Stock Market 2013: Better Late Than Never

(Drivebycuriosity) - Yesterday "USA Today", a newspaper which caters Joe Sixpack, put the bull market on their front page (allstarcharts). They wrote "bull run gets solid footing" and proclaimed that the boost from home prices and consumer confidence proves that the rally is more than a Fed-induced ‘sugar high`.

The idea, to give the stock market rally a broad audience, didn`t get much applause from the self-proclaimed pundits. The reactions from the financial blogosphere varied from skeptical and cynical to outright negative. Abnormal Returns, which has a popular and regular link collection, wrote "Uh oh. USA Today has figured out the stock market is on a tear" (abnormalreturns). Slopeofhope wrote "welcome our new bullish overlords" (slopeofhope). And the important blog "The Reformed Broker" lamented "A very troubling cover on USA Today…" (abnormalreturns).

How arrogant.

My comment is: Better late than never. Yes, the stock indices have tripled since they left the panic stricken depression hole in spring 2009. But, that doesn´t prevent the rally from continuing.

I believe that everyone should own stocks because in the long run stock prices go up. Stock investors participate in the economy which in the long run is getting better and better. 

I further believe that we are experiencing now a very long period of climbing stock prices, comparable to the phase 1982 to 2000. Then the Dow Jones multiplied 10 times!

I see at least 5 reasons for this perpetual bull market:

1. During the recessions of the years 2001/02 and in 2008 companies restructured and reduced costs significantly in order to survive. Now they are much fitter and more efficient than before. This learning process will continue and translates into a long term trend of rising company profits.

2. We are experiencing a new technological revolution, meaning rapid innovations in computing (including mobile devices like iPads & iPhones), engineering, robotics, nanotechnology and other fields. All these processes are further enhancing the efficiency of the companies and create new markets. These trends should fuel economic growth and therefore generate gains on the stock markets over many years to come.

3. The global economy will get a lot of tailwinds from the emerging markets thanks to the catching up process of China and other emerging markets. In Asia, Latin America & Africa  live billions of talented & diligent people who want to reach the US and European living standards and are working hard.

4. Inflation rates are at historical lows. Hence central banks don´t have to raise interest rates sharply to break inflation which have often caused a recession in the past. Hence the low interest rates will continue for years and inspire investments that will add to economic growth.

5. The governments in the U.S. and in Europe have been cutting their spending significantly (austerity policy). This means less political influence and less bureaucracy and creates more scope for private investments.

Movies: Star Trek Into Darkness

(Drivebycuriosity) - "Star Trek" was my favorite TV series in the 70s and the 80s. The episodes offered fascinating visions of the future and told stories about space travel, new technologies, encounters with aliens and much more. Later I lost interest and preferred books from authors like Gregory Benford, Isaac Asimov, Arthur C. Clark and Alastair Reynolds who are more ambitious and focus more on science, the so-called "hard science fiction". 

"Star Trek Into Darkness", the newest incarnation of the franchise, rekindled my interest (imdb). One reason was J. .J. Abrams, the director of this movie (wikipedia). This man stands behind innovative TV series like "Lost", "Person of Interest", "Alias" and more, directing "Mission: Impossible III". His oeuvre discloses Abrams as a master of modern entertainment, a virtual magician just as Walt Disney was in his days.

And he delivers. As expected, the newest "Star Trek" adventure is aimed at the U.S. cinema market, the young male adult visitor, who is addicted to action fireworks and cares less about advances in science fiction. The film shows the usual struggle between the good ones and the super villains who we have seen in many "James Bond" & "Mission Impossible" movies.

The visual effects, created by Industrial Light & Magic, a company founded by George Lucas and now part of the Disney empire, are gorgeous, especially when viewed - as I did -  in 3D on an IMAX screen. The digital spectacle sucked the audience almost into the furious action.  I often flinched because imaginary things, including enormous spaceships, seemed to fly right into my face or to crush the whole theatre. Thanks to a legion of coders and other software engineers (the final titles gave the impression that the producers had employed large parts of Silicon Valley) the audience virtually visited futuristic cities, alien landscapes and participated on breathtaking trips intö outer space.

