Economy: Split Personality?

This morning we got news that U.S. retail sales grew 0.1% in April and were 6.4% higher than last year (calculatedriskblog.com). Retail sales are up 23.1% from the bottom of the last recession, and are now 7.7% above the pre-recession peak. But on the stock markets we spot quite the opposite behavior: The stock market indices are hovering on a three month low and the sentiment there is very bad.

It seems that the majority of U.S. citizens show a split personality. In their manifestation as consumers they display confidence in the future and they are expanding their spending with a solid speed. But in their appearance as investors they act contrarily. They don`t trust the future and shun investments in risky assets like stocks which represent the future of companies & the economy.

I bet that this divergence will diminish when the economic upswing continues. A lot of economic barometers show that the U.S. economy is still healing as a result of the expanding global economy and rising company profits.

I reckon that pessimism on the stock markets will abate and investors will come back in the coming months because they are becoming more confident. Their rising retail spending is just the first step.

Movies: Headhunters

Hollywood is the perfect student. Since its beginning the dream factory has been learning a lot from foreign cinemas. In the 20s of the last century American cinema was influenced by German movies (Metropolis, Nosferatu), in the 50s by Italian & French films, in the 70s by German cinema again and lately by flicks from Hong Kong and Mainland China.

Now it looks like it is turn to Scandinavian cinema to influence Hollywood. Not long ago Hollywood delivered an interesting remake of the Swedish film "The Girl with a Dragon Tattoo", based on the novels of Stieg Larsson, an extremely successful Swedish writer. Now the American movie theaters are showing another Scandinavian product: "The Headhunter" (imdb), based on a book from Jo Nesbo, who seems to be the Norwegian "Larsson".  Wikipedia reports that Hollywood already bought the rights for a U.S. remake of the Norwegian production, which is being shown in America in Norwegian & Danish with English subtitles (wikipedia).

The film tells the story of a man who is the most successful headhunter in Norway but is fighting with his inferiority complex, partly because he is just 5' 8" (172 cm) short. For compensation he leads an expensive lifestyle with a gorgeous trophy woman. To finance this he moonlights as an art thieve.  But as he tries his biggest hit ever he acquires a ruthless enemy and starts a violent and very bloody chain reaction filled with a lot of surprises and twists - a kind of Nordic dynamite.

Aksel Hennie, who reminds me a bit of the young Christopher Walken, is perfectly cast as this headhunter. The popular Norwegian actor performs like an innocent child lost in a perilous fairy forest and responds with a lot of smartness, stoicism and readiness to assimilate. The rest of the cast also is convincing and sometimes surprisingly funny.

It is a lot of fun watching this explosive and violent roller coaster created by director Morten Tyldum and his cinematographer John Andreas Andersen.  I reckon that both are at the brink of an international career and that Hollywood`s Tarantinos & Coen Brothers have now a lot of homework to do. I`m looking forward to seeing more examples of this Nordic dynamite in the cinemas.  

Stock Markets: Presents From The Bears

This Friday the stock markets finished sharply down. If we believe the media this was a response to the U.S. nonfarm payroll report from April which showed fewer created new jobs than expected (scottgrannis.blogspot.com). I reckon that this was an overreaction and creates a new buying opportunity on the stock markets - a present from the bears.

The Q1 earnings seasons shows that company profits grew solidly even in a sluggish economy, one result of the rising efficiency of corporations. Falling stock prices and rising company profits translate into  shrinking stock valuations, meaning that stocks got cheaper. And the global economy is still growing. Even the April U.S. jobs number weren`t so bad, because the job numbers from the prior months were revised significantly higher.

And the investors got another valuable gift from the bears: The pessimistic sentiment on the financial markets sent oil prices sharply lower. On Friday the oil future (WTI) fell 3.9% and closed below the psychological important $100 mark (bloomberg). Since late February, when oil reached $110, energy prices are under pressure. Cheaper oil is a relief for the economy because consumers have now more money to spend for other goods, which will fuel consumer spending in the coming months and power the economic upswing.

I still believe that the stock market will continue its rally and the S&P 500 will reach 1.700 by end of the year.

Movies: The Raven

Edgar Allen Poe was a poet of the dark. He wrote macabre but highly entertaining tales about murders and other grizzly incidents. In some of his stories he described gruesome and deadly machineries, a kind of sinister science fiction. This inspired Hollywood to make a movie in which the writer himself has to deal with a serial killer who constructs his murders in the same manner as Poem described in his stories: "The Raven" (imdb) .

