Archive for July, 2011

• Morning News: July 8, 2011
  Eddy Elfenbein, July 8th, 2011 at 7:17 am

  German Exports Increased More Than Forecast

  Offshore Yuan Clearing Bank to Buy China Bonds

  Ethanol Subsidies Besieged

  Geithner Doesn’t Think Obama Has The Constitutional Authority To Ignore Debt Ceiling

  Elizabeth Warren’s Dream Becomes a Real Agency She May Never Get to Lead

  Behind the Gentler Approach to Banks by U.S.

  Dim Sum Market Stirs U.S. Borrowers

  To Slow Piracy, Internet Providers Ready Penalties

  News Corp.’s BSkyB Bid Facing Delay on Review

  JPMorgan Settles Bond Bid-Rigging Case for $211 Million

  Target, Limited Sales Beat Estimates in June Amid Discounts

  S.Korea’s SK Telecom, STX Battle for $2.3 Billion Hynix Stake

  Buffett Donates $1.5 Billion in Annual Gates Foundation Gift

  James Altucher: 7 Unusual Things I Learned from Louis Armstrong

  Brian Shannon: Stock Market Analysis & Ideas for 7/8/11

  Phil Pearlman: Drudge Is The Master

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• The Wilshire 4500 Rally
  Eddy Elfenbein, July 7th, 2011 at 2:36 pm

  The Wilshire 5000 is the probably the ultimate in market-cap weighted indexes. You really can’t get broader than what Wilshire has done. As of May, the total value of the stocks in their index was $14.2 trillion.

  Wilshire also tracks its Wilshire 4500 which is all of the companies in the Wilshire 5000 that aren’t in the S&P 500. As of May, the total value of Wilshire 4500 was $2.7 trillion. That shows you just how much Wall Street is dominated by the mega-cap stocks. The top 10% holds roughly 80% of the stock market’s value.

  Interestingly, the Wilshire 4500 has been creaming the Wilshire 5000 (or really, the S&P 500) for nearly 13 years. The large-caps had a good run from early 1994 to October 1998. Since then, the small guys have dominated.

  From October 8, 1998 to yesterday, the total return of the Wilshire 5000 is 99.78%, but the total return of the Wilshire 4500 is 218.29%. That’s a huge spread. In fact, the Wilshire 4500 has a good chance of making a new all-time high today. The previous high was set on April 29th.

  It’s true that equities have been a tough place to be for the last decade. But the problem has been the large-cap names, not most stocks.

  To give you another example, we’re coming up on the 10th anniversary of 9/11. Measuring from September 10th, 2001— so we’re including a bear market that lasted for another 18 months—to yesterday, the total return of the Wilshire 4500 is 140.85%. Annualized, that comes out to about 9.4%. That fact probably would have surprised a lot of folks in the aftermath of 9/11.

  Here’s a chart of the total return of the Wilshire 4500 and the Wilshire 5000 since October 8, 1998:

  

• Morning News: July 7, 2011
  Eddy Elfenbein, July 7th, 2011 at 8:08 am

  BOE Keeps Rates on Hold as Governor King Diverges from Europe

  Banks Struggle to Agree on Greek Aid Plan in Rome Talks

  Building Boom in China Stirs Fears of Debt Overload

  German Banks See Business Developing Positively, Survey Shows

  Contagion Fears Weigh on Euro

  Irish Begged to Buy Fridges to Boost Economy

  SEC Watchdog Refers Leasing Issue to Department of Justice

  As Plastic Reigns, the Treasury Slows Its Printing Presses

  June Retail Sales Get Lift from Bargains

  Berkshire Is in Group Bidding on Citi Unit

  JPMorgan, BofA Said to Near Foreclosure Deal

  The Murdoch Style, Under Pressure

  Costco June Same-store Sales Up 14%, Beat Poll

  Jeff Miller: What Investors Need to Know About the Debt Ceiling Debate

  Joshua Brown: The Return of Korporate Kindergarten

  Stone Street: 4 Week Goose Eggs, Again

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• Dividends Up by 11%
  Eddy Elfenbein, July 6th, 2011 at 2:56 pm

  From David Berman at the Globe and Mail:

  Dividends are going up, up, up. According to the latest report from Standard & Poor’s, the number of U.S. companies that boosted their dividends in the second quarter, which ended last week, rose to 444. That’s up from 335 raises in the second quarter of last year, among the 7,000 companies that report such information. Just 21 companies decreased their dividend payouts, down from 34 cuts last year.

