The Big Picture | August 2004

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Bush Support Among Arab Americans Tumbles

Tuesday, August 31, 2004 | 04:23 AM

ncm_logo_transp_60_240 sfgatecom_125x80

Back in March, we noted that Arab-American Voters had been abandoning Bush in key swing states.

A new nationwide poll of Americans of Middle Eastern descent, commissioned by Amnesty International and New California Media, reveal that support for the President amongst Arab Americans has dropped precipitously. "A majority of Arab Americans strongly opposes President Bush's handling of the Iraq war and many favor Democratic candidate Sen. John Kerry in this year's presidential election." In 2000, then Governor Bush won a majority of the Arab-American vote.

Given the concentration of Arab Americans in swing states such as Michigan, Ohio and Pennsylvania, this development could have a significant impact on the outcome of the election.

The poll's internals are quite revealing. The San Francisco Chronicle noted among the poll's findings:

-- 73 percent of Arab Americans gave Bush negative marks on his Iraq policy; 60 percent rate his handling of Iraq as "poor" while another 13 percent rated his performance as "mediocre."

-- 55 percent of Arab Americans say going to war with Iraq was the wrong decision, and 54 percent believe the president deliberately misled the public about his reason for going to war.

-- Iranians were less suspicious of U.S. intentions in the Middle East than Arab or Pakistani Americans and more willing to see Iraq as part of the war against terrorism. By contrast, less than half of Arab Americans and only one fourth of Pakistani Americans believe it is part of the war on terror.

-- Arab Americans have experienced more discrimination and are over three times more likely than the non-Latino white population to have experienced racial profiling since the Sept. 11 attacks. For Pakistani Americans and for the Muslims polled, those numbers were even higher.

Fascinating stuff: "We have a poll that shows a strong rejection of President Bush's policies in Iraq, and a suggestion that we withdraw our troops as soon as possible," said Sergio Bendixen, president of the Miami-based firm that conducted the poll.

An estimated 3 million Arab Americans live in the United States.

Sources:
New Poll- Bush Support Among Arab Americans Tumbles
Pacific News Service, News Features,
Marcelo Ballve, Aug 26, 2004
Poll commissioned by Amnesty International and New California Media
http://news.ncmonline.com/news/view_article.html?article_id=ba0d8edbc77c450db7e3c8b88e203125

Arab Americans favor Kerry over Bush
Poll indicates War in Iraq seen as main reason for shift from GOP
Jason B. Johnson,
San Francisco Chronicle, Friday, August 27, 2004
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/08/27/MNG878F62F1.DTL

Kinda Late to be "Solidfying the Base"

Monday, August 30, 2004 | 05:47 PM

in Politics

wsj_format_logo

Interesting catch by the Journal: Why is Bush "so concerned about voters he should already have in the bag?"

Based upon the cable buys the Bush re-election campaign has been making, there appears to be some serious concern by Rove & Company over "the base." The Bush campaign is not only outspending Kerry on cable -- by more than 10 to 1 -- but placing their ad dollars in places that you might have suspected were (excuse the term) a slam-dunk.

While the challenger has purchased only 265 cable spots, the incumbent has bought a whopping 3092 cable adverts thru (June of 2004). Even more intriguing are the types of channels the incumbent has been buying: The Golf Channel, Fox News, MSNBC, The Speed Channel and The Travel Channel.

These are hardly the provinces of swing voters . . .

Here's an excerpt from the Journal:

President Bush is spending heavily on cable-television advertising in his bid to win re-election, and if the channels he is dropping dollars on are any indication, he is particularly concerned about voters he should already have in the bag.

Through the first six months of this year, Mr. Bush's campaign bought almost 3,100 ads on cable, mostly on channels that attract white male viewers, many of them affluent.

According to Nielsen Monitor Plus, which has been tracking ad spending by the candidates, Mr. Bush bought 335 spots on the History Channel, 282 on Discovery Communications Inc.'s Travel Channel and almost 100 on News Corp.'s Speed Channel. He also bought 400 spots on Comcast Corp.'s Golf Channel, whose audience is so tiny it doesn't even subscribe to Nielsen to get ratings.

But if the Golf Channel is the network of the few, those few are well-to-do. The network says that 33% of its prime-time audience, and 67% of its viewers between the ages of 35 and 64, have a household income of over $100,000.

Mr. Bush also has been spending a lot on cable-news channels, and it comes as no surprise that News Corp.'s Fox News has been the biggest beneficiary, getting 253 commercials from the Bush-Cheney committee in the year's first six months. Time Warner Inc.'s CNN sold 383 spots to the president in the same time frame, but according to the Bush campaign, those spots are cheaper than on Fox. MSNBC, which is co-owned by General Electric Co. and Microsoft Corp. and lags far behind in the cable-news ratings race, sold almost 700 spots to President Bush's re-election effort.

Four years ago, Nielsen research shows that the Bush-Cheney committee didn't buy any time on the cable-news networks, and the Gore-Lieberman campaign bought just 12 spots.

