1---Will Corporate Spending Float The Economy in 2014?, zero hedge
Submitted by Lance Roberts of STA Wealth Management,
I have been reading quite a few articles, as of late, regarding the resurgence of corporate fixed investment in 2014 that will provide a much needed boost to the economy. My friend David Rosenberg recently penned in his daily missive:
"The hallmark of this cycle is that it goes down as the weakest ever in term of growth in the real private sector capital stock. Volume capital spending growth has barely averaged a 1% annual rate in the past half-decade, as the business sector moved forcefully to reward their shareholders in the form of dividend hikes and initiations and stock buybacks while refraining from investing organically in their own businesses.I sense that this is coming to an end, and I say that because years of neglect and decay have now resulted in productivity growth slowing to zero percent on a year-over-year basis which is a development that tends to happen late in the cycle, not in the middle of one. Given the time worn link between productivity ratios and profit margins companies are going to be incentivized to divert their casl1f lows and cash on the balance sheet towards productivity-enhancing investment strategies in the coming year. ...But the real impetus is going to come from merely preventing more obsolescence to occur in the nation's productive capital stock. The average age of the private sector capital stock is fast approacl1ing 22 years! That is total plant and equipment. The last time the corporate sector allowed its capital stock to get this old and obsolete was back in 1958.
2---Earnings drive stock prices and earnings are in trouble, Testosterone Pit
. Turns out, America’s corporate heroes have been lowering their Q4 earnings outlook in record numbers. According to FactSet, of the 107 S&P 500 companies that have given an outlook for Q4 so far, 94 have guided way below analysts’ expectations. That’s 88%!
It was the worst ever in the universe of the FactSet data series that started in 2006. And it was the 14th quarter in a row of negative guidance exceeding positive guidance, with the gap widening nearly every quarter (disconcerting chart via MarketWatch).
“The most negative guidance sentiment on record,” is what Thomson Reuters analyst Greg Harrison called the phenomenon. They found that of the 130 companies in the S&P 500 that have given outlooks so far, only 11 guided above analysts’ “consensus,” and 11 guided in line. But 108 cut their outlooks below consensus. That’s a chilling negative-positive ratio of 91%
Clearly, earnings growth is in trouble. Sales have barely kept up with inflation over the last couple of years. With top-line growth missing, earnings have to be goosed in other ways. Rampant cost cutting has been in full swing for years, and the low-hanging fruit has been harvested. This is supplemented by accounting tricks, such as dumping large chunks of costs into “non-cash” and very regular “one-time” write-offs that are then totally ignored by the market. And perhaps the most effective: financial engineering, such as borrowing loads of money to buy back shares, dolls up per-share earnings, while quietly hallowing out stockholder equity. If wayward analysts paid attention to these methods, they’d be fired or ridiculed.
But even those methods are now reaching their limit in generating “earnings growth.” Leaves the last measure to drive up stock prices: manipulating the “beats” during earnings season.
A year ago, analysts pegged earnings growth for Q4 2013 at 17.6%, according to Thomson Reuters. That phenomenal number was used to rationalize soaring stock prices. Only the sky would be the limit for forward earnings per share. Alas, over the course of the year, companies gave analysts to understand that they’d never be able to meet these ridiculous earnings growth figures. So down they went – while the stock market continued to soar. Thomson Reuters now pegs Q4 earnings growth at 7.6% and S&P Capital IQ at a measly 5.7%. Quarter after quarter, it’s the same goofiness
3---The Bernanke Bubble, Testosterone Pit
$10,000 would have turned into $22,832. You would have more than doubled your money – without doing anything fancy. That's simply the total return on the stock market (the S&P 500 index) from 2009 through 2013.
