” Yun said. “Credit remains tight, but if lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy.”

For perspective, Yun said that the U.S. has added 27 million people over the past 10 years. “However, the number of jobs is roughly the same as it was in 2000 when existing-home sales totaled 5.2 million, which appears to be a sustainable figure given the current level of employment,” he explained.

“All the indicator trends are pointing to a gradual housing recovery,” Yun said. “Home price prospects will vary depending largely upon local job market conditions. The national median home price, however, is expected to remain stable even with a continuing flow of distressed properties coming onto the market, as long as there is a steady demand of financially healthy home buyers.”

Existing-home sales are projected to rise about 8 percent to 5.2 million in 2011 from 4.8 million in 2010, with an additional gain of 4 percent in 2012. The median existing-home price could rise 0.6 percent to $173,700 in 2011 from $172,700 in 2010, which was essentially unchanged from 2009.

“As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2 to 3 percent in 2012,” Yun said.

New-home sales are estimated to rise 24 percent to 392,000 in 2011, but would remain well below historic averages, while housing starts are forecast to rise 21 percent to 716,000.

Yun sees Gross Domestic Product growing 2.5 percent in 2011, and the Consumer Price Index rising 2.3 percent. NAR Press Release

In an effort to attend Bernanke's NYE party, Dept. of Labor adjusts out 424,000 jobless claims

Grandpa Fun Facts to Know and Share
In an effort to reward Wall Street manipulators this holiday season and remain in contention for the Bernanke NYE party, the DOL seasonally adjusted out 423,723 Americans filing initial jobless claims month to date. In early December, Secretary of Labor, Hilda Solis experienced a significant panic attack given the uptick in "real" initial jobless claims.

Hilda realized this increase in "real" jobless claims would not bode well for Wall Street, the stock market nor Ben Bernanke's mandate of inflating all asset classes. Accepting the fact that she could not massage the actual number of people filing claims and knowing Wall Street ignores core fundamental data, Ms. Solis implemented a bonus program for any staff member that could tweak the seasonal adjustment formula and wipe out at least 1/4 of a million jobless claims in the month.

Madam Secretary was ecstatic with the results of her incentive program, as her crack staff blew past the 1/4 million mark and managed to seasonally eliminate 423,723 Americans filing initial jobless claims through Christmas.

Week Ending        SA        NSA        Diff

12/25/10         388,000   521,834   133,834 (423,723 M-T-D)

12/18/10         422,000    496,935    74,935

12/11/10         423,000    490,276    67,276

12/4/10           438,000    585,678  147,678

DOL Press Release
In the week ending Dec. 25, the advance figure for seasonally adjusted initial claims was 388,000, a decrease of 34,000 from the previous week's revised figure of 422,000. The 4-week moving average was 414,000, a decrease of 12,500 from the previous week's revised average of 426,500.

The advance seasonally adjusted insured unemployment rate was 3.3 percent for the week ending Dec. 18, an increase of 0.1 percentage point from the prior week's unrevised rate of 3.2 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Dec.18 was 4,128,000, an increase of 57,000 from the preceding week's revised level of 4,071,000. The 4-week moving average was 4,120,000, a decrease of 37,250 from the preceding week's revised average of 4,157,250.

The advance number of actual initial claims under state programs, unadjusted, totaled 521,834 in the week ending Dec. 25, an increase of 24,879 from the previous week. There were 556,517 initial claims in the comparable week in 2009.

The advance unadjusted insured unemployment rate was 3.3 percent during the week ending Dec. 18, unchanged from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 4,095,135, a decrease of 85,886 from the preceding week. A year earlier, the rate was 3.9 percent and the volume was 5,088,864.

The total number of people claiming benefits in all programs for the week ending Dec. 4 was 8,866,924.

Ever Closer to a Failed Auction (Michael Pento)

Tuesday, December 28, 2010
Michael Pento
By: Michael Pento

Yesterday was a rather depressing day on the economic data front. The S and P/Case-Shiller home price index fell 0.8% in the month of October from the year ago period. Even more troubling was the MOM decline of 1.3%. 18 of 20 cities were down and the index is off 30% from its peak. The real estate sector has most assuredly resumed its decline. The progenitor and nucleus of the credit crisis was the overleveraged real estate market. Now that home prices are falling once again there will more homeowners underwater on their mortgages and the incentives to walk away from the loans will increase. This will cause a further increase in foreclosure activity and further downward pressure on home prices.

To make matters worse, an auction of five-year US bonds went poorly and the yield on the 10-year bellwether bond is back to 3.49%. That auction is just a taste of what’s ahead. Soaring borrowing costs are the future for U.S. sovereign debt issuance. We are fast approaching the day when the U.S. will either have to pay an astronomical interest rate on borrowed funds or be unable to issue the debt at all.

China, Russia, and Brazil have felt it necessary to raise interest rates as inflation is hurting the middle class and their economies. At lease those countries are dealing with the problem. The U.S. is not only ignoring inflation but actually doing everything in its power to encourage it. More and more debt, soaring commodity prices and massive money printing are the prescription our government has given us.

All this and they want you to believe that all is ok just because retail sales were up?

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Wednesday, December 29, 2010

Dept. of Labor Using New Darts for 2011 Employment Reporting

Nice job by Sara Murray with her recap
of upcoming changes with the
Department of Laughter's Labor's
Employment Reports.
(thanks Sara!)