  The number of increases means that investors are receiving bigger dividend streams, of course, with average yield for dividend payers rising to 2.51 per cent at the end of the second quarter, up from 2.39 per cent at the end of the first quarter. “If dividends were a paycheque, dividend investors would have received an 11.1 per cent raise in the first half of 2011,” said Howard Silverblatt, senior index analyst at S&P Indices, in a note.

  He expects more dividend increases throughout the rest of the year, but the pace could be slightly lower than in the first half of the year.

  The recent improvements are quite striking. Just two years ago, in the second quarter of 2009, dividends were being chopped at a furious pace by cash-strapped U.S. companies. Back then, there were 250 dividend decreases, outnumbering the 233 increases. Still, today’s levels still don’t quite measure up to the second quarter of 2007, before the onslaught of the financial crisis. Then, there were 542 dividend increases during the quarter, versus just 18 decreases.

• Morning News: July 6, 2011
  Eddy Elfenbein, July 6th, 2011 at 7:40 am

  Greek Finance Minister Moves From Crisis to Crisis

  China Raises Rates to Counter Fastest Inflation Since 2008

  Portugal’s Debt Rating Cut to Junk by Moody’s

  W.T.O. Says Chinese Restrictions on Raw Materials Break Rules

  German Factory Orders Rise on Domestic Demand

  Currency Wars Not Over, Says Brazil

  Oil Prices Mixed As Market Looks For Direction

  How America Ceded Capitalism’s Bastion to German Boerse

  Banks Chafe at Pay Clawbacks in Liquidation Plan

  Big Business Leaves Deficit to Politicians

  U.S. Farmland Boom May Peak on Rates After Five-Year Surge, Rabobank Says

  Microsoft, Baidu to Expand Web-Search Partnership in China

  Zuckerberg Finds Fans on Google+

  Deal Makers Soak Up Sun Valley

  Todd Sullivan: “Davidson” on Employment

  Howard Lindzon: Rethinking Anonymity

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• Consumer Discretionaries Hit All-Time High
  Eddy Elfenbein, July 5th, 2011 at 1:18 pm

  Even though the S&P 500 is still well below its all-time high from October 2007, some parts of the underlying market have been doing well.

  On Friday, the Consumer Discretionary Sector closed at an all-time high. The Consumer Staples sector is just below the all-time high it reached in May. (By the way, I also think it’s interesting that the Staples, Discretionaries and Industrials all closed at nearly the same level on Friday — 325.077, 324.157 and 327.472.)

  Most surprisingly, the Healthcare sector closed on Friday within 6.5% of the all-time high it reached in December 2000. The sector has been a money-loser for 10-1/2 years.

  The Tech, Telecom and Financials sectors are still close to 60% below their all-time highs.

  

• June ISM = 55.3
  Eddy Elfenbein, July 5th, 2011 at 9:46 am

  On Friday, the ISM Index for June came in at 55.3. This is an important report because the number for May came in at a surprisingly weak 53.5. Until then, the numbers had been running around 60.

  Unlike a lot of economic reports, I like to follow the ISM because it has a pretty good track record of telling us if we’re in a recession or not. Historically, whenever the ISM is below 45, the odds that the economy is receding are very high.