The cast was mere support for the furious show but appropriate for an action & special effects soaked movie. I remember especially the British crew. Benedict Cumberbatch, known as "Sherlock Holmes" from the British TV series "Sherlock", is an impressive super-villain. Simon Peck convinced as the reliable technician "Scotty", a role similar to his appearance in the "Mission Impossible" franchise. Alice Eve, the eye candy of the movie, was too underemployed for my taste.

"Star Trek into Darkness" is cutting edge action cinema and a hell lot of fun. Well done J. .J.

New York City: Pop Art - Fun With Dictators

(Drivebycuriosity) - New York City is a center for commerce and art. And often both medias are merging. Advertising becomes pop art and vice versa. Sometimes the fusion of commerce and art leads to hilarious results.

On Lafayette Street, which goes from East Village to Chinatown in Manhattan, I saw a huge billboard using North Korea´s dictator Kim Jong-il for a vodka advertisement. The board portrays him in the style of Ernst Stavro Blofeld, a character in some James Bond movies, who used to cuddle a cat while giving his vicious commands (wikipedia). The advertisement has the slogan: "American Quality - North American Pricing".

And there is more of this kind at New York`s Lower East Side. On Prince Street, 2 blocks East of Lafayette Street, one of New York´s ubiquitous street artists anonymously made also fun of the late North Korean leader. He sprayed a mural of him on a construction wall with the message: "Kim Jong fun".

Also on Spring Street, closer to Lafayette Street,  another dictator was ridiculed  and merged into a kind of McDonald`s clown. Not sure if the fast food giant does approve.

Fun with dictators isn´t a new development. In the year 1940 Charlie Chaplin made his famous movie "The Great Dictator" (imdb).  A Google research shows a lot of dictators who became icons of pop art (google). You might also remember Andy Warhol`s famous print of Mao Zedong (andywarhol).

It seems we don`t get rid of those dictators. They seem to live forever - at least in their incarnations of pop art.

Stock Market: QE3 - Don`t Fear The Exit

(Drivebycuriosity) - Last week the U.S. Federal Reserve Bank signaled that the end of their stimulus programs, now QE3, might be near. Since spring 2009 the central bank has been buying U.S. government bonds valued many billions of dollars to rekindle the economy. The stock market responded nervously and the Dow Jones Industrial Average, the Nasdaq and the S&P 500 all ended lower for the week.

The pessimists (bears) claim that the whole stock market rally since spring 2009 is just a bubble blown up by the Fed`s stimulus that pumped too much money into the markets. Hence they assert that the end of the monetary stimulus programs would also be the end of the rally.

I don´t subscribe to this naive and bearish theory. Yes, the massive stimulus was necessary to kickstart the economy and to ignite the upswing. It also was necessary to kill the extreme fear that paralyzed investors and consumers after the financial crisis.

Now the economy and the bull market are running on their own power, driven by the healing job market, the comeback of housing and rising company profits. We don´t need QE anymore.

The Fed, which is highly considerate for the economic situation, especially the job market, will abandon their bond buying program gradually and will be alert not to kill the recovery. The end of the stimulus should keep the commodity speculation at bay and hence keep a lit on the oil prices.

Don`t Fear The Exit.

Economy/Urbanism - Do Luxury Towers Spoil The Rents?

 

(Drivebycuriosity) - New York City has an interesting new trend: Piling up the rich. Last weekend the New York Times reported that developers are building a series of skyscrapers for wealthy people who like to rent or buy apartments on the upper floors (nytimes).  The super rich agree to pay extremely high prices for the gorgeous view and the absence of street noise the upper floors offer.

According to the paper there is a huge demand for higher flats in upcoming luxury towers like 432 Park Avenue, an 84-story building in Midtown Manhattan. The paper believes that this trend will drive the already high rents in New York City even higher. James Parrott, chief economist for the Fiscal Policy Institute, a liberal research organization supported by unions, claims "the rush to build these towers underscores the gap between rich and poor in New York City" (nytimes).

