Herb Greenberg calls out Stock Analysts: Too Scared or Too Stupid for Sell Ratings?

So far this year, with the S&P 500 at

1,337, a mere 338 of 10,557 rankings

or 3.2 percent received outright sells.

CNBC Stock Blog
By Herb Greenberg
April 28, 2011

Among the long-running jokes to those of us watching Wall Street: Analysts almost never put an outright “sell” rating and recommendation on a stock.

Reasons are varied and obvious — including fears of being frozen out by a company or bawled out by a client.

Earlier this week, Reuters columnist Felix Salmon tackled the subject, after he had challenged me on some comments I had put out on Twitter.

But the level of stinginess with "sells" is pathetic and even surprising, especially as stock market races to post-crash highs.

How pathetic? I recently asked Factset to cull its database on sells in the S&P 500, and here are the result:

So far this year, with the S&P 500 at 1,337, a mere 338 of 10,557 rankings or 3.2 percent received outright sells. Another 191 or 1.81 percent received a ranking of “underweight,” which is the the politically correct equivalent of “sell.”

At this time last year, when arguably stocks were a better bargain with the S&P at around 1,208 — 4.15 percent of 9,141 rankings were sells and 1.65 percent underweight.

Now for the hammer: This time in 2009, with the S&P at a death-watch 843 — as the market was just crawling out of the depths of its depression — analysts had double the number of sells that they do now: 6.4 percent, with 3.74 percent underweights. It was the most negative they’ve been in years, and still a pathetically low number.

Goes to show: Not only are they stingy, but some (in retrospect, of course) look downright stupid.

Keith McCullough: Suggests 46% of assets in cash

CNBC Television
Nicole Lapin
March 16, 2011

U.S. Debt Problems are

Structurally Impairing Growth

“Now here you are with net leverage positions in the hedge fund community at the highest points they’ve been since October 2007,” Keith McCoullough, CEO Hedgeye Risk Management told CNBC. “We suggest having 46 percent of your assets in cash,” McCullough added.

Next Subprime: Municipal Bonds Going Down at Least 15-20% (Jeff Gundlach)

Between here and the endgame lies the valley

and the valley is full of fear. And I think the

muni market is going to go down by

at least 15 to 20%. At least.

CNBC
March 9, 2011
Bond king Jeff Gundlach likened municipal bonds to subprime mortgage bonds on CNBC’s Strategy Session on Wednesday.

“You’ve got a history of low defaults, which is comforting. But that kind of sounds like what subprime sounded like back in 2006,” Gundlach said.

Gundlach said the markets for subprime bonds and municipal bonds are similar because the buyers are similar. Muni bond buyers aren’t seeking fundamentally good credit stories—they are buying for “technical reasons,” Gundlach said. This is exactly what happened with subprime

With subprime bonds, buyers were seeking highly-rated credit with very low default histories in order to satisfy regulatory bank capital requirements. They largely ignored deteriorating fundamentals, and continued to buy subprime mortgage-backed securities at a rapid clip even when the problems with the market were becoming apparent in the first half of 2007.

Muni bonds are bought for a different “technical reason”—the tax benefit—and buyers are once again ignoring deteriorating fundamentals. So are munis going the way of subprime?

“If by that you mean, lower, then yes. If you mean crashing, I’m agnostic on that,” he told David Faber.

Got that? Munis are headed lower. And he’s “agnostic” on whether or not they will crash. When one of the most important names in bond investing says he cannot tell whether or not an entire class of bonds will crash, there’s reason for investors to worry.

It wouldn’t be surprising if Gundlach’s comments spark a renewed sell-off of bond funds.

Gundlach pointed out that even if defaults do not ultimately climb as high as critics like Meredith Whitney have warned, muni bonds will likely trade much lower.

“Between here and the end game, lies the valley. And the valley is full of fear. I think the muni market is going to go down by at least, on the long end, something like 15 and 20 percent,” he said.

He brushed off the notion that the investors in the muni market are buy-and-hold types who are unaffected by declines in trading prices.

“It gets scary when the prices start to drop. The fear factor here is going to be palpable. People who own munis tend to own them for the tax benefit and they tend to own most of their assets, if not all of their assets, in the muni asset class. So when they get to fall, they get nervous," Gundlach said.

Just 2 1/2 months ago, Meredith Whitney fired the

first warning shot on 60 Minutes.

The Charles Evans Show (Michael Pento)

Fed policy had little to do with soaring

commodity and food prices

Monday, March 7, 2011
By: Michael Pento

CNBC was competing with viewers from the Comedy Channel this morning when it aired an interview with Charles Evans, the President of the Chicago Federal Reserve. Mr. Evans claimed that U.S. inflation is currently low, even though oil prices were surging past $105 a barrel during his interview. He went on to explain that Fed policy had little to do with soaring commodity and food prices. As it is, of course, global growth that is to blame.

