Professor Elam

Banks and Brokers Weakening

We are now in a corrective wave from the March lows.  This is the bank or financial spdr, after trillions of dollars of help we might add.  Most of the comments are in the chart but here goes

At top RSI is still above 50% but for how long

The $14 level appears to be important for support for the bank spdr

Volume has been decreasing the entire way up

The MACD has turned negative for the first time since the March low.

 

 

The chart for the brokers looks exactly the same, these two groups have had the benefit of billions of dollars of cash, the good news is in this market for now, they may have to make it on their own earnings for a while....
 

 

A New Economic Paradigm

Every so often a college professor wanders onto center stage with the public. This usually happens when he or she manages to actually connect some arcane theory with reality. A few examples

Harry Markowitz in the 1950s came up with his efficient frontier of risk and reward

Milton Friedman came up with Money Supply in the 1970s

Supply Side economics, the Laffer Curve got Reagan's attentino in the 1980s

The black Scholes model for option pricing won a Nobel Prize

And the guy with Freakonomics has sold a lot of books

Okay so what is the next brave new frontier of economics?

I think it is the first prof that points out the King has No New Clothes. Only manufacturing produces wealth. First we decided that the US would become a service economy. Then  Jack Welch, the retired CEO of GE, started shipping intellectual property work overseas to China and India about 1989. So no surprise, we then decided to get rich investing in the stock market and playing state lotteries, indeed over 30 states now have lotteries, my take is that this is the only way citizens will continue to pay taxes. 

BUt I digress. We have followed the stories of how make believe economies, Vegas, Dubai, Macau are now falling apart. The King has no new clothes, those are ultimate swap dollar service economies. There is no real wealth created, they float on a sea of minimum wage jobs. Shut the hotel for a month and there is nothing left. 

Meanwhile the Tigers of Asia have built manufacturing economies. It is true the iPod was designed here and it is true the profits show up on the Apple financial statement. But where does the wealth reside?  It seems to me that at the end of the day, the real wealth statement is 

Who is a creditor

Who is a debtor

Whole countries like the US and Western Europe have become net debtors for the simple reason that citizens did not want to get their hands dirty so to speak. What's that old saying shirt sleeves to shirt sleeves in three generations?  At the end of the Monopoly game, the group with the most income wins the game. Now China is lecturing the US on how to run the US banking system, quite a shift for a country that was pretty much destitute when Nixon went to visit, no heat in the buildings, etc. 

So a new model needs to b e constructed that would probably include

Some sort of net money supply but divided by net borrowing, 

or perhaps we adopt sort of a cash flow think for a country, does the wealth come from 

earnings, and if so manufacturing or intangibles like renting hotel rooms

borrowings

investing, ie selling assets, rather like cutting up the wooden boat to feed the steam boiler to get to port, will we run out of boat before we get there?

My point is that 1800s England, 1900s US, 2000 China and India and countries that produce wealth like S Korea

Nevada and California may well be the window on what the US becomes by 2015

7,000 New Rooms and Counting...

It's not just the city, it's the state.

That quote sums up the prospects for Las Vegas with City Center and the State of Nevada and more new rooms opening Dec 16. 

Dubai, Macau, and Las Vegas have all made gigantic bets on tourism, the latter two depending on gambling. Dubai and Vegas are playing pretend it seems to me, they have built 'downtowns but there is no real business to occupy the buildings, no on produces anything, it just 'feels like a city.'

An amazing evaluation of our times. The Cowboys football stadium is in the same league, but at least it is surrounded by an economy that does produce something. Can all these destinations continue to draw in visitors until the economy improves and pay on their notes? 

I am Going to Make Point Here, Stand By

The hot wide angle lens on the market right now is the Nikon 14-24 mm 2.8 zoom. And it's a technological tour de force. Exotic lens elements. Nano coating. Hyper Drive focusing (I made that up). And the consensus is that, wide open, it trounces all the lenses in the focal range. By a long shot. It's currently around $1,800 US. If you shoot fast and wide you'll want one whether or not you are a Nikon shooter. Very cool.

But....what if you're a different kind of shooter? What if your wide angle work is outside in the middle of the day? What if you had the good sense to use some of your money to buy a great tripod? What if you'd rather spend your money on food and shelter?

Here's the secret that drives lens junkies crazy: All good lenses are great two stops down from wide open. Almost without exception. Take a 14-24 Nikon and compare it to an Sigma 10-20mm lens and at f5.6 or f8 you'll probably be amazed to find that they are pretty darn close.

