Which Default is more Troublesome?

Lots of talk about Greece's debt problems, which would you rather have?

Reasons for Unemployment

We all know those people that got laid off and now choose to stay at home, not looking for a job, or becoming a mother, but still technically (as the numbers go) unemployed. This charts breaks down the numbers behind unemployment.

Earnings: Looking good?

So far earnings this quarter have been looking great considering our environment, right?

Wrong. While the bottom line of net profit may be looking tasty and better than it has in a long time, that is due to the cutting of jobs. We need remember that among this media spin of good profits, is the fact that the top line items (sales) have been shrinking.

Just a reminder that it is good to look at the company's financial position, and how they got there, not just the bottom line.

Here's is a little piece from The Reformed Broker:

I run a fairly sizable brokerage and advisory business. I could fire my staff and cut off the research products I subscribe to and only commute to work 4 days a week instead of 5 and stop wining and dining prospective clients and drop the amount of states I do business in to lower registration fees. And yes, my take home pay would look much improved at first. But then what? How can I grow my book of business if I've gutted it of the raw materials and resources it needs to get bigger?

The answer is I cannot, and as my revenues decline, my juicy margins from all that expense trimming are sure to fade along with them. And then no one is happy, especially not the wife or her salesgirl at Bloomingdales.

The meeting of temporary profitability targets may earn execs their bonuses and make for good headlines, but at some point, you aren't aren't just cutting fat - you're chopping into the muscle itself that you need to walk the next mile.

Stupid Things We Hear

Courtesy of the Reformed Broker, here is a list of stupid comments he has heard recently, and it all sounds too familiar...

Some stupid s&%# I've heard recently from some of the market participants I (am forced to) talk to...

"The Vix is dead, it should to be delisted."

"As long as China wants to keep buying up all our debt, I wonder if they'd like to take a look at my latest Discover Card bill."

"Why can't we just bring back Clinton and Greenspan, then everything will be cool again, like in the 90's."

"Yeah but I heard on CNBC that Wal-Mart and TJ Maxx are doing well, so the consumer must be recovering."

"I don't understand why people don't just put 100% of their portfolios in emerging markets and metals? All they do is go up everyday, duh!"

"So what they laid off 70% of their workforce, beating earnings is beating earnings!"

"I don't want to load up on BBB paper, but the Fed is basically forcing me to."

"If you just read John Thain's resume and see Goldman VP, head of NYSE, CEO of Merrill and you ignore all the news articles about him, he's actually overqualified to lead CIT."

"Can I switch my direct deposit to just go into GLD instead of my bank account?"

"I can't wait for the Facebook IPO, how many shares do you think each member is gonna get? Will it go by how many friends you have?"

At Least We Have Our Priorities Straight...

We may not have jobs, but we have iPhones...Is there an app for jobs?

Yield Curve Record

Today, the yield curve hit a record. At 380 basis points, which incidentally was the widest spread between the 2 Year and the 30 Year ever, it has never been easier for banks to make money on the short-long interest spread.

This isn't necessarily a bad thing. The quick reaction to a steepened yield curve is to buy equities. Banks can now loan more money. So a steepening yield curve in theory helps to boost the debt and equity markets.


-Image Courtesy of Zero Hedge

Your Friendly Reminder

The last 3/4 of 2009 were awesome and we've really been having a great run up in the market, but from The Reformed Broker comes a friendly reminder that we could also turn down at any point, and quick. Just look at the recent run up and what has 'triggered" them:

Here are some features of the recent anti-gravity stock market:

* Bad employment number - stocks go up
* Good employment number - stocks go up
* Sovereign credit default - stocks go up
* Sovereign credit downgraded to junk - stocks go up
* Hawkish Fed speech - stocks go up
* Dovish Fed speech - stocks go up
* Hawkish Fed minutes released - stocks go up
* Dovish Fed minutes - stocks go up
* Treasury auction goes well - stocks go up
* Treasury auction goes poorly - stocks go up
* Crude oil and other raw costs rally - stocks go up
* Crude oil and other raw costs sell off - stocks go up
* Banks report earnings - stocks go up
* Banks dilute their shareholders back to the bronze age - stocks go up
* CES preview captures our imaginations - stocks go up
* CES becomes a joke with 3D TV and a $2300 battery-powered bike - stocks go up
* The weather is unseasonably warm in November - stocks go up
* The weather is Antarctic across the country, Black Friday is snowed out - stocks go up
* Stimulus plan is roundly criticized as wasteful and irresponsible - stocks go up
* Talk of a yet another stimulus plan begins - stocks go up

Ladies and Gentlemen, We Are Trading on the Moon- The Reformed Broker

Hedge Fund Managers, Nothing more than Major Index Huggers?

An interesting article was just released showing that in 2009 on average hedge funds returned 24.6% where the S&P 500 returned 26.5% in 2009. Now the thing to keep in mind is these are the Hedge Funds in the Hennessee Hedge Fund Index. the index is made up of about 1,000 funds calculated on an equal weighting, so by no means does this mean that all hedge funds were directly correlated with the S&P 500 in 2009.

I NEVER agree with just comparing anything to a single major broad market, as I feel risk mitigation is also essential in designing a portfolio. If you were in only the S&P 500 in 2008, you would have lost nearly twice as much as the Hennessee Hedge fund Index.

So if you had 100,00 to start 2008 an "Investor A" put it into the S&P 500 it would have lost 38.5% in 2008 then gained 26.5% for and ending value of about $77,797.50. "Investor B" put their money into the Hennessee Hedge Fund Index which lost 19.83% in 2008 then gained 24.6% in 2009 for an ending value of $99,921.72. Point being, limiting your downside risk is important as well, I would never recommend just putting all your money into any single index.

Just some interesting food for thought.

Article