« December 2003 | Main | February 2004 »

Why the unemployment rate is really higher than it looks

Saturday, January 31, 2004 | 02:36 AM


Huzzah! I am an emerging blogger.

Dan Gross' Moneybox column in Slate gives big ups to the Big Picture. Dan referred to our clear eyed view of what's become a contentious issue: the so called "Self-Employed Work-at-Home Contractors."

Thanks for the kind words, Dan!
(Sorry 'bout the wisecracks 'bout your alma mater!)

UPDATE: February 1, 2004 5:02PM
Dan also has an interesting column in the Sunday Times, which I will point to despite the fact that I am no where to be found in it, thus, ending my streak of mentions in intelligent commentary at a grand total of one straight.

Odd Jobs: Why the unemployment rate is really higher than it looks
By Daniel Gross
Posted Friday, Jan. 30, 2004, at 1:57 PM PT

Growth Forecasts, Without the Wait
New York Times, February 1, 2004

Saturday, January 31, 2004 | 02:36 AM | Permalink | Comments (1) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Will Stock Rally End in 2nd Half?

Friday, January 30, 2004 | 04:45 AM

I've been meaning to post this for some time now . . . this week's sell off makes now as a good a time as ever:

I was trained in Technical Analysis by 2 people: Guy Ortmann, who was trained by Alan Shaw, and Ralph Acampora, who is a peer of Alan Shaw. So when a story appeared on Bloomberg about Shaw, you can be sure it got my attention:

"Shaw, 65 years old and a 45-year veteran of Wall Street, said the latest rally in stocks probably will end during the second half of this year. 'Unless the history books are wrong, we're only supposed to have one major bull market in one's lifetime,' said Alan Shaw, who received the No. 1 ranking for technical analysis on Wall Street along with colleague Louise Yamada in a survey by Institutional Investor magazine last year.

The rally happened from 1982 to 1999 and any gains now are taking place in the context of a longer-term bear market, Shaw said at a conference of the Market Technicians Association last week. Technical analysts rely on identifying patterns in price charts to make buying and selling decisions. "We are now in the midst of the first cyclical bull market'' that occurs after reaching a milestone such as 10,000, said Shaw, who has worked for Smith Barney and predecessor firms since 1958. Smith Barney is a division of Citigroup Inc. Analysts define a cyclical bull market as a rally that eventually fails and occurs within a longer period when stocks are little changed or declining."

I agree with Shaw's long term perspective. Its hard to argue with when you see it on a chart. Its even harder to advocate caution when momentum takes the market up a few 1000 points. Its a fine line to walk.

"The Dow flirted with 100 from 1905 to 1924, and had four rallies along the way. The average gain equaled 77 percent and lasted 24 months, Shaw's data show. In February 1966, the benchmark came within five points of 1000. It failed to surpass the level for good until 1982. There were also four bull-market rallies during that time, and they averaged 53 percent and 29 months in length, the data show.

The first close above 10,000 during the market's current rally took place on Dec. 11 and marked the 19th time that the Dow industrials crossed that threshold. "My conclusion from this is we do have further to go in the cyclical sense,'' said Shaw. The Dow and benchmarks such as the Standard & Poor's 500 Index could even reach their previous highs "and still be in a cyclical bull market,'' he said.

Understanding the difference between cyclical and secular may very well be the key to making money in the market over the decade.

"Another reason why a longer-lasting bull market probably isn't in store is that interest rates aren't likely to go much lower, Shaw said. The 4 1/4 percent U.S. Treasury note maturing in November 2013 yields 4 percent; last year, the benchmark 10- year note yielded 3.07 percent, the lowest since 1958. "There's very little leeway'' to support a more sustained advance in share prices, he said. The Dow returned 14 percent a year from 1980 through 1999, a period when the 10-year note's yield fell to 6.45 percent from a peak of almost 16 percent.

