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Welcome Hundred Percenters & Conservative Underground

Monday, January 31, 2005 | 03:47 PM

Glad to see you folks!

I am sorry, however, to inform you that you were unfortunately brought here under false pretenses. The maps which summoned you forth are hardly biased (tho I cannot say the same thing for the post November Maps).

If you are looking for a wet blanket, you came to the wrong place.

However, if you are looking for an interesting collection of information on Iraq -- its people, ethnic groups, oil reserves, states, and where and how the violence over the past year has been concentrated -- from a variety of sources, from the CIA to the WSJ to BBC to NYT -- than enjoy!

But understand, my job:  I'm in the business of interpretating data, and attempting to anticipate market reaction to that data point(s).  My own personal views on political events are mostly irrelevant -- I have no room for in my econometric model for anything but cold, hard, critical analysis. But that shouldn't stop other people from engaging in polemical perspectives, optimistic views or wishful thinking.

Hey, someones gotta take the other side of the trade . . .

Monday, January 31, 2005 | 03:47 PM | Permalink | Comments (2) | TrackBack (0)
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VOTE: Best Financial Industry/Investment Blog

Sunday, January 30, 2005 | 07:44 PM

The Business Blogging Awards have finished with nominations, and the voting is open.

We have been nominated in the "Best Financial Industry/Investment Blog" (its the 4th category); In early polling, we are in 2nd place.

Get thee over there and cast your vote . . .

Sunday, January 30, 2005 | 07:44 PM | Permalink | Comments (1) | TrackBack (0)
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We've gone Map Crazy, part 3 (Iraq edition)

Sunday, January 30, 2005 | 11:00 AM

We are at it again, folks. Iraq's elections are today. Following in the footsteps of our previous Map obsessions, here is the latest collection of graphics -- but this time, we look at Iraq, and not the US elections.  Call it everything you wanted to kn ow about Iraq -- its geography, politics, religions, ethnicity, insurgency and violence -- but were afraid to ask . . .


Iraqi Provinces (Governorates) 
consider these Iraq's "States"
Iraq: Not a Blue or Red State
more of the same

Iraq's Complex Government Structure   
Is this any way to run City Hall?

Iraq's Oil Infrastructure
People love Freedom . . .

Iraq Religous and Ethnic Groups   
kinda complex when compared to our mess

Iraqi Voter Participation by Ethnic Group
Some groups will be boycotting the election

ViolenceUnfortunately, this has become the most prevalent type of map we've come across

175 Election Attacks in Iraq
Iraqis voted despite attacks; Now if we can only get Americans to do so . . .

260 Attacks on Election Day

Iraq Attacks by district
attacks per 100,000 persons

Iraq's Security-challenged Provinces
No, really everything's going just fine

Iraq Insurgency Map
except for the 100,000 dead civilians

Violence shifts locale as election approached

Violence in Baghdad               

US (and coalition) Casualties in Iraq

And how could we do this without throwing in a US poll?

US on Bush's handling of Iraq War
You broke it, you bought it . . .

Come across any others? Please let me know


UPDATE: January 31, 2005 11:01am

 The L.A. Times has an extensive collection of graphics (Pre-2005) covering many other issues -- worth checking out . . .

UPDATE 2: February 1, 2005 7:01am
The WSJ has a nice round up of the rest of the world's Press reaction to the Iraq vote: Graphic: World Press Reacts


CIA World fact book: Iraq
UN Sat

Sunday, January 30, 2005 | 11:00 AM | Permalink | Comments (1) | TrackBack (1)
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Ten Commandments of Trading

Sunday, January 30, 2005 | 09:32 AM

Rev Shark does an excellent job writing the trading diary for Real Money.  Shark is one of my must reads everyday on RM.

Last week, he revealed his Ten Commandments of Trading:

There are many different ways to successfully trade the market, but there are certain things that all successful traders seem to have in common. Live those Ten Commandments and they shall reap a bountiful harvest! Go forth my friends and sin no more!

The Ten Commandments of Trading

I. Thou shall never stop educating thyself.

II. Thou shall have a plan.

III. Thou shall be disciplined.

IV. Thou shall be patient.

V. Thou shall strive to stay objective.

VI. Thou shall be humble and hold no fear of admitting mistakes.

VII. Thou shall act aggressively when the odds lie in thy favor.

VIII. Thou shall be persistent and stay optimistic.

IX. Thou shall stay mentally and physically healthy.

X. Thou shall protect thy capital.

Why is that common sense advice is surprisingly uncommon? Rev Shark has it in spades . . .

Sunday, January 30, 2005 | 09:32 AM | Permalink | Comments (0) | TrackBack (0)
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Why GDP is Soft, and is likely to stay that way

Saturday, January 29, 2005 | 02:41 PM

Yesterday's GDP number was a downside surprise --  at least to some. I love when CNBC schedules mega-Bulls for Squawk Box, and then  hits 'em with a nasty number that leaves 'em stammering.

Its a good thing.