I don´t subscribe to this theory. Prices and rents for apartments are closely connected with the land on which they are built. If the land prices rise, apartment prices will rise too.  And land prices rise when the demand for land rises because the supply stays unchanged, for instance in Manhattan.

The new luxury towers don´t need much extra land.  The new Manhattan luxury skyscrapers are squeezed between the existing buildings. They are slim structures and rise high into the sky. Take for instance Tower Verre which is now under construction at 53 West 53rd Street in Midtown. Other examples are a 75-story skyscraper at 157 West 57th Street and a 60-story tower in TriBeCa (56 Leonard)  (google  .wikipedia  ).

Actually those luxury towers raise the supply of luxury apartments by transferring air space into flats. This could save Manhattan from the development experienced in London where the demand from the super rich like hedge fund managers, Russian oil tycoons and sheiks from Near East drive land prices & rents up to the sky.

In the British capital the hyper-rich demand a lot of land because they buy spacious  mansions (wordpress). Hence they make land more scarce and expensive.  In Manhattan they buy places in the sky.

New York City: Street Art - A Tribute To Ai Weiwei

Ai Weiwei is a busy man. The Chinese artist collected a lot of awards for his sculptures, photographies, writing, installations, videos, architecture and other artworks (wikipedi).

Ai Weiwei also is one of the most famous Chinese dissidents. His conflict with the government in Beijing attracts wider interest in the global media. CNN calls the activist "a perpetual thorn in the Chinese government's side" (cnn.com).

Apparently the activist also has fans in the New York street art scene. On some streets in the Lower East Side (Bowery, Prince Street, Spring Street) you can find some spray work regarding to Ai Weiwei´s political conflict.

I am not sure if his situation is so dramatic as the murals suggest and that the campaign will really help him. But at least these pieces of art look funny and are an enrichment of the already gaudy street art environment in Southern Manhattan.

Globalization: Why Are Germans So Popular?

 

(Drivebycuriosity) - Germany is the most popular country in the world. This is a result of the new Country Ratings Poll for the BBC (bbc.co.uk). The authors believe that Germany´s image benefits from its role in global trade and the strength of the German economy. Maybe so.

But I believe there is another reason: The German tourists. They are ubiquitous. Germans like to travel, but their home country is small. Therefore they travel abroad, all-over Europe, Asia, Africa and - of course - to America.

The average German tourist is friendly, curious, communicative and willing to adapt to foreign cultures - at least a bit. And German tourists are fluent in English. The German school system attaches great importance to transmit the language of the world.

This makes German tourists to a kind of ambassadors for their country. People everywhere in the world meet Germans and get an impression of modern Germany. This impression seems to be not too bad as the BBC poll shows.

Stock Market: The Teflon Rally

This morning we saw some thunderstorms on the stock market horizon. Last night Japan`s stock market index Nikkei plumped 7.3% (minus 10% from the intraday high), China reported that manufacturing surprisingly contracted in May and Wall Street was still digesting yesterday`s signals that the Ben Bernanke and his Federal Reserve Bank could end their stimulus program QE3 soon. "Fear rang the door bell", wrote one commentator (thereformedbroker).

But the Japan Crash didn`t roll over the ocean, Wall Street barely blinked. The indices Dow Jones, Nasdaq and S&P 500 recovered soon from their morning losses and finished the day almost unchanged (Dow Jones minus 0.08%, S&P 500 minus 0.29%, Nasdaq minus 0.11%).

This must again disappoint those who are waiting for a sharp correction of this rally. One the leading link connections linked to a post with the title "Extreme Fear" (ritholtz  joefahmy ). But there was no panic, instead the confidence came back.  Strong news from the U.S. economy calmed the nervous sentiment. Housing data showed builders sold more U.S. new homes than projected in April, wrote Bloomberg (bloomberg). A separate report showed fewer Americans than forecast filed applications for unemployment benefits last week, a sign that the job market is sustaining recent gains (bloomberg).

