Stock Markets: Comeback Of The Bull?

The U.S. stock market (S&P 500) finished the first half of the year with a meager gain of 8%. I wrote on December 31 2011: "One of the big surprises of 2012 could be a strong rally on the global stock markets with gains of 30% and more, leading the S&P 500 to north of 1.700" (drivebycuriosity). This rally didn`t manifest yet. To reach my year end target the S&P 500 would have to climb around 25% in the second half of the year.

Yes, this is very ambitious. And still, I stick to my year end goal. In the few last months the stock markets were spooked by the European mess, slower growth in China and a sluggish U.S. job market. A very gloomy sentiment spoiled the appetite for risky assets like stocks.

Now the stock markets have priced-in a very pessimistic scenario: A worsening of the global economy, caused by a severe depression in Europe and a hard landing in China. I reckon that the global economy is still better than many think and that the global economic situation will get better in the coming months. My optimism is founded on the strong profit growth of companies, thanks to their rising efficiency, record low interest rates and cheaper commodities.

I expect that China will reaccelerate in the coming months in response to a more accommodative economic policy. I expect further that Europe will start it´s healing process because the economies will begin to adapt to austerity measures. For the U.S. I expect that the job market will recover further because companies should respond to rising profits and tight headcounts. As a response, consumer spending should gather speed again.

A lot of funds are underinvested. Many market participants are betting on a worsening global economy and are sitting on huge amounts of cash and low yield bonds. They could come under performance pressure and return to the stock markets when a better economic climate rekindles the appetite for risk. These factors could work together and the depressed stock markets could respond like a depressed spring when the pressure ceases. Today`s strong half year finish of the stock markets could be the beginning of a powerful rally.

Culture: Punk Island 2012, Governor`s Island, New York City

 

(Drivebycuriosity) - Punk rules. At least on last Sunday the punks got a whole island for themselves: Governor`s Island. This small and mostly green piece of land south of Manhattan, New York City, was the venue for "Punk Island 2012", a free of charge rock festival. The official website of the organizers (http://punkisland2012) claims that 50 bands attended the huge event and performed on 7 stages!

My girlfriend and I took the ferry from Manhattan, which also was free of charge. We enjoyed the beautiful summer day, strolling over the green meadows from stage to stage, following the sound of the groups. My girlfriend also found a place in the shade and wrote a poem.

I was surprised that not many people visited this spectacle. Maybe the competition from the European Soccer Championship and another rock festival on Randall`s Island, New York City, which happened both at the same time, stole many prospective attendees. 

They  missed a lot. The 50 bands delivered a variety of styles. I guess the program showed the state of art in the current punk scene. Some bands served experimental and complex sound pictures. But why not? Punk is now almost 40 years old. That's a lot of time to grow up.

The band I most remember also was the festival´s final act: "Sworn Enemy". This is a hardcore band from Queens, New York City. Their very powerful performance animated their audience to dynamic punk dances.

Being a German I also was surprised that this event was commerce free, I wouldn´t have expected that in America! At similar rock events in Germany there would have been  a lot hawkers offering food, t-shirts and drinks. And they would have sold a lot of alcohol. German rock festivals therefore have some "Oktoberfest attitude". My girlfriend explained to me that Governor´s Island is a state owned property and the lack of alcohol and other commercial offers was part of the permission to hold a music festival there.

"Punk Island" was a very peaceful and friendly party. Those who liked to let some steam off participated at the dynamic circle runs and jump dances before the stages. Others enjoyed the concerts sitting in the grass like attending a family picnic.  I certainly hope that this  event will recur next year.

Economy: The Stealth Stimulus Program

Doom & glooms rules. The media are focusing on negative news and the stock markets have been under pressure for weeks. But the extremely pessimistic sentiment has a positive flip side: It keeps  commodity speculation at bay.

Bloomberg reports that "speculators increased bets on a rally in commodities for a second consecutive week, just as prices tumbled into a bear market" (bloomberg). A bear market is defined as a situation where market prices are at least 20% below their latest peak.

Bloomberg writes further "hedge funds and other money managers raised net-long positions across 18 U.S. futures and options by 7% to 628,560 contracts in the week ended June 19". For years a lot of hedge funds and specialized commodity funds are betting on climbing commodity prices and are buying futures and options on oil, wheat, corn and other commodities which are traded on the financial markets like stocks. In 2008 the massive purchases by financial institutions caused a commodity  price explosion, for instance oil jumped to $ 147, which worsened the recession then. The falling commodity prices now signal that commodity speculation is less aggressive today, a response to the risk aversion of the markets.