By Sara Murray
Wall Street Journal

The Labor Department is ringing in the New Year with an assortment of changes to the employment report. The adjustments, both to improve accuracy and to better gauge the effects of the recession, will be rolled out over the next couple months. Here’s a guide to the changes coming up:

Unemployment Duration: Jobless Americans will be able to report unemployment durations of up to five years; until now, the government has recorded only whether a person has been out of work for two years or more. The switch will show up in January’s employment data, released in February. It won’t change the total number of unemployed people.

The decision to change the maximum was the result of a downturn that’s created the largest pool of unemployed workers on record. Some 1.5 million were out of work for two years or more as of November.

“There has been an unprecedented rise in the number of persons with very long durations of unemployment during the recent labor market downturn,” the Labor Department states. “This upper bound was selected to allow reporting of considerably longer durations while limiting the effect of erroneous extreme values (outliers).”

Because the new five-year maximum will affect average unemployment duration measures, the numbers released in February won’t be comparable to prior months. The Labor Department doesn’t predict whether the duration measures will increase or decrease.

The full effect of this change won’t be evident until April’s data is released in May because the survey doesn’t ask each respondent for unemployment duration every month.

Birth/Death Model: Business births and deaths will be estimated on a quarterly basis instead of annually with the aim that it will lead to smaller revisions in employment data. The adjustment will begin with the January jobs report released in February.

Applying the quarterly adjustment to data from 2003 to 2009 showed that the change had the biggest impact in 2009 when the job market was suffering from the recession.

The annual model estimated that business birth and deaths contributed 990,000 jobs in 2009, not seasonally adjusted. The estimate was too high: The number was later revised to 585,000 jobs. If the quarterly analysis had been applied, the estimated contribution from business birth and deaths would have been 730,000 jobs, closer to the actual contribution.

“This suggests that the quarterly methodology should help CES [Current Employment Statistics] estimates better reflect turning points,” according ot the Labor Department.

Self-Employed Workers: People who work for themselves will be classified more specifically according to whether they operate incorporated or unincorporated businesses.

Separate measures for unincorporated self-employed workers and incorporated self-employed workers will be added to Table A-9, which currently looks like this.

The tables that currently identify self-employed workers, Table A-8 for example, will now list them as self-employed workers, unincorporated. That changes their title but still measures the same set of people.

Occupations: Definitions of occupations were updated for 2010 and the jobs report will begin classifying workers according to these new definitions, starting with the February release. Those occupations appear in Table-13. The last time the definitions were updated was in 2000.

The Labor Department’s updated list includes 840 detailed occupations, 359 of which are unchanged from 2000. Others experienced changes in definition, title, etc. For more on how occupations are classified, read this.

The Department of Laughter's Labor's Birth/Death Model
has been a great data manipulating tool for the government
given the fact it is based on throwing darts.


AIG stock up 97% YTD, HOWEVER: Forgot to Report $18.7 Billion of Company Guarantees

Robert Benmosche (12/29/10):
"I was wondering if I might get a call from someone saying maybe 'you were right,' because we look better than we did last May and we can see the finish line from here, and it comes with a profit for the taxpayers," Mr. Benmosche said in an email. "But as I learned in [Ayn Rand's book] 'Atlas Shrugged,' find your Thank Yous from within." WSJ Unlikely Comeback of AIG's Stock

By Andrew Frye and Hugh Son
Dec. 29 (Bloomberg) -- American International Group Inc., the bailed-out U.S. insurer, failed to report $18.7 billion of policyholder guarantees at two property-casualty subsidiaries in 2008, a Pennsylvania regulator said.

National Union Fire Insurance Co. of Pittsburgh and American Home Assurance Co., which issued the guarantees to bolster other AIG units, had contingent liabilities tied to the promises of $157 billion on Dec. 31, 2008, compared with the $138.3 billion disclosed at the time, Robert Pratter, the state’s acting insurance commissioner, said today in a report.

AIG was instructed by the regulator to limit or end its intra-group guarantees, according to the report. It doesn’t face financial penalties, Rosanne Placey, a spokeswoman for the Pennsylvania regulator, said in an e-mail. The New York-based insurer, once the world’s largest, was brought to the brink of collapse in September 2008 when the company was unable to meet its obligations without a cash injection from the government.

Failing to report contingent liabilities may be “a serious problem because of the systemic risk for the whole enterprise,” said Robert Hunter, a former Texas insurance commissioner who is now insurance director at the Washington-based Consumer Federation of America. The rest of the AIG/Absent Minded Professor Bloomberg Story

40 square feet of retail space for every person in America

U.S. has 40 square feet of retail space for
every person in America...

By: Ann Zimmerman, Justin Lakhart and
Rachel Dodes
Wall Street Journal

American shoppers expanded their year-end purchases this holiday season by the biggest margin since the boom year of 2005, but retailers still face daunting challenges in the new year, from rising gasoline and cotton prices to an overabundance of stores.

U.S. retail sales, excluding automobiles, rose 5.5% between Nov. 5 and Dec. 24 compared with a year ago, according to MasterCard SpendingPulse, a unit of MasterCard Advisors that tracks sales by all types of payment.

Last year, sales rose 4.1% during the 50 day period, but those results were easy comparisons against the recession in 2008, when sales fell 6.1%.

"To sum up, the holiday season is a joyous one," said Sherif Mityas, a partner in the retail practice of A.T. Kearney, a global management consulting firm. "Consumers are looking to spend again. They are more confident than they had been."

