Thursday, August 30, 2012

Economy: The Consumer Mantra

Europe in a crisis? China is cooling? Fiscal cliff? The U.S. consumers don`t give a f…k. They are ignoring the doom & gloom sentiment in the media and keep spending. I have been writing this for around a year like a mantra. Today we got more evidence for the resilience of the U.S. consumers.

Retailers are crushing it with a late month surge in back-to-school spending boosting monthly sales numbers, writes Seeking Alpha (seekingalpha.com). Excluding drugstores, same-store sales (excluding shop openings and closings) in August rose 5.9%, beating estimates for a 4.2% increase, reports Bloomberg (bloomberg). The bigger the retailer, the better the numbers with Target, Gap, Costco, and Limited Brands leading the charge (seekingalpha). Same-store sales at Gap, the biggest U.S. specialty-apparel retailer, climbed 9%, beating the average analyst projection for a 5.5%. Macy’s, the department-store chain, posted a 5.1% increase in same-store sales, topping the 3.3% (bloomberg).

This morning we also got news that Americans stepped up spending in July for the first time in three months (). Purchases increased 0.4% after being little changed in June.

The U.S. consumers benefit from 3 factors: Rising incomes (in July U.S. incomes climbed 0.3% for a third month in spite of the sluggish job market), climbing stock prices (the S&P 500 gained around 15% since August 2011) and the recovering housing market.

I reckon that the solid consumer spending (around 2 thirds of the economy) will preserve the economic upswing in the U.S. Rising U.S. consumer spending means climbing exports for Volkswagen, Adidas, Samsung et. al. and should therefore contribute to stabilize the ailing European economies and rekindle the Asian economies.


Movies: Cosmopolis

"I wanna be special, so f…g special, but I am just a creep". "Cosmopolis", David Cronenberg`s newest flick (imdb), reminds me of this Radiohead line ("Creep"  youtube). The movie, based on the same named novel by Don DeLillo (wikipedia), reports a day in the life of a multi billionaire fund manger who is traveling in his stretch limo through Manhattan to get a haircut. But, maybe the film describes just the dream of a 20 something guy who is still living with his mother. At least, there is a lot of evidence for that.

The flick has a dreamlike style. Persons, known to the character, appear & disappear suddenly & randomly during the drive, the fund manager temporarily materializes in a discotheque, then he appears again in his limo. The structure of the movie, which doesn`t really have a plot, resembles the structure of dreams which usually don`t follow a strict line and are in most cases very random.

Another piece of evidence is that the places and incidents are pathetic. The film doesn`t show the extremely ritzy & classy world you would expect from a multi billionaire asset manager. Quite contrary, "Cosmopolis" exhibits a poor and pathetic world, maybe similar to the real places the dreamer lives in, who isn`t capable of imagining the world of a financial market mogul, even in his dreams. How many real world billionaires happen to eat in the dives the movie´s character choses? The hair dresser's, which is the character's destination, isn`t a ritzy spa with models serving the sophisticated wishes of the sophisticated clientele, no - it `s an old man in an empty salon, which might have seen its last customer months ago. There are plenty of computer screens inside the limo but they don`t show the usual stock market symbols, commodity futures quotes and interest rates, no, they look more like computer games to entertain toddlers. Even the sex scenes were dull & boring, but what can you expect from a 20s something who is still living with his mother.

The movie site IMBD claims Cronenberg wrote the script in six days. That explains sentences like: "Everything is barely weeks. Everything is days. We have minutes to live." What about the rising life expectancy? And driving through the crammed canyons of Manhattan isn`t really a sign of time pressure. It´s just smug nonsense.

"The movie would have been better, if it would have played on a stage", commented my girlfriend. I agree. Since almost nothing happens,  all the audience gets is a series of dialogues on film. Cronenberg used the flick to tell his paying customers how he, and book author DeLillo, sees the world. Both don't like this kind of creep represented by the flick´s leading character. Who would after all that mess? But why should I sit in a cinema theater to watch some actors reading senseless dialogs? Maybe I would have spent my time better if I would have gone to a hairdresser.


Saturday, August 25, 2012

Culture: Birth Of A Skyscraper

There is always something going on on the streets of Manhattan. Like any metropolis, New York City is continuously changing her face. The city may not grow as fast as Shanghai and Dubai but she doesn´t sleep either, not at all.

Recently, while walking in the Financial District in South Manhattan, I spotted the birth of a skyscraper, kind of. There was a collection of huge machines on the street. Engineers and machinists were working to get the machines ready and to erect the huge cranes and other devices which are needed to build the tower.

The place had some beauty, like a collection of modern art. There was a mix of strong macho looking devices like the chunky towing vehicles and the filigree structures of crane towers. Some of the machines were even painted like fanciful toys. 

