Author Archive | Michael Rosen

Fairy Tales

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The technology bubble of the late 1990s is a distant memory for most investors, and an ignorance for the rest. But back then, companies were raising huge sums of private capital on business plans made of fairy dust, which is precisely what all that money turned into. Over a span of a little more than a year (4Q 1999 to 4Q 2000), well over $100 billion was funneled to private companies. Very little of it was ever returned to investors. Over this past year, just over $50 billion has been invested in private companies, the most since the bubble era, Read More


Patricia

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It’s another beautiful day in Santa Monica: blue skies, a few high wisps of stratus clouds. But 1500 miles south of here is the strongest hurricane ever recorded in the Western Hemisphere. It will slam into Mexico tonight and will likely continue into Texas in a few days. Patricia is a Category 5 storm, with sustained winds in excess of 200 mph. This morning, the NOAA recorded 880 millibars of pressure, the lowest ever (1013 millibars is “normal” pressure at sea level). The satellite image below looks benign, just another cloud layer, but that’s very deceptive. Patricia is powerful. Experts Read More


I’m Swiss

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No question, this has been a challenging year. Virtually every financial asset class is struggling. Stocks are down, bonds are down, gold is down, oil is down. US is down, non-US is down. Large caps down, small caps down. Industrials, financials, health care: all down. High-grade bonds, low-grade bonds: down. Japan’s economy has flat-lined, Europe rejoices if GDP growth is fractionally above zero, and Chinese passengers should assume the crash position before their economy hard-lands. And in the US, there are a handful of crazy people running for president, some even leading in the polls. Most of the above statements Read More


Ursa Minor

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The bears are stirring. Not yet rampaging, but there’s a lot of red ink across most markets. Today’s jobs report was weak. No honey-coating it, it was a treat for the bears. Payrolls rose 142,000, well below the 200,000 expected, and a jump in government jobs hid a weaker private sector rise of 118,000. July and August were revised lower, so the employment picture weakened substantially in the 3rd quarter. The unemployment rate remained at 5.1%, only because there was a huge (350,000) reduction in the labor force, bringing the labor participation rate to 62.4%, the lowest since 1977. About Read More


Yogi

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Baseball, more than any other sport, by far, has drawn its share of colorful characters. I don’t know why that is, but it is. This week, we lost one of the greatest, maybe the greatest, of all-time, with the passing of Yogi Berra. Yogi was easy to underestimate. He was barely over 5 1/2 feet tall, pudgy (i.e., kind of fat), with a face that looked like a child put together with a play set. His malapropisms were frequent and famous (example: on Yogi Berra Day in his hometown of St. Louis he thanked the crowd for making this day necessary). Read More


Drop (in the bucket)

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Markets will fluctuate, as Pierpont Morgan caustically observed. And “fluctuate” means down as well as up. Perhaps I, too, am being caustically obvious, but I’ve long believed that a broad perspective on markets can often bring more clarity than myopic obsession. It was in 2011 that the S&P 500 Index last fell more than 10%, apparently beyond the memory of many investors who believed these corrections were relegated to ancient history, like buggy whips and handlebar moustaches. Last month the S&P dropped more than 6%, and between 21 May and 25 August of this year, declined 12.4%, ending the 3rd-longest spell (since 1928) Read More


Mauled

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Investors in Emerging Markets could be forgiven for feeling as if they’ve gone 15 rounds with Ronda Rousey (see below).  Or, more like 3 years with the the best pound-for-pound fighter today (she might even give Sugar Ray Robinson, who gets my vote for best of all-time, a contest). It’s been brutal. How brutal, you ask? EM currencies have dropped 30% in the past 3 years, while the US$ has jumped more than 20% (see first graph below). This has translated into an overall 10% decline in EM equities, 40% behind global equities and more than 50% below the return of Read More


Jobs

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Markets have taken today’s employment release as evidence of a weakening jobs market. A mere 173,000 net new jobs were added in August, below the consensus figure of 217,000. But, coincidentally, 44,000 more jobs were added to previous months’ figures. So, you could say we were right on expectations. Clearly, today the markets disagree. The unemployment rate fell to 5.1%, from 5.3%, and the labor participation rate remained at 62.6%, the lowest level since 1977. Baby Boomer retirements (structural) and rising disability rolls (policy—see Graph below—yes, that’s 24 million people) probably account for the bulk of the low participation rate. So, Read More


Picking Up the Pace

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Lost amidst the market turmoil this week were a number of reports of a strengthening US economy. Consumer confidence soared last month, as did new home sales. Durable goods orders surprised with a 2% jump in July, and personal incomes rose, and are up 4.3% over the past twelve months. 2Q GDP was revised sharply higher, from a 2.3% annual growth rate to 3.7%. This pace is above the 3.2% quarterly average over the past 65 years (see Graph below). All major components of GDP were revised higher, indicating broad strength in the economy, with business investment particularly strong. In Read More


Jolt

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Two weeks ago (13 August, No Panic (Yet)) I noted that the renminbi devaluation was officially described as a modest alignment with market forces, which may have been true, but that it was strongly indicative of protracted weakness in China’s economy. I saw no need to panic two weeks ago, but last week would have been more timely; the “(Yet)” part of the title came upon us with a fury. Yesterday, US stocks lost more than 3%, but the intraday move was cumulatively more than 25%, up and down 5,000 Dow points. But US (or European) markets are not the drivers Read More