The numbers were not reflective of a late December storm, which did not hit most of the East Coast until Christmas Day or later. The day after Christmas is traditionally one of the season's biggest shopping days but retailers are expecting that shoppers will simply delay their purchases, not abandon them.

Just how long retailers' confidence will last for shoppers and stores alike is the big question.

Couple of interesting Factoids
Over the past four quarters, consumer spending accounted for 68.6% of demand in the economy, up from 66.5% in 2007. The reason: With housing contributing less to the economy than at any time since World War II, and with businesses spending also down sharply, consumer spending is taking a larger piece of the overall pie.

Even if shoppers continue to loosen purse strings in the year ahead, the retail landscape is still littered with too many stores for all to prosper. The U.S. now has some 40 square feet of retail space for each person—the most per person in the world. Read on Garth

ShopperTrak: Retail sales down 4.1% (because of calendar shift, blizzard and Father's Day)

No Mention of potential foot traffic increases
in other parts of the country that
incurred sunshine.

CHICAGO – December 29, 2010 – ShopperTrak’s National Retail Sales Estimate (NRSE) today reported that total GAFO retail sales for Christmas week (week ending Dec. 25) slipped 4.1 percent compared to last year, while the company’s retail traffic index (SRTI) reported a strong 6.8 percent total U.S. foot traffic decline for the same period.

Although retail levels slowed last week, the 2010 calendar shift that placed Dec. 26 on a Sunday as opposed to a Saturday last year had the greatest impact on overall performance. By falling on a Sunday this year, Dec. 26 is not counted in the Christmas week performance, eliminating a day that finished third in sales and second in traffic in 2009 which was included in last year’s Christmas week data. This year ShopperTrak anticipates Dec. 26 will finish 10th in both sales and traffic.

“It seems the calendar was a bit unkind to retailers this year as the 2009 comparison week is particularly strong and a critical day in the season fell on a Sunday which created some unique challenges,” said Bill Martin, founder of ShopperTrak. “In some locations retailers didn’t have the ability to extend store hours on a Sunday due to various regulations, so there was a shorter window to move merchandise that day. Additionally, the beginning of some inclement weather in the Midwest, Northeast and South regions last week most likely influenced retailer’s levels as well.”

Because the 2010 calendar shift also provided a full week between Super Saturday and Christmas, Dec. 23 – a day ShopperTrak deems Father’s Day because of procrastinating male shoppers – saw strong returns and finished second behind Black Friday with $7.857 billion spent. Black Friday and Super Saturday accounted for $10.69 and $7.58 billion respectively. By comparison consumers spent $7.547 billion on Dec. 23, 2009, a day which also finished second behind Black Friday and ahead of Super Saturday.

Switching gears, ShopperTrak also measured the impact of the blizzard which crippled the Northeast particularly on Dec. 26 and 27 strongly impacted retail traffic in the region and across the country. The company’s analysis shows because of the blizzard:
  • On Dec. 26 total U.S. foot traffic was 11.2% below what it would have been expected if the blizzard had not hit the Northeast
  • Northeast region foot traffic fell 6.1 percent on Dec. 26 while the other three regions (Midwest, South, West) had an average gain of 38.6 percent versus last year.
  • On Dec. 27 total U.S. foot traffic was 13.9 percent below expectations had the blizzard not hit the Northeast.
  • Northeast region foot traffic fell 42.9 percent on Dec. 27 compared to 2009, while the other regions averaged a 13.0 percent gain.
  • Preliminary GAFO retail sales estimates for Dec. 26 and 27 combined are roughly $10 billion. Assuming a conservative 10 percent sales impact nationally for the blizzard, roughly $1 billion of retail spending was postponed during the two day period.
ShopperTrak Complete Press Release

Brett Arends not a Believer of the Santa Rally (very good read)

If you need a breather from the odorous Bullpen, spend a few minutes reading Mr. Arends' perspective on the Santa Rally. Granted, the U.S. Stock Market deems fundamental data irrelevant. Ben Bernanke has Wall Street flush with cash in an effort to bid up all asset classes regardless of the outcome from yet another round of irrational exuberance.

Kind of eerie how similar the behavior of bullish pundits is to the tech wreck of the dot-bomb era, merely 10 years ago.

The Wall Street Journal

It's been quite a Santa Rally.

The stock market has gained about 10% this quarter. That's the best fourth-quarter performance since 2003 and the seventh-best in thirty years. Wall Street is cheering. The shops had a good Christmas. The economy may be perking up. Investors are feeling cheerful again, and strategists are predicting a happy new year for equities.

Two words: Bah, humbug.

I can't cheer this Santa Rally. Call me Scrooge. But I'll give you ten reasons why not -- and they don't even mention the dismal economy.

1. Shares may be more expensive than they're telling you. Wall Street says the market is still reasonably priced, at about 14 times forecast earnings. But two other measures tell a different story. The "Cyclically-Adjusted Price-to-Earnings Ratio" compares share prices to average earnings for the last ten years, not just for one year.

And a measure called "Tobin's q" compares share prices to the cost of replacing company assets. These may seem off-the-wall measures, but for more than a century they have proven very good guides for long-term investors. Right now both say the market is about 75% above its average value: Not a bubble, but expensive. These don't mean the market will tank. But they do suggest your long-term returns from here may be modest.