Being a German I also appreciate that at least one of the machines comes from Demag Cranes AG. This is a German heavy equipment manufacturer now controlled by US based Terex (wikipedia). I looks like that this birthplace is another sign of the globalization.

Soon I will be back in New York City. I intend to visit this place again. Maybe there is more to report then.

Monday, August 20, 2012

Stock Market: History doesn`t repeat itself

History doesn`t repeat itself. Those who believed otherwise are getting now punished by the recent stock market rally which started in the first days of June (google.com/finance).

Last April many so called pundits wrote "Sell in May and go away". They claimed that the stock market follows a historical pattern which means that stock prices reach a temporary peak in April and then is dropping through autumn.  Those who followed this drivel sold their stocks way to cheap and have been missing the recent rally.

I wrote in my post from April 30th (drivebycuriosity) that following the "Sell in May" call would be a mistake and stated 6 arguments against selling automatically in a certain calendar month. The recent rally proves again that the stock market doesn`t follow a script and isn`t dictated by history.

The reason for the current rally is that many have been betting on a hard landing of the Chinese economy, the crash of the European economies and a new recession in the U.S. None of them happened yet, and the likelihood is low that they will happen in near future. Instead the global economy, especially the leader U.S.,  has been continuing its slow recovery process which started in spring 2009. 

As explained in my April post the sentiment was way too bad. Many who have been betting on a global depression got disappointed and are covering their bets now.
 
I reckon that the stock market is still undervalued because the majority of market participants is still too pessimistic and underinvested. I believe that China will avoid the hard landing and re-accelerate in the coming months, Europe will surprise on the positive side and the U.S. will continue their slow recovery. Therefore I reckon that the rally will continue in the coming months.

Tuesday, August 14, 2012

Economy: The Return Of The U.S. Consumer

There is so much ado about the sluggish global economy and the high priests of doom & gloom are summoning the "next" recession. But the economy is much more robust than many think - which explains partly the stock market rally in the recent weeks.

Today we got news that retail sales in the U.S. rose 0.8% in July, the biggest rise since February and the first gain in four months (bloomberg). The gains last month were led by a 0.8% increase at auto dealers, a 0.6% rise at department stores that was the most since September, and a 0.9% advance at electronics and appliance outlets, reports Bloomberg.

It looks like that the re-acceleration of the retail is a response to the healing U.S. job market. The weekly jobless claims are trending lower and are now close to the lows of this decade (bespokeinvest). The shrinking risk to loose a job seems to encourage spending.  Also helpful is the recent rally on the stock market which boosts he wealth of many Americans.

This also is good news for the global economy because a growing U.S. retail translates into more exports for Volkswagen, Samsung and other European & Asian companies. It looks like that the U.S. consumer is still the engine of the global economy.

Culture: Life On Mars?

The world looks on Mars. The NASA Mars-rover "Curiosity", which is now exploring the Red Planet, finds a lot of attention because it enlarges our knowledge about the universe, at least about our neighbors in the solar system (facebook). The recent Mars mission also is a triumph for science & technology. Those scientists and engineers, who are involved in the Mars project, suddenly became "pop stars of the modern times", writes the German news side "Der Spiegel" (spiegel.de).

The Mars-rover`s name "Curiosity" is a perfect choice. Curiosity is the engine of progress, the fundament of human culture and wealth. The "natural inquisitive behavior" (wikipedia) induced the early hominids to climb down from the trees and to explore the world around them. Curiosity encouraged humans to invent the wheel, to start the fire, to discover foreign continents. Curiosity is the fundament of all sciences and therefore of medicine, physics, biology, chemistry and all the knowledge our live is based on.

The things "Curiosity" will discover on Mars could help us to understand more about how planets, including our world, evolved, and how life developed. The life news transmission from the Red Planed also shows the state of the art in information technology and helps to improve it.

The mars mission could rekindle the public interest in science & technology. Maybe the reports from Mars could encourage more people to study sciences including technology, physics, mathematic, biology and more. The mars program is another important step for mankind - even there is no life on Mars.

Monday, August 13, 2012

Lifestyle: Summer In The City

Oh, what a pleasure -  it´s summer! I prefer this season to other seasons - definitely. Partly because of the light. It looks like that human beings are phototrope organisms, they respond positively to sunlight. The summerly deluge of sunlight is kickstarting my mornings and keeps me going over the day. 

The nature may look more beautiful in spring and in fall because of blooming flowers and colorful trees, but cities show themselves from their best sides in summer time. I indulge walking the summerly streets, places and parks of a city, especially a metropolis like New York City.  It seems everything shows itself in a better light.

Many restaurants, cafes and bars serve outside. Dining and drinking in gardens and on patios is a part of lifestyle. Many use these occasions to flee the somewhat claustrophobic rooms.

Maybe the best part of summer is the response of the girls. It seems the hotter it gets, the more generously they display their beauty.

Enjoy.