Fascinating stuff; Here's the breakdown of all the White House ad buys:

Presidential campaign ads on major cable-TV channels, January - June 2004:

CHANNEL BUSH KERRY

BET 0 1

Comedy Central 10 0

CNBC 345 51

CNN 383 157

ESPN2 44 0

ESPN 108 0

Fox News 253 26

FX 32 0

Golf Channel 400 0

History Channel 335 0

MSNBC 693 30

Speed Channel 82 0

TLC 125 0

Travel Channel 282 0

TOTAL 3,092 265

Sources: Nielsen Media Research; WSJ research

We've discussed the how the election will hinge on the undecided voters in the Swing States ad nauseum. The WSJ notes they are "about 10% of the electorate -- in about a dozen swing states. Who these on-the-fence citizens are and what they watch are matters of debate. But if Mr. Bush is using cable largely to shore up his base, isn't he risking wasting money preaching to the converted?

I continue to believe that this race will end up busting out, prolly post-debate. I do not think it will be a close election . . .

Source:
Bush Cable Ads Aim to Solidify 'Partisan' Vote
Joe Flint
The Wall Street Journal, August 26, 2004;Page B1
http://online.wsj.com/article/0,,SB109347863558701469,00.html

Electionomics

Monday, August 30, 2004 | 01:59 AM

in Finance | Media | Politics

We discussed Confusing Cause & Effect last month. Despite those pearls of wisdom, we continue to see many people who should know better get it wrong. I gently correct Business Week on the subject: Is the Presidential race roiling the markets? Or are the markets roiling the race?.

Here's an excerpt:

Q: Who do you think will win the election?
A: I'm a numbers geek at heart, so I watch four quantitative factors that have had a strong historical correlation with incumbent electoral victory, regardless of party. The first is job creation, second is Presidential approval rating, third is percentage saying the country is going in the right or wrong direction, and the fourth is the Dow Jones industrial average performance in the first half of the election year.

The polls are saying this is a very close race, but all four of the above data points suggest the incumbent is in deep trouble. Over a four-year term, when job creation is less than 5%, studies have shown it's a huge negative for the occupant in the White House. As of last month, we were at a negative 0.8%.

We see recent surveys showing the incumbent polling less than a 50% job-approval rating, and for the "right/wrong direction" question, only 36% are answering "right direction." These are big negatives. The Dow started the year at 10,450. It has come up off the lows but is still down for the year. It's a minor negative.

Q: So you think Kerry will win?
A: Here's where things get tricky: Once all the quantitative data is in -- and assuming there's no "October Surprise" -- I look for an analogy with another, historically similar period. This includes economic data -- interest rates, taxes, unemployment, inflation -- as well as geopolitics.

What makes the 2004 election such a challenge to forecast is that we have never seen a Presidential term with a burst market bubble, a recession, a major terrorist attack on U.S. soil, a big tax cut, and not one, but two, wars. So without an analogous comparable, making a prediction with a high degree of confidence becomes quite problematic -- it's just a crapshoot.

If you won't let me weasel out of giving an answer, then I'll fall back on quant work. All four data points suggest the incumbent gets defeated in November.

Q: Doesn't Wall Street typically prefer Republican Presidents?
A: Ideally, the Street prefers a divided government: The best stock markets of the past three decades have been under Presidents Reagan and Clinton. Reagan was a Republican with a Democratic Congress, while Clinton was a Democrat with a Republican Congress.

Gridlock works because it forces both sides to the middle. Pragmatic moderation is an effective economic policy. Hard-core ideological approaches tend to be disastrous.

The full discussion can be found here

bw_0427_market

Source:
Is the Presidential race roiling the markets? Or are the markets roiling the race?
Karyn McCormack
Business Week, August 30, 2004
http://www.businessweek.com/bwdaily/dnflash/aug2004/nf20040830_5077_db049.htm

Encouragement in GDP Report

Sunday, August 29, 2004 | 06:55 PM

in Finance

wsj_format_logo

The drop in U.S. gross domestic product growth during the second quarter came as no surprise to most economy and market analysts. Here are reactions to the report.

"The headline may not be strong, but some of the details were a little stronger, especially with respect to consumption and spending."
-- Meg Browne, currency strategist, HSBC Bank USA

* * *
"We did see a pause in the second quarter." However, "we're still seeing the underlying strength of the economy -- low inflation, high productivity, unemployment rate falling and the continuing in the pickup on jobs."
-- Treasury Secretary John Snow

* * *
The weaker GDP growth rate provides evidence that "George Bush is misleading Americans when he says that the economy has turned a corner.''
-- statement from John Kerry's campaign

* * *
"Maybe we are in fact in a soft spot right now as Greenspan believes. the fact that corporate profits were flat means [corporations] may have to look at ways to increase their productivity."
-- Drew Matus, economist, Lehman Brothers

* * *
"I think the most positive thing about this report was the upward revision in nonresidential capital spending." The report "underscores that firms have a distinct desire to add machines rather than people in order to get increases in productivity and output."
-- Ken Mayland, president, ClearView Economics

* * *
"The decline in inflation in the third quarter appears to be related to weak consumer spending and more extensive discounting, etc. We are forecasting an acceleration of consumer spending in the fourth quarter."
-- Bruce Kasman, global head of economic research, J.P. Morgan Securities

* * *
"Economic growth was below par -- temporarily we think -- but the expansion is still continuing."
-- Lynn Reaser, chief economist, Banc of America Capital Management

* * *
"Assuming the leap in the trade deficit reverse in July, [third-quarter] growth should be 3%-plus."
-- Ian Shepherdson, chief economist of High Frequency Economics

Source:
Beyond the Headline Number, Encouragement in GDP Report
August 27, 2004 1:31 p.m.
http://online.wsj.com/article/0,,SB109362514417603094,00.html

Squawk Box Guest Host post-mortem

Sunday, August 29, 2004 | 06:57 AM

in Media

I usually scribble a few words after an interesting TV appearance -- only I was so exhausted Wednesday, I couldn't get to it. Here's my belated post mortem:

My problems started the night before. I fell asleep at 10:45 pm, only to wake up at 11:15. I was simply too keyed up to get any sleep. Tossed and turned for hours. Finally, at 3:00 am, I went downstairs to watch a recently TiVo-ed Insomniac with Dave Atell (Tokyo). The show is amusing when you are awake, and somnolent when you are tired. I started it 3 times, fell asleep each time, and ended up with a grand total of 2 hours shut eye for the night.