Now commodity prices work inversely to 2008 and to the first half of 2011. The recent commodity price reduction of at least 20% (for instance the global oil future Brent dropped from $126 to around $90) is now a stealth stimulus program for the global economy. Falling commodity prices (bespokeinvest.com) have the same effect like a tax cut because consumers have more money in their wallets which they can spend for other goods and the companies have less costs and therefore higher profits. I reckon that the commodity bear market should help to rekindle the sluggish global economy and stimulate the stock markets.

Culture: Mermaid Parade, Coney Island, New York City

 

(Drivebycuriosity) - Rio has its "Carneval", New Orleans "Mardi Grass", Köln (Cologne/Germany) the "Rosenmontagszug" and New York City the "Mermaid  Parade".  All events are an occasion to celebrate, to see and to be seen.

This year´s "Mermaid Parade", the 30th anniversary,  happened last Saturday in Coney Island, this is the southern point of Brooklyn, New York City.  The event is a part of New York´s culture - with a strong reference to it`s queer & freak subculture - and celebrates the begining of the summer season (wikipedia). Some call it a ritual to celebrate the Summer Solstice. 

The media claim that roughly a half-million people gathered there. The miles long parade worm creept through the huge amusement park, which makes Coney Island famous, and along the crowded beach.

 

This year again the event benefitted from subtropical temperatures (mid-80 F, 30 C). Many girls took the occasion and the freedom to show much of their beauty. You could see a lot of skin, sometimes camouflaged with fanciful paintings. The parade benefits from a New York law which permits women to be topless in public.

 

But there also were elaborate costumes and groups performing a studied choreography or playing rock music. Even an Egyptian princess had travelled through space and time to join the New York event. 

Being a German, I was surprised how civilized the people behaved. Contrary to the sober American audience many people at Cologne`s "Rosenmontagszug" - and similar events -  drink a lot of beer and you can see a lot of drunks, especially alcoholized youth. The "Mermaid Parade" therefore was much more relaxed and playful than comparable German events. 

Bravo Americans!

Movies: Hysteria

 

(Drivebycuriosity) - Technical progress brought us cars, TV sets, refrigerators, airplanes and - yes - the vibrator. At least the female part of the world benefits a lot from this device. The movie "Hysteria" - a comedy blended with a fairy tale - claims to tell how this item was invented and popularized (imdb.com).

The plot plays in London in the late 19th century - the prudish Victorian era. In these times many women were falsely diagnosed with an alleged disease called "hysteria" as a response to symptoms like nervousness, insomnia, exhaustion, depression, cramps, and sexual frustration (wikipedia). Wikipedia claims that many physicians tried to cure "hysteria" by massaging the most sensitive parts of their female patients with their hands (in Germany the films runs with the title "In guten Händen"/"In Good Hands").

The movie tells the story of a young doctor and his employer who used this then popular method with a lot of success and made good money with their growing crowd of satisfied customers. Unfortunately the rising demand lead to a kind of manual assembly line job which got more and more tedious and exhausting. But then "came" help.  An inventor friend of the young doctor developed a mechanical device - driven by electricity produced by a huge crude machine - which completed the same task quite satisfying.

Don´t expect sex scenes. You won't get them. Instead Tanya Wexler, the director, deals with this delicate topic in a comical manner and created a lot of funny situations and dialogues which cause plenty of laughs. The cast is part of the fun, especially Rupert Everett as a wealthy faineant and genius inventor. Maggie Gyllenhal, playing a suffragette, overacted a bit, but did still a nice job. But my favorite actor was the technological construction. If you stay till the credits you can the see the evolution of this device over the following decades.  

A praise to the technical progress!

New York City: Heat Wave No. One

(Drivebycuriosity) - New York City got its first heat wave of the year. Temperatures climbed to the mid-90s F (35 F). The streets are less crowded than usual. It looks like that many New Yorkers escaped to cooler places. 

This is an advantage for the remaining citizens and the heat-resistant tourists. You can walk now with less risk to collide with another pedestrian, which happens in other seasons very often.  And the lines waiting at popular restaurants and bars are much shorter now.

The city also got more sex appeal. Many girls on the streets or in the restaurants & bars are very summerly dressed - one of the joys of a hot summer day. 

Some of the remaining citizens escape to one of the plentyful parks of the city, sitting in the shade or are refreshing at the fountains. Others use the hot weather and play rock music on streets and open places. Maybe escaping is a mistake. In my eyes New York City is more attractive now. Enjoy!