Tuesday, August 7, 2012

Economy: Money For Nothing?

The financial markets are shaky and the sentiment is very bad. Many funds and individuals avoid risky assets like stocks and prefer cash and bonds. The U.S. government benefits from this "flight to safety" mentality because they are paying now record low interest rates for their debts. But they are not alone. Large multinational companies also are getting  "money for nothing", writes "The Economist" (economist).

Last week, Unilever, the large European food conglomerate, sold $550 million worth of 5-year notes with a coupon (interest rate) of just 0.85%, reports the service "Business Insider" (businessinsider.com). This is the lowest ever borrowing cost for U.S. debt. And the chip giant Texas Instrument has broken a record for the lowest coupon on 3-year debt at just 0.45%, adds "Business Insider".  A week earlier IBM had raised ten-year money at a rate of just 1.875% (economist). 

These low borrowing costs are a sign of strength! Every borrower has to pay a premium to compensate the borrower for the risks, meaning the possible default of bond amortization and interest payments. The higher the risk the more interest a creditor has to offer, which you can see at the high rates of Greek debts and other junk bonds. The very low interest rates for some company bonds show that these assets are treated like "safe havens". This doesn´t fit to the drivel about an approaching global recession, which would hinder the  multinationals to service their debts.

The low borrowing costs also are a huge advantage for the big companies. They are getting very cheap capital to invest, almost "money for nothing". The cheap credits are an incentive for them to put more money on profitable products and to expand their markets. Therefore the record lows for company bonds are a stimulus for the global economy and maybe are more important than an additional monetary stimulus by the U.S. central bank  (QE3), that many are betting on now.

Saturday, August 4, 2012

Stock Market: Kowtow Before The Bears?

The earnings season, which is running for around 4 weeks, is turning out well. Through Friday morning, 406 companies in the S&P 500 have reported second quarter earnings results, 261 have beaten, 93 have missed and 52 have matched profit expectations, reports Barron`s (blogs.barrons.com). But, as always, there is a catch: Of the 73 companies that have released third quarter guidance, 51 have provided projections that were below analysts’ expectations, while 16 have exceeded expectations and 6 have met them. It seems that most of the companies are very skeptical for the near time future.

But what are these guidances really worth? No management has a silver ball, nobody knows the future. The companies don`t really know what their customers will do and how the markets will behave in this quarter and beyond. There are too many imponderabilities. The guidances are just guesses. The companies have to be cautious while making projections especially as news from the economic frontier is still sluggish. Maybe these managements were a bit too cautious in the face of the doom & gloom which dominates the headlines in the media.

I reckon that the skeptical guidances are a kowtow before the pessimistic zeitgeist. There is so much speculation about an alleged hard landing in China, a crash of the European Economies and a new recession in U.S.

But the skeptical guidances lowered the barriers companies will have to overcome when they deliver their Q3 earning numbers next October and November. I reckon that then we will get another strong earning season and a new push for the stock market.

Thursday, August 2, 2012

Movies: The Dark Knight Rises

If we believe the media the world is in a mess. What a relief to spend some hours in a cinema theater and get at least the illusion that there is someone who protects us from the evil. Maybe we need a benevolent mega-billionaire who uses all his wealth and power to transform into a superhero. "The Dark Knight Rises", the newest incarnation of the Batman franchise (imdb.com), satisfies a lot of these savior fantasies.

Director Christopher Nolan and his dream factory delivered the expected huge cinematic spectacle. They gave full firepower and showed what Hollywood is capable of. Apparently Nolan, his brother Jonathan and author David S. Goyer, took a deep look into the history books as they developed the script. The plot reminds me of the French Revolution. As in these dark times the mob rules the streets commanded by a super-villain. They even had a tribunal. The script writers weaved a complex story about betrayal, struggle of power, civil war and much more to satisfy the appetite of the cinema craving crowd.

The cast belongs to the strongest assets of this blockbuster, especially Christian Bale. The straightforwardness and honesty, which this fine actor radiates in his roles, makes him very believable as an aging billionaire and Batman. Michael Caine convinced us again as Batman´s traditional butler and kind of father figure. I wanna have such an ├╝ber-butler for my own to take care of me.  But my favorite is Anne Hathaway as gorgeous cat woman. The way she wears her ultra-tight outfit and moves her crispy backside is alone worth the cinema ticket.

As in the former Batman movies, Gotham city, represented by Manhattan, Chicago, Los Angeles and other places, played a crucial role. Their concrete canyons, towers and bridges completed the dark picture of Batman`s world.

In spite of all these cinematic fireworks "The Dark Knight Rises" isn`t Nolan`s masterpiece.  This Batman spectacle doesn`t have the imaginary power of "Inception" and won`t have a lasting effect, at least in my cinematic mind. But the flick is fun and cool like a huge scoop of ice cream on a summer day. Enjoy.