As for the Dow, Shaw assessed how far it might fall by applying the patterns of the benchmark around 100 and 1000 to what he called a "computer-generated simulation.'' The results showed the average would ultimately hit bottom in 2008 at around 6000, or 43 percent below current prices, he theorized. Even so, he and the other panelists at the conference said the current rally had further to go and investors could still generate positive returns over the next five years with the right investments.

Smith Barney's Shaw Sees U.S. Stock Rally Ending in Second Half
John Melloy
Bloomberg.net, January 15, 2004 00:00 EST

Friday, January 30, 2004 | 04:45 AM | Permalink | Comments (0) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Is Disney/Pixar the sequel to Apple/NeXT ?

Friday, January 30, 2004 | 12:57 AM

Pixar to Disney: Buh-Bye !

Jobs gives Eisner the fin . . .

The WSJ called it a "stunning blow." CNN/Money quoted an analyst who said "It makes it look like Eisner did something wrong again." And of course, former chairman of Disney's animation Roy Disney piled on (I'm paraphrasing here): "The breakup would be bad for Disney shareholders long-term; Eisner failed to nurture the relationship with Pixar."

But here's the money quote -- from Jobs:

"After 10 months of trying to strike a deal with Disney, we're moving on. We've had a great run together -- one of the most successful in Hollywood history -- and it's a shame that Disney won't be participating in Pixar's future successes."

While everyone is chatting about likely suitors -- Viacom, Warner Brothers, Sony and MGM are said to be interested -- the larger story is being overlooked: It was Jobs who broke off the negotiations, catching Disney execs unaware. The timing of the Pixar announcement was impeccable, and certainly not coincidental, as it was reported Thursday that senior Disney management's had again taken hefty pay raises -- despite the company underperforming.

Its no coincidence these came out the same day - This is Jobs attempt to embarrass Eisner; the Disney CEO is considered by some to be amongst the most overpaid / underperforming CEOs in recent corporate history.

The more interesting aspect of this story is the probability that Jobs is angling for Eisner's gig. And not passively either. This is hardly a "Hey, if you ever decide you need a new CEO, you know my number." This was more of a "When are going to throw da bum out?" move by Jobs.

And why not? The Apple / Pixar chief craves the accolades given to execs like Bill Gates or Eisner. He does not think that Wall Street or the public appreciates his contributions -- and he may be somewhat correct in that assessment. Capturing the Disney CEO position would be Jobs' coup de grace.

Given his success with iTunes, iPod and the Apple Music Store, he already is a power player in the entertainment side of things. Pixar would be his backdoor entry into the Disney executive suite. Like at Apple, he might work for $1 a year -- after trading his Pixar holdings for about $2.25B worth of Disney stock. Disney is a $50 billion company, while the much smaller Pixar has a market cap of about $3.5B (Jobs owns about half).

Will a Disney/Pixar merger be the sequel of the Apple/NeXT deal?
Its pure Jobs . . . Stay tuned . . .

UPDATE: 1/30/04 1:39EST

Will wonders never cease: We actually discussed this very subject only last month ("Jobs to become Heir Apparent at Disney?"). Here was our take, all the way back on December 3rd:

With a market value more than 10X that of its important partner -- Disney's cap stands at $43.99 Billion to Pixar's $3.81 Billion -- DIS should just get it over with and buy PIXR outright. That would resolve the future of the lucrative animation business, and solve the issue of who's gonna replace Eisner, in one fell swoop.

Eisner, who's already sucked out over a billion dollars in compensation from the entertainment giant's coffers over the past decade, could make a graceful exit. The alternative may be an ugly ego driven battle with the company's largest shareholders (Walt's heirs) that would make Carly Fiorina's battles with the Hewlett heirs look like a mah-jong scrum.

That turns out to be prescient -- and its even more true today . . .

UPDATE 2: 1/30/04 2:49EST
A hardy hello to all you readers from Pixar. Appreciate y'all stoppin' by to read these humble musings. Feel free to tell me whether I'm smokin' crack or perhaps if I am on to sumpthin'.