2. Bargains are hard to find. Value investors are gasping for air. Looking for stocks below, say, 16 times likely earnings, and with a dividend yield of more than 3%? Good luck. Once you weed out shares of companies on life support or those with meager interest cover, you're left with a smattering of decent-sized names - mostly drug companies and utilities, plus a handful of others such as Chevron and Kraft. In a market that's reasonably priced, you typically find lots of stocks on the bargain rack. Not here.

3. Is that really it? The stock market is now where it was before Lehman Brothers collapsed. And if you exclude financial stocks, the market value of U.S. equities is now within about 15% of the October, 2007, peak. To believe that (non-financial) stocks are reasonably valued today implies that they were pretty reasonable then, at the peak of the bubble - and that therefore most of the last three years was little more than a bad dream. Do you believe that? Do I?

4. The dividend yield is dismal. As the market has rallied, the yield has tumbled. Today it's just 1.7%, very low indeed by historic standards. David Rosenberg at Gluskin Sheff says the long-term average has been about 4.4%. Of course, dividends aren't the only way for investors to make money: Stock buybacks and growth can also generate returns. But dividends have historically been a key driver of investment profits, and the current level is paltry.

5. Corporate debts are far larger than people realize. Wall Street is selling a story that corporate balance sheets are in great shape and U.S. companies are simply awash with spare money. It's misleading. Some companies, naturally, are fine. But overall, corporate debts have been rising, not falling. Federal Reserve data show non-financial corporations owed $7.4 trillion at the end of the third quarter - an increase of $250 billion in a year, and a new record. As recently as 2005 the figure was just $5.5 trillion.

The Fed says nonfinancial corporations now have debts equal to 58% of their net worth - compared to just 41% five years ago. And when you add these debts to the value of equities, the so-called "enterprise value" of public companies is now about 2.2 times annual sales, according to FactSet. That's an extreme level - far higher than in 2006 or 2007, and exceeded only by the madness of 1999-2000.

Brett's #6 through #10 and worth the read!

Brett Arends writes ROI, or Return on Investment, offering analysis on what the latest news means for you and your money. The column covers investments, spending and broader personal-finance issues. Brett writes from a value-oriented and generally contrarian perspective. He has been writing about finance, in Europe and in the U.S., since the 1990s. Before that he worked as an analyst at McKinsey & Co., the strategy consultancy.

By: Brett Arends

Robert Shiller interview by WSJ discussing falling home prices

Professor Robert Shiller interviewed by Wall Street Journal discussing yesterday's Case-Shiller Report. (20-City Composite fell 0.8% from their levels in October 2009)
 If prices continue to fall at this rate, Shiller expects Congress will issue another home-buyer tax credit or other emergency measure to stop the fall, despite the fact that it's an unfair gift of taxpayer money to a group of people that simply buy a house. When the ship is sinking this fast, Shiller says, you do what you have to do.

Humpty Homeowner had a great fall: 382,000 U.S. Home Foreclosures in Q3 (up 31.2% over Q2)

Humpty Homeowner sat on a wall,
Humpty Homeowner had a great fall.
All Bush's/Obama's horses & all Bush's/Obama's men
Couldn't put Humpty together again

By Dave Clark

(Reuters) - U.S. home foreclosures jumped in the third quarter and banks' efforts to keep borrowers in their homes dropped as the housing market continues to struggle, U.S. bank regulators said on Wednesday.

The regulators said one reason for the increase in foreclosures is that banks have "exhausted" options for keeping many delinquent borrowers in their homes through programs such as loan modifications.

Newly initiated foreclosures increased to 382,000 in the third quarter, a 31.2 percent jump over the previous quarter and a 3.7 percent rise from a year ago, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in their quarterly mortgage report.

The number of foreclosures in process increased to 1.2 million, a 4.5 percent increase from the second quarter and a 10.1 percent increase from a year ago, according to the regulators.

The report, which covers 33 million loans serviced by national banks and federally regulated thrifts, also shows a sharp drop in the amount of loan modifications processed through the Home Affordable Modification Program (HAMP), the Obama administration's leading foreclosure prevention effort. HAMP loan modifications fell by almost 46 percent in the third quarter, according to the report.

Regulators noted, however, that loan modifications done by servicers outside of HAMP increased by 10 percent in the third quarter.

Overall home retention actions taken by banks to keep borrowers in their homes dropped by 17 percent compared to the second quarter. Add'l Housing Market Articles

No need to worry, the U.S. Stock Market has all
negative matter priced in to the market.

Tuesday, December 28, 2010

Wall Street Gets What It Wants (Mostly)

While Obama vowed to change the system,
he filled his economic team with people
who helped create it.

By Christine Harper
Dec. 28 (Bloomberg) -- Wall Street’s biggest banks, whose missteps caused a global financial crisis and economic slowdown two years ago, were more agile when it came to countering the political and regulatory response.

The U.S. government, promising to make the system safer, buckled under many of the financial industry’s protests. Lawmakers spurned changes that would wall off deposit-taking banks from riskier trading. They declined to limit the size of lenders or ban any form of derivatives. Higher capital and liquidity requirements agreed to by regulators worldwide have been delayed for years to aid economic recovery.

“We continue to listen to the same people whose errors in judgment were central to the problem,” said John Reed, 71, a former co-chief executive officer of Citigroup Inc., who estimated only 25 percent of needed changes have been enacted. “I’m astounded because we basically dropped the world’s biggest economy because of an error in bank management.”

