While Spain is imploding, Spain’s richest man is getting richer by the day, now surpassing Buffet’s wealth. Meet this fascinating man, via Bloomberg.
Inside Inditex SA (ITX)’s concrete-and- glass headquarters in the Spanish town of Arteixo, a lithe woman slips into a dress that a seamstress working amid buzzing sewing machines stitched together just minutes earlier. A half circle of designers — looking like models themselves — nod approval.
In weeks, this and hundreds of others creations inspired by pop culture or couture catwalks will fill the company’s more than 1,600 Zara stores in 85 countries on six continents. Since opening the first shop in his seaside home of La Coruna in 1975, billionaire founder Amancio Ortega has built the world’s largest clothing retailer — and a fortune exceeding Warren Buffett’s, Bloomberg Markets magazine reports in its December cover package.
We have all been reassured that the German Gold is in safe hands, at least judging by the shiny pictures presented. Here is Spiegel’s take on Germany’s golden bars.
There, 6,000 gold bars are stacked on industrial-strength shelves in a purpose-built building in Frankfurt. An additional 76,000 bars of bullion are stored in four safe boxes, in sealed containers.
But even this personal inspection wasn’t enough to reassure the visiting member of parliament — on the contrary: “The Bundesbank monitors its domestic gold in an exemplary fashion,” Gauweiler says, “and this makes it all the more incomprehensible that the bank doesn’t look after its reserves abroad.”
Market comments by Hussman of Hussman Funds.
In recent weeks, market conditions have fallen into a cluster of historical instances that have been associated with average market losses approaching -50% at an annualized rate. Of course, such conditions don’t generally persist for more than several weeks – the general outcome is a hard initial decline and then a transition to a less severe average rate of market weakness (the word “average” is important as the individual outcomes certainly aren’t uniformly negative on a week-to-week basis). Last week, our estimates of prospective market return/risk improved slightly, to a level that has historically been associated with market losses at an annualized rate of about -30%. Though that improvement falls into the category of a distinction without a difference, at least we can say that conditions are not the most negative on record.
Over the course of the coming cycle, I expect that we will easily observe conditions among the many favorable clusters in the historical record, where we will not face the syndromes of hostile conditions we’ve seen recently (e.g. overvalued, overbought, overbullish, yields rising). Valuations, though rich, are nowhere near where they were in 2000, and even the tepid valuations of early 2003 provided ample opportunity to accept market risk without the need for significant hedging. Unlike 2009, the next cycle will not unexpectedly present us with the need to capture Depression-era data in our approach (which we’ve addressed). Even without significant undervaluation, there are many combinations of market conditions that have historically been associated with strong subsequent market returns, on average.
So there’s little doubt that market conditions will provide investors with a strong basis to accept risk at various points over the coming market cycle. The difficulty today is not only that valuations are rich, but that on our metrics, present market conditions cluster among those that have produced strikingly negative market outcomes on a blended horizon from 2-weeks to 18-months. Wall Street’s beloved forward-earnings multiples only seem reasonable here because profit margins are the highest in history (largely as a result of steep government deficits and depressed savings rates). Once we normalize for profit margins – which is necessary because stocks are very long-lived assets – valuations are elevated, and are coupled with a variety of historically hostile, overvalued, overbought indicator syndromes. Moreover, while our economic concerns do not significantly feed into our concerns about the equity market, we continue to view the U.S. economy as being in an unrecognized recession that started about mid-year.
Some links with regards to Frankenstorm.
Guest post by Peter Tchir.
From Risk Off to Risk Neutral
Until Friday of last week, we had been in a risk off stance. We had believed that the market was too optimistic about what immediate impact QE would have and that too many had over-estimated how eager Europe was to proceed with new and bigger bailouts. Those all helped our view, but in the end, earnings turned out far worse than most were expecting. The earnings story has been a drag on the market for the first time in recent memory. Even Apple struggled. The outlooks were even gloomier than the actual results.
So why are we switching from Risk Off to Risk Neutral or even Risk On?
First, S&P 1,400 helps. We believe the range on this downside move had been 1,375 to 1,400 so there is still some room lower, but we hit levels that make sense for us to look for a reversal. Then there is Apple. For the first time in a long time, I can see some strength building for Apple. Maybe we will get more profit taking, but given their earnings, the cash on hand, and the magic of round numbers, right around $600 seems like we could see some support and new investors who missed the surge to $700, step in and take a shot. Apple is so large in the Nasdaq, the Nasdaq 100 (QQQ) that it alone can drive the indices. Even the S&P is affected directly and indirectly by Apple.