Love your work . . .


UPDATE 3: 1/31/04 7:49am

Kudlow & Cramer weighed in on this very issue at the end of the show Friday nite. Mad props go to Larry for mentioning the Big Picture and this very discussion. (Too bad they ran out of time for a fuller discussion).

I love this angle of the story and would like to expand on it; Anyone interested in 750 - 1500 words as to why Disney must do this (or its toast!), you know where to find me.

The End: Pixar Breaks Up With Distribution Partner Disney
WALL STREET JOURNAL, January 29, 2004

Disney Discloses Chief's Raise and Some Details of U.S. Inquiry
NY Times, January 28, 2004

Pixar dumps Disney
CNN/Money, January 29, 2004: 7:20 PM EST

Pixar Says 'So Long' to Disney
02:47 PM Jan. 29, 2004 PT

Friday, January 30, 2004 | 12:57 AM | Permalink | Comments (1) | TrackBack (2)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

The Fed's "2 for 1" Sale

Thursday, January 29, 2004 | 01:24 PM

All Hell broke loose yesterday when Fed Chief Alan Greenspan decided to replace the two most beautiful words ever whispered into a bond ghoul’s ear with a single term of far lesser endearment. The market, in search of an excuse to take profits for nine weeks anyway, held a "2 for 1" sale.

Such is what passes for thoughtful analysis on the Street sometimes. The market had made new highs on very light volume Monday, and then saw selling on much increased volume Tuesday and Wednesday. In the parlance of the technicians, these were “distribution days.” As the giddy momentum had driven the Bulls ever higher, this reversal of fortune became all but inevitable.

From a macro perspective, what significance do we ascribe to the substituting of the parental “patience” in the stead of a more exuberant (if we may use that word) “considerable period?” Warm Fuzzys aside, we believe these linguistic contortions signal three important changes in the Fed’s mind-set: 1) Incremental rate increases, formerly unthinkable (at least by us) in 2004, are now more likely by Summer; 2) The economy is showing resiliency, despite recent disappointing data series (Durable Goods, Home Sales, and Consumer Confidence); 3) An upside surprise may be in the offing from either 4thQ GDP or December employment data or both.

The tortured verbal gymnastics changes our prior expectation of no rate increases until after the ‘04 elections. In our opinion, higher rates in 2004 are now a very likely probability, starting with a ¼ point increase in June.

Given the horrific employment data we saw from December, the language change from the Fed may also be signaling that there is an imminent possibility of improvement in the Employment Situation. This would be a welcome - and long overdue - development. The Fed has access to data, which mere mortals (such as you or I) do not, and this early look may possibly be coloring their thought processes.

Nonetheless, we are staring at the kind of possible retracement, which made us so cautious last week. Look for short-term support around the 2000 level on the Nasdaq (then 1950), on the SPX, support is at 1076 then 1060. On the Dow, a move to 10,140 and then 9,900 would present good entry points, in our view.

There is an old cliché: for want of a nail, a kingdom was lost. It’s doubtful that for want of a word, a market will be lost.

Thursday, January 29, 2004 | 01:24 PM | Permalink | Comments (0) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Chart of the Week: 6 Month SPX chart

Thursday, January 29, 2004 | 12:56 PM

On a short-term basis, the S&P 500 broke a trading channel and with short-term momentum weakening there is some near-term risk to correct towards the 50-day MA just under 1,110.

6 Month SPX chart
Source: Bloomberg

Technimental’s Kevin Lane notes that “Given the strong tape action along the away, this corrective activity is likely to be modest; However, there has been minor trend lines on the S&P 500 violated and some internals that are weakening.”

