1--NYSE November Margin Debt Rises To Fresh Post-Lehman High, zero hedge
Excerpt: After we recently disclosed that surging NYSE margin debt is the latest indication of record euphoria (which presumably was sufficiently interesting that it made Alan Abelson's latest column), after it hit a post-Lehman high of $269 billion, we are happy to announce that as we expected, November margin credit grew by another $5 billion to $274 billion, which implies that investors continue to purchase stocks increasingly on margin, i.e., on credit, which is fantastic when stocks levitate, but leads to a circular sell off when sell offs generate collateral calls, forcing more sell offs, etc. And looking at net cash, it was flat M/M at ($34) billion meaning that there was no incremental real cash going into cash accounts, and the entire November outperformance was achieved as net cash remained flat, and every incremental point in gains was financed by net crediting. As before, we expect no change to this trend when December data is announced.
2--Floyd Norris On The End Of The American Love Affair With Stocks, zero hedge
Excerpt: Three weeks ago when we noted the 30th consecutive outflow from US-based equity mutual funds (now at 33 straight weeks), we said: "America's love affair with stocks is over, has bypassed the marriage stage and gone straight to the bitter divorce." Today, we are happy to see that the the NYT's Floyd Norris for repackaging our metaphor in a slightly more palatable fashion: "The love affair of American investors with the stock market appears to have ended." His piece in today's NYT "For U.S. investors, the glow is off domestic stocks" will not be news to anyone who follows our weekly report on ICI data: "The year now ending will be the fourth consecutive year in which mutual funds that invest primarily in American stocks experienced net outflows of funds, meaning that investors as a group withdrew more money than they put in." And yet stocks continue to ramp higher, in big part due to the rapid increase in NYSE margin interest which means the bulk of investors are buying stock increasingly on leverage, but still the question to just who continues to do the actual holding remains unanswered. Indeed, only a few people, Charles Biderman among them, have answered with the response that everyone knows is true, yet most are afraid to utter....
Norris: The first of those years came after the 1987 crash, which scared many investors as the market fell more than 20 percent in one day. But it recovered all of that loss and more in 1988, and many investors learned from that experience that market declines presented buying opportunities, not reasons to sell. The assumption that stocks were sure to rise, at least in the long run, became widely accepted.
In some ways, the current mood is reminiscent of the one that prevailed then. In 1979, Business Week published a cover article on the “Death of Equities,” which it attributed in large part to rising inflation. By 1982, inflation had begun to fall, but the country was in a deep recession. That is when the great bull market of the 1980s began. Few investors seem confident that such a renewal of optimism is likely this time.
3--After Nearly Two Years Of Searching, TrimTabs Still Can't Figure Out Who Is Buying Stocks, zero hedge
Excerpt: A year after Charles Biderman's provocative post first appeared on Zero Hedge, in which he asked just who is doing all the buying of stocks as the money was obviously not coming from retail investors (and came up with one very notable suggestion), today Maria Bartiromo invited the TrimTabs head once again (conveniently in CNBC's lowest rated show, during Christmas Eve eve, at a time when perhaps 5 people would be watching) in an interview which disclosed that after more than a year of searching, Biderman still has no idea who actually buying. In response to Bartiromo's question if the retail investor, who left after the flash crash (thank you SEC), Biderman responds what every Zero Hedger has known for 33 weeks: "Retail investors are not coming back to the US. Those investors that are investing are buying global equities and are buying commodities. We are seeing lots money going into commodity ETF funds: gold, silver..." and the even more unpleasant summation: "individuals have been selling, companies are net selling, insider selling and new offerings are swamping any buyback and any cash M&A activity since QE 2 was announced. Pension funds and hedge funds don't really have that much cash to invest. So what nobody's asking is what happens when QE 2 stops: if the only buyer is the Fed, and the Fed stops buying, I don't know what is going to happen...When I was on your show a year ago I was saying the same thing: we can't figure out who is doing the buying it has to be the government, and people said I was nuts. Now the government is admitting it is rigging the market." Cue Bartiromo jaw dropping.
as for the simple math of where the money is actually going:
"Money flows come out of income, take home pay of everybody plus money that came from real estate is down about $1 trillion a year. It peaked in the 3rd quarter of 2008, at $7 trillion, that's take home pay for everybody who pays taxes plus the money that came from real estate. It has now bottomed at $5.9 trillion. We are still down $1.1 trillion in money that people have to spend each year, that 16%. And some of the money that is leaving equity markets we think is going to pay bills."
Due to time constraints, what I didn’t get to address on CNBC today is what will happen after the Fed is either successful or not successful with QE2. The Fed is rigging the market by digitally creating money that is used to buy financial institutions assets — currently Treasuries, last year all kinds of toxic waste. What will happen when the Fed stops buying assets?
4--Japan November Consumer Prices Fall for 21st Month as Deflation Persists, Bloomberg
Excerpt: Japan’s consumer prices fell for a 21st month in November, a sign sustained deflation may prompt the central bank to revise its price projections.