CNBC sends a car for guests, and I noticed it sitting outside at 5:15am. We left at 5:37, and were at the studios in NJ 35 minutes later.

Working on so little sleep, I was running on caffeine, adrenaline and fumes for the full 3 hours of the show.

It started off pretty quietly -- except for my embarrassing throat clearing kkrrhhhhaaarggggccchh just as Joe Kernan introduced the show. I typically only get nervous for the first few minutes or so -- nervous energy, hyped-up dry-mouth, tight-throat type of stuff. Once I start yapping it fades away, but until then . . . A dozen people asked me about "The Cough," and I had absolutely zero idea it even happened. On TiVo, you can see Joe Kernan stop and whip his head to look my way.

A rather inauspicious way to begin. (at least it wasn't a Nobel prize moment)

For future reference, someone on the show (anyone!) might want to tell the guest about the magic button. Theres a square, red kill switch on the desk which mutes your microphone. Had I known about this little gizmo, perhaps the audience might have spared the charming symphony of my kkrrhhhhaaarggggccchh phlegm.

After the first 10 minute segment, one of the crew announces we're clear -- off the air -- and the promo for "The Big Idea with Donny Deustche" pops up: Tonite, Jenna Jameson, on her new book How to make love like a porn star."

Genius that I am, I blurt out: I have to TiVo THAT. Everyone kinda laughs, and Kernan and I discuss Jenna and a few of her peer group. I'll spare you the details, but it was very amusing -- I manage to crack up the crew -- and it immediately loosens me up.

Not the first time in my career that I can be accused of "playing to the band."

A bit later, were back live on air. Dylan Ratigan and Joe Kernan are back and forth, talking digital cameras -- Joe is apparently a technophobe, and talks about how he doesn't even have a printer. I was born in Brooklyn, and it rears its head every now and again, especially when I am exhausted. I say "Printa" -- which Kernan immediately hears and (good-naturedly) mocks -- Printa -- on the air.

During the next break, Joe Kernan announces: "This is what I love about this job." Joe says he got an email from Dell -- every purchase of a new Dell PC comes free printer that you can plug the camera directly, into even with the PC can be off.

Here's the really cool part: The email is not just from Dell, its actually from MICHAEL DELL, who was watching the show. The guy is always selling, and thats one of the reasons DELL the company is such a smashing success.

Before the market opens, we do a segment with former Dallas Cowboy coach Jimmy Johnson. I get a few question in (Coach, given how the talent is spread so evenly around the NFL, what team do you think would be the most fun and exiting for you to coach?) which Johnson politely ducks, talking about structural changes in the NFL instead.

Dylan Ratigan tag teams with me, follows up on my question, and actually gets Johnson to say the Jacksonville Jaguars is a really interesting team. So if you kids down there are looking for a new head honcho, JJ is available, give him a shout. (Ratigan and I get do the same later with Homeland Security Secy Tom Ridge).

Before the Durable Goods number comes out at 8:30am, WSJ/CNBC reporter Steve Liesman does a long segment with me about the markets, employment and politics. We talk job creation, Payroll vs Household Surveys, the impact of the markets on politics. A quick break -- then the Durable Goods number comes out, we do a few more minutes, and the segment ends.

During commercial, I tell Steve that some of his recent guests have been blowing smoke and bad data his way -- we talk about the surveys, and I drop the bombshell -- Did you know that of the 629,000 job number in the last Household Survey, a full 92% were only part-time gigs? He finds this hard to believe, I tell him to check out BLS. We shake hands, and off he goes.

Later, I get to ask Homeland Security Secretary Tom Ridge a question live on air (on the Chemical industry vulnerability). Ridge has a thankless job, and is one of the overlooked good guys in the administration. You can understand why he is retiring.

On the last segment I get 30 seconds to talk about Volume -- If it doesn't show up soon, we an expect to revisit the recent lows, blah, blah, blah.

The show ends at 10:00 a.m., I thank everyone -- handshakes all around -- and the producer walk me off the Squawk Box set. As we head into the main office (that huge cube farm you see in the background sometimes), Steve Liesman runs up to us. He's been all over the BLS site, he cannot confirm my position, want's to know where's my data from.

I say BLS -- If you have a screen for me, I can show you. "Lets go." Long story short, after hunting all over BLS, Steve gets the Chief Economist of BLS on the phone (I wish I had that power!). He puts us on with a very senior quant geek, and it turns out I'm right. (I'll have an upcoming analysis of this soon).

Steve's a terrific guy, we chat a bit, and then he's off in the next day or so to Colorado to harass Chairman Greenspan.

All in all, it was a very cool experience, and I'm looking forward to doing it again, when Mark Haines returns from vacay. Also, a little sleep under my belt before guest hosting might be a good idea . . .

We, The Media

Saturday, August 28, 2004 | 11:33 AM

in Books

A big shout out to Hans of Milano, Italy.