This is not a 4%+ economy. Are we all clear on that now? Good.  I've been an outlier on the GDP numbers for a while, on the low end of the scale (2.5-3.25%).

Yesterday, they came to papa: 

Wsj_econ_chartsgdp_01282005_2Its apparent that the 2003 Tax cuts had a huge, albeit temporary impact on consumer spending. The Q3 2003 spike was shows that the maximum impact was only transitory. As the datapoints continue to make clear, it was mostly a one time shot of adrenaline, with attenuating impact on the macro environment. As we mentioned in The Frankenstein Economy, once the tax cut stimulus faded, there would be little in the way of organic self-sustaining growth -- business hiring, capex spending, and even on durable goods.   

This is an inherent problem with stimulating the stock market, and hoping it leads, rather than stimulating the economy, and hoping the stock market  follows.

Now, as all the prior stimulus fades -- as interest rates go higher, the tax breaks fade, the deficit spending starts scaring the senate -- something else must be found to replace the spent fuel in order to continue the economic expansion and power the market higher.

What might that be . . .?

Well, it could be accomodative interest rates, but that seems to be unlikely . . .  Or it could be the continued weak dollar policy, which everyone but John Snow seems to be willing to acknowledge in public. Or it could be another massive tax cut, something increasingly unlikely to take place.

More deficit spending via public works? Unlikely with this administration.

Hey, I have an idea! How about another significant War? Good for the economy, its an acceptable form of deficit spending to the supply siders, and its (somewhat) stimulative, in a (Shhhh!) Keynsian sort of way.

Too bad there aren't any imminent threats or targets on the horizon . . .

Saturday, January 29, 2005 | 02:41 PM | Permalink | Comments (3) | TrackBack (0)
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"Don't Just Do Something - Sit there!"

Saturday, January 29, 2005 | 07:42 AM

All too frequently, decisions are made when none need to be.

There is an old trading expression: 

    "Don't Just Do Something - Sit there!"

Its an old aphorism for traders. The need to DO something often forces people to act when they need not -- they deviate from their plan, make mistakes, just to remove their "itch."

Sometimes doing nothing is the best course of action; Do not, hoever, confuse this with indecision, or "paralysis by analysis."

Let's have a look at CNBC: 

The Market's still been rough for a coupla years -- and their viewership is way down; Too many of the adverts on CNBC are of the cheesy, low-rent variety for me to think that the ad revenue is doing well.

I can just imagine the GE higher ups saying: "Viewership is down, ad sales are down, revenues are down -- send someone in to fix it, pronto."

That's a classic "Don't just sit there, do something!" issue. In trading, the mistake shows up in your P&L; In show business, the same error will merely be someone getting blame (or credit) for fixing something which is a) not broke and 2) likely beyond anyone's control.

In the 1990s, equities were the national pastime. The Market was the NY Yankees, Chicago Bulls and Dallas Cowboys rolled into one. Everyone rooted for their favorite team stock. CNBC was the ESPN highlight show of around the World Series, March Madness and Superbowl time -- all at once.

Its not that CNBC is broken -- at least, not in the sense they think it is -- its just that the wheel has turned.

Instead of recognizing this is a post-bubble, secular bear market, with reduced interest in equity markets TV, they try to "fix" whats not broken.

The great irony is that they will do this a few more times over the next 5 - 10 years, and suddenly, one of the revamps will actually appear to work. Whoever the wunderkind behind it will get all sorts of accolades, and a promotion. And He/she will have almost nothing whatsoever to do with the improvement.

The wheel will have turned . . .

For more on this, check out Rob at Business Pundit. He has an interesting discussion going on whether its "Better to Be Right Than Decisive?"


Saturday, January 29, 2005 | 07:42 AM | Permalink | Comments (2) | TrackBack (0)
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Radio Execs Fear the iPod

Thursday, January 27, 2005 | 11:25 AM

Back on Janaury 15th, we discussed that the iPod shuffle = new radio.

I just discovered this interview with Emmis Communications CEO. Emmis owns dozens of radio stations in the Western US

Emmis' Smulyan Feels iPod Threat
January 19, 2005

Last week, Emmis Chairman/CEO Jeff Smulyan told FMQB in an exclusive Q&A, "If the American public wants satellite radio, I think that's great. The key is, at the end of the day, we're still going to reach hundreds of millions of people every week. The best case scenario for satellite is twenty million people."

One week later, Smulyan has expanded on the satellite radio subject, stating he feels a bigger threat than the satcasters is going to be Apple's iPod. In a Q&A posted on the company's Web site, Smulyan said, "Despite the buzz surrounding satellite radio, I believe iPods are a bigger threat, because you have a larger number of people with an alternative source of music. That said, I can remember when people were predicting the death of radio after 8-tracks came out. Despite continually evolving technologies, nothing has replaced the local information and local personalities we give our audiences. We know our communities, and we respond to their needs. Over the holiday season alone, Emmis radio stations raised $500,000 for charitable causes in their local communities . . ."