The Fed President didn’t care to opine at all as to why gold was hitting an all time high as he was speaking. I wondered--while struggling to watch the interview--if the record high dollar price in the monetary metal is telling him anything. I guess he would explain that the Fed doesn’t have anything to do with gold prices either and it is probably a sign that this year’s Indian wedding season will be a real gangbuster.

Some more comic relief came from his GDP predictions. Mr. Evans sophomorically stated that he expects 4% GDP growth this year and the next. But contrary to what that previous guess may have you believe, the interview didn’t give much hope for monetary responsibility returning to the country any time soon. In fact, even though the evidence of rampant inflation were scrolling under his feet on the ticker, Evans said that interest rates should stay low for an extended period of time.

Maybe that’s why consumer credit has reversed course and is now growing once again. Total consumer credit (both revolving and non-revolving) has now expanded for the fourth month in a row and is accelerating at a 2.5% annual pace in January. That’s after falling 4.4% in 2009 and dropping 1.6% for 2010. One of the baneful effects of the Fed’s zero percent interest rate policy is that it entices the consumer to borrow when they should be deleveraging. The truth is that Household debt as a percentage of disposable income is still well above historical levels and is now headed back in the wrong direction.

Yes Mr. Evans, the Fed is responsible for rising commodity prices and for encouraging the accumulation of debt. And they may soon share equal blame with the government for inflicting soaring interest rates on the American public.

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. Other Michael Pento Posts

CNBC Transcript of Evans Interview

Banks: Still too big, Still can't fail (so much for financial reform)

The biggest banks are bigger than

they were before the last crisis.

The Wall Street Journal
March 5, 2011

The 2010 Dodd-Frank law was sold as a way to prevent future bank bailouts. But so few people believe it that Sheila Bair, chairman of the Federal Deposit Insurance Corporation, has embarked on a campaign to convince the markets that next time really will be different.

On Friday Ms. Bair sent a letter to Standard and Poor's, the giant credit-ratings agency. S and P, like most of the financial community, suspects that Washington will open the checkbook again when Wall Street stumbles. Therefore the firm has given the largest financial institutions higher credit ratings to reflect this potential government support.

Ms. Bair's note assures S and P that she will put the wood to big banks and their creditors if they end up in the FDIC's new resolution process for systemic firms. Therefore, she argues, the giant banks should no longer receive higher ratings, because Uncle Sam isn't coming to their rescue.

We guess the financial crisis really is over when a senior federal regulator feels confident urging downgrades of big banks. And on the merits, if Ms. Bair were the only Washingtonian with a say in this matter, investors might start to believe that the freedom to fail really has been restored.

But investors are still expressing a different belief. Recent data from the Federal Reserve and Ms. Bair's FDIC confirm that the biggest banks still enjoy advantages over their smaller rivals, and by some measures these advantages have been growing since the July enactment of Dodd-Frank.

The FDIC data show how much banks pay to borrow money. One would expect that if Dodd-Frank really eliminated the possibility of government assistance for the largest banks and their creditors, then such creditors would be no more or less willing to lend to the big banks than to their smaller competitors. But in the second half of 2010, right after the passage of the law, banks with more than $100 billion in assets clearly enjoyed a lower cost of funds than banks in every other category.

While the FDIC collects data on banks, the Federal Reserve collects data for bank holding companies. Its data only go through the third quarter, but they also show a funding advantage for the biggest players. And an analysis by Mike Mayo of Credit Agricole Securities (USA) shows that for all of 2010, the 10 largest bank holding companies, on average, paid 29 basis points less on interest-bearing liabilities than the next 40 bank holding companies.

The FDIC concedes that big banks enjoy funding advantages, but not because the government will bail them out. The agency says the product mix at large firms helps them do especially well in low-interest-rate environments like the current one.

The FDIC has a point. The big banks also enjoyed particularly cheap funding relative to competitors in the 2002-2004 period of very easy money. And whereas academic research once suggested that banks couldn't draw much additional benefit from economies of scale once they had grown to a few hundred million dollars of assets, more recent data suggest that even the biggest banks can gain efficiencies as they grow and deploy automated systems across vast territories.

But the big guys have been enjoying free money for years since the crisis, and the benefits of scale for even longer. If Dodd-Frank was really working as advertised, wouldn't the loss of special government protection create at least a competitive speed bump? Some claim that mandated capital raises after the crisis have made them a safer investment, but those changes were underway long before last summer's passage of Dodd-Frank.