This is something I learned a long time ago in two different ways from two different people. Charlie Guerrero (Master Photographer par excellence) showed me on an old Leica that the 35 mm f2.8 Elmarit was actually much sharper than the Summicron 35mm f2 inspite of the fact that, at the time the Sumi was four times the price of the Elmarit. Stopped down to f4 they were pretty even but at 5.6 and 8 the Elmarit walked away with it. Same thing with 50 mm lenses. If you test them at f4, f5.6 and f8 the 50mm f2 lenses absolutely school the 50 1.4 lenses. In fact Charlie used to take cheap lenses and expensive lenses and do a test for our students. He'd have them shoot the pricey lens handheld in regular daylight while shooting the cheaper lenses on a tripod. Same aperture, same shutter speed (well about the "one over the focal length" rule...) and whatever lens was on the tripod was clearly better.

Kirk Tuck, The Visual Science Lab

Parade Goes to a Cowboy Game

We have discussed the cost of the new Cowboy Stadium and whether this will weather the economic storm, see previous post on food stamps.Parade dispatched a reporter to give us the up close and personal experience. She encoutered a fellow who had paid $24,000 for the rights to two seats, the actual tickets are another $2500 a season,l no word on whether that price is subject to escalation, but I would imagine it is. $758 for a family of four to go to the game. Send me the photos...

Food Stamp Reliance at Record High

It's not just for the homeless any more, yep Food Stamps now help 36 million people

The numbers were growing even at the stock market and economy were in good shape. Will these new additions ever go off the program?  See the previous post about the trillions in deficit spending....

TigerGate

My wife is after me to write more on forensic accounting. And she is hot on the trail of what promises to be the latest in breaking news at shall we say the financial top. Yep, it's Tigergate. Here is what we know.

• Tiger Woods has earned over $100 M each year the last two years just in playing winnings, never mind the endorsements from Accenture, Nike, etc.
• He smashed his Cadillac SUV ( I thought he endorsed buicks???) at 2:25 AM outside his own house ($2.5 M not your or my house). Seems he hit a fire hydrant and then a tree.
• His wife said 'she used a golf club tosmash out a back window and help Woods from teh car.
• IN fact both rear passenger windows were broken out.
• Front page today, authorities to grill Tiger Woods today, inside, Troopers may question Woods and wife today, the last two days they were not available for comment

Now mix that with

• our forensic friends at the National Enquirer whoops 'was planning a piece that would have said  prior to the accident that Wools had  been seeing Rachel Uchitel, a New York nightclub hostess (hey that's what the SA paper says but it gets better)
• Rachel denies this and resents her reputation getting completely blasted in the media  Rachel was in Melbourne with clients

Car windows are tempered and layered with goop so that they do not shatter in a collision. This makes them, as my wife points out, near impossible to break out, but Woods wife managed it no matter how many golf clubs were destroyed, the latter another unknown

So inquiriing minds

Where was Woods headed at 2:25 AM?

Was his wife determined to get Woods out of the car or let herself in?

How did he hit so many things on his own lawn, could he have been dodging a pedestrian, who might that have been?

Will GM have Woods in a commercial extolling he crash protection features of the Escalade?

http://www.bigredcalculator.com/

I admit to be fascinated by as Jimmy Buffet says, the Bamboo Steamer. He wrote that song as tribute to all the cable tv junk that gets sold on the weekends. Surely we could think of the next great  Billy Mays or Ron Popeii

cut the wine bottle to make a glass

pasta maker

or my personal favorite, spray on hair

Anyway here it is the latest sure to be a hit order by internet gadget. Someone creatd the  sixteen digit calculator now that we have debt in the trillions. When ordinary just won't do I guess.

Needless to say the official color is red. The fact that our debt is now the subject of such derision suggests that the editorial in today's San Antonio paper supporting a bi partisan commission to bring deficits under control is long overdue.

Dubai Lays an Egg

 Dubai World said Uncle on  Nov 25 asking for an extension on debt payments totaling some $80 B. Dubai does not have any oil in particular, the oil is in the neighboring countries. So who's in charge now. We have followed Dubai's failure to follow through on a similar project in Las Vegas, City Center. By the way Dubai hosts the world's tallest building, the fountains cost $250 M.

Robert Prechter at Elliott Wave has noted that building skyscrapers is usually conincident with stock market tops. Optimism fuels such projects, the latest being the tallest building ever at the top of the highest stock market ever. That such a project could be built in a country with no real economy says volumes about just how optimsisic everyone got. 

Japan stock exchange closed down over 3%, Hong Kong's Hang Seng closed down 4.8%. 

Meanwhile, hotels in the US  are behind on their debt payments. 

Luxury may be fundamental to the human experience as one hotel analyst says but then so is going broke...

Maria Interviews Jim Rogers

For whatever reason, Bloomberg, the new owner of Business Week is apparently discontinuing Maria 

Bartiromo's inerviews each week. Oh well, who better to end with than one of my favorites, Jim Rogers. 

The author of Hot Commodities, Rogers is bullish on well you guessed it commodities. He likes palladium an silver in particular.