Archive for August, 2009

• How Bad Is Inflation in Zimbabwe?
  Eddy Elfenbein, August 18th, 2009 at 2:39 pm

  At one point last year, prices were doubling.
  Every day.

• RIP: Rose Friedman
  Eddy Elfenbein, August 18th, 2009 at 1:19 pm

  Rose Friedman passed away yesterday at the age of 98.
  “The only person known to have ever won an argument with Milton.” – President George W. Bush
  

• PPI Is Lowest on Record
  Eddy Elfenbein, August 18th, 2009 at 10:35 am

  Today’s PPI report shows that wholesale prices have dropped by 6.8% over the last year. That’s the lowest on record.
  
  So is deflation a threat? Matthew Lynn says that fears of deflation are vastly overblown.

  In other words, there were plenty of deflationary years. Yet over that period, the U.K. became the greatest economic power in the world: Its relative decline only started once inflation took hold. Deflation didn’t stop the Industrial Revolution, one of the most sustained times of economic creativity ever seen.
  Likewise, a 2004 study by the Federal Reserve Bank of Minneapolis looked at the data on deflation across 17 countries over 100 years. It found that although the Great Depression of the 1930s was linked with falling prices, that wasn’t true of any other historical period. There was, it said, “virtually no evidence” that deflation caused a depression.
  Why should it? We are constantly told that deflation is bad because it makes consumers hold off from buying things, thinking they will be cheaper tomorrow. But that is just silly.

• The Biggest Thing Since E-mail
  Eddy Elfenbein, August 18th, 2009 at 10:17 am

  Jim Cramer pounds the table for Smart Phones:

  As big and as game-changing as the personal computer and the Internet were, I believe the mobile Internet—the integration of voice, data, video, and storage in one handheld device—will be more lucrative than both. Maybe both put together. That may sound far-fetched now, but these devices, chock-full of applications and hardware that have begun to rival those of personal computers, have finally realized the elusive holy grail. As any twentysomething, or even middle-schooler, knows, once you procure a smartphone, you can throw away pretty much every publication, every guide, every television, every camera, every music device, heck, every gizmo you have, save your toaster oven. You just don’t need ’em anymore.
  It’s not just the dazzling technology that’s driving things. It’s the size of the market and the speed at which companies and consumers are getting onboard. It took a half-dozen years and a host of competitors like Dell, Gateway, and Compaq to produce personal computers cheap enough to entice the masses. Thanks to the substantial subsidies offered by Verizon, Sprint, AT&T, and T-Mobile in their endless battles for market share, Americans are buying up smartphones and calling plans much faster than they bought PCs.
  And the U.S. market is tiny versus the overseas arena. Beijing alone just committed $40 billion to build a smartphone network that will cover the whole nation, and the big telephone companies in China plan on subsidizing the phones with the same zeal as the American firms—obviously with millions more customers. Currently, there are as many as 4 billion cell-phone users worldwide, but only 12 percent use smartphones. Given the superiority of the product and the aggressive pricing, I expect we will see a total replacement of dumb phones with smart ones rather quickly. You’re talking about a market that could grow eightfold in just a few years.

• The 10 stupidest tech company blunders
  Eddy Elfenbein, August 18th, 2009 at 9:52 am

  InfoWorld runs down the 10 stupidest blunders from tech companies. Here’s a sample and it’s one I never knew about:

  2. Real Networks Punts on the iPod
  People think Steve Jobs invented the iPod. He didn’t, of course. Jobs merely said yes to engineer Tony Fadell after the folks at Real Networks rejected Fadell’s idea for a new kind of music player in the fall of 2000. (Fadell’s former employer Philips also turned him down.)
  By then MP3 players had been around for years, but Fadell’s concept was slightly different: smaller, sleeker, and focused on a content-delivery system that would give music lovers an easy way to fill up their “pods.” (Jobs is famous for driving the design of the iPod.)
  Today that content-delivery system is known as iTunes, and Apple controls some 80 percent of the digital music market. Fadell worked at, and eventually ran, Apple’s iPod division until November 2008. Real Networks is still a player in the streaming-media world, but its revenues are a fraction of what Apple makes from iTunes alone.

  Um…sorry.

• S&P 500 Stocks Above Pre-Lehman Levels
  Eddy Elfenbein, August 18th, 2009 at 9:41 am

  Bespoke finds the very small list of stocks that are above their level prior to Lehman Brothers going kablooey. Only 55 stocks are up and just 27 are up by more than 10%.
  

• Insiders Are Dumping Stock
  Eddy Elfenbein, August 18th, 2009 at 8:51 am

  From Reuters:

  A massive rally in U.S. stocks since March has reawakened bullish spirits, but insiders are jumping out of the market in a sign the run up is getting stretched.
  Company executives are selling stock at a rate not seen in two years after a near 50 percent rise in the S&P 500 from a March 9 low. That suggests directors and managers may think stock prices are nearing the top end of their range in the current economic climate.
  There has been a decline in short interest — borrowed shares sold but not yet repurchased — which some analysts see as a warning. Some investors sell short to profit from price declines, and some say the recent rally has been supported by the reversing of short positions.

  After a 50% rally, I think a sharp pullback is necessary. When it will happen and by how much is still a question. However, I don’t think the market really experienced a rally as much as we saw an unwinding of a vicious bear market.
  The rally has been led by junk stocks which is really due to investors fleeing all investments which held any type of risk. The low-quality rally is mirrored by what’s been happening in the bond market with the closing of the gigantic spreads between corporates and Treasuries.

• This Explains A Lot
  Eddy Elfenbein, August 17th, 2009 at 3:26 pm

  The Onion reports:

  ENGLEWOOD CLIFFS, NJ—Citing a need to provide quality programming 24 hours a day, CNBC has extended an invitation to anyone who owns a suit to drop by the financial news network and be a guest expert, cohost a show with Larry Kudlow, or do whatever. “Don’t worry about what kind of shape your suit is in,” said CNBC president Mark Hoffman, who explained that his network’s studio has an iron and some old phone books that people can press their jackets on. “Just come on down, run a comb through your hair, and if you’re here by 8 a.m., we’ll have you on Squawk Box at 8:15 making stock picks. But don’t forget your suit!” Hoffman added that men of ruddy complexion with neck sizes exceeding 19 inches are not required to wear a tie.

• Well, That Changes Things
  Eddy Elfenbein, August 17th, 2009 at 2:38 pm

  From CNBC’s Correction page:

  An earlier version of this story misstated the amount of Goldman Sachs earnings, listing them as $344 billion when it should have read $3.44 billion.

  In other news, CNBC has a corrections page?

• Abby Joseph Cohen: Recession Ending Now
  Eddy Elfenbein, August 17th, 2009 at 10:39 am

  Abby Joseph Cohen jumps on the Dennis Kneale bandwagon:

  The U.S. recession is ending “right now,” said Abby Joseph Cohen, a senior investment strategist at Goldman Sachs Group Inc.
  The economy may grow by 3 percent in the next couple of quarters and expand by 1.5 percent to 2 percent next year, Cohen said. While consumer spending is likely to rise, it probably won’t increase as fast as at the end of prior periods when the U.S. was emerging from a recession, she said.
  “Clearly the economy is on the mend,” Cohen said in an interview with Bloomberg Radio. “We do think that profit growth will be more substantial going forward.”
  Cohen, known for her optimistic forecasts for stocks during the 1990s stock-market rally, was replaced in March 2008 as the bank’s chief forecaster for the U.S. equity market. She predicted in a May 1 interview that the Standard & Poor’s 500 Index might jump 20 percent to 1,050 in the next 6 to 12 months. The index climbed 15 percent to 1,010.48 through Aug. 7 before retreating 0.6 percent last week.