What's remarkable about the FDIC data is that the biggest banks seem to be accelerating through the first months of Dodd-Frank. Looking at the FDIC's data on non-deposit, interest-bearing liabilities, the big guys' funding advantage over the other banks in the second half of last year was even larger than in the first half—before the great "reform" was enacted. The funding advantage enjoyed by banks with more than $100 billion in assets over those in the $10-$100 billion range rose from 71 basis points in the first quarter to 78 basis points in the third quarter, which began with President Obama signing the bill and proclaiming an end to too-big-to-fail. The advantage increased to 81 in the fourth quarter. It's good to be the kings of banking in a Dodd-Frank world.

In a Wednesday visit to the Journal, Kansas City Fed President Thomas Hoenig said that the banking giants' "huge" edge over their smaller rivals is due in large part to government support.

Yes, there is new authority for Ms. Bair's FDIC to resolve large institutions, but will it even be used? In a recent speech, Mr. Hoenig noted that "there are important weaknesses with this framework. In particular, the final decision on solvency is not market driven but rests with different regulatory agencies and finally with the Secretary of the Treasury, which will bring political considerations into what should be a financial determination."

Mr. Hoenig reminded us that the biggest institutions are even bigger than they were before the financial crisis, and that he expects more bailouts of financial giants in the next crisis, regardless of "who the Secretary of the Treasury is." That sounds right to us, which is also what the market is saying. Dodd-Frank is making the big banks bigger and more protected than ever against failure.

Mike Mayo on CNBC:

Do you truly believe the banks

will not need another bailout?
Well...???

Grandpa believe Mr. Mayo could experience

some acid reflux from his bullish call

on Bank of America...time will tell...

Rick Santelli comes out swinging and accuses Steve Liesman of Fighting Like a Girl

Rick Santelli was on a tear this morning and took the first swing at Steve "I can put a positive spin on anything" Liesman and when he swung back, Rick Santelli informs the planet that Steve fights like a girl. Rick's ire is raised at the 7:45 mark and the "fights like a girl" fireworks are around 10:15.

Enjoy the show! (the cackling in the background is ex-Federal Reserve Governor Frederic Mishkin).

Consumers face more financial troubles as economy sheds more jobs than it creates (Consumer Reports)

In the past 30 days, 6.7% of those surveyed

have lost their job, but only 5.2%

have started a new job.

(their survey is not seasonally adjusted)

YONKERS, N.Y., Feb. 9, 2011 /PRNewswire-USNewswire/ -- Consumers have a guarded outlook of the coming months as stress levels rise, employment remains flat and financial difficulties increase according to the Consumer Reports Index for February.

The Consumer Reports Trouble Tracker Index has again climbed for the third straight month (58.7), revealing increasing financial difficulty for consumers. The Trouble Tracker index, which tracks the depth and breadth of financial difficulties among households, has climbed up from 54.2 last month and from 53.4 one year ago.

The gains in retail activity coupled with increased financial difficulty may lead to a credit crunch for some consumers, especially as missing payments on major bills (9.7%) or missing a mortgage payment (3.2%) are up when compared to a year ago. Also, compared to last month, the number of consumers facing negative changes to their credit card terms (e.g., interest rates, penalty fees, credit limit) was up.

The Consumer Reports Employment Index shows no sign of improvement as it remained unchanged from the prior month at 49.2 and on par with a year prior (49.0). In the past 30 days, 6.7% of those surveyed have lost their job, but only 5.2% have started a new job.

"February's Employment Index is indicative of an economy shedding more jobs than it is creating and this kept sentiment in negative territory, despite other measures that have shown gains," said Ed Farrell, a director of the Consumer Reports National Research Center. "While the share of those starting a new job was up nominally from January, growth is insufficient to seriously address the expanding pool of unemployed or fresh job seekers."

The compounding of these various negative factors may be reason for the rise in the Consumer Reports Stress Index, which measure of the stress consumers feel in their everyday lives versus a year ago. Despite a significant drop in January, in February the index is up to 59.3 from 55.4 the prior month and is on par with one year ago (59.9).

Despite the negative factors, some green shoots remain particularly when it comes to retail. The retail outlook is improving as the Consumer Reports Past 30-Day Retail Index is up to 11.6 from last year (10.9). Similar signs of improvement are revealed in the Consumer Reports Next 30-Day Retail Index, which rose to 8.3, from 6.9 a year ago. Major home electronics and personal electronics are helping to fuel the retail gains for both indexes. Complete Press Release

Mark Haines and Erin "the princess" Burnett did not have their

glass 1/2 full this morning. No pom-poms on set.

Unlike the U.S. Government, Consumer Reports does not

seasonally adjust out the reality we all face daily.

CNBC Hosted "Guess the Payroll Number" Gong Show and All Panelists were gonged.

2/4/2011
CNBC delivers today's BS BLS Non-Farm Payroll Data and their esteemed panel blows off the number. Mark Zandi, almost pulled a John Boehner weep when he stated the numbers are meaningless. Mark later states the numbers make no sense. Mr. Zandi does not handle seasonal adjustments well when they embarrass Mr. permabull given his 140,000 new jobs projection. Of course at no time during the panel of experts diatribe did anyone mention the Department of Labor seasonally adjusting out over 1 million initial jobless claims during the prior 9 weeks. Economists are giddy when seasonal adjustments maintain the fictitious pace of recovery.

