Stