Wcw - Investing

25-54 Year Trough

wcw@bignose.org (Wcw) — Mon, 05 Apr 2010 04:49:13 +0000

Monthly, Percent, Seasonally Adjusted, 1970-2010">

Civilian Employment-Population Ratio, 25-54 Years
Monthly, Percent, Seasonally Adjusted, 1970-2010

Small favors.

Ugliness troughs

wcw@bignose.org (Wcw) — Fri, 02 Apr 2010 14:03:34 +0000

Civilian Employment-Population Ratio, Monthly, Percent, Seasonally Adjusted, 1970-2010

The civilian labor force participation rate (64.9 percent) and the employment-
population ratio (58.6 percent) continued to edge up in March.

Employment Situation News Release
Bureau of Labor Statistics, 2. April, 2010

It's better than bad.

Total Rental and Homeowner Vacancy Rate

wcw@bignose.org (Wcw) — Fri, 30 Oct 2009 00:26:04 +0000

Rental and Homeowner Vacancy Rates for the United States, 1965-2009

Supply and demand, my shiny metal hiney.

More ugliness

wcw@bignose.org (Wcw) — Fri, 02 Oct 2009 15:20:20 +0000

Civilian Employment-Population Ratio, Monthly, Percent, Seasonally Adjusted, 1970-2009

The civilian labor force participation rate declined by 0.3 percentage point in September to 65.2 percent. The employment-population ratio, at 58.8 percent, also declined over the month and has decreased by 3.9 percentage points since the recession began in December 2007.

Employment Situation News Release
Bureau of Labor Statistics, 2. October, 2009

Ugh.

I'll update the pure ugliness chart later today if I can stomach it.

I don't think it ever wasn't fraud

wcw@bignose.org (Wcw) — Thu, 13 Aug 2009 18:04:53 +0000

The SEC alleges that DiPascali, who resides in Bridgewater, N.J., sustained Madoff's unprecedented fraud from at least the 1980s until the scheme's collapse, causing billions of dollars in investor losses. A specific computer was used to simulate phantom trading in advisory accounts, and to generate phony books and records reflecting that trading. This fake set of books and records was kept separate and distinct from the books and records for the market-making and proprietary trading operation at Bernard L. Madoff Investment Securities LLC (BMIS). When investors sent in funds to BMIS for investment, the funds were deposited or wired into a bank account at JPMorgan Chase that was not in any way reflected on the books and records (including the ledger) of the BMIS broker-dealer operation.

SEC Charges Key Madoff Lieutenant For Operating And Concealing Fraud Through Bogus Trades And Documents
US Securities and Exchange Commission, 11. August 2009

Or as I mooted a little while back,

Me, I don't think it ever wasn't fraud. Bernie may even have fooled himself for a while, but the more I hear, the more through-the-looking-glass I feel. I think he got killed because he set up a Ponzi scheme.

Bernie's histogram #1.1.1.1
Wcw, 11. June 2009

It's not like our intrepid college dropout didn't have a nice run while it lasted, though.

The SEC further alleges that DiPascali misappropriated investor funds for personal gain, setting up an account at BMIS for himself in 2002 that he named after his fishing yacht, Dorothy Jo. DiPascali withdrew more than $5 million from the account between 2002 and 2008 to fund personal expenses, including the purchase of a new boat. DiPascali's withdrawals were funded directly from money deposited by investors with BMIS. Investor money being used to fund the overall operations of BMIS also contributed to the more than $2 million in salary and bonus that DiPascali received each year.

SEC Charges Key Madoff Lieutenant For Operating And Concealing Fraud Through Bogus Trades And Documents
US Securities and Exchange Commission, 11. August 2009

Whew. Punk rock.

How things change

wcw@bignose.org (Wcw) — Mon, 13 Jul 2009 04:45:25 +0000

Corporate Profits Percentage of National Income, 1947-2009

Two quarters more in the books and the golden age of profits lives on.

Wcw, Corporate profits, 8. April 2007

How things change.

Worth noting that despite the carnage, corporate profits as percentage of national income (with inventory and capital adjustments) are smack dab in the middle of the modern, postwar distribution. Things in aggregate just aren't that ugly out there unless you work for a living.

FINRA does something useful

wcw@bignose.org (Wcw) — Wed, 01 Jul 2009 05:08:49 +0000

AIG 4.95% 3/20/12, CUSIP 02687QBL1, 3- 6- and 12-Month Charts

So, you can't afford a Bloomberg and you want to check out how much your broker's bond quote screws you?

FINRA, rather improbably, has your back, at least a little bit.