U.S. stocks soared 32% in 2013, extending their winning streak to five straight years. Astoundingly, four of the last five years have generated 15%-plus gains:
These are fantastic returns. It's hard to imagine that stocks could still go up from here, right
3---This Chart Is A True Representation Of The Employment Crisis In This Country” , Testosterone Pit
4---Usury gains popularity, WSJ
Mr. Nguyen is paying 14.9% interest over the loan's six-month term—the equivalent of about 30% annually. Payments are drawn automatically each day from his business bank account. "It's not cheap, but they served my needs quickly," he says
About two dozen such nonbank lenders—including OnDeck Capital Inc., Kabbage Inc. and CAN Capital Inc.—lent about $3 billion collectively last year, double the 2012 total, estimates Marc Glazer, chief executive of Business Financial Services Inc., a lender with about $100 million of such loans outstanding.
These short-term lenders want to become the go-to financiers for business owners needing quick cash, often $50,000 or less....
Banks generally require solid credit scores and spend weeks reviewing financial statements, tax returns and business plans. Biz2Credit, an online loan broker for small businesses, says an analysis of loan applications made in December through its website showed big banks approved 18% of loan applications by its customers in December, while small banks approved 49%....
Interest rates on such loans can run in excess of 50%, on an annualized basis, much higher than on conventional bank loans. Usury laws limiting interest rates generally don't apply to the short-term lenders. Some of the loans are originated in states that don't cap interest rates on commercial loans. Others are structured as private contracts between two businesses. Many loans come through brokers working on commission.
Speaking at a recent Small Business Administration conference, Treasury Secretary Jack Lew said the government wants to "do more to knock down barriers to financing," and he voiced support for new approaches to lending. "These companies are using alternative measures to assess a business's ability to pay back a loan," he said. "They use data like real-time shipping schedules, records held in a business's accounting software, and even social-media traffic to determine creditworthiness." The government, he said, wants to provide access, with a borrower's permission, to certain information reported to the government....
Unlike banks, the short-term lenders don't take deposits, so they need other sources of capital to fund the loans. OnDeck has an $80 million credit facility from a syndicate that includes Goldman Sachs Group Inc. They have a successful business model that we like," says a Goldman spokesman.
Inquiry Looks for Deliberate Mispricing of Mortgage Bonds Key to Financial Crisis
Regulators are investigating whether traders exploited the murky pricing around residential mortgage-backed securities from around 2009 through 2011 to buy or sell the investments at artificially depressed or inflated values, the people close to the inquiry said. The other parties in such transactions would typically be rival banks, hedge funds and other large investment firms....
One issue that could come to the fore in the investigation, according to one person familiar with the matter, is where does aggressive salesmanship cross the line into fraud?
If there is reason to believe that most of the unemployed would not find work if the economy returned to its level of potential output (we are still down by more than 6 percent [$1 trillion annually] according to the Congressional Budget Office) the NYT opted not to show it.
7---The Truth about Mortgage Apps : If investors are less active, then owner-occupants must become more active to make up the difference OC Housing
The economy has improved since the depths of the recession, but not by much. Demand is neither robust or resurgent; in fact, sales volumes at the end of 2013 were lower than in 2012, and both years are far below historic norms. Therefore, the usual dynamic of new households with high wages pushing up real estate prices was absent. Instead, a larger share of investors and an artificial shortage of supply created an imbalance that drove prices higher. Whether or not that’s a sustainable model is yet to be seen.
Trends in Purchase ApplicationsPurchase mortgage applications generally increase over time to reflect population growth and new household formation. The chart below shows the steady increase in mortgage applications from 1990 to 2005. If the data went back farther, the same pattern would emerge.
The collapse in purchase mortgage applications corresponds to the collapse in house prices and a dramatic reduction in the rate of owner occupancy. When the economy officially pulled out of recession in 2009, the purchase mortgage application index stopped falling and stabilized at mid 90s levels. For the last four years, despite sluggish improvements in the job market, the number of purchase mortgage applications has not increased, not even to match population growth, clear evidence of a weak recovery.
Due to higher home prices, it no longer makes sense to buy homes for cashflow in many markets, so most housing analysts believe investors will be less active in 2014. If investors are less active, then owner-occupants must become more active to make up the difference. For home sales volumes to match last year’s levels, owner-occupants must buy more homes. For home sales volumes to increase — the consensus believes sales volumes will rise in 2014 — then owner occupants must break out of the four-year holding pattern and start buying many, many more homes. Does that seem likely?