Hans plucked Dan Gillmor's We the Media off of the not well publicized Amuse Me link to your right.

After enough of you asked about a tip jar, I put my Amazon wishlist there, and kinda forgot about it. Hans gets props for being the first kind soul to send me something. (After I read it, expect a review).

Yo, Hans: "Molti ringraziamenti per il libro! Sto osservandola in avanti a lettura questa fine settimana. Ringrazi."

Dan Gillmor: We the Media
We the Media

Read it here first: Losing the Signal

Saturday, August 28, 2004 | 07:38 AM

in Finance | Music

Back in July, we addressed the slow death of Radio in Radio's Wounded Business Model.

This morning, Barron's cover story hits on many of the same themes: Internet broadcast and streaming, Satellite Radio, iPods, and P2P and how they are (heh heh) killing the industry.

As we observed last time, its their own damned fault. The industry -- Clearchannel in particular -- went for short profits at the expense of the long term relationship with their audience. They completely overlooked that their product IS THE AUDIENCE -- who they then sell to their clients, the advertisers.

Ooops! We alienated our living breathing product, who have since told us to bugger off. Its no surprise their shareholders are punishing them by voting with their feet.

Sure, any burger joint could raise short term profit by using Hamburger Helper -- but that does long term damage to their business: Their reputation suffers, they lose customers, mostof whom go away permanently. Its the EXACT same thing here: Radio -- defined as the broad swath of FM stations broadcasting across the USA -- has become the Hamburger Helper of music.

Where does the blame lay? Start with the Telecommunications Act of 1996 -- the enabling legislation that got the ball rolling: It allowed -- nay, encouraged -- massive consolidation in the industry. I haven't thought through whether Radio's Wounded Business Model is solely an unintended consequence of that legislation -- or the result of awful management. Its prolly a combination of both.

All we can say is "Buh-bye."

Here's a lengthy (yet surprisingly familiar to readers of this blog) excerpt from Barron's:

Younger adults -- the key targets of radio advertising -- have clearly been losing their ardor for the medium. By one key measure, the number of listeners ages 18 to 34 has declined by about 8% in the past five years, as portable digital-music players, Internet radio programming and other innovations have started to take hold. And while the dollars spent on radio advertising have been essentially flat for the past few years, competing media like cable TV, the 'Net and outdoor advertising have been gaining steadily.

"It's over," Larry Haverty, a media specialist at State Street Research and Management in Boston, says of radio stocks' big run. "Something good happened in the 'Nineties; something less good has happened in the '00s. Every retailer is blowing its budget on advertising and radio is not getting any of it. If they don't get it now, they're not going to."

Investors, along with radio executives, may not be facing up to the full extent of the industry's challenges. While radio has always weathered past threats -- video did not kill radio's star, as a group called the Buggles prophesied in 1981 -- things could really be different this time.

Across the country, listeners are changing how they choose to receive music and news and talk radio. They are turning to portable music players like Apple Computer's iPod, streaming audio over the Internet and the emerging field of satellite radio to hear what they want, when they want to hear it.

Anne Kershaw, a 46-year-old lawyer who travels weekly between her home in Tarrytown, N.Y., and an office in Richmond, Va., bought an iPod in May, partly because "there is no decent radio station in Richmond. I was tired of being preached to." She still uses the radio -- but not in the old way. By attaching a transmitter to her iPod and setting it on a certain FM frequency, she can play the 983 tunes she has downloaded to the iPod through the radio, whether at home or in the car.

Music downloading is one of the "fastest-growing digital phenomena ever," says Forrester Research Group. It predicts download services will generate more than $200 million in revenue this year, $40 million higher than forecast and up from just $36 million in 2003. In all, some 35 million U.S. adults have downloaded music, according to the Pew Internet & American Life Project, a nonprofit initiative.

Trends like that are causing companies to reassess advertising choices, to ensure they're getting the most bang for their buck. Accountability and return on investment are the priorities in advertising right now, and it's hard to say radio is providing much of either as listeners start tuning out. Among all people older than 12, only 14.6% are listening to radio during an average 15-minute period, down from 16% in 1998, according to Arbitron.

Glad to see this meme has infiltrated the mainstream. Merely took a month and a half! (MMmuuhaa hhhaaahhhaaa! My evil plan is coming together, just as I envisioned!) Pretty cool.

My next target: Insipid boy bands!

UPDATE: August 28, 2004, 10:13 am
David Farber's interesting-people listserve has the complete article

Source:
Losing the Signal
Radio may be in a long-term decline. Time to tune out the stocks?
By Sandra Ward
Barron's, Monday, August 30, 2004
http://online.barrons.com/article/SB109364644941303432.html

Radio's Wounded Business Model
http://bigpicture.typepad.com/comments/2004/07/clear_channels_.html

Losing the Signal
http://www.interesting-people.org/archives/interesting people/200408/msg00316.html

WSJ: Polls reveal hurdles for Bush

Friday, August 27, 2004 | 06:05 AM

in Politics

wsj_format_logo

Interesting article on the front page of today's WSJ, noting the "conundrum" George W. Bush faces in his re-election race: "The same policies that have secured his conservative base and given him a slight lead in the presidential race are now complicating his bid to win over crucial undecided voters."