The last two years have been the best ever for combined investment-banking and trading revenue at Bank of America Corp., JPMorgan Chase and Co., Citigroup, Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg. Goldman Sachs CEO Lloyd Blankfein, 56, and his top deputies are in line to collect more than $100 million in delayed 2007 bonuses -- six months after paying $550 million to settle a fraud lawsuit related to the firm’s behavior that year. Citigroup, the bank that needed more taxpayer support than any other, has a balance sheet 14 percent bigger than it was four years ago. The Rest of the Story on Wall Street Gets What it Wants

“It was very clear by February 2009 that the banks were going to get a free pass,” said Simon Johnson, a former chief economist for the International Monetary Fund who is now a professor at the Massachusetts Institute of Technology’s Sloan School of Management. “You could see from the hiring of Tim Geithner and from the messages that he and his team were putting out that this was going to go very badly.”

Great Job Christine!

Weekly "Seasonally Adjusted" Retail Sales (Int'l Council of Shopping Centers)

Dec 28 (Reuters) - The International Council of Shopping Centers and Goldman Sachs on Tuesday released the following seasonally adjusted weekly data on U.S. chain store retail sales.

Week Ending Index 1977 = 100

Week       Index      Year/Year    Weekly Change
Ending                      Change

Dec 25    513.4           4.8%            1.0
Dec 18    508.4           4.2               1.7
Dec 11    499.9           3.1               0.8
Dec 4      495.9           2.6              -2.1
Nov 27    506.6            3.5               0.5
Nov 20    503.9            2.8              -0.6
Nov 13    507.0            3.4              -0.1

Grandpa's Tuesday Tunes (Tower of Power, Dr. Hook and Grand Funk Railroad)

Grandpa's Tuesday tunes and a
trip down musical memory road.

Tower of Power: "What is Hip?"

Dr. Hook and The Medicine Show: "Cover of the Rolling Stone"

Grand Funk Railroad: "I'm Your Captain"

TARP Bailout Banks thank Geithner with Lofty GM Price Targets

By Andrew Ross Sorkin
DealBook NY Times
The New York Times

The initial public offering of the year, without question, was General Motors’ return engagement to the stock market, selling more than $23 billion in shares amid strong demand. Now, the newly public company has received additional plaudits from Wall Street.

A slew of analysts initiated coverage of G.M. on Tuesday with strong recommendations.

Citigroup analysts rated the company a “buy,” saying that G.M. is well-positioned to profit as it heads into its 2011-2014 product cycle. “G.M. may be the most compelling 1-3 year auto turnaround story in our universe,” Citigroup says.

Bank of America-Merrill Lynch also has a “buy” recommendation. Emerging from bankruptcy as a leaner company, the company should benefit from a cyclical recovery in United States auto sales, the bank’s analysts write. “Furthermore, we expect new leader to provide an opportunity to reinvigorate G.M.’s corporate culture,” they write.

Both Citi and BofA have price targets of $45 on G.M. shares.

JPMorgan gave a price target of $44 and an overweight rating. Barclays Capital recommended G.M. with an overweight rating and a price target of $42. Credit Suisse gave the company an outperform rating and a target of $43.

Shares of G.M. are up nearly 5 percent from their I.P.O. price of $33 on Nov. 18. and they are poised to rise further today.

The offering in November was intended in large part to cut some of the bonds between the auto maker and the United States government, which invested $50 billion to keep it going. The I.P.O. cut the Treasury Department’s stake to 26 percent from 61 percent, but that ownership continues to be a “headwind” for G.M.’s stock, Bank of America noted. The government’s exit strategy will be “a material overhang for the stock.”

Andrew neglected to mention the IPO "quiet period" ceased today.

Major Underwriters of GM IPO and their Price Targets:
JPMorgan Chase ($44)
Morgan Stanley ($50)
Bank of America ($45)
Citigroup ($45)

And the underwriters payday:
How did the investment bankers, the chief managers of this marketing and sales campaign, earn their fees, estimated at $248 million? By creating the image of a huge hit.

A Reminder on GM Bailout
The U.S. government invested $49.5 billion to save GM. So far, it was recouped about $23 billion, including the IPO proceeds. It will still own a third of GM after the IPO. If it sold this remaining stake at $33 a share, Treasury would lose money on its investment.

That has raised questions about why the IPO was increased in size in recent days. If fewer shares were sold now and GM stock climbs in the future, the government might have been able to sell at higher prices, recouping more of its investment.

Senior administration officials said Wednesday that Treasury tried to strike a balance between selling at the right price, to get as much back for taxpayers, and exiting the investment as soon as practicable.

The ultimate loss or return on the government’s investment in GM won’t be known until Treasury sells all its shares.

Treasury agreed to a six-month lockup on its remaining GM stake after the IPO.

When does the U.S. Govrnment Break Even
on the GM Bailout You Ask?
The Treasury needed to sell all of the GM shares it held at an average price of $43.67 to break even on its investment. That would require its remaining 500 million shares to be sold at $53.07 each.

Consumer Confidence: another 72% and will achieve an economy growing at a "good clip"

"Despite this month's modest decline,
consumer confidence is no worse off today
than it was a year ago."
(well then party on Garth!)

28 Dec. 2010

The Conference Board Consumer Confidence Index®, which had improved in November, decreased slightly in December. The Index now stands at 52.5 (1985=100), down from 54.3 in November. The Present Situation Index declined to 23.5 from 25.4. The Expectations Index decreased to 71.9 from 73.6 last month.