  

• Morning News: July 5, 2011
  Eddy Elfenbein, July 5th, 2011 at 7:47 am

  Eurozone Banks to Meet on Greek Debt

  Europe Faces Tough Road on Effort to Ease Greek Debt

  Chinese Local Debt Understated by $540 Billion: Moody’s

  Osaka Securities Exchange Jumps on Report of Takeover Bid by Tokyo Bourse

  Argentina Hopes for a Big Payoff in Its Shale Oil Field Discovery

  EU Sees Delays in Derivatives, Short-selling Rules

  European Retail Sales Declined 1.1% in May

  Gold Climbs as Risk Aversion Picks Up

  Oil Halts Two-Day Drop in London; Barclays Raises 2012 Brent, WTI Forecast

  Treasuries Triple Global Returns as Dealers Predict Decline

  An Agency Builder, but Not Yet Its Leader

  Energy Transfer Raises Southern Union Bid to $5.1 Billion

  GM China Sales Hit All-Time Record In 1H At 1.27 Mln Units

  Microsoft to Partner With China’s Leading Search Engine

  Jeff Miller: Weighing the Week Ahead: From One Crisis to Another

  Josh Brown: Four Pebbles in the Recovery’s Shoe

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• RIP: Archduke Otto von Habsburg
  Eddy Elfenbein, July 4th, 2011 at 5:21 pm

  Archduke Otto von Habsburg has passed away at the age of 98. Talk about a person from another time! To him, the events of World War I were personal.

  His father was Emperor Franz Josef’s great-nephew. When Archduke Franz Ferdinand was shot in 1914, Otto’s father became next in line. Then the war started and Franz Josef died in 1916 after 68 years on the throne. That made Otto’s father the new top dog, Emperor Charles I.

  After the war, Charles gave up the Emperor biz but never technically abdicated. He died in 1922 and from that day until earlier today, Otto has been the pretender to the Austrian crown.

  Within that neatly closed circle lay all the major political dramas of the 20th century, most of which he witnessed and some of which he influenced. He was centre stage for one of them — the unequal struggle against Hitler for the survival of his Austrian homeland, which he tried to conduct as an exiled Pretender in the 1930s. Not for nothing did the Führer call the triumphant march-in of March 12 1938 “Operation Otto”.

  All that seemed unimaginable to the world in which young Otto, as he was known, started life during the deceptively tranquil Indian summer of the 650-year-old Habsburg monarchy. He was born third in line to the throne on November 12, 1912 in the small Vienna palace of Hetzendorf and christened with a string of names demonstrating that the blood of all the Roman Catholic royal families of Europe flowed in his veins: Franz Josef Otto Robert Maria Anton Karl Max Heinrich Sixtus Xavier Felix Renatus Ludwig Gaetan Pius Ignatius.

  His father, the Archduke Karl, was a great-nephew of the ruling Emperor Franz Josef, and was then serving as an infantry major-commander at the regimental barracks in the capital. His mother was the former Princess Zita of Bourbon-Parma, and their marriage the year before had been that rare event in a dynasty plagued with so many matrimonial mishaps and misalliances — a happy union of two people perfectly matched in attractiveness, temperament and lineage. Their firstborn was to follow the prescription almost to the letter in his own marriage 38 years later.

  At the time of his birth, the 11-nation monarchy still seemed safe, if somewhat wobbly, and his own time at its helm still fairly distant. One Viennese newspaper hailed the newborn prince as the future monarch who “according to the human calculations, will be called upon to steer the future of Europe in the last quarter of the 20th century”.

  The assassination at Sarajevo on June 28, 1914 of the heir apparent, Archduke Franz Ferdinand, alongside his morganatic wife, put a brusque end to all such calculations. Indeed, the First World War which broke out six weeks later was to spell the doom of Europe’s continental empires, that of the Habsburgs included.

  Half way through the war, in the early hours of November 22, 1916, the old emperor Franz Josef, who had ruled for a record-breaking 68 years, died at last.

  An era, as well as a reign, was over, but the succession was smooth. Otto’s father automatically became the new emperor, and he, aged four, the new Crown Prince. His first ceremonial appearance came on November 30, 1916 when he walked, a tiny figure in a white fur-trimmed tunic, between his parents behind the hearse of the late ruler at the great funeral procession in the capital.

  A month later he was greeted with wild enthusiasm by the monarchy’s Magyar subjects when his father was crowned in Budapest as the new King of Hungary. The official photograph shows the young boy, dressed in ermine and velvet with a great white feather in his cap, sitting between his parents in their ornate coronation robes.