Poll_Extra08262004211022 No surprise there. The "Undecideds" tend to be moderate pragmatics, far less interested in dogma than results. Most of the major initiatives we've seen from the White House have been more dogmatic than pragmatic: The Neo-Con's War in Iraq was pure dogma, the Tax Cuts were an exercise in Supply Side theory, even the refusal to address issues such as conservation and energy efficiency reveal a slavish devotion to laissez faire market theory -- with no exceptions made, except for pork barrel corporate welfare for contributors. (hmmm, maybe its not so laissez faire after all).

As Harwood correctly observes, independent and swing voters are finding it difficult to reconcile the warm and fuzzy campaign rhetoric with the realities of this White House's policies. The latest Wall Street Journal/NBC News poll finds a majority "disapproves of his approach to critical foreign and domestic issues alike and saying his policies on Iraq, health care and jobs and the economy need "major adjustments" or outright reversal. Among the one in five voters who say they are undecided or leaning one way but open to persuasion, those majorities are overwhelming."

The poll finds the incumbent slightly ahead -- 47%-to-45% -- nationally. But as we noted on Monday (this is key) -- Kerry now leads in 14 swing states (up from 13 early August) -- despite the damge done by the now thoroughly debunked SBVFT. In 2000, six of these states were won by Bush. As of today, polls place Arkanas, Florida, Missouri, Nevada, New Hampshire, and Tennessee in the challenger's camp.

Conundrum defined:

The question is what sort of agenda Mr. Bush can offer to attract new supporters without alienating his conservative base. While his job performance so far has earned him 79% approval among conservatives, 55% of persuadable voters disapprove. Persuadable voters, 19% of the electorate, include those who say they are still undecided or not yet fixed in their presidential choice.

Overall, 50% of the electorate says the nation has gotten on the wrong track, while just 36% say it's heading in the right direction. Among independents, 60% say the nation is headed in the wrong direction. By 50% to 46%, voters say Mr. Bush doesn't deserve to be re-elected to a second term.

Its not all bad for Bush: The Journal notes a number of positives for the incumbent: He still gets strong ratings on terror, and by a 2-to-1 margin, voters give him high ratings for being "easygoing and likable."

But its the issues that keep haunting Karl Rove -- is it any surprise he'd rather see the media (and his candidate) talking about 527s, rather than Iraq, Health Care, and the Economy?

The president's personal assets have been eroded by Democratic attacks and controversies over such issues as the Abu Ghraib prison abuse scandal and the failure to find weapons of mass destruction in Iraq. While Mr. Bush continues to receive positive marks for his "strong leadership qualities," his 50% approval on that dimension matches the weakest of his presidency. Just 45% of voters rate him highly for "being honest and straightforward," while 39% give him low marks.

More problematic are the ratings Mr. Bush receives on the issues, aside from the broader antiterror war, that have dominated campaign debate thus far. On Iraq, a 51% majority says Mr. Bush needs to change his approach, and a 49% plurality says removing Saddam Hussein from power wasn't worth the human and financial costs. By 51% to 43%, voters say it is appropriate to begin considering troop reductions in Baghdad, which Mr. Kerry recently suggested could begin in the first six months of his presidency.

On the domestic front, the most critical issue is the economy, for which Mr. Hart describes the president's ratings as "dreadful." Some 52% of voters overall disapprove of the president's handling of the economy, and the proportion who say the economy has gotten better in the past year has fallen to 29%. Despite a revival of economic growth overall, voters say by a 2-to-1 margin that circumstances for middle- and working-class families aren't improving.

Those negative assessments span Mr. Bush's handling of a series of issues. By 55% to 38%, voters say the president's tax cuts mostly have benefited the wealthy rather than all Americans. As oil prices hit record levels, six in 10 voters criticize his approach to gas prices. Some 58% of voters want major changes in the president's approach to health care, while 55% say the same thing about his policies on jobs.

Too bad the report came out in that left wing commie rag, the Wall Street Journal. Now if it was in the New York Post, well than maybe we could have trusted its objectivity . . .

Source:
Bush Holds Slight Edge, but Faces Hurdles With Undecided Voters
By John Harwood
The Wall Street Journal, August 27, 2004; Page A1
http://online.wsj.com/article/0,,SB109356130837402477,00.html

Last Minute Reprieve . . .

Thursday, August 26, 2004 | 04:46 PM

in Finance

The future by its very nature is unknowable. A truism, certainly, but its why we keep questioning our forecasts. We constantly ask ourselves how we can determine, sooner rather than later, when a forecast may be wrong.

Last week, we noted the importance of a high volume follow through day to last Monday’s (8/16) rally. We view big volume as a sign of broad institutional participation, a strong level of conviction in the fundamentals, and a degree of confidence in the near term. Low volume implies no institutional buying, little conviction and no confidence.

Failing to see that volume spike would serve to confirm that last Monday’s rally was an over-sold bounce. Once that over-sold condition gets worked off, the argument goes, the market should resume its downward trend.

Today is the ninth day after that rally. We should have seen that big follow thru day by now. Last week’s rally is looking more and more like a one-day wonder – at least according to guidelines we laid out. But what might make this view – technically sound though it may be – wrong? Are we getting prematurely bearish here?

The GOP convention is in town next week, followed by the long holiday weekend. Instead of insisting a sell off is imminent – which is what the lack of confirmation suggests – I propose the following: Let’s violate our technical rules! Let’s give the markets 2 more weeks. (We’re compassionate conservatives!) Push the deadline for the confirmation date back to the week after Labor Day (September 10th). That provides time to see if the institutional romance for stocks is rekindled. And as long as there is no terror event during the RNC, we may even see a low-volume drift-up next week.