The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world’s largest custom research company. The cutoff date for December’s preliminary results was December 20th.

Says Lynn Franco, Director of the Consumer Research Center at The Conference Board: "Despite this month's modest decline, consumer confidence is no worse off today than it was a year ago. Consumers' assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious. Thus, all signs continue to suggest that the economic expansion will continue well into 2011, but that the pace of growth will remain moderate."

Consumers' appraisal of present-day conditions was slightly more pessimistic than in November. The percentage of consumers claiming business conditions are "bad" decreased to 41.2 percent from 42.9 percent, however, those claiming business conditions are "good" declined to 7.5 percent from 8.5 percent. Consumers’ assessment of the labor market was less favorable than last month. Those saying jobs are "plentiful" decreased to 3.9 percent from 4.3 percent, while those stating jobs are "hard to get" edged up to 46.8 percent from 46.3 percent.

Consumers’ expectations were slightly less optimistic than in November. Those expecting an improvement in business conditions over the next six months edged up to 16.6 percent from 16.4 percent, while those anticipating business conditions will worsen edged down to 12.1 percent from 12.4 percent. Consumers remained mixed about future job prospects. Those anticipating fewer jobs in the months ahead increased to 19.5 percent from 19.1 percent, while those expecting more jobs declined to 14.3 percent from 15.1 percent. The proportion of consumers expecting an increase in their incomes decreased to 9.9 percent from 11.1 percent. Conference Board 

Generally when the economy is growing at a good clip,
confidence readings are at 90 and above.
(another 72% and we will achieve a "good clip")

Monday, December 27, 2010

2010: An Economic Review (Irwin Stelzer)

The year saw what must be the most rapid
peace-time deterioration in the
nation’s financial position.

By Irwin M. Stelzer
The Weekly Standard

As we look back on the year that is limping to an end, there is little—not nothing, just little—to cheer about. The year opened with the headline unemployment rate at 9.7 percent, and the rate including workers too discouraged to look for work or involuntarily on short-time (the U-6 rate, in the jargon of the trade) at 16.5 percent of the work force. It is closing with the headline rate close to 10 percent and the U-6 rate at 17 percent. The number of workers unemployed for 27 weeks or longer has jumped during the year from about 6 million to 6.3 million. All of this despite the expenditure of about $1 trillion on an economic stimulus.

Republicans and conservatives take these numbers as final proof that the reputation of John Maynard Keynes should remain in the graveyard of fallen economists, while President Obama and his team claim that without the heavy dose of Keynes’s medicine, a demand-side stimulus, the jobs situation would be much worse. Only the federal government has survived job cuts—the number of employees on the federal government payroll has increased a bit. And these are what liberals call “good paying jobs”: the average annual salary of federal workers is close to $118,000, and in comparable jobs is about 10 percent higher than private-sector pay.

One thing is beyond dispute. The year saw what must be the most rapid peace-time deterioration in the nation’s financial position. Under Bush, a budget surplus running at 2.37 percent of GDP in 2000 turned into a deficit of 3.18 percent in 2008. Under Obama, the deficit rose to a staggering 9.91 percent last year. This year it will be closer to 11 percent than to 10 percent. Yes, some of this is the natural effect of the recession. But some comes from the president’s decision to allow congressional Democrats to dust off spending plans long gathering dust.

For them, Santa Claus came early this year, and stayed right through the latest deal agreed by Republicans: taxes on the so-called wealthy will not go up, a big win say conservatives who argue that the $100 million increase in taxes on the wealthy would have thrown us back into recession. But the price for that concession was agreement to spend another $1 trillion on some favorite Obama programs, increasing the deficit—something conservatives say will throw us back into recession!

The U.S. government now owes its creditors almost $14 trillion, up from less than $6 trillion when George W. Bush was packing to return to Texas. And the total is headed up, and will rise even faster if the recent increase in interest rates proves to be only the first round of rate rises. The rest of Mr. Stelzer's Review

Algorithms Take Control of Wall Street (Wired)

For better or worse, the computers
are now in control.

By Felix Salmon and
Jon Stokes

Last spring, Dow Jones launched a new service called Lexicon, which sends real-time financial news to professional investors. This in itself is not surprising. The company behind The Wall Street Journal and Dow Jones Newswires made its name by publishing the kind of news that moves the stock market. But many of the professional investors subscribing to Lexicon aren’t human—they’re algorithms, the lines of code that govern an increasing amount of global trading activity—and they don’t read news the way humans do. They don’t need their information delivered in the form of a story or even in sentences. They just want data—the hard, actionable information that those words represent.

Lexicon packages the news in a way that its robo-clients can understand. It scans every Dow Jones story in real time, looking for textual clues that might indicate how investors should feel about a stock. It then sends that information in machine-readable form to its algorithmic subscribers, which can parse it further, using the resulting data to inform their own investing decisions. Lexicon has helped automate the process of reading the news, drawing insight from it, and using that information to buy or sell a stock. The machines aren’t there just to crunch numbers anymore; they’re now making the decisions.

That increasingly describes the entire financial system. Over the past decade, algorithmic trading has overtaken the industry. From the single desk of a startup hedge fund to the gilded halls of Goldman Sachs, computer code is now responsible for most of the activity on Wall Street. (By some estimates, computer-aided high-frequency trading now accounts for about 70 percent of total trade volume.) Increasingly, the market’s ups and downs are determined not by traders competing to see who has the best information or sharpest business mind but by algorithms feverishly scanning for faint signals of potential profit.