  He always retained vague memories of those events, but these became much sharper when, two years later, the monarchy collapsed under the combined pressure of domestic upheaval and defeat on the battlefield.

  The beginning of November 1918 saw him and his siblings stranded in a royal shooting lodge near Budapest, where an armed revolution had broken out. They were rescued by one of their Bourbon uncles, Prince René, who smuggled them across the border to rejoin their parents in the Schonbrunn Palace of Vienna. Otto had a child’s eye view of the collapse of the monarchy, abandoned by the aristocracy it had created.

  On November 11, 1918 the Emperor Karl, though not formally abdicating, “renounced participation in the affairs of state”. That same night they fled the deserted palace, heading at first for Eckartsau, their privately owned shooting lodge 40 miles north-east of the capital.

  The winter there passed fairly calmly, but by the spring their tiny self-styled “court” was under threat from Left-wing agitators. (Austria had promptly declared itself a Republic after their flight from Vienna.)

  Their rescuer now was not a family member but a British Army officer — Lieutenant-Colonel Edward Strutt, dispatched on the personal authority of King George V with orders to escort the beleaguered Austrian emperor and his family to safety. This Strutt accomplished in some style, reassembling their royal train for the journey into Switzerland on March 25 1919. Otto never forgot the experience. Whenever he heard in later life complaints about British indifference to the Habsburgs’ fate he would reply: “Yes, but there was always Strutt.”

  The two and a half years of their Swiss exile were marked by the two attempts of the ex-Emperor to regain his Hungarian crown. Both were blocked in Budapest by Miklos Horthy, who had now ensconced himself in power as Regent. After the ignominious failure of the second restoration bid the family were exiled by the allied powers to Madeira, where Karl died, a broken man, on April 1 1922. That same day the nine-year-old Otto heard himself addressed as “Your Majesty” by the tiny household-in-exile. To the end of his days he remembered the shock it gave him: “Now it was my turn.”

  Under the protection of their kinsman, King Alfonso XIII of Spain, the family moved to Lequeitio on the Spanish Basque coast. Otto remembered the seven years they spent there as their most tranquil time of exile. They were also, for him, the most hardworking. Under the strict supervision of his mother he took, under various tutors, the Matura (roughly, English A-levels) in both German and Hungarian. His further education was also the motive for their next move — to the gloomy castle of Hams at Steenokkerzeel, in Belgium, so that Otto could take his degree at the nearby university of Louvain. It was at Hams that Otto reached his 18th birthday and was duly declared, in a family ceremony with few outside guests, “in his own right sovereign and head of the house”.

  However ghostly that title appeared, it was enough to impress the Austrian-born Adolf Hitler, who was manoeuvring to seize power in Germany. When in the winter of 1931-32 the young Pretender spent a few months studying in Berlin Hitler twice suggested a meeting.

  The first invitation came from Prince August Wilhelm of Prussia, the dim-witted Nazi son of the exiled Kaiser, and the second via Goering himself. Otto refused both times on the spurious excuse that he had not come to Berlin to discuss politics (in fact, he was doing nothing but). Hitler was incensed by the snub and it touched off a six-year battle between the two men for the fate of their Austrian homeland.

  The climax was reached in February and March of 1938 when a Nazi takeover in Vienna seemed imminent, prompting a short-lived show of defiance from the Austrian Chancellor Kurt Schuschnigg — a monarchist at heart but without the strength of his convictions. His vacillation prompted a remarkably courageous offer from the young Pretender to return from exile to take over the reins of government in order to repel Hitler. Schuschnigg dithered but eventually rejected the idea — perhaps just as well for Otto, who was already high on the Gestapo’s wanted list.

  He had moved close to the top of that list by the time, two years after the Anschluss, that German armies swept into France and Belgium. The exiled Habsburgs got away from Hams only a few hours before Goering’s bombers attacked the castle, and then they joined the vast stream of refugees heading south. They eventually reached Lisbon, where they were still being hounded by the Gestapo. President Roosevelt (whom Otto had met in Washington just before the fall of France) then honoured his offer of “hospitality in an emergency” and they were all flown by Clipper seaplane to the United States.