The Gong Show Winner is David Malpass who projected 220,000 new jobs and then states, "I really think there is an improvement in the economy though you can't see it." SAY WHAT!

The highlight is Rick Santelli opening a can of whoop a@* when Steve Liesman deemed the U-6 figure dropped to 16.1%. NOTE: once again, the seasonally adjusted number dropped from 16.7% to 16.1%. The Non-Seasonally Adjusted figure (a.k.a. real) increased to 17.1% from 16.6%. Non of the esteemed panelists opted to bring up that data nugget.



The Experts New Jobs Projections Episode

U-6

Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.. .

Jim Rogers "I am short emerging markets ETFs, short Nasdaq ETFs." (CNBC & Zero Hedge)

Great Recap of Jim Rogers appearance

on CNBC via Zero Hedge

Jim Rogers, in his latest interview, cuts right to the chase: "I don't own many equities, because I don't know what is going to happen in the world economy. I expect more currency turmoil, more social unrest, more governments collapsing.

So I am investing in currencies and commodities rather than stocks." Pretty much like everyone else, as we have been suggesting for quite a while. Rogers snaps at the trademark CNBC question of what he would be investing in: "I have been explaining to everybody on CNBC for a year and half or two now that food prices are going to go through the roof, they're going to explode.

We have serious shortage of everything developing, including shortages of farmers... The average age of farmers in one major agricultural state is 58 years old. In 10 years it will be 68 years old. In parts of Japan they have no farmers... It takes 7 years for a coffee tree to mature. Orange trees, palm trees: you don't just suddenly snap your fingers and suddenly get some more palm oil. All of this takes time." So all those who believe that the surge in people rushing to fill the ag arbitrage holes will produce immediate results, may need to wait 3-7 years, dependant on access to manure.

On whether this is not a demand-led inflation

in commodity prices:

Whenever governments have printed money throughout history, people put their money in real assets, whether it's rice or silver or natural gas. People protect themselves, they don't just say "give me some more paper money." And if you say it's not demand: go to India, go to China, see how people are changing their lives and using more." As for supply: "Commodities are based on supply and demand. You can have demand go down, but if supply goes down more you are going to have a bull market."

Marc Faber: We're All Doomed in the Long Run and Bernanke is a Liar

Ben Bernanke:

Worries are overblown that the

Federal Reserve's plan to aid

the economy could unleash inflation

Marc Faber

“I guarantee you … the annual cost of living increases are more than 5 percent, and the Bureau of Labor Statistics is lying,” Faber told CNBC at the Russia Forum in Moscow.

“Mr Bernanke is a liar; inflation is much higher than what they publish. I would imagine for most households it’s between five and eight percent per annum in the United States and in Western European countries maybe a little bit lower but also around four and five percent per annum,” he said.

Turning to the global economic recovery, Faber said the West was bottoming out and recovering, which meant the global economy looked “OK” for the next six months.

But “we’re all doomed in the long run,” he said.

“We have to realize it’s an artificial recovery driven by ultra-expansionary, monetary policies and also ultra-expansionary fiscal policies.

In other words, the deficits of governments are huge and that will lead down the road to renewed problems,” he said.

TrimTabs Still Can't Figure Out Who Is Buying Stocks (Zero Hedge)

Great Post By  Zero Hedge

12-23-10

Save this post as we will all be reviewing

it several times throughout 2011

A year after Charles Biderman's provocative post first appeared on Zero Hedge, in which he asked just who is doing all the buying of stocks as the money was obviously not coming from retail investors (and came up with one very notable suggestion), today Maria Bartiromo invited the TrimTabs head once again (conveniently in CNBC's lowest rated show, during Christmas Eve eve, at a time when perhaps 5 people would be watching) in an interview which disclosed that after more than a year of searching, Biderman still has no idea who actually buying.

In response to Bartiromo's question if the retail investor, who left after the flash crash (thank you SEC), Biderman responds what every Zero Hedger has known for 33 weeks: "Retail investors are not coming back to the US. Those investors that are investing are buying global equities and are buying commodities. We are seeing lots money going into commodity ETF funds: gold, silver..." and the even more unpleasant summation: "individuals have been selling, companies are net selling, insider selling and new offerings are swamping any buyback and any cash M&A activity since QE 2 was announced. Pension funds and hedge funds don't really have that much cash to invest.

So what nobody's asking is what happens when QE 2 stops: if the only buyer is the Fed, and the Fed stops buying, I don't know what is going to happen...When I was on your show a year ago I was saying the same thing: we can't figure out who is doing the buying it has to be the government, and people said I was nuts. Now the government is admitting it is rigging the market." Cue Bartiromo jaw dropping.