I didn`t care much about the plot. As in many contemporary thrillers the story was heavily constructed and ridiculous. But I enjoyed the sinister atmosphere created by the director James McTeigue and his cinematographer Danny Ruhlmann.

The film is set in Baltimore in the year 1849 and lures the viewer into the then ruling Victorian era, which was influenced by romanticism and mysticism (wikipedia). The pub scenes, a ball in an opulent mansion and other settings show dark gothic tableaus which support the grizzly tale a lot.

John Cusak, is in my opinion one of Hollywood`s finest actors, and is a perfect incarnation for the funny, cynic and alcoholic Poe. The rest of the crew also is convincing. But my favorite actor is a raccoon, which acts as Poe´s  pet.

"The Raven" is a peek into the macabre fantasy world of Edgar Allan Poe  and an enjoyable way to get some goose pimples on a lazy afternoon.

Economy: Debt Crisis Forever?

Pessimism rules. These days there is no lack of gloomy forecasts. Almost every day someone predicts a bleak future. The newest example is a paper by Carmen Reinhart (Peterson Institute for International Economics in Washington), Vincent Reinhart (U.S. economist for Morgan Stanley in New York) and Kenneth Rogoff (Harvard University), published by the influential National Bureau of Economic Research (businessweek.com).

These economists claim that the U.S. and other developed economies with high public debt potentially face “massive” losses of output lasting more than a decade". If they are right the U.S. economy will grow very slowly until at least the year 2020.

These pessimists refer to historical data which show that in the past countries with debts exceeding 90 percent of the economy have historically experienced subpar (lower than usual) economic growth for more than 20 years. That has left output (and wealth) at the end of the period a quarter below where it would have been otherwise. 

I reckon that these gloomy economists are just following the negative zeitgeist and their paper is a waste of government money. They are just extrapolating the negative trends of the present into the (alleged) future. They have a static view and ignore the strong dynamics which are changing the global economy.

I believe that these bean counters underestimate at least 2 positive trends which should fuel strong growth in the coming years:

1.  Ongoing Globalization - The catching up process of China and other emerging markets especially fuels the growth of the global economy. Companies in the U.S. and other highly indebted countries benefit strongly from the growing markets in Asia and Latin America which create rising profits and income for the employees. 

2. Accelerating Technological Progress - iPhones, iPads, cloud computing, and rooting etc. create new markets and reduce production costs which lead to rising income and wealth.

And the study has more flaws. It ignores forces which already reduce the government debts. The U.S. and other highly indebted countries are now practicing an austerity policy (drastically lower public expenditures) which will reduce the government debt in the coming years. There also are economic forces which will lead to lower governments debt:  Fast climbing company profits, which are fruits of rising efficiency, will spill more money into public cash boxes. Plus climbing stock prices and rising consumer spending which will do the same.

I reckon that all these factors will play together and lead to a much healthier and wealthier global economy than these people think.

Economy: In Consumers We Trust 2012 III

If we believe the media the U.S. economic recovery is endangered because of the sluggish American job market and the crisis in Europe. But U.S. consumers, the engines of the economy, are still boosting their expenditures and fueling the upswing.

This morning we got news that the Restaurant Performance Index climbed in March to a new post-recession high (calculatedriskblog.com). The index is a gauge for consumer spending for restaurant services. The majority of restaurant operators reported higher same-store sales and customer traffic levels

The rising expenditures for eating out are another sign that the majority of consumers are becoming more optimistic. It seems that at least the rising numbers of restaurant visitors are putting more confidence in the economy than the media and the stock market. Maybe investors should follow their example.

Movies: Mirror, Mirror

It seems that Brothers Grimm`s fairy tales are an inexhaustible source for Hollywood movies. Maybe the most popular of them is "Snow White", famously visualized in the classic Disney movie. The newest cinema reincarnation is "Mirror Mirror", directed by Tarsem Singh (imdb.com).

I had much fun to watch Julia Roberts as the "Evil Queen". She blends her malicious behavior with a lot of charm and arrogance. Lily Collins, as Snow White, is really an eye candy and a worthy counterpart to the witchy queen. Armie Hammer, famous for giving face to the Winklevoss Brothers in "Social Network", plays the visiting prince and fits well to this kind of  ménage à troise.

The plot had a lot of changes from the original (no spoilers) which made the flick more entertaining and certainly more surprising. "Mirror Mirror" is a lightweight entertainment for an easy afternoon.