Guest post by Lance Roberts of Streettalklive.
The Bureau Of Economic Analysis reported that Personal Incomes in September advanced 0.4 percent from August which had increased by only 0.1 percent. More importantly, wages & salaries gained 0.3 percent tacking onto the 0.1 percent increase in August. However, digging down into the report revealed some interesting issues.
The chart below shows the changes to personal income broken down by major subcategories. The most notable change from last month’s report on personal incomes is that is that Government Social Benefits (welfare) jumped from a -1.8 billion dollar decrease in August to an increase of 12.6 billion dollars in September. This increase in social benefits accounted for more than 26% of the latest increase in personal incomes. Also, interesting is that personal dividend income rose less in September than August, presumably from stock liquidations, while personal interest income declined by 12.1 billion dollars again in September.
What is the number one fear concerning investors at the moment? Vix and more provides some fresh facts.
For the second week in a row, investors cited the U.S. fiscal cliff as the top risk to the stock market, followed closely by fears about the European sovereign debt crisis. Concerns about weak earnings, a distant third last week, gained significant ground as Apple (AAPL) and others continued to report disappointing earnings and revenues while guiding future expectations lower.
As was the case last week, geography appears to have a significant influence on results, with a clear Americentric bias coming from U.S.-based respondents. In the U.S., for instance, concerns about the fiscal cliff outpolled the European sovereign debt crisis by 9.5%, but outside of the U.S. the European sovereign debt crisis topped concerns about the fiscal cliff by 8.2%. Similarly, 15.2% of U.S. respondents cited U.S. election uncertainty as the biggest risk to stocks while just 5.5% of non-U.S. respondents judged U.S. elections to be the top risk factor.
Guest post by Eric Sprott and David Baker of Sprott Asset Management.
Other than some obligatory arrests for disorderly conduct, the Occupy Wall Street movement celebrated its one year anniversary this past September with little fanfare. While the movement seems to have lost momentum, at least temporarily, it did succeed in showcasing the growing sense of unease felt among a large segment of the US population – a group the Occupy movement shrewdly referred to as “the 99%”. The 99% means different things to different people, but to us, the 99% represents the US consumer. It represents the majority of Americans who are neither wealthy nor impoverished and whose spending power makes up approximately 71% of the US economy. It is the purchasing power of this massive, amorphous group that drives the US economy forward. The problem, however, is that four years into a so-called recovery, this group is still being financially squeezed from every possible angle, making it very difficult for them to maintain their standard of living, let alone increase their levels of consumption.
One of the central themes that arose out of the Occupy movement was the growing sense of unease among the average American citizen with regard to growing imbalances in wealth within the US. The rich are getting richer while the poor get poorer. That feeling is entirely legitimate. According to the US Census Bureau, in 2011 the median income of US households, adjusted for inflation, fell to $50,054. This is 4.9% below its 2009 level, and 8.9% below its all-time peak of $54,932 in 1999.1 This is not encouraging data. It implies that the average American household is almost 9% poorer today than it was thirteen years ago.
Guest post via Gold Silver Worlds.
We recently wrote The Case For A Higher Gold Price Based On Monetary History, which describes the analogy between the end of Bretton Woods and a potential end of the current hegemony of the US dollar as a reserve currency. Today we present another case in monetary history: Germany in the 20th century. This case is particularly interesting because it’s often cited as a prime example of hyperinflation. The key question in this case is what the root cause was of the hyperinflation and which measure(s) brought the situation back under control. Ultimately, here at GoldSilverWorlds, we are interested in understanding if therey is any link with Gold.
While researching what exactly caused Germany’s hyperinflation of 1923, we’ve found an extremely insightful paper in the scientific directory Citeseerx. The paper is entitled “Germany Monetary History in the First Half of the Twentieth Century” and is written by Robert Hetzel. The document provides an in-depth analysis of Germany’s situation before, during and after the hyperinflationary period. Below are the highlights from the paper; the full version of the document is embedded below.
The hyperinflation had its roots in the World War I. Germany, just like many other countries in the West, gave up the gold standard in 1914 in order to finance the world war. By abandoning its gold standard, a country becomes free to create theoretically unlimited amounts of money, with the only limitation the speed of the printing press. Money creation can serve short term objectives like financing a war, but there are long term effects which can be very nasty and painful mainly for the citizens, making the short term objective unworthy. The quantity of Germany’s monetary base expansion is presented in the chart below (see dotted line). The chart shows as well the rate of inflation. Source: paper page 5.