As for the simple math of where the money is actually going:

"Money flows come out of income, take home pay of everybody plus money that came from real estate is down about $1 trillion a year. It peaked in the 3rd quarter of 2008, at $7 trillion, that's take home pay for everybody who pays taxes plus the money that came from real estate. It has now bottomed at $5.9 trillion. We are still down $1.1 trillion in money that people have to spend each year, that 16%. And some of the money that is leaving equity markets we think is going to pay bills."

Update: Charles has just sent in the following addendum

to his CNBC appearance:

Due to time constraints, what I didn’t get to address on CNBC today is what will happen after the Fed is either successful or not successful with QE2. The Fed is rigging the market by digitally creating money that is used to buy financial institutions assets — currently Treasuries, last year all kinds of toxic waste. What will happen when the Fed stops buying assets?

What the Fed is hoping is that QE2 actually works and the economy starts growing at 3+%. If that happens, unlikely as it is, then the Fed will end its QE activities. But for the stock market, if the only source of buying power, the Fed, withdraws its support, the market is likely to plunge to well below fair value. At that point perhaps some new source of money , i.e., China, et al will be able to buy US assets on the cheap.

The Fed is legally mandated to manage the economy, not the stock market. If the Fed’s QE is successful and the trickle down impact of higher equities creates a sustainable recovery, the Fed will gladly sacrifice the stock market to its legal mandate to manage the economy.

A more likely outcome is that while stocks will be higher by the end of QE2, economic growth will not be sustainable without government aid. That would then require additional QE. Stock prices could then keep rising for a while. At some unknowable now moment in time, unless the economy starts to grow again, no amount of QE can work forever in keeping the current stock market bubble from bursting.

Now we ae going to define home ownership based on home equity?

So what happens if you take those underwater borrowers out of the homeownership equation. It pushes the homeownership rate down to 56.6 percent, down 10 percentage points from the currently reported rate, according to CoreLogic. That rate was over 69 percent during the housing boom. Grandpa: What Planet did I just land on!!!

Diana Olick
CNBC
One of only reasons to watch CNBC
12/13/10

Just because you owe more on your mortgage than your home is worth doesn't necessarily mean that you are no longer able to afford your mortgage. For many Americans who bought their homes during the housing boom, little has changed for them financially other than what the appraiser has determined on paper.

What has changed are attitudes, and attitudes can be dangerous.

22.5 percent of U.S. borrowers were in a negative equity position on their homes at the end of Q3, according to a new report from CoreLogic.

That is actually an improvement from Q2, but only because many severely underwater homes went into foreclosure in the quarter, thereby taking them out of the pool.

The authors of the study warn that deteriorating home prices now will likely push the percentage back up in Q4.

The definition of home ownership, at least according to the Census, includes homeowners in a negative equity position, "however, homeowners in negative equity are not likely to behave similarly to homeowners with equity, because their financial interest (the equity) has disappeared and has only a small prospect of returning soon, given price trends," note CoreLogic authors.

Underwater borrowers are more likely to behave like renters, which means they're not going to invest much in home improvement. They are also more likely to walk away from their commitment, although not in the waves some had predicted.

So what happens if you take those underwater borrowers out of the homeownership equation. It pushes the homeownership rate down to 56.6 percent, down 10 percentage points from the currently reported rate, according to CoreLogic. That rate was over 69 percent during the housing boom.

The Obama Administration has been pushing lenders, Fannie Mae and Freddie Mac to write down principal on underwater mortgages, in order to put borrowers back into a positive equity position. Interestingly, the latest push is for borrowers who are current on their mortgages. They lenders argue, why should they give money voluntarily if the loans are still performing? They don't even do that very often when the loans are in trouble!

The answer is: attitudes.

The Administration is clearly concerned that more borrowers will either walk away from their commitments or stop spending money on their homes, which are usually their single largest investment.

Think about how much money you have put into your home over the years.

That lack of consumer spending has already hit the economy hard, and the more borrowers who become effectively renters, the less spending we'll see.

But is the Administration's answer, to give borrowers back a few percentage points of equity on paper, really going to fix that and change owner attitudes? No, especially since so many Americans got used to taking money OUT of their homes to pay for all those lovely upgrades.

The change has to come in real home price appreciation.

That is the only thing that is going to give homeowners that much-needed faith in the market, that confidence to stay where they are and spend, not some measly equity handout that won't amount to much and may just prompt the borrowers to put their house on the already glutted market.

And how do you get home price appreciation?

Get rid of that glut of inventory — especially the foreclosures. I'm back on my investor high horse again. Stop offering handouts to underwater borrowers who don't need them to pay their mortgages and start focusing that same money on eating up empty houses and restoring real home price appreciation through a competitive marketplace. If you help well-vetted, responsible investors buy up the properties and rent them to all the families that lost their homes, you will do a lot more good.