Algorithms have become so ingrained in our financial system that the markets could not operate without them. At the most basic level, computers help prospective buyers and sellers of stocks find one another—without the bother of screaming middlemen or their commissions. High-frequency traders, sometimes called flash traders, buy and sell thousands of shares every second, executing deals so quickly, and on such a massive scale, that they can win or lose a fortune if the price of a stock fluctuates by even a few cents. Other algorithms are slower but more sophisticated, analyzing earning statements, stock performance, and newsfeeds to find attractive investments that others may have missed. The result is a system that is more efficient, faster, and smarter than any human. Complete article

“There are predatory traders out there that are constantly probing in the dark, trying to detect the presence of a big submarine coming through. And the job of the algorithmic trader is to make that submarine as stealth as possible.”

Nearly 2.2 million loans are 90 days or more delinquent but not yet in foreclosure (retailers have loved it!)

One-third of loans that are 90 days
or more delinquent have not
made a payment in a year
(well giddyup holiday retail sales)

JACKSONVILLE, Fla., Dec. 27, 2010 /PRNewswire/ -- The November Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that the volume of loans moving to REO continued to drop as moratoria further delayed foreclosure sales. While the 90+ delinquency category has steadily declined, the number of loans moving to seriously delinquent status beyond 90 days far outpaced the number of foreclosure starts. Nearly 2.2 million loans are 90 days or more delinquent but not yet in foreclosure.

Foreclosure inventories also continued to rise for the fifth straight month as delinquent accounts are referred for foreclosure, but the sale of foreclosure properties continued to decline. When compared to January 2008 levels, the foreclosure inventory of Jumbo Prime loans is nearly seven times higher; the inventory of Agency Prime loans is nearly six times higher; and the foreclosure inventory of Option ARM loans is approaching five times the inventory in January 2008.

The report also shows that one-third of loans that are 90 days or more delinquent have not made a payment in a year; however, the number of new problem loans declined nearly 5.4 percent from October, which is opposite of the seasonality trend that typically impacts new delinquencies this time of year. Self-cures for loans one to two months delinquent increased in November to a six-month high.

In the month of November, 261,153 loans were referred to foreclosure, which represents a 0.7% month-over-month decline. The total number of delinquent loans is nearly 2.1 times historical averages – and foreclosure inventory is currently at 7.7 times historical averages.

As reported in LPS' First Look release, other key results from LPS' latest Mortgage Monitor report include:
  • Total U.S. loan delinquency rate: 9.02 percent
  • Total U.S. foreclosure inventory rate: 4.08 percent
  • Total U.S. non-current* loan rate: 13.10 percent
  • States with most non-current* loans: Florida, Nevada, Mississippi, Georgia, New Jersey
  • States with fewest non-current* loans: North Dakota, South Dakota, Alaska, Wyoming, Montana
*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state. LPS Link and complete report

Sunday, December 26, 2010

David Einhorn: fears a 2nd crisis if interest rates are kept low

By Richard Blackden
Add'l Richard Blackden Articles
U.S. Business Editor
The Telegraph

America is storing up a second financial crisis by keeping interest rates at record low levels, according to David Einhorn, the hedge fund manager who first publicly warned about the financial catastrophe facing Lehman Brothers.

"The crisis that required zero interest rates has passed," said Mr Einhorn, who co-founded and runs Greenlight Capital, a $6.5bn (£4.2bn) fund. By not raising rates "it increases the chance that governments will over-borrow and fall into a debt trap".

The criticism of the Federal Reserve comes as it embarks on another $600bn (£380bn) of quantitative easing – or printing money – in an effort to fire up a stronger recovery next year.

Interest rates around the western world, including in Britain, have sat at or below 1pc since the near collapse of the financial system in 2008 triggered a global recession.

"If interest rates ever do go up again, you have another crisis," Mr Einhorn told The Sunday Telegraph.

Those in favour of very low interest rates point to the support it has given the real estate market in the US and that, as in the UK, it should encourage politicians to begin to tackle the $1.3 trillion budget deficit without fear of damaging the economy.

Greenlight, which Mr Einhorn founded in 1996 with about $1m, including an investment from his parents, has its single largest position in gold – an asset that many investors have historically turned to during periods of economic uncertainty.

The gold price, which is closing in on a tenth straight year of gains, reached a record $1,432.50 an ounce earlier this month.

Mr Einhorn admits that he is having to pay far more attention to the broader economic picture when making decisions about which companies to invest in than he has ever done. He declined to say what he thought of either the UK or eurozone economies at the moment.

The 42 year-old, already well known within the hedge fund industry, shot to wider prominence in 2008 after using a lecture in May of that year to voice criticisms of how Lehman was valuing its assets. The lecture had echoes of one he gave six years earlier on Allied Capital, a lender which he accused of using misleading accounting practices.

That lecture sparked an almost decade-long battle with Allied, which is recorded in Mr Einhorn's 2008 book Fooling Some of The People All of The Time. The financial crisis, he says, has done little to ensure that the regulators are any better at detecting either fraudulent or financially weak companies.

Both lectures drew stinging criticism from some investors and parts of the media, who accused the fund manager of stirring up concerns because it had short positions in both companies that would see Greenlight benefit if their share prices dropped.

Mr Einhorn has responded that he only holds short positions if he has serious worries about a company.