Random Items:
The Super Bowl Indicator
The Paradox of Progress (Dallas Fed Reserve) pdf
Breaking the oil cartel's stranglehold
The Pentagon's Weather Nightmare
J.P. Morgan Chase-Bank One Merger: Winner or Loser?
The Most Hated Company In Tech
China's Ranking of World Universities - 2003

Quote of the Day
"Given the sluggish job growth and the virtual absence of inflation, the Fed has no reason to tighten monetary policy for quite awhile, regardless of the electoral calendar."
- Alice M. Rivlin, former vice chairwoman of the Federal Reserve

Thursday, January 29, 2004 | 12:56 PM | Permalink | Comments (0) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Apolitical Fed ?

Thursday, January 29, 2004 | 07:39 AM

click for a much larger pop up chart

Interesting Fed piece out yesterday from the NYT before the rate announcement. (I wonder how many people overlooked it, choosing to shovel snow instead). Here's the most relevant excerpt:

Most economists dismiss such complaints of political favoritism. But the Fed is not totally above the fray. Indeed, there seems to be one clear political pattern in interest-rate decisions - one particularly relevant to today's circumstances. Precisely because of the potential impact of changes in monetary policy, the Fed tries not to start raising interest rates in the months before a presidential election.

"The Fed considers itself apolitical, but that does not mean ignoring politics; rather, it means trying to avoid becoming a political issue itself," said Laurence H. Meyer, a former Fed governor who advises investors on monetary policy. "It tries to do this by avoiding actions that are unnecessarily provocative."

This year, avoiding provocation could be awkward. With the economy perking up and interest rates at historic lows, there is little doubt that the Fed's next move will be to raise rates, for the first time since May 2000.

But when? Starting to raise rates in September, at the last meeting of the Federal Open Markets Committee before the election, could be seen as a slap at President Bush. Raising rates at the November meeting, a week after the election, might elicit charges that the Fed waited to avoid harming Mr. Bush's electoral chances by putting the brakes on the economy. The committee meets again in December, but few economists expect sharp policy changes in a month when financial market activity traditionally tails off.

Good stuff; Be sure to check out the pop up historical chart above.

On Presidential Politics, the Fed Walks a Tight Rope
NYTimes, January 28, 2004

Thursday, January 29, 2004 | 07:39 AM | Permalink | Comments (0) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Economists Wanted

Wednesday, January 28, 2004 | 12:30 PM

In celebration (if thats the right word) of today's Fed announcement (2:15pm EST), I thought I would share this puff piece found in this Sunday's Newsday.

Answering a Need for Analysis "When there is a question about the condition of the U.S. economy or where it is headed, the occupation most often quoted in the media is the economist. But what do economists actually do, and is it a good career choice?

Economists are found in all facets of government and business. That is because they not only study the macro conditions that make our economy work and make predictions, they also study the micro elements of business and make projections. The Department of Labor estimates that the number of economists in the United States is approaching 150,000. In the next 10 years, employment is projected to grow between 21 and 35 percent.

You'll be in good company: Among the nation's most prominent economists are Steve Friedman, chief economic adviser to President George W. Bush; Robert Reich, who played a similar role in the Clinton administration, and Alan Greenspan, chairman of the Federal Reserve.

So what would you actually do? Government officials and corporate boards often depend on the information provided by economists in their decision making. The nation's monetary policy is formulated by the information given by some of the best economic minds in the country. Without accurate data, the conclusions that go with it and the actions taken, the nation's economy as well as the world's economy would collapse.

Federal, state and local governments rely on their work. They may be involved in education, labor, international trade, transportation or even the lottery. However, most are directly concerned with the practical applications. Banks, insurance companies, security firms, pharmaceutical companies, hospitals, transportation companies and virtually every type of business hire economists.

So, yes, the job is crucial and influential. But you have to like numbers and analysis, and you have to be able to put up with being wrong a lot. Economics is sometimes more of an art, and even some of its biggest fans refer to it as "the dismal science."