The sanguine response to the unnerving early morning underlines again that the rally moves on much stronger fundaments than many think. The new U.S. data prove that the global economic upswing continues.  In the recent weeks we also learned that companies  can squeeze out more profits even in a sluggish economy. And interest rates stay close a record low. Bernanke´s Fed won`t stop their stimulus program if the economy would stumble. Yes, we will get the usual correction - sometimes. But I reckon it will be short and mild as the corrections in the recent months. The teflon rally will continue. 

New York City: Street Art - The Centre-Fuge Public Art Project

(Drivebycuriosity) - New York city is a mecca for street art. You can spot a lot of murals, graffiti and cut outs, especially on the Lower East Side, in the East Village and Soho.

One of the most important contributors to New York`s street art scene is the Centre-fuge Public Art Project, a non-profit organization (centre-fuge   indiegogo). Behind the name is a group of street artists including the famous Adam Cost (villagevoice). You can find their work at First Street East which goes east-west between Bowery and First Avenue along Houston Street East (between the East Village and Lower East Side).

The center of their work is a trailer on First Street East - a satellite office for Second Avenue Subway workers (boweryboogie). The murals appear in cycles which change after a few months, giving place to new pantings (or spray works).

According to their website, each cycle has a different group of contributors. Hence in the course of the recent 2 years a lot of artists expressed themselves in this project.

I admire the variety of their work and the diversity of their ideas. Their murals are fun and give the audience something to think about. And they transform the area into an outdoor gallery. New York City is a bit nicer and more interesting because of them. Thank´s a lot Centre-fuge. There is much more on their Tumblr (centre-fuge) and Facebook (facebook) pages where you also can find the artist´s bios (centre-fuge). 

According to the Blog Bowery Boogie, Centre-fuge recently had a crowd funding campaign helping to expand the program by “acquiring more rotating mural locations as well as facilitating murals for individuals and businesses" (boweryboogie ). They also cooperated with the New Museum on the Bowery in New York, as part of the Ideas-City Festival.

Centre-fuge now presents their "Cycle 8" on different spots on First Street East. I plan to report about that soon.

To be continued.

Movies: The Great Gatsby

"The Great Gatsby", directed by Baz Luhrmann, was one of the most anticipated movies of the year (imdb). The buzz was created by a well oiled marketing campaign, a gorgeous trailer (spin.com) and the prestige of the same named novel which is one of the classics of American literature. Both the book and movie are set shortly after the year 1920 (the roaring twenties) and cast a light on the life of the well-off who lived close to New York.

The story focuses on a "Mr. Gatsby," a mysterious billionaire whose history and origin of wealth are sources of rumor. This reminds me a bit of hedge fund managers who are residing in their Connecticut estates today. Just before the movie was released, I streamed the "Great Gatsby" movie from 1974 (imdb). This film with Robert Redford and Mia Farrow was already the third incarnation of the Gatsby pictures.

The 2013 Gatsby is much better than the 1974 version, but didn´t come up to my expectations. Maybe my anticipation was too high after all this buzz. The plot of both versions was too kitschy and too melodramatic for my taste, but that´s a matter of opinion.

The cast was as brilliant as hoped and much better than in the 1974 version. Leonardo DiCaprio in the leading role beat Redford by length. DiCaprio is "The Great Gatsby". The actor owns the role. He possesses the ease, effortlessness and style a man radiates when money doesn´t play a role any more.

Tobey Maguire almost stole the focus as the introverted neighbor and observer. The actor is a perfect mirror for transmitting and amplifying the plot. In Maguire`s face, you can read his amazement, puzzlement and empathy.

Carey Mulligan as a beautiful but spoiled upper-class trophy woman also is part of the film`s wonder.

Unfortunately, the cinematography disappointed. This could be the fault of the now fashionable 3-D projection.
Some of the artificial, plastic impressions functioned, especially when the camera let the audience participate in a car drive or simulated a deep fall.

But many other scenes reminded me of pop-up-books for children. Something or a person popped suddenly up and almost stuck in the face of the observer, the rest laid in the background like a picture on the wall. And: Continuously watching things and persons popping up got tedious and tiring for the eyes.