Economy: Wait And See

As I surfed the Internet about comments on yesterday´s Fed decision I found conflicting responses. The blog "Calculated Risk" wrote: "Bernanke Paves the Way for QE3 on August 1" (calculatedriskblog.com).  Quite to the contrary the blog "Califa Beach Pundit" commented: "No more quantitative easing is a good thing"" (scottgrannis.blogspot.com).

It looks like the Fed delivered something for everyone, including the "we-need-more-economic-stimulus" faction as well as the "we-have-already-sufficient-stimulus" group. The U.S. central bank announced that they will continue their asset buying program to keep interest rates low (operation twist), but they declined to take additional measures and to pour much more money into the economy  (Quantitive Easing or QE3). No wonder that the stock market closed yesterday almost unchanged.

I am in the camp of "no further stimulus needed" (you can find a thoroughrationale here  becker-posner-blog.com). Yes, the economy is cooling. So what? The job market is still healing as the weekly jobless claims prove, which are way beyond the numbers from last summer (calculatedriskblog.com) and the U.S. service sector, which dominates the economy, is still growing at a solid pace. The blog "Sober Look"" refers to the solid growth of bank loans which makes a further stimulus unnecessary (soberlook.com). And the Conference Board reported today that its Leading Economic Index (LEI) increased 0.3% in May to a four-year high of 95.8, following a 0.1% decline in April, and a 0.2% increase in March.

I reckon therefore that the monetary policy does enough for the moment and another stimulus program could be counter-productive. If the Fed would pour more money into the economy this could rekindle the commodity speculation and drive the prices of oil and other commodities northwards. A rally of oil and other commodities would again suck a large part of the additional fed money out of the economy and slow down the healing process.

But you never know. If the pessimists are right and the economy cools further in the coming weeks than the Fed could turn the heat on as soon as August. Therefore their wait and see approach is the best move they can make now.

Culture: All Eyes On Europe

All eyes are on Europe. Not just on the financial markets because of Spain, Greece et al. The European Football Championship (Euro 2012)  in Poland and Ukraine seems to find a lot of attention even overseas. In New York City, where usually Baseball, Basketball and Football rule, almost every screen at pubs, bars or restaurants is showing the soccer games.

And the tournament also has some influence on New York`s optical street life. I made these pictures at the intersection of Delancey & Allen Street in Manhattan´s Lower East Side.

Economy: Sleeping Places Instead Of Working Places

What separates rich nations form the poor ones? Recently I found an interesting statistics (marginalrevolution.com). It compares ownership of homes in different European nations. The statistics show that richer nations have a much lower home owner ship (in percentage of the population) than the poorer ones: Switzerland has 44.3% and Germany 53.2%. But Romania has 97.5%, Croatia, 90.1% and Slovakia, 90.0%.

The result doesn´t surprise me. Investing in homes is not productive, not at all!. If you want to earn income in the future and expand your wealth you have to invest in capital like factories, infrastructure (airports, railways, networks et al.), machines, software and human capital (education). Investing in capital generates income in the future. Factories & machines produce goods, software helps organizing & delivering production plus reducing costs. And the more human capital (skills & knowledge) you have, the more you can produce.

Investment in homes instead produces nothing. Homes are just consumer goods like holiday travel or ice cream.  Nations which consume less money for building homes have more money to invest in productive capital.

I reckon that governments who are fostering homeownership are poorly advised. They promote sleeping places, not working places. And the U.S. politicians who for years promoted homeownership where partly responsible for the housing bubble which caused partly the housing bust and partly the mess on the financial markets.

Movies: Moonrise Kingdom

 

(Drivebycuriosity) - Brand names are useful. They help you to find certain attributes. The brand name Wes Anderson stands for hilarious & entertaining independent movies full of surprises like "The Royal Tenenbaum" and "The Life Aquatic with Steve Ziossu". The director`s newest opus, "Moonrise Kingdom" (imdb.com), lives up to his reputation. The icon of the U.S. independent cinema tells the story of 2 kids (12 years old) who fell in love and ran away into the wilderness, which triggerd a funny chain of events.

The flick deals with a lot of issues like first love, a dysfunctional family, boy scouts as a paramilitary organization, the fascistic attitude of some public social workers, dangerous weather situations, the beauty of nature and a lot more. Anderson (and his co-script writer Roman Coppola) treated these topics with unique humor and created a lot of hilarious situations.

The flick benefited a lot from cinematographer Robert D. Yeoman who showed his talent especially in the fine interior shots. The rich colors in many scenes, which, I suppose, were beautified in post-production, enhanced the allure of the flick. And the use of Benjamin Britten`s music was a further enrichment.