Welcome to the Bond Section of the Market Data Center. This section includes general bond market information such as news, benchmark yields, and corporate bond market activity and performance information, descriptive data on U.S. Treasury, Agency, Corporate and Municipal Bonds, Credit Rating Information from major rating agencies, and price information with real-time transaction prices for Corporate Bonds (TRACE), Municipal Bonds (MSRB) and end of day prices for U.S. Treasury Bonds.

FINRA - Investor Information - Market Data - Bonds

'Tain't perfect, but it's free.

Close second: EMMA, for munis. Gold.

Housing stock value

wcw@bignose.org (Wcw) — Mon, 15 Jun 2009 05:43:10 +0000

Household real estate assets, %GDP and Real $ per Unit, 1952-2009

Where I blithely muttered earlier about a return to [the] 1980s peak values for houses in terms of GDP, commenters both at Felix's Reuters House of Fun and elsewhere have noted that houses are, you know, bigger than they used to be. Better, even. To the extent homes nationally are bigger and better than they were in 1989, they should be worth more. The 1989 housing %GDP peak was 116%. We're at 127% now. Maybe that's fair value.

The million-dollar REO around the corner from me was built in the 1950s, mind you. But maybe.

I did want to nail down another moving part I had ignored: total units. Have we just built up in a way the 1950s never knew? I deflated the flow-of-funds assets data by CPI ex-shelter and divided by total units, and came up with a surprisingly tight fit to my naive %GDP chart. It would seem recent price movements swamp everything else. Intriguingly, this was not true of the 1989 peak: that one is much moderated in unit terms. Per unit, we are 40% above 1989 in real dollars per unit, which makes me wonder a little.

If that REO next door would only drop those 40% tomorrow, I'd be in the market.

Flow of funds: owners equity update

wcw@bignose.org (Wcw) — Fri, 12 Jun 2009 15:21:03 +0000

Owners equity in household real estate, %GDP, 1952-2009

Yesterday's Flow of Funds gives us the update above. Equity in real estate continues to vaporize. And the scary thing is, household real estate isn't even cheap yet. On a historical relative-to-GDP basis, it remains at elevated levels never seen before the current bubble.

Household real estate assets, %GDP, 1952-2009

I suppose the good news is, we only have to drop ten or twenty percent more to return to 1980s peak values for houses. The bad news, alas, is what that will do to owners equity and what the wealth effect means for future consumption.

Green shoots are nice to see, but the outlook for US households isn't pretty.

Shoots?

wcw@bignose.org (Wcw) — Fri, 12 Jun 2009 04:57:37 +0000

Aruoba-Diebold-Scotti Business Conditions Index 2007-2009

We construct the ADS Index using the latest data available as of June 11, 2009. The bold vertical lines provide information as to which indicators are available for which dates. For dates to the left of the left line, the ADS index is based on observed data for all six underlying indicators. For dates between the left and right lines, the ADS index is based on at least two monthly indicators (typically employment and industrial production) and initial jobless claims. For dates to the right of the right line, the ADS index is based on initial jobless claims and possibly one monthly indicator.

Plot of ADS Business Conditions Index in the Most Recent Two Years [PDF]
Federal Reserve Bank of Philadelphia, 11. June 2009

Yes, yes, it's only the second derivative that's positive, but c'mon, it's something. You'll need some cheering up after I post the updated housing charts from the Flow of Funds.

Full disclosure: if pinned down and forced to make a prediction, I am in the L-bottom camp. Worth remembering, though, that my last "muddle through" hope was pretty firmly dashed by March 2008.

Pure ugliness

wcw@bignose.org (Wcw) — Wed, 10 Jun 2009 05:12:56 +0000

Aggregate Weekly Hours: Private Industries per Civilan, Noninstitutional Population, 1964-2009

During the current recession, both the inflow and outflow rates have shifted significantly, with high levels of firing and low levels of hiring, similar to what was observed in the 1970s and 1980s. We are currently at a historically low outflow rate, meaning that the unemployed find it very difficult to get work and average unemployment spells are getting much longer. At the same time, the recent increase in the inflow rate is comparable to what was observed in the 1970s and 1980s. These factors combined are creating especially weak labor market conditions.

Daly, Hobijn and Kwok, Jobless Recovery Redux?
FRBSF Economic Letter 2009-18, 5. June, 2009

Like James Hamilton, I have some hopes that moderating initial claims numbers aren't just noise. So when everyone and his mother began noting Jeff Frankels solid point about aggregate hours, I thought I'd take a quick stab.

There are roughly fifty moving parts missing from a real analysis here (demography, female labor-force participation, changing government share of the economy, etc etc). No matter how you slice them, these data are ugly. We first cracked the current level of aggregate hours per population in 1964.

1964, when the participation rate was seven points lower.

Pure ugliness.

Full disclosure: my bonus this year was de minimis. Plus keeping my job. I was happy.