MI Sentiment just plain ugly for retailers

Nearly twice as many consumers reported

that their finances had worsened rather

than improved during the past year

(CNBC's Interpretation of MI Sentiment- 

Stronger than expected...naturally, as CNBC has yet

to see data that can't be twisted into a positive)

Reuters/University of Michigan Surveys of Consumers
12/10/10

The economic news heard by consumers about jobs grew significantly more favorable in November. Unfortunately, the favorable job news only had a small impact on how consumers expected the overall unemploy-ment rate to change in the year ahead. The majority of consumers anticipated the jobless rate to remain stuck at its current high level throughout the year ahead.

Given these expectations, it should be no surprise that half of consumers expected the slow pace of economic growth to remain largely unchanged during the year ahead. Importantly, the balance of consumers twice as frequently ex-pected some additional improvement rather than a worsening pace of economic growth during the year ahead.

Personal Finances Remain Dismal

The personal finances of consumers remained quite bleak in November. Nearly twice as many consumers reported that their finances had worsened rather than improved during the past year, with one-in-three reporting declines in household income. There has been some small improvement since the cyclical low point. Income gains were reported twice as frequently this November compared with a year ago, although the frequency of in-come gains have remained unchanged for the past 4 months.

The larger problem was that just 25% of all house-holds expected their finances to improve during the year ahead, down from 29% last November. The majority of households expected no income increase during the year ahead in November, for the 23rd consecutive month, an all-time record. Households with incomes above $75,000 held the same dismal outlook for their finances, showing no improvement in their financial expectations for the year ahead. Holiday sales will be based, more than ever, on the availability of discounts as consumers continue to cope with their dismal financial circumstances.

Surveys of Consumers chief economist, Richard Curtin

It is clearly too early to declare the November uptick in consumer confidence a turning point. It marks the third time that the Sentiment Index has reached this level since the cyclical low was recorded two years ago. In each of the prior rebounds, the gains as well as subsequent losses were mostly based on changing prospects for the economy.

Unfortunately, there has been no improvement in consumers’ financial prospect in the past two years. While consumers clearly believe that the recovery has gained some traction, most still think that the eco-nomic gains will be too small to improve their own job and income position anytime soon.”Complete report and prior reports

Grandpa predicts a retail stock reality check in January given the launch to 52+ week highs on many of these stocks and what could prove to be a major wake up call on the retail ETF-XRT. But hey, I am just a grandpa however I did not just fall off the turnip truck...“

Commercial Real Estate Prices take a hit in October (per CoStar)

Diana Olick recaps CoStar report coming out 12/8/10. Commercial real estate prices took a hit in October. CoStar notes there is a very limited amount of high quality supply which adds to the valuation volatility. Once again, Grandpa maintains the REIT market is ahead of itself and continues to price in absolute perfection while the commercial real estate marketplace is hardly defined as perfection.

Obama rolling over for a Republican belly rub, sorry kids: Obama Near Deal to Extend All Bush Tax Cuts

CNBC and Reuters
12/6/10

President Obama is expected to announce shortly that he is close to a deal with congressional leaders to extend all the Bush-era tax cuts for two years, NBC News reported.

The deal is said to be "all but done," a source told NBC.

The broad outlines of the the agreement call for:

• Two-year extension of all Bush tax cuts
• A 13-month extension of unemployment benefits
• A two percentage point cut in the payroll tax for one year.
• An estate tax at 35 percent with a $5 million exemption, proposed by Republicans.

The overall cost in lost revenue to the government is at least $450 billion in 2011 and could climb as high as $600 billion depending on how much the economy grows over the next two years. Link to the Obama rollover belly rub

Must read post from Zero Hedge and Must watch David Stockman video

12/4/10
Zero Hedge
Do yourself and kids a favor and; visit Zero Hedge

There is propaganda, and there are facts. For anyone seeking just one concise, definitive and completely true (as in fact-, not hope- based) explanation of what has happened to the American economy in the past 2 years, we suggest this presentation by former OMB director David Stockman, whose 10 minute appearance on the CNBC's strategy session left the hosts with absolutely nothing to retort. Among his observations: the government sector for the first time in history is shrinking: "the reason is that governments are broke... we are going to have to cut back government employment."

 And it gets scarier: "if you take core government plus the middle class economy (65 million jobs), that's the breadwinning economy, if we take some numbers - how many jobs in the "core economy" in November - zero; how many jobs since last December: net zero; how many jobs since the bottom of the recession in June 2009: still a million behind from when the recession ended." As to whether the economy can grow without employment growth: "I can't imagine how it can because employment growth generates income growth which is the basis for spending and saving ultimately and we are not getting income growth out of the middle class."