It´s impressive how many famous actors Anderson could collect for his flick. Bill Murray ( a standard in Anderson`s movies), Edward Norton, Bruce Willis, Harvey Keitel, Tilda Swinton and Frances McDo rmand - and all did a good job. The newcomer Kara Hayward, who was at the time of shooting just 12, is a real discovery.  Kara's aplomb and calmness were amazing; her steady gaze could propel  her to become a rising star in Hollywood. The coeval Jared Gilman was her adequate partner.

Congratulations. With "Moonrise Kingdom" Wes Anderson expanded his brand name as maker of funny & highly watchable movies.

Culture: Mogwai, at Webster Hall, New York

 

(Drivebycuriosity) - Very often you need a lot of patience, but sometimes it`s worth it. In April 2011 my girlfriend and I had a ticket for a Mogwai concert (mogwai.co.uk) in New York, but the gig was cancelled - because of visa issues. We kept the tickets and hoped to attend their postponement concert in autumn. But this act also got cancelled, this time because of health problems. Recently the Scottish band (wikipedia) announced another U.S. tour and we took the risk and bought tickets again.

We where highly rewarded. The Mogwai show at Webster Hall, New York (websterhall.com), last Friday was something to remember for years on. The band started - as announced on Facebook (facebook./mogwai) - at 8.30 pm, a very unusual punctuality, and played almost 2 hours. 

The five musicians (3 guitars, keyboards & percussion) delivered mainly instrumentals, illustrated by some sporadic vocals. They didn´t provide much of a show. Instead Mogwai acted very economically and focused on their job: Developing a variety of acoustical pictures. The stage fit to this task. We saw just the musicians standing before a black screen with some blinking lights, a canopy which could be interpreted as the universe.

The dramaturgy of the show was well done (you can find the setlist here setlist.fm).  The Scotsmen played long pieces with some very melodic and atmospheric parts which you almost could have enjoyed while sitting on a sofa (which wasn`t there), but occasionally they turned on the heat and you had to stand up and bang your head. The final ascended to a performance of dynamic power and culminated in a furious climax with blurred guitars, viscous resonance, feed back and other effects. The keyboarder changed his instrument and now 4 guitars served massive walls of sound.

During the encore (Zugabe) the percussionist and the keyboard player left the stage and the remaining two guitarists started tormenting their instruments on the ground  producing a fierce tsunami of sounds. Finally there was just one guitarist on the stage serving a staccato of sound effects. After he had left his abanded guitar continued filling the hall alone with her powerful sound for some minutes.

Wow. Thanks a lot Mogwai. You rewarded us well for waiting. We want to see you again!

Economy: Keep On Rolling

If we believe the doom & gloom in the media then the economic situation in the U.S. is getting worse and we are on the brink of a new recession. But signals from the real economy show that the U.S. is  still doing well. Bloomberg reported yesterday that" two measures of trucking activity signal the industry remains steady and has even firmed up since mid-May" (bloomberg).

The news service referred to 2 trucking indices which rose in April. The for-hire truck-tonnage index gained 2.8% in April from a year earlier, up from 0.2 percent the prior month, marking 29 months of growth. The economy has never contracted without tonnage turning negative first, so the truck figures are a leading indicator, providing the “first signal” of a slump, explain analysts. Another index, the index of U.S. truck loadings, that tracks the movement of goods between manufacturers and consumers, increased 3% and reached the highest level since 2008.

And the tracking company Landstar reported in its mid-quarter update, that both the economy and the operating environment for them are “pretty much as forecasted,” moving “in a northerly direction, albeit in a slow and sometimes choppy pace” (bloomberg).

"Rising truck shipments show that the U.S. economic expansion is intact", commented Bloomberg.

Movies: A Cat In Paris

These days the world of cinema seems to be ruled by spectacular digital effects. But good old fashioned hand drawn movies, in German called "Zeichentrickfilme", still have their place. This is  evident in "A Cat In Paris" (imdb.com). This is an animated French movie whose English language version is running now in U.S. cinemas.

"The cat.." is beautifully drawn. The artful style reminds me a bit of Art Deco paintings and the faces could be painted by Armedo Modigliani or by Marc Chagall. The movie makers didn`t try to replicate reality, instead they showed the world in a highly stylized version. It´s a lot of fun to watch what kind of symbols they invented in their drawn world.

The plot isn´t very important. The movie tells a very simple adventure story which is a bit funny, a bit silly and suitable for small children. But even adults can enjoy the film because of its optical charm and the frequent references to a lot of  famous movies like Vertigo or Tarantino`s Reservoir Dogs. The short flick  (just 70 minutes) could be a nice hors d'oeuvres for a pleasant evening.