Answering a Need for Analysis
Newsday, January 25, 2004

Federal Reserve News and Events

Wednesday, January 28, 2004 | 12:30 PM | Permalink | Comments (2) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Best Buy Keeps Up the Heat on CD Price Competition

Wednesday, January 28, 2004 | 05:24 AM


More evidence of price competition, as Best Buy maintains price pressure. From this past weekend's circular:

CD Sale: $9.99 or less
•   Helmet Unsung: The Very Best of Helmet (1991-1997): $7.99
•   No Motiv Daylight Breaking: $8.99
•   Twista Kamikaze: $9.99
•   Baby Bash The Smokin' Nephew: $9.99
•   Tupac Resurrection: The Soundtrack: $9.99
•   Yes The Ultimate Yes: 35th Anniversary: $15.99 (Double CD)

And of course, the continued "DVDs that are cheaper than CDs" sale:
•   Swingers $9.99
•   Clerks $9.99
•   Grosse Pointe Blank $9.99 (which is one of my all time favorite comedies; I will swing by BB and pick this up this weekend).

Given our prior discussions on Peter Gabriel and Brian Eno, I may just splurge and drop $15.99 on Peter Gabriel's Growing Live. 134 minutes long -- looks great!

Best Buy still offers free shipping -- so if the weather is as bad as predicted (we got a foot of snow last nite), I can still pick 'em up from home.

Ain't competition grand?

UPDATE: 1/28/04 6:56 am
Since we are all about competition here, Amazon has the Peter Gabriel DVD for $14.99. And since I earned a grand total of $24.76 as an Amazon Associate (buy something, people!) it looks like Amazon will get the Gabriel sale . . .

Wednesday, January 28, 2004 | 05:24 AM | Permalink | Comments (1) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Musicians Looking To Let Internet Replace Record Cos

Monday, January 26, 2004 | 04:45 PM

Graphic: Peter Gabriel's Real World

At least, that's the headline which Dow Jones ran for this story. Most everyone else who ran this AP story used the tamer headline: Musicians Unveil Digital 'Manifesto'.

But I suspect that Dow Jones got the basic premise correct: A highly respected and intelligent pair of innovative musicians are making a power grab on behalf of artists. They are taking advantage of the general chaos in the space, and the apparent cluelessness of the big labels vis-a-vis the internet.

In other words, the music industry's Hell just got a lot hotter.

Consider the players: Gabriel is an extremely bright and creative musician. He has been a major innovator in his entire career, from recording with Genesis and on his own, to live performances, to social activism (Human Rights, the Environment, his association with WOMAD) to his music business savvy. Gabriel owns recording studios, is a co-founder of the digital downloading service "On Demand 2" (OD2); He even founded his own label RealWorld.

If you followed Gabriel's career -- and his music -- over the years, than you know that he is not a mainstream thinker. I have a sneaking suspicion that Peter is a disarmingly charming negotiator --both formidible and clever. Now, along with his cohort, Brian Eno, the Music Industry's nightmare may have just gotten much worse.

Gabriel & Eno present an opportunity to turn the classic rocker cliché on its head: Think of a group of stoners, signing anything their label presents to them, while corrupt agents and business managers bleed them dry. Now imagine the polar opposite: that's Gabriel & Eno. Long term survivors of the industry, they are smart enough not to confront the industry head on -- they certainly do not want to turn this into a holy war. Instead, they are proposing a set of changes -- incremental in appearence -- which will gradually reduce the power of the record labels in favor of the musician. Gabriel is smart enough to retain a role for the labels, primarily that of marketing. That makes their model a compromise between the anarchy of P2P, and the disintermediation of a "labelless" pure internet model.

This may ultimately change the economic dynamics of the industry, reducing the role of the labels. Eventually, the changes could be dramatic.

CANNES, France (AP)--Peter Gabriel and Brian Eno are recruiting other musicians for a provocative online experiment: Since the Internet has changed the way fans buy and listen to songs, they say, why not transform the music itself?