The housing market is not the US Senate

wcw@bignose.org (Wcw) — Sun, 07 Jun 2009 20:31:11 +0000

Owners Equity in Household Real Estate, %GDP, 1952-2008

Now, that chart looks punk: owners equity in household real estate as percentage of GDP has, as of 08Q4, dropped to levels not seen since 1976. Despite those data, and tons like them from the FHFA and S&P/Case-Shiller, there is a line of argument going around that the housing shock is regionally limited. A fine example was published recently in the FAJ, updated by an exchange of letters, ending:

Updated data in Table 1 support our thesis that the impact of falling housing prices has not been uniform across the United States. Housing markets in California, Nevada, Florida, and Arizona have suffered big declines, but markets in 30 of the 50 states have fallen at less than a −2 percent annual rate in real terms. In many areas, housing prices have remained flat to rising throughout the most recent bear market.

Eli Beracha and Mark Hirschey, “When Will Housing Recover?”: Authors’ Response [subscription]
Financial Analysts Journal, May/June 2009, Vol. 65, No. 3: 14-15.

While the title of this post may hint at my view here, I reproduce the table below. Critique later: I have a date with a toddler and a sunny playground.

Enjoy.

Table 1. The Bear Market in U.S. Housing, Q4:2006–Q4:2008
State Real Price Change Annual Rate (%) State Real Price Change Annual Rate (%)
California –30.14 –16.42 Nebraska –2.19 –1.10
Nevada –29.84 –16.24 Pennsylvania –2.17 –1.09
Florida –27.06 –14.59 Idaho –1.95 –0.98
Arizona –21.23 –11.25 Vermont –1.80 –0.90
Michigan –14.64 –7.61 West Virginia –1.70 –0.85
Rhode Island –14.65 –7.61 Alaska –1.43 –0.72
Maryland –11.13 –5.73 New Mexico –1.27 –0.64
Massachusetts –10.51 –5.40 Kansas –1.10 –0.55
New Hampshire –9.76 –5.01 Iowa –0.88 –0.44
New Jersey –9.60 –4.92 Arkansas –0.84 –0.42
Minnesota –9.14 –4.68 Kentucky 0.22 0.11
District of Columbia –8.48 –4.34 Mississippi 0.24 0.12
Virginia –7.99 –4.08 Louisiana 0.31 0.15
Connecticut –7.89 –4.03 South Carolina 0.30 0.15
United States –7.71 –3.93 Tennessee 1.03 0.51
Hawaii –7.31 –3.73 Utah 1.39 0.69
New York –7.24 –3.69 Alabama 1.61 0.80
Delaware –6.81 –3.46 North Carolina 2.04 1.01
Ohio –6.06 –3.08 Oklahoma 2.16 1.07
Illinois –5.38 –2.73 Montana 2.65 1.32
Oregon –4.99 –2.53 Texas 3.49 1.73
Georgia –4.15 –2.09 South Dakota 3.55 1.76
Maine –3.91 –1.97 Wyoming 5.19 2.56
Wisconsin –3.30 –1.66 North Dakota 6.57 3.23
Indiana –2.94 –1.48 Low –30.14 –17.22
Washington –2.78 –1.40 High 6.57 3.75
Missouri –2.66 –1.34 Median –2.72 –1.55
Colorado –2.62 –1.32 Average –5.09 –2.91

Household real estate assets, %GDP

wcw@bignose.org (Wcw) — Tue, 02 Jun 2009 07:50:14 +0000

Household real estate assets, %GDP, 1952 - 2008

I am a little surprised that at 08Q4 we were still above the 89Q4 peak in this series, if slightly.

FD: we (still) rent.

Bernie's histogram

wcw@bignose.org (Wcw) — Tue, 23 Dec 2008 05:31:01 +0000

Madoff vs GATEX monthly return histograms and density estimates, 1993 - 2008

The Gateway Fund has been using Bernie Madoff's collared beta strategy for almost as long as he supposedly did. GATEX's monthly returns indeed look like an investing time series: fat-tailed and narrow-peaked compared to a normal curve. Madoff's don't. Madoff's look just like a normal curve, except that if you squint, they are slightly positively skewed, and their negative tail is too small. I would love to invest with someone who actually could produce returns like that, but collared beta doesn't.

Does Jim Simons?

Oh, jeepers

wcw@bignose.org (Wcw) — Sun, 30 Nov 2008 20:03:29 +0000

Total Borrowings of Depository Institutions from the Federal Reserve, Percentage of GDP, 1929 - 2008

Any time that a properly normalized series starts rivaling the freaking Depression, you have to worry.

As I've said before: mea culpa.

Wcw, Yowza
West-Coast Whiner, 17. March 2008

We have now breached Depression and 1920s highs in Fed borrowing as percent of GDP.