Though Mr Einhorn is best known as a short seller, Greenlight typically has more long positions than short positions.

Greenlight, which hasn't taken any new money from investors since the early part of this decade, has delivered an average annual return of 21pc since it was started.

Vodafone is currently one of his largest positions and he also owns shares in Apple.

"Tis the Season to be Wary (Alan Abelson-Barron's)

Pessimism about Europe and optimism
about the U.S. may both be overdone.
But Wall Street's bull run looks
vulnerable for a 2011 selloff.

Link to add'l Alan Abelson Articles 

The deep freeze. No, no, we're not about to do a reprise on the credit collapse back in 2008-2009. Hey, this is the season to be jolly. The freeze we're talking about is neither financial nor metaphorical but climatic—the real thing, that dumped who knows how much snow on Northern Europe, grounding thousands of flights, making life miserable for any poor souls who had to get out and about, and further constraining the populace's shopping impulse, already chilled by the cold winds of economic austerity.

Do you need any greater evidence of how desperate folks are than the dispatch from Berlin that told of how two men dressed as Santa Claus strolled into a supermarket, whipped out a pistol and robbed the joint? Although the report of the incident is lamentably shy of details on motive, one can only assume the faux Clauses were among the involuntarily idled, obviously short of means and unable to face the prospect of their little ones looking under the tree (recently purloined) on Christmas morn and finding—nothing.

One can only sympathize with the beset economic wise men of Europe for suspecting that somebody up there doesn't like them. Here they were frantically running around in circles, concocting all kinds of weird nostrums in an attempt to keep the weak sisters of the euro zone vertical, when the heavens open up and all but bury the Continent under a ton of snow. But if they leave off frowning and fretting and fulminating about the quirks of misfortune for a moment or two, they might realize the furious storm may prove a blessing, not a curse.

For inclement climate is just the ticket to get feckless governments and reckless bankers off the hook. A good chunk of the blame for their failure to fix the broken economies their machinations have left across a wide swath of Europe can now be cunningly shifted to the vagaries of nature. So, the great storm may come in right handy if, as seems likely, the quacky remedies they've proposed to ease the economic bind of countries like Ireland, Greece, Portugal and Spain aggravate rather than alleviate the pain.

The overwhelming consensus among the economic cognoscenti on this side of the Atlantic is that Europe is destined for further rough going in the year ahead and, indeed, there's lots of muttering of default by one or another of the debt-laden struggling members of the euro zone, even of a possible breakup of that somewhat ungainly entity. Since we have the unshakable conviction that the consensus is usually wrong, and when it's overwhelming it's inevitably wrong, we offer that as a token of holiday cheer to our shivering European cousins.

In striking contrast, optimism rules the roost among the seers when sizing up the prospects for our own economy. While we earnestly hope the optimists are right, we have some difficulty in envisioning woe in Europe failing to affect us. That would be decoupling on a rather grand scale, and we're frankly more than a tad skeptical that it'll happen. But we'll see.

Certainly, investors, who just a scant couple of weeks ago were acting pretty antsy when it looked as if one or another of the European invalids were about to sink from sight, have shrugged off such worries. But we guess they're just too busy these days buying stocks and watching them go up—and for sheer excitement, we admit, it beats pro football hands down—to spend precious time wrinkling their brows over the consequences of sovereign default and other such dull, arcane stuff. Complete article

Honorable Mentions: Zero Hedge and David Rosenberg
As Zero Hedge observes, margin debt on the Big Board in October swelled to $269 billion, a leap of $13 billion over the September figure, and the highest since September 2008, just before Lehman gave up the ghost.

Any forced unwind, triggered by an unpleasant surprise (yes, Virginia, no matter what your daddy and mommy tell you, there are such things as unpleasant surprises in the stock market) could be very, very ugly.

The upward spiral in crude to $91 a barrel is on its way, predicts the commodity bunch at Barclays Capital, to $100, so Jane and John are obviously going to feel the pinch all the more. Dave Rosenberg, Gluskin Sheff's chief economist and strategist (but a fine fellow nonetheless), estimates the run-up in energy prices is costing American consumers something like $60 billion a year. Toss in the rising cost of food, which like energy is conveniently omitted from the official tally of so-called core inflation, and pinch morphs into squeeze.

Dave points out, incidentally, that "it's very dangerous to use the holidays as a guide to any fundamental shifts in consumer attitudes." In the good old days of free-flowing credit, he goes on, thanks to "the massive wealth buildup from double-digit home-price appreciation and sustainable strong employment…consumer spending in real terms surpassed a 2.5% annual rate no fewer than 13 quarters and 3% nine times. It has yet to happen so far."

A market historian of sorts, Dave relates that the dividend rate on the Standard & Poor's 500 (here we're hesitantly trespassing on the turf of the excellent Shirley Lazo, author of Barron's Speaking of Dividends), currently 2%, is "too low." It smacks, he says of a market top, where investors are willing to forgo yield because they feel they'll more than make up for it in capital gains. Ominously, the last time S&P yield was that low was in the summer of 2000, followed, you may recall, by the dot-com crash.

But, wait, don't go away unhappy. When said yield gets to its long-term average 4.35%, equities, Dave reckons, will be a great buy. Which gives you something to look forward to. Whew, now we can wish you a "Merry Christmas" with a clear conscience.

Thanks to Joe Saluzzi of Themis Trading for the head's up.