8---Sales of bank-owned homes surge, cnbc
Surge? Less than 1%
"But as the backlog of distressed inventory available dries up in many of the markets with the most efficient foreclosure processes—namely California, Arizona and Nevada, with Georgia not far behind—overall sales volume is declining and will continue to do so until more nondistressed sellers enter the market."...
In the meantime, Fannie Mae just announced it is giving non-investors more time to look at its bank-owned properties before letting investors compete. Its "First Look" program used to give owner-occupant buyers 15 days to make an offer before investors could bid. That has been extended to 20, possibly reflecting the extended time it is now taking consumers to secure financing. Investors largely use cash.
"The goal has always been to sell to owner-occupants whenever possible," said Fannie Mae spokesman Andrew Wilson.
9---Housing investors starting to exit?, cnbc
Phoenix, Las Vegas and much of California no longer offer the best returns. In fact, they are not even in the top 10. Looking at costs of acquisition, rehabilitation, rental rates and maintenance, CoreLogic found Chicago, Tampa, Orlando, Atlanta and Indianapolis now offer the best investor returns for investors in single-family rentals.
"Atlanta is still one of the very early movers in home price appreciation and in distressed asset acquisition, so we think there are a lot of states, especially judicial states that will start releasing stock over the next few years and we want to be there when they do," said Frost. He expects to start moving into Maryland and New Jersey in the near future.
As for investors who started early in the so-called "sand states," some are beginning to sell a few of their properties to other smaller investors, but they are staying in the trade themselves by lending to those same investors. Blackstone recently announced a new program to finance small investors buying multiple rental properties.
10--The dumb money returns, Mish
11---Why the US wants to stay in Afghanistan, antiwar
The CNN/ORC International survey released Dec. 30 shows that 75% of the American people oppose keeping any US military troops in Afghanistan after the scheduled pullout Dec. 31. Indeed, "a majority of Americans would like to see US troops pull out of Afghanistan before the December 2014 deadline."
The poll’s most important statistic is that "Just 17% of those questioned say they support the 12-year-long war, down from 52% in December 2008. Opposition to the conflict now stands at 82%, up from 46% five years ago. CNN Polling Director Keating Holland suggested the 17% support was the lowest for any US ongoing war.
A majority of Americans turned against the war against Afghanistan a few years go, but according to a Associated Press-GFK poll released Dec. 18 – these days 57% say that even attacking and invading Afghanistan in 2001 was probably the "wrong thing to do."...
The more understated second reason is that Afghanistan is an extremely important geopolitical asset for the US, particularly because it is the Pentagon’s only military base in Central Asia, touching Iran to the west, Pakistan to the east, China to the northeast and various resource-rich former Soviet republics to the northwest, as well as Russia to the north.
At this point a continued presence in Afghanistan dovetails with Washington’s so-called New Silk Road policy first announced by then Secretary of State Hillary Clinton two years ago. The objective over time is to sharply increase US economic, trade and political power in strategic Central and South Asia to strengthen US global hegemony and to impede China’s development into a regional hegemon.
As the State Department’s Robert O. Blake Jr. put it March 23: "The dynamic region stretching from Turkey, across the Caspian Sea to Central Asia, to Afghanistan and the massive South Asian economies, is a region where greater cooperation and integration can lead to more prosperity, opportunity, and stability.
12---Afghans don't like being bombed, WA Post
In the end, the most salient factor in explaining support levels was an individual’s exposure to violence by the warring parties—not receipt of aid, the level of control exerted by the combatants, or socioeconomic factors like age, wealth, or education. And while a key policy takeaway—avoid civilian casualties—seems obvious, even taking great pains to minimize civilian suffering is no guarantee that civilians can be won over
13---Wall Street swindles, not pensions, behind financial crisis in Detroit and other US cities, wsws
14---The cynical charade of Obama’s campaign for jobless benefits, wsws
15---Arrival of ‘bad inflation’ trend bodes ill for Japan’s rebound, JT