Chanos on the Shorts
Jim Chanos on the economy, debt, the Fed and the stock market. Sounds like the World is a short….
Groupon faaaading
Meanwhile;
Our post from the 3rd of June. This time it is different. Like the old Einstein said, “only thing greater than the universe, is the stupidity of people”. LinkedIn at 1000 P/E and now everybody making bargains shopping on Groupon. This time it is really different, or?
Some points of why you should buy the stock, according to the Groupon CEO, ANDREW MASON;
We are always reinventing ourselves.
In our early days, each Groupon market featured only one deal per day. The model was built around our limitations: We had a tiny community of customers and merchants.
As we grew, we ran into the opposite problem. Overwhelming demand from merchants, with nine-month waiting lists in some markets, left merchant demand unfilled and contributed to hundreds of Groupon clones springing up around the world. And our customer base grew so large that many of our merchants had an entirely new problem: Struggling with too many customers instead of too few.
From weak to weaker as central banks can’t stimulate the Economy-Stiglitz
Stiglitz on the Recession, Fiscal Policies and Debt problems. From Bloomberg video;
Remember Napier, and how we got into this mess?
We won’t bother you by bashing out the sell argument further, as the market is reaching some short term support levels a little lower. The long term picture sure does not look too rosy. One of the people having been spot on is Napier. Although somewhat “extremely” bearish (SPX to reach 400) , Napier’s arguments are still valid. From his book, “Anatomy of the Bear, lessons from Wall Street’s Four Great Bottoms;”
The debt cycle will end when the world realizes that the US government is a terrible credit risk. This is the most likely catalyst to reduce equities to a 70% discount to the replacement value of their assets (the valuation that marked the bottom in the previous bottoms of US equities through history). It will be then that you should re-read this book, as great fortunes will be made by investing in very cheap US assets. Until then you should be wary of equities, unless you feel comfortable investing in bear market rallies, and you should be terrified of Treasuries.
Classic video below.
If you wonder why we got into this mess, here is a great summary by Forbes.
Christmas Property Sale-down 83% from peak levels
Europe has its own property collapse, although not too many talk about it. The super hot market in Ireland, is totally imploding. We have argued for the mainly Spanish property market to resume the implosion, as there simply are too many empty houses, and land to build on for the next 40-50 years. With unemployment spiking further, the property economies of Europe are facing the same future, as some of the worst hit areas in the US. Today we get a true story of what is happening in Dublin. From the Independent in Ireland;
Global PMIs breaking down
One chart tells it all. This is what Contraction looks like. Just breaking the support levels.
GDP-get the consumer back
With the GDP falling, the consumer needs to come back asap. From D Short;
Over the time frame of this chart, the Personal Consumption Expenditures (PCE) component has shown the most consistent correlation with real GDP itself. When PCE has been positive, GDP has been positive, and vice versa. PCE in the latest update came at 1.63 of the 2.0 real GDP. However, the 1.63 is a downward revision from the Advance Estimate of 1.72.
For a long-term view of the role of personal consumption in GDP and how it has increased over time, here is a snapshot of the PCE-to-GDP ratio since the inception of quarterly GDP in 1947. Full charts below.
China slows-back to the drawing table
Many have forgotten, China is supposed to bail out the World, but something else is happening. It seems growth will return as the main obsession for the Chinese rulers. Back to the drawing board and start painting those perfectly decoupled 8-9% growth rates, irrespective of what is going on in the World. Flash PMI out of China suggests trouble ahead. What happens when China does not want to buy more debt? From Markit;
• Flash China Manufacturing PMITM at 48.0 (51.0 in October). 32-month low.
• Flash China Manufacturing Output Index at 46.7 (51.4 in October). 32-month low.
More charts below.
News That Matters
Ft.com
Nomura has approached big private equity firms about the possible sale of domestic businesses, including its real estate arm, as the Japanese bank moves to shore up its capital buffers, reports the FT. http://ftalphaville.ft.com/thecut/2011/11/23/759061/nomura-steps-up-its-asset-sale-plans/
The US Federal Reserve is unlikely to ease monetary policy any further until it has settled on a new communication strategy, according to the minutes of its November meeting released on Tuesday, reports the FT. http://ftalphaville.ft.com/thecut/2011/11/23/759041/fed-unlikely-to-institute-qe3-2/
Egypt’s ruling generals have promised to speed up the handover of power to elected civilians but the gesture failed to placate the hundreds of thousands of protesters who have packed Cairo’s Tahrir Square in a replay of the demonstrations that brought down the rule of Hosni Mubarak, http://ftalphaville.ft.com/thecut/2011/11/23/759011/egypt%e2%80%99s-generals-pledge-quick-handover-2/
Goldman Sachs’ planned redevelopment of one of the City of London’s largest unoccupied offices hit a snag on Tuesday after the government granted protected status to murals adorning the front of the building, http://ftalphaville.ft.com/thecut/2011/11/23/758981/goldman-hits-a-wall-over-city-hq-plan/
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