Consumer prices excluding fresh food declined 0.5 percent from a year earlier, the statistics bureau said today in Tokyo. That compared with a median 0.6 percent drop predicted by 28 economists surveyed by Bloomberg News.
Entrenched deflation is weighing on an economy at risk of contracting this quarter as the effects of Prime Minister Naoto Kan’s stimulus spending fades. Miyako Suda, a Bank of Japan policy maker, said this month the persistent price falls will continue in the year starting April, an outlook that conflicts with the bank’s forecast of moderate inflation in the period.
5--U.S. Economy: Confidence Falls on Concern Over Jobs, Bloomberg
Excerpt: Confidence among U.S. consumers unexpectedly fell in December, restrained by concern that jobs will remain scarce in 2011.
The Conference Board’s confidence index unexpectedly fell to 52.5, lower than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the New York-based research group showed today. Another report showed home values dropped more than economists projected.
The loss of confidence is at odds with a report from the University of Michigan that showed sentiment improved to a six- month high in December, and with data showing holiday spending posted the biggest gain in five years. Federal Reserve policy makers this month said “depressed” housing and high unemployment remained constraints on consumer spending, supporting their plans to expand record monetary stimulus.
“We should watch what consumers do and not what they say,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut. “If you looked at the confidence data you wouldn’t have looked for the pace of spending to accelerate as much as it has. Consumers are still very cautious and very nervous about where the labor market is headed.”
6--One in Four Borrowers Is Underwater, Wall Street Journal
Excerpt: The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.
Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American....
But negative equity "is an outstanding risk hanging over the mortgage market," said Mark Fleming, chief economist of First American Core Logic. "It lowers homeowners' mobility because they can't sell, even if they want to move to get a new job." Borrowers who owe more than 120% of their home's value, he said, were more likely to default....
More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value....
About 7.5 million households were 30 days or more behind on their mortgage payments or in foreclosure at the end of September, according to the Mortgage Bankers Association. Many of those homes will be lost to foreclosure, adding to the supply of homes for sale.
7--1 out of 3 Americans has zero dollars in a retirement account, mybudget360.com
Excerpt: Retirement account fantasy and middle class erosion – 1 out of 3 Americans has zero dollars in a retirement account. From 1950 to 1989 top 1 percent earned roughly 7 to 8 percent of nationwide income. Today it is inching closer to 20 percent resembling pre-Great Depression levels....
43 million Americans are depending on government food assistance to get by. But many more millions are merely living paycheck to paycheck hidden in the cellar of the headlines. 1 out of 3 Americans has zero in any retirement account (not one slowly eroding dollar). Half of Americans have $2,000 or less which puts them one month away from needing government assistance....
There has been virtually no real income growth for most Americans. The real significant wage growth over the last 50 years has occurred at the very top 10 percent of income earners in the country with this inequality accelerating in the last bubble decade.
8--Opposition to the Euro Grows in Germany, Der Spiegel
Excerpt: Surveys show that many Germans are worried about the future of the euro, but the country's political parties are not taking their fears seriously. The number of grassroots initiatives against the common currency is increasing, and political observers say a Tea Party-style anti-euro movement could do well....
Unnerved by shaky, debt-ridden countries and bailout packages worth billions, the majority of Germans want the mark back. In a survey conducted in early December by the polling firm Infratest dimap, 57 percent of respondents agreed with the statement that Germany would have been better off keeping the mark than introducing the euro. Germans, it seems, are gripped once again by their historic fear of inflation: According to the Forschungsgruppe Wahlen polling institute, 82 percent of the population is worried about the stability of their currency....
The euro, as the presenter and audience quickly agreed, is bad money. It should be abolished. Since the introduction of the European common currency, Schäffler has counted over 70 violations of the Stability Pact, which limits the annual budget deficits of euro-zone countries to 3 percent of GDP. He has also vehemently criticized the European Central Bank, which has been purchasing government bonds from cash-strapped countries, even though EU rules forbid it from buying debt directly from governments. "We buy everything except animal feed," said the FDP politician to general applause.
9--Case-Shiller: Home Prices Weaken Further in October, Calculated Risk
Excerpt: From S&P: U.S. Home Prices Weaken Further as Six Cities Make New Lows
Data through October 2010, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show a deceleration in the annual growth rates in 18 of the 20 MSAs and the 10- and 20-City Composites in October compared to what was reported for September 2010. The 10-City Composite was up only 0.2% and the 20-City Composite fell 0.8% from their levels in October 2009. Home prices decreased in all 20 MSAs and both Composites in October from their September levels. In October, only the 10-City Composite and four MSAs – Los Angeles, San Diego, San Francisco and Washington DC – showed year-over-year gains. While the composite housing prices are still above their spring 2009 lows, six markets – Atlanta, Charlotte, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices started to fall in 2006 and 2007, meaning that average home prices in those markets have fallen beyond the recent lows seen in most other markets in the spring of 2009....
The Composite 10 index is off 30.7% from the peak, and down 0.9% in October(SA)....Prices are now falling - and falling just about everywhere. As S&P noted "six markets – Atlanta, Charlotte, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices started to fall in 2006 and 2007". More cities will join them soon.