Smulyan is right -- the iPod shuffle is less of a threat to the kinds of stations he is discussing . . . but those are unfortunately disappearing, replaced by the Clearchannel simulacra.

Thursday, January 27, 2005 | 11:25 AM | Permalink | Comments (3) | TrackBack (0)
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Cyclical Bull Market to End This Year

Thursday, January 27, 2005 | 10:30 AM

I spoke with Jim Welsh yesterday -- he writes the The Financial Commentator out of Carlsbad, California.

His views of the overall earnings situation intrigued me (they are somewhat similar to my own). Jim notes that not only is the energy sector disproportionately helping the SPX, but so are advantageous currency exchange rates and low interest rates --  situations unlikely to persist as the year progresses.

Jim was kind enough to give me permission to reproduce his research/commentary here:


Cyclical Bull Market to End This Year

JANUARY 24 – A number of factors are likely to weigh on the economy, especially in the second half of the year.

President Bush will attempt to make good on his pledge to reduce the budget deficit, which means the economy will receive less fiscal stimulus in 2005.

Monetary policy is also going to be more of a drag. Changes in monetary policy take six to 12 months to impact the economy, so the rate hikes that started last June are just now beginning to bite.

Since rates started from such extraordinarily low levels, the drag will be modest, at least initially.

In addition, 5-year, 10-year, and 30-year Treasury yields have not risen, even as the Fed has raised short-term rates from 1% to 2.25%.

As a result, they remain quite low and supportive of the economy. However, as the Fed continues to raise rates, the drag on the economy will progressively increase going into 2006.

As the economy decelerates, corporate profit growth will slow. In 2004, financial-related companies generated about 40% of total corporate profits. Even companies like General Motors and Ford derived almost all of their 2004 profits from their financing arms.

As interest rates climb further, it will be a tougher operating environment and profit margins are likely to be pinched.

Corporate profits were also bolstered in 2004 by the surge in oil prices, which provided oil companies a profit gusher.

Crude oil prices will not rise by 50% in 2005, so profits for oil companies won't grow as fast.

And international companies saw their bottom lines boosted by the decline in the U.S. dollar. If the dollar rallies in the first half of this year, as I expect, earnings growth of international companies will slow.

This suggests that the cyclical bull market that began in October 2002 will end in this year's first half.


Jim Welsh
The Financial Commentator
3578 Camino Arena
Carlsbad, CA 92009
(760) 436-3574

Thursday, January 27, 2005 | 10:30 AM | Permalink | Comments (3) | TrackBack (0)
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Iraqi Elections

Thursday, January 27, 2005 | 06:24 AM

Iraq's elections are 3 days away. Following our past Map obsessions, here is a similar graphic of where the voters are in Iraq. 

Note that Iraqis are hardly "Red or Blue" Staters; There are instead many combinations of Shiites, Kurds and Sunnis.


Some interesting details about the structure of the newly elected government:


Iraq election guide
Wall Street Journal


Thursday, January 27, 2005 | 06:24 AM | Permalink | Comments (0) | TrackBack (0)
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A Promising Start, But . . .

Wednesday, January 26, 2005 | 11:43 AM

I’ve been hearing a lot of chatter rationalizing the weak market the past few weeks – as well as euphoria for yesterday’s rally. I must take issue with much of the econ-blather coming out of my screen lately:

Seasonality? It’s been a no show. Pre-empted by the overextended Q4 rally, it certainly has not helping lately;

Mutual fund inflows? Also MIA. Institutional buying and overseas appetite for U.S. equities are similarly missing;

Earnings? While 15.55% year-over-year earnings gains is respectable, it’s the unintended beneficiary of high Oil prices from energy firms – back out that sector (Energy sucks the air out of the room for every other group) and the S&P500 gained a mere 10% Y-o-Y. While that’s not bad, it represents a broader negative trend. Either a 10 or 15% profit gain reveals the continued deceleration of earnings momentum. This is foreboding for equities 12 months out;

Non-existent inflation? Hardly. Inflation is by any measure rising – commodities are in the midst of a 2-year rally; Producers are being squeezed – and they have been having a hard time raising their prices, squeezing margins;

Lower long-term rates: The fact the long term rates have been stable while the Fed tightens only tightens the yield curve -- and that is hardly a good thing.

The bottom line is that the above reasons are not why the market hasn't gone higher since 2005 began – they, are instead, an explanation as to the longer risk factors to the markets in the back half of 2005 and into 2006.

As to yesterday’s bounce:

It was NOT particularly impressive. Internals were only fair, with the OTC A/D a mere 8/7, and up/down volume barely over 2 to 1. NYSE, A/D was 17/15. up/down volume even less impressive 7/5. Volume was similarly lackluster.

I am not yet convinced yesterday's rally (and today’s follow through) is the end of the downward action. While I continue to expect a lift off the lows in late January/early February, I would prefer to see much broader participation (i.e., advance decline), a significant volume thrust, and much, much stronger volume.

Wednesday, January 26, 2005 | 11:43 AM | Permalink | Comments (2) | TrackBack (0)
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