  As Otto von Habsburg later admitted, he wasted far too much energy during those wartime years in America on the faction-fighting among Austrian refugee groups instead of concentrating on the broader political picture. But, thanks largely to his personal ties with the President, he was able to repair the image of Austria so tarnished by its supine surrender to Hitler in the Anschluss. And, in the last months of the war, he worked closely with the White House in the vain attempt to lure Horthyite Hungary over to the Allied side.

  Churchill, whom he met at the Quebec Conference, warmly supported the vision of a post-war conservative federation in Central Europe. Stalin put paid to those visions, however, and it was to a Communist-controlled Danube Basin that Otto returned in the spring of 1945.

  He made a brief foray into Western Austria but was expelled by the reborn Austrian Republic, which had reaffirmed the anti-Habsburg legislation of 1919. He then faced a personal crisis — without a valid passport, a home or any regular income. He solved the last problem by embarking on a career as a journalist and public lecturer. This was exhausting but highly remunerative and, within five years, he had paid off all his wartime debts and was enjoying a comfortable income.

  He could now think of finding a home and founding a family. The ideal partner appeared by chance in 1950, when he visited a refugee centre near Munich. Working there as a nurse was Princess Regina of Sachsen-Meiningen, herself a refugee whose father, Duke George III, had died in a Soviet concentration camp. The ideally-matched couple were married a year later and settled in a comfortable villa at Pocking, near Lake Starnberg in Bavaria. Their first five children were all girls, and it was not until 1961 that the birth of Karl Thomas, the first of two sons, assured the line of direct succession.

  This prompted Otto to renounce his own dynastic claims and pursue what had long fascinated him, a full-time career in politics. He acquired dual German-Austrian nationality, and in 1979 was elected to the European Parliament as Christian Democrat member for North Bavaria. There he stayed for the next 20 years, becoming the highly regarded Father of the House and its only member to have been born before the First World War.

  He proved an accomplished debater with a fluent command of seven European languages. Though he spoke on a variety of topics, his abiding theme was the need to bridge the East-West division of the continent and ultimately to bring all the nations of the old monarchy within the new European Union. He continued to work successfully at this even after his retirement, using the pan-European movement as his principal platform. He had been the president ever since the death of its founder, Count Coudenhove-Kalergi, in 1972.

  On October 3, 2004, Pope John Paul II beatified Otto’s father, Emperor Karl. It was an important event in Otto von Habsburg’s life, and one that perhaps softened the blow that had occurred five years earlier.

  He had hoped that his son Karl would carry on the Habsburg name in the European Parliament, but in 1999 the young archduke — who had been sitting alongside his famous father as a Right-wing member for Western Austria — was dropped by his party after a controversy over the financing of his campaign funds. A subsequent attempt to launch Karl on to the Austrian domestic political scene proved a dire, if gallant, failure.

  Otto von Habsburg’s wife, the Archduchess Regina, died in February 2010.

• Morning News: July 4, 2011
  Eddy Elfenbein, July 4th, 2011 at 7:39 am

  EU Rescue Effort May Prompt S&P Default Rating on Greece

  Hedge Funds Seeking Gains in Greek Crisis

  Greece’s Bailout Faces German Court Scrutiny

  Bank of Japan Report Signals Recovery

  Carrefour Approves Brazil Merger Amid Casino Battle

  Spanish Registered Unemployment Falls as Tourist Industry Grows

  Peabody, China, Russia Teams Chosen in Mongolia Mine Bid

  Gold Gains on Buying After Drop to Lowest Price in Six Weeks, Lower Dollar

  Carmakers and White House Haggling Over Mileage Rules

  Nestlé in Acquisition Talks With China’s Biggest Confectioner

  McDonald’s UAE in Venture to Make Biodiesel From Cooking Oil

  VW Takes Majority Stake in Truckmaker MAN

  James Altucher: July 4th is a Scam

  Brian Shannon: Stock Trading Ideas for 7/5/11

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