Some of the scenery, especially the backgrounds and horizons, looked poor. New York City, recreated from the 20s of the last century, looked almost painted by hand and reminded me of cheap movies from the beginning of cinema.

The soundtrack, a mixture of contemporary party music and modern hip-hop, was acceptable but I missed the gorgeous musical score from the trailer (spin.com).

Luhrmann delivered a passable work, not more.  A master in the like of Paul Thomas Anderson,  David Fincher, Francis Ford Coppola, Roman Polanski and Lars von Trier could have delivered a classic. Luhrmann did not.

Economy/Urbanism: Why Cities Go Vertical

 

 (Drivebycuriosity) -  I like big cities like New York. They offer so many opportunities for jobs, education, medical services, entertainment, sports and more. There are lot of cinemas, libraries, museums, restaurants, bars, gyms and much more.

Hence I was surprised as I saw this statistic last week: The density of large U.S. cities like New York City is shrinking, at least in the decade 2000 through 2010 (reuters). That means that in the year 2010 in big cities fewer people lived per square mile than in the year 2000.

This is puzzling in the face of all the advantages New York and other metropolises have to offer. Do people really prefer living in the suburbs and on the countryside?

Felix Salmon, a columnist and blogger for Reuters, has an interesting explanation (reuters). He observes a rise in the number of wealthy & politically powerful groups and individuals who move back into the city from the suburbs.

"They decrease density just by moving to the city: they do that by dint of the fact that they live in larger homes with smaller families…..Rich people like to maximize the amount of space they live in, whether they’re buying suburban McMansions or downtown lofts."

Salmon also sees a second important effect: The rich and powerful use their political power to prevent construction of (large) tenant buildings in their neighborhood. He labels this elitist strategies with "Not In My Back Yard" and "Build Absolutely Nothing Anywhere Near Anything"

I find Salmon`s arguments very plausible and valuable. But I reckon those developments that have been dominating the development of large cities are just temporary and the density of New York City and similar places will rise again soon or has started already.

There are other trends that should overcompensate the political effects of the political-economical influence of wealthier power group:.


1.  Last Sunday the New York Times reported that wealthy people like to buy or rent apartments in higher floors of skyscrapers (nytimes). The paper labels this trend:  "Living vertical". Those people enjoy the gorgeous views and the absence from street noise. They quote a couple who migrated to a New York City tower because their kids want to join a ballet class in the neighborhood (Upper West Side of Manhattan). I call this trend "piling up the rich".

2. Living vertical gets a lot of support from the omnipresent technological progress. Advances in materials, engineering, architecture and other areas allow building awesome skyscrapers which you can see at many places in the world (skyscraperpage). Those advances also permit buildings with interesting designs, there are more and more skyscrapers that look stylish and cool. Residing there is a part of an exquisite and modern lifestyle.

 Take for instance 8 Spruce Street New York, a rental building designed by star architect Frank Gehry (wikipedia). According to the New York Times is this skyscraper presently Manhattan’s tallest occupied residential tower at 76 stories (nytimes). And Manhattan has more of those elegant building to attract the wealthy crowd, like the 432 Park Avenue (related.com) and the One57 (in construction  one57.com).

But not just new towers are attracting the rich. There also are traditional buildings in already crowded areas that get refurnished for affluent buyers & tenants. An example for this is the almost ancient Woolworth Building 233 Broadway, Manhattan, New York City, where now the top 30 of its 58 floors are transformed into luxury apartments (wikipedia).

3. The mentioned statistics covers just a single decade from 2000 through 2010. This era included 2 severe recessions which may have stopped many large construction projects.  The financial crisis of the years 2008 and early 2009 had especially frozen the financing of skyscrapers.

Since the spring of 2009 the U.S. and the global economy are growing again. Now you can see a lot of gigantic construction cranes in New York City, a sign that the economic upswing has reanimated the financing of skyscraper constructions. 

 

And there is more. Over time, the general rising wealth improves the heart of the cities: There is a growing market for classy restaurants, bars, galleries, sports clubs and more (gentrification), which attracts more people to the cities. Even Manhattan has areas of spare land which will be used for residential buildings. The City of New York is owner of large area on the Lower East Side (Seward Park) which will be used for a big housing project that also includes affordable apartments for the not so rich (.thelodownny).