Lacking any sort of high volume confirmation day between now and September 10th – or some other significant change in the internals – this market is then damned to revisiting its 2004 lows. The timeline is most likely between now and Halloween. That sell off would send sentiment measures to extreme levels, clearing the decks for a year ending rally.

Consider this “extension” a last minute reprieve from the Governor. We now reset our clocks two weeks forward to see if that volume confirmation day bothers to show up. This also presumes that Oil behaves, no major pre-announcements rear their ugly heads, Iraq quiets down, that the economic data continues to support our thesis of a modest recovery, and that the Fed doesn’t startle the markets.

Chart of the Week: % Nasdaq Daily MACD Sell

Thursday, August 26, 2004 | 03:53 PM

in Finance

Technimental Research observes “Short-term indicators that have flashed accurate inflection points of late suggest the market is approaching short-term overbought levels and could make a minor top very soon. The odds of this increase with good resistance near 1,875 on the NASDAQ.”

% Nasdaq Daily MACD Sell
click for larger chart

Source: Redwood Technimentals

The red circles on the charts above highlight when very few issues on the NASDAQ have MACD sell signals. These low readings (below 20%) have corresponded to short-term peaks in upside momentum.

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Quote of the Day:
"In democracies, nothing is more great or brilliant than commerce; It attracts the attention of the public, and fills the imagination of the multitude, all passions of energy are directed toward it."
- Alexis de Tocueville (1805-1859)

Squawk Box

Wednesday, August 25, 2004 | 06:00 AM

in Media

So, today is the big day! (Gotta remember to look into the camera).

Here's some of the charts we may be discussing this morning . . .

Recovery & Jobs versus Prior Cycles
click for larger chart

via Chart of the Day

Corporate Profits versus Compensation
click for larger chart

Source: National Economic Trends, Federal Bank of St. Louis

Dow Industrials: Election Year Cycles
click for larger chart

Chart courtesy of Ned Davis Research

Should be interesting

Thanks to all the well wishers who wrote in . . .

Wisdom versus Madness

Tuesday, August 24, 2004 | 06:02 PM

in Books | Finance

Two books point out the inherent challenge of the Markets. The irony lay in their titles: they seem to be inconsistent, polar opposites -- but they are not.

The first is a classic: Extraordinary Popular Delusions & the Madness of Crowds, first published by Charles MacKay in 1841. In the intervening 163 years, I see no basis for believing that Human Nature has changed much. Indeed, I doubt there will be any appreciable change in mankind's fundamental nature over the next 163 years. (After that, between biomechanical networked implants and genetic tinkering, its anyone's guess).

If you believe in the Madness of Crowds, then you may find shorting into bubbles to your liking, buying capitulations a viable strategy, and making contrarian plays where possible; If you "buy when there is blood in the streets," then this is the book for you.

The other work is called: The Wisdom of Crowds by James Surowiecki. If expressions such as "Don't fight the tape," Go along to get along, and "The trend is your friend" appeal to you, than this book has your name on it.

Now here's where things get funky: Not only are these books not mutually inconsistent, they are actually somewhat complimentary to each other.

They merely reflect different phases of markets. Bull markets start out from periods of disbelief, doubt, and discomfort. After a period of time, the fear levels dissipate. More people buy in. Economies expand, situations improve, the market moves higher. There's still some levels of disbelief, naysaying, FUD.

The next leg up is caused by people who now fear they are missing the easy money. Buyer's start chasing stocks. Things get a bit extended, but not terribly so. People who have been waiting for a pullback decide it ain't gonna happen, and jump on board. There are some signs of froth, but nothing too crazy. So far, the Wisdom of crowds has been on display.

The next phase is where that wisdom starts to dissipate: The good economic times have been rolling. The market has been humming along for quite a few years now. The more people talk about it starting to get overheated, the higher it goes. Those who missed the more advantageous entries are getting panicky. The long side is starting to get crowded. Examples of absurd valuations are everywhere. THings are getting crazy.

New technologies breed new rules. Someone, somewhere utters those fateful words: "Its different this time."

Deep down inside, you know its not. But still, how can you miss this? The real pile has just started. All common sense is out the window, as Wisdom morphs into Madness

Guess what happens next . . . ?

Sources:

Extraordinary Popular Delusions & the Madness of Crowds

The Wisdom of Crowds

Media Appearance: Guest Hosting Squawk Box

Tuesday, August 24, 2004 | 02:00 PM

in Media

Big day tomorrow: Your humble blogger will be guest hosting Squawk Box, CNBC, Wednesday, 7 to 10am.

Looking forward to meeting the crew. Haines and Faber are on vacay, so it looks like it will be Maria Bartiroma, Joe Kernan, Becky Quick, and yours truly. Should be interesting . . .

I'll try to get a post up covering some of the subject matter before airtime.

Economists vs. Job Creation: Why the disconnect?

Tuesday, August 24, 2004 | 09:45 AM

in Finance

Here's my most recent commentary. Its kinda big, so an excerpt is here, and the full piece is below.

"Slow Job Growth Puzzles Economists."

That was the headline of a WSJ article in March of this year, on the economy's anemic job creation. "Many economists admit they are 'stumped' by the question of why the expanding U.S. economy isn't churning out lots of new jobs, as it did so faithfully in the 1990s," the Journal noted.