And the stunner: the job "growth" has come almost exclusively from the part-time economy (two-thirds). Why is this a major problem: "there is 35 million jobs in that sector, with an average wage of $20,000 a year: that is not a breadwinning job, you can't support a family on that, you can't save on that. Those jobs will not generate income that will become self-feeding into spending."

As for the biggest condemnation, it is reserved to what Zero Hedge has been claiming for two years now is a completely broken market: "I can't explain the market... I don't know what it is pricing today, I don't think the market discounts anything anymore, it is purely a daytraders' market that is trading off the Fed, trading off the headlines. One day it is manic, the next day it is depressive, and we can't draw any conclusions." End scene.

Steep cuts in Federal spending that could cut right through to commercial real estate (Diana Olick)

Diana Olick
Link to Diana Olick Site
CNBC
12/1/10

Just when you thought the commercial real estate market was finally on the upswing, new roadblocks to recovery may be lurking right around the corner. President Obama's deficit commission recommended some steep cuts in Federal spending that could cut right through to real estate.

"The commission’s recommendations, if implemented, would be a sizable drag on commercial real estate in the short term as increased taxes and reduced government spending will have a cooling effect on the economy," says Christopher Macke of CoStar Group, a commercial real estate analytics and data service provider.

The most glaring risk is in jobs cuts.

The recommendation to reduce the federal workforce by 10 percent, or 200,000 jobs, would cut the need for office space. It's as simple as that.

"DC's office market fundamentals, in particular, have benefited from growth in federal payrolls and related private sector jobs. Even in other markets, there is some evidence that GSA-tenanted office buildings trade at a premium (tenant credit quality matters a lot these days)," notes Sam Chandan of Real Capital Analytics. "Ultimately, the impact on fundamentals and property values would be concentrated in the one market that would stand to lose a meaningful share of total office space demand, i.e. Washington, DC."

DC surely has the highest share of federal workers, but CoStar estimates it's still only 17 percent of the total 3.6 million employees, so the pain would surely spread outside the district. But then take $100 billion out of defense spending, and you're obviously reducing employment in local markets that are heavily dependent on defense. Much of that is also in DC, and beyond.

Now here's one you might not have thought of: If you scrap the mortgage interest deduction on mortgages over $500,000 (currently it's capped at $1 million), then you reduce consumer wealth, which in turn reduces consumer spending, which in turn reduces retail space demand.

"Eliminating or scaling back this vital housing deduction will shrink the local tax base of many communities, causing already cash-strapped state and local governments to further cut jobs and essential services," adds Bob Jones, chairman of the National Association of Home Builders.

CoStar agrees, pointing to likely inevitable state budget gaps that it says will result from the deficit reduction proposals. Those gaps would force states to cut spending even more (can they possibly??), which would mean more layoffs at the state level and reduced consumer spending, hitting both office and retail. Then, states might be forced to sell off more of the real estate they own, which could reduce commercial prices.

"It is always best to have corporate spending driving the economy, but absent that somebody has to spend," adds Macke.

S&P/Case-Shiller national home price index shows a slip in home prices (Diana Olick)

The S and P/Case-Shiller national home price index shows a slip in home prices. CNBC's Diana Olick has the details.

Fact: Home prices lag home sales. It happens on the way up and on the way down. Today's S&P Case Shiller home price report just confirmed what we've seen from umpteen other reports in the past few months, that home prices are taking a double dip. We knew it would happen.

"I would guess that by the end of today I would hear lots of double-dip forecasts and a few I told you so's. Things are rotten," opines S&P's David Blitzer. Full article on Diana Olick's Blog

Black Friday sales little changed even though CNBC did their very best to hype retail activity

CNBC did their very best to hype retail activity on Black Friday. Live interviews with shoppers, video clips of mall-ites carrying bags albeit CNBC personalities were not granted a peek into bags.

CNBC even displayed satellite images of a mall parking lot comparing car counts for a three year period. Of course there is no way to definitively determine if the count resulting from the painstaking process of placing red dots on cars reflected actual shoppers or an increase in "park-and-ride" vehicles.

In true WWE Smackdown fashion, CNBC attempts to whip viewers into a state of frenzy anticipating the best Black Friday in years. As with Smackdown, the promotional fanfare does not live up to the results.

By Dan Hart and Ian Thomson

Nov. 27 (Bloomberg) -- Black Friday sales were little changed, rising 0.3 percent, from last year, as U.S. retailers’ efforts to lure customers by opening early failed, ShopperTrak said.

The early holiday sales and promotions boosted sales and traffic for the first two weeks of this month through Nov. 13 by 6.1 percent and 6.2 percent, respectively, ShopperTrak said in a statement on its Website.