The two independent musicians have dreamed up an online alliance for musicians, and they hope to launch within a month. By taking record labels out of the equation, artists could put downloads online themselves, becoming their own retailers and setting their own prices. They call it the "Magnificent Union of Digitally Downloading Artists" - or "MUDDA" for short, which has a less lofty ring to it. On Monday, Gabriel and Eno handed out a slim red manifesto at a huge dealmaking music conference in southern France.

Do you have any doubt that what these gentlemen are proposing is anything short of a major revamping of an industry? Than read on:

Gabriel, who has his own label, Real World Records, said he isn't trying to shut down the record companies - he just wants to give artists more options. "There are some artists who already tried to do everything on their own," he said, adding that they often found out they didn't like marketing or accounting. "I think we believe there will be all sorts of models for this."

One band that has found its niche online is the jam band Phish, which sells downloads of its concerts at www.livephish.com. The band's relationship with its devoted fans is often compared to that of the Grateful Dead, and the site is another chance for close contact. But it also made money: $2.25 million in sales since 2002. What's driving the movement is the success of legitimate download sites such as Apple's Internet music store, iTunes, which sells songs for 99 cents a pop in the U.S.

Gabriel co-founded a European company, On Demand Distribution, which runs legal download sites in 11 European countries. The company would provide the technology for MUDDA, though Gabriel and Eno are looking for online partners.

Stay tuned . . .


Musicians Unveil Digital 'Manifesto'
Associated Press, 1/26/04

What Peter Gabriel gets out of Davos
By Tim Weber, Monday, 26 January, 2004, 09:04 GMT
BBC News Online business editor in Davos

Gabriel to launch musicians' union
By Tim Weber Friday, 23 January, 2004, 17:19 GMT

Musicians to Use Internet To Bypass Record Labels
Associated Press

Musicians Looking To Let Internet Replace Record Cos

Just Say 'No' to Record Labels
Wired, 03:12 PM Jan. 26, 2004 PT

Monday, January 26, 2004 | 04:45 PM | Permalink | Comments (6) | TrackBack (1)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

A “Considerable Period?”

Monday, January 26, 2004 | 11:58 AM

What exactly is a “considerable period” of time? That seems to be the issue challenging so many on Wall Street this week. The correct answer seems to be “it depends.” It depends upon future economic conditions, and it depends upon your question’s perspective. So what exactly is the context of your inquiry?

If you are discussing this question this week, than you are likely doing so within the context of the Federal Reserve, which meets on Tuesday and Wednesday this week. Surely you must be referring to the interval in which the Fed said they will maintain an “accommodative” monetary policy of ultra low interest rates - for a “considerable period.”

As we have been writing for quite sometime, it has been our opinion that the Fed will maintain this posture, if not this precise language, until after the November elections. While this posture has prompted some to question the Fed’s political independence, maintaining accommodative rates makes sense in light of the low capacity utilization and continued lack of job creation. The “considerable period” will likely last until both of those issues appear to be significantly improving.

Perhaps you were discussing the major indices winning streaks as a “considerable period.” Nine straight weeks would certainly qualify - and that is just what the S&P index did, scoring its ninth straight weekly gain last week. (The Dow and Nasdaq saw their winning streaks end.) Jeff Cooper notes “You have to go all the way back to 1989 to find the last time that the S&P notched nine consecutive higher weekly closes. That's how unusual the current persistency is.”

The longest weekly winning streak in 15 years most certainly counts as a “considerable period” of time. Here’s another one worthy of notice: From the March 12, 2003 reversal day, until this very morning, the SPX has not yet had a 5% pullback. That certainly sounds lengthy, and in many respects, it is. One must look back to 1996 to find as long a correction free period of at least 11 months.

But if you thought that run was a “considerable period” of time, consider this: Recall the streak, which ended in July 1996. That streak makes our present run look positively modest: Beginning in December of 1994, that streak ran for 16 months. That’s right, 16 straight months without so much as a 5% correction in the SPX.

Now that’s a considerable period of time!

Monday, January 26, 2004 | 11:58 AM | Permalink | Comments (0) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™