Since then, their forecasting record has gone from bad to worse. With the June shortfall now clearly not a “one-off” courtesy of July’s disappointment, one question remains: Why have so many Economists gotten it so wrong? Observers are hard pressed to recall the last time the Dismal Scientists have been so consistently inaccurate, by such a large margin, and for so long a period.

It is easy to surmise that a combination of factors is to blame for the unusually slow job growth: Productivity enhancements have delayed the need for new hires in many businesses. And, during this expansion, jobs have been outsourced overseas (which, for obvious reasons, do not show up in the Bureau of Labor Statistic’s data). Last, we cannot underestimate the impact the tech/telecom/internet crash had on suppressing end demand. So much excess capacity was created by over-investment during the bubble era, that an extended delay in job creation – “Slack in the labor market,” as Chairman Greenspan likes to call it – is the natural result.

Yet all these issues have been well known and documented long before Economists started serving up their stink bombs. Did the entire profession suddenly become unhinged – or is some other, unknown factor at work? Since most economists I know are only mildly delusional (at least, they appear that way to a non-economist) we should consider another possibility: A major factor –unaccounted for by mainstream economists -- has contributed to the present recovery cycle’s unprecedented long delay in job creation.

Pick your flavor:
Word Doc: Download Economists vs. Job Creation.doc

Adobe PDF: Download Economists vs. Job Creations.pdf

Projected Electoral College Vote: Swing States, 8/23/04

Monday, August 23, 2004 | 05:00 PM

in Politics

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click for larger chart

Chart courtesy of WSJ

Yet another fascinating poll, courtesy of WSJ. The recent SBVFT commercials seemed to have had an impact nationally, narrowing the gap between the challenger and the incumbent. According to this most recent WSJ/Zogby poll, conducted Aug. 16-21, there seems to be little impact in the Battleground States. Kerry now leads in 14 states (up from 13 early August). President Bush leads in two states."

Here's the Journals take on the polling data's internals:

The contest for the White House remains tight, according to the latest Zogby Interactive poll of likely voters in 16 battleground states. Although the map is awash in blue, with President Bush leading in only two of the battleground states, down from the three states he held three weeks ago, the results in three-quarters of the states in the survey are within the margin of error -- meaning those states remain very hotly contested. Mr. Kerry holds the top spot in 14 of the 16 polled states, up from 13 in the previous poll.

Mr. Bush's lead is outside the margin of error in one state, but it's a key one: Ohio. Only two 20th-century presidents have been elected without carrying the Buckeye State, and no Republican has won the White House without Ohio's support since the party was founded in 1854. Mr. Kerry has top spots outside the margin in three states: Oregon, Washington and electoral-vote rich Pennsylvania.

In addition, several states continue to switch their allegiances. The survey results were closest in Florida and Missouri, where the margins between the two candidates are less than one percentage point. Both states, with their total of 38 electoral votes, have flipped between Messrs. Bush and Kerry more than once, most recently landing in the Democratic column. Similarly, the two states Mr. Bush leads in this poll, Ohio and West Virginia, have been led by both candidates at different points in the poll series. For further analysis of how these results could play out in the Electoral College, view this article

RNC in NY in one week . . .

Sources:
Battlegrounds States Poll - August 23, 2004
http://online.wsj.com/public/resources/documents/info-battleground04-0823print.html

Interactive version
http://online.wsj.com/public/resources/documents/info-battleground04-frameset.html

Continue reading "Projected Electoral College Vote: Swing States, 8/23/04"

More on Bad Faith Legal Settlement

Monday, August 23, 2004 | 10:33 AM

in Music

Since it seems to be Music Monday at the Big Picture, lets go for the hat trick:

We previously mentioned the bad faith of the music industry in the execution of their price fixing scheme plea arrangement. (C'mon Elliot Spitzer, step up to the plate here).

The Shifted Librarian reports that the excess of crap titles being dumped on Libraries as part of the Industry's proice fixing scheme is in fact a willful distribution of s$#@:

For the BMG boxes, I didn't have to open them at all. Each one has a label on the outside with the titles of the contents on the outside, 30 CDs to a box. If there was ever any doubt that libraries are receiving bargain bin CDs that couldn't even be sold through "12 for the price of 1" clubs, let them forever be dispelled now.

Several of the boxes are literally cut on the side, and the cut goes into the jewel cases themselves. Hence my declaration that we received a ton of "cut-outs." Some of the boxes even have dates of 2001 and 2002 posted on the labels, which I hope doesn't mean the date they were boxed up and put into storage. There is no way these boxes were packed by mistake as the result of a computer glitch. Some of the labels very clearly say 30 copies of this or that title, and I highly doubt the labels were supposed to cut the boxes after boxing and labeling them.

What weasels. Like we said before, let the deathwatch continue . . .

via Boing Boing

Clive Davis: Music Retailers a Bore

Monday, August 23, 2004 | 08:14 AM

in Finance | Music

Here's a news flash: Shopping in retail music stores is boring. So says industry impressario Clive Davis, who apparently has a penchant for stating the incredibly obvious. (No word on whether Davis thinks Oatmeal is flavorless, or "Sense and Sensibility" was tiresome and overwrought -- but its even money).

As we noted some 7 months ago, one of the things which had done in Tower Records was the moribund retailing experience. With Davis saying the same thing, the odds improve for something being done about it.

Of course, having alienated an entire generation of music ~~buyers~~ downloaders, its prolly too little too late. What the hell, watching the final death spasms of the industry could be educational for future executives to learn what mistakes not to make.