Shoppers nationwide spent $10.69 billion yesterday, Bill Martin, founder of Chicago-based research firm ShopperTrak, said in the statement. Black Friday is the day after Thanksgiving Day in the U.S. and the traditional beginning of holiday season buying.

Hundreds of people lined up at individual stores across the U.S. to take advantage of special deals as they face down a slow economic recovery. Sears Holdings Corp. and Toys “R” Us Inc. started their Black Friday “doorbuster” sales on Thanksgiving Day to attract consumers after two years of dampened shopping enthusiasm since the recession.

Sears, the largest U.S. department-store chain, opened at 7 a.m. with bargains that included a 58-inch Panasonic Corp. high- definition plasma television for $1,044, 55 percent off its list price of $2,299.

Open on Thanksgiving

Toys “R” Us, the world’s biggest toy retailer, opened earlier this year to accommodate customers who said they wanted to shop after Thanksgiving dinner, said Chief Executive Officer Jerry Storch. Employees at the chain’s Times Square store in New York handed out Santa hats to about 1,500 shoppers queued outside before the opening, spokeswoman Jennifer Albano said.

In 2009, Black Friday spending rose 0.5 percent to $10.66 billion, compared with a year earlier, according to ShopperTrak.

Analysts’ estimates for the holiday season’s aggregate sales vary from little changed to increases of as much as 4.5 percent. The Washington-based National Retail Federation forecasts a gain of 2.3 percent to $447.1 billion after an uptick of 0.4 percent last year and a 3.9 percent drop in 2008.

The projections coincide with a rebound in U.S. consumer spending this year as the economy began adding jobs. Consumer spending, which accounts for about 70 percent of the nation’s economy, increased at a 2.8 percent annual rate in the third quarter, according to the Commerce Department. That was the fastest since the final three months of 2006.

Assciated Press notes:

Comparatively, sales on Black Friday 2009 increased 0.5 percent

versus Black Friday 2008, with 10.66 billion dollars spent.

AP Article

Market Vulnerable to Another Flash Crash (Joseph Saluzzi)

“But can we trust a market where most

of the volume is concentrated in just a few stocks?”

By: John Melloy
Executive Producer, Fast Money
11/19/10

Stock market activity is still dominated by high-frequency trading and concentrated around just a few stocks and exchange-traded funds, creating an environment that will likely lead to another ‘Flash Crash’, so said a widely followed and esteemed trading expert.

“Markets that are not built on fundamental demand from long term investors are subject to cracks like we saw on May 6th,” said Joseph Saluzzi, co-head of the trading desk at Themis Trading, an agency brokerage firm. “When shocks like sovereign debt problems hit the market, the lack of real demand is exposed and a market which is not structurally sound can produce violent reactions.”

Saluzzi was featured last month in a 60 Minutes episode exploring the dangers of high frequency trading. This summer after the Flash Crash, his partner, Sal Arnuk, was asked to participate in an open meeting with the Securities Exchange Commission on market structure. They are some of the few electronic trading experts willing to talk about the practice because they guide clients around high-frequency trading instead of practice it themselves.

The firm’s renewed prediction today for another violent sell-off is based on a simple breakdown in the market basics of supply and demand.

“Prices set by the stock market are thought to be efficient and reflect an accurate measure of supply and demand,” wrote Saluzzi in the note. “But can we trust a market where most of the volume is concentrated in just a few stocks?”

On Thursday, General Motors [GM 34.26 0.07 (+0.2%) ], Citigroup [C 4.268 -0.032 (-0.74%) ] and Ford [F 16.28 0.16 (+0.99%) ] accounted for 15 percent of the shares traded, according to Themis. This kind of concentration does not occur in a market operating under the basic economic function of supply meeting demand, they argue. How could 15 percent of actual investors want to buy or sell these three stocks in a single day?

They also cite the volume in ETFs, baskets of whole stocks that can be bought and sold as easily as a single share. Trading in the SPDR S and P 500 [SPY 120.29 0.3325 (+0.28%) ], PowerShares QQQ Trust [QQQQ 52.47 0.04 (+0.08%) ] and iShares MSCI Emerging Markets [EEM 46.51 0.03 (+0.06%) ] are typically among the most actively traded vehicles on U.S. exchanges every day. Many individual investors have taken to these products in order to avoid single-company risk.

The regular long-term investor, who doesn’t buy or sell in milliseconds, is essentially gone from the market, Themis said. According to ICI data, there have been 28 consecutive weeks of domestic equity outflows since the May intraday crash where the Dow lost nearly 1,000 points in minutes. Turnover is now so great that the average holding period for stocks is just three months, according to Alan Newman’s Crosscurrents newsletter.

To be sure, stocks have recovered the losses from the May crash and then some, hitting a new high for the year just earlier this month. Some argue that the long-term investor is coming back soon and will add another leg to this bull market.

Maybe they decided to begin by buying GM, Ford and Citigroup yesterday.