4. The flip side of the gentrification is rising rents of course. But there is a solution: Last year New York`s mayor Michael Bloomberg started a competition for architects to submit designs for apartments measuring just 275 to 300 square feet (25.5 to 28 square meters) "to address the shortage of homes suitable and affordable for the city’s growing population of one- and two-person households" (drivebycuriosity ). This may be a good idea for singles who aren´t especially demanding and don´t want to agglomerate too many things in their dwellings. They also could function for couples who like to go out very often, aren`t too claustrophobic and don`t plan to have babies in the next years.

Hence I reckon that verticalization, tailored mini apartments and other urban developments will attract people to the centers of the large cities like New York and raise their density again. Maybe its already happening. This would reduce traffic (less commuting from the suburbs) and could lower oil prices and dampen the greenhouse effect.

Economy: The Consumer Mantra 2013

According to the skeptics the U.S. is still in a recession or the next recession is around the corner. Don´t believe the pessimists. The reality is much better.

This morning we got news that U.S. retail sales rose 0.1% in April (bloomberg). This seems to be very slow, but the numbers are influenced by falling gas prices at the pump which reduce the expenditures for filling the gas tanks significantly. Hence retail sales ex-gasoline increased 0.7% and were 4.7% higher than in April 2012 (calculatedriskblog). The biggest gainer were clothing stores (plus 1.2%) and general merchandise outlets, which include department stores (plus 1%)

It seems that the U.S. consumers are encouraged by the ongoing stock market rally (plus around 140% since March 2009), climbing home prices and the healing job market.  Also helpful are the shrinking gas prices at the pump which leave more money for spending in the wallets.

But I guess it is equally important, that the U.S. consumers ignore the gloomy sentiment in the media and show a lot of optimism and confidence in their future. Maybe the Americans of today inherited the positive pioneering spirit of the ancestors.

Thus I am convinced that the steady rise of the consumer spending will continue in the coming months and will furthermore fuel the upswing of the economy and the rally on the stock market.

Culture: 190 Bowery, New York - A Mecca Of Street Art

It seems New York City is a paradise for connoisseurs of street art. Especially in South Manhattan - Soho, the East Village & Lower East Side - where you can see hundreds of murals, graffiti, cut  outs and other pieces of contemporary art.

There is place of pilgrimage for street art lovers: 190 Bowery at the corner of Spring Street, a fashionable east-west connection in Soho, and the Bowery, a road which runs north-south along the Lower East Side and from East Village to China Town (maps.google).

The building was owned once by the Germania Bank that financed the mainly German community of the Lower East Side in the 19th century (Little Germany). In 1966 the house was sold to Jay Maisel, a commercial photographer (wikipedia). According to New York Magazine (nymag) the artist is still its owner and uses the six-story, 72-room, 35,000-square-foot building partly as gallery spaces for his photography and art projects.

I have never been inside but when I pass the Germania building I am fascinated by the almost black walls that have been painted, sprayed and glued by various artists.
I enjoy the different styles and ideas expressed by the persons who have ben displaying their work there for many years.

Apparently 190 Bowery is a place for artistic freedom. Old pieces are partly covered by new work.It's art in progress. You could call the changes anarchy or even vandalism, but it is kind of evolution. Hence the walls are continually changing like a living being.

The mixture of old and new expressions from a lot of different persons is an art piece of itself. The house, at least its walls on Spring Street and Bowery, became something we call in Germany "Gesamtkunstwerk" (total work of art).

I don`t know the artists who have expressed themselves on Bowery 190 but I recognize some of their pieces from other places in Manhattan. It seems the Germania building works as a kind of business card of the New York street art scene.

I guess the artists don`t get paid for their work there, but they can use the building to make their work more known and to expand their reputations.

I am not the only admirer and reporter of those works of course. On the internet you can find  other reports (lostnewyorkcity tumblr  satanslaundromat) including some of the older incarnations of the street art at Bowery 190.

Enjoy.