Here's the unavoidable excerpt:

"You are faced with a major threat ... competition from digital distribution," Davis warned hundreds of merchants and recording industry executives who gathered Sunday for a conference.

The renowned chairman and chief executive of BMG North America compared the choice between buying music online or in a store to eating dinner at a restaurant or at home.

"It's fun to shop for music ... and you're not making it a fun experience," he said. "You have got to make it exciting." Davis said he was impressed by Tower Records, which has staff members well-versed in music, and Virgin Megastore, which recently redesigned some stores.

Also being promoted are in-store computer kiosks that can crank out custom CDs and sell downloads. "We have to make sure CD burning becomes a commercially viable option for all of us," said Glen Ward, president and chief executive of Virgin Megastore.

Too little, too late.

What makes this so fascinating to me is how the Music Retailers and Music Industry have each been unwitting participants in the other's doom: The retailers vociferous objections is cited as a prime reason the industry stayed out of legit digital downloading for years and years. By ignoring what the consumer marketplace ws demanding, the industry created a vaccuum -- which the market rushed to fill -- hence, Napster, Kazaa, Grokster, Bit Torrent etc. was allowed to gain a toehold.

More than missing opportunities, this strategic error essentially conditioned an entire generation to quickly learn what only a handful of economists and strategists knew: The music industry is rife with business incompetents who cares very little about their customers, artists or products.

While the Retailers wherebusy sabotaging digital downloads for the major Labels, the labels were working hard at making sure the retail experience, well, sucked. They would not allow kiosks to create mixed CDs, fearing they would cannabilize singles sales; They colluded in a vast scheme of illegal price fixing, accellerating the move by customers to unauthorized downloadds. Lastly, they strived mightily to insure that there was little room for any innovation on the retail side.

Its a disfunctional relationship, and has been for at least 2 decades. The sooner both sides whither and die, the faster we can see a more intelligent business model replacing it which will be 1) better for consumers; 2) much better for artists, 3) economically more viable as an actually legal, money making operation.

Sources:
Music stores must make shopping a thrill - or else, producer says
ALEX VEIGA
Associated Press, August 22, 2004
http://www.mercurynews.com/mld/mercurynews/news/breaking_news/9468796.htm

National Association of Recording Merchandisers:
http://www.narm.com

Anti-Competitive Behavior: Radio

Monday, August 23, 2004 | 05:23 AM

in Finance | Music

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Oooh, I'm shocked! Shocked to find anti-competitive behavior in the radio industry! (Your winnings, sir.)

Forbers takes a swipe at it:

"For decades the radio industry has crushed incipient competitors by wielding raw political muscle and arguments that are at once apocalyptic and apocryphal. Radio station owners, who formed the National Association of Broadcasters in 1923, have won laws and regulations that have banned, crippled or massively delayed every major new competitive technology since the first threat emerged in 1934: FM radio.

In 1945 many AM incumbents, ostensibly concerned that interference related to sunspots might endanger their rivals in FM, encouraged the feds to uproot the FM dial and move it to a higher frequency band. This rendered half a million FM radios useless and forced the nation's FM stations to start over. A congressional investigation in 1948 found that the interference fears were bogus and that a Federal Communications Commission report had been conveniently altered to disguise that fact. Too late--the shift helped inferior AM technology remain dominant for the next 25 years. The coda: In 1954 the inventor of FM radio, Edwin Armstrong, frustrated by repeated setbacks and all but bankrupt, penned a suicide note to his wife and leapt out the window of his 13th-floor apartment.

Fifty years later radio's old guard has been as effective at thwarting the digital threat. Existing stations thrive on an array of perks won by radio operators, including free use of the airwaves (XM and Sirius, by contrast, had to pay almost $200 million combined for their spectrum) and an exclusive exemption from paying royalties to performers. But the NAB's real forte has been in the modes of attack and delay, persuading regulators and Congress to impose daunting restraints on the satellite rivals and stalling their debut for the better part of a decade."

A good article worth the read if this subject matter interests you. And, it helps to explain why music and broadcast executives' first instincts are usually so awful -- their bad behavior has a rich -- and surprisngly successful history.

Source:
Broadcast Bullies
Scott Woolley
Forbes, 09.06.04
http://www.forbes.com/forbes/2004/0906/134.html

http://www.forbes.com/forbes/2004/0906/134_print.htmla

Job Growth Is Weak In Several Key States

Sunday, August 22, 2004 | 08:09 AM

in Finance

wsj_format_logo

Another terrific data source from the WSJ, buried online. (This is an excellent source of information, and is well worth the expense of subscribing to the online version).

"Job growth is a key issue for voters heading into this presidential election and national readings on the labor market have been painfully weak in the last two months. The latest breakdown of payrolls by state show that several key battleground states suffered some of the biggest drops in the nation in July – including Missouri and Michigan. However, Washington and Wisconsin experienced some of the highest job growth in the nation.
Here are data for 16 so-called battleground states, where thin margins in the 2000 election and possible swing voters could make all the difference on Nov. 2." (Source: U.S. Labor Department)

CHANNEL	BUSH	KERRY
BET	0	1
Comedy Central	10	0
CNBC	345	51
CNN	383	157
ESPN2	44	0
ESPN	108	0
Fox News	253	26
FX	32	0
Golf Channel	400	0
History Channel	335	0
MSNBC	693	30
Speed Channel	82	0
TLC	125	0
Travel Channel	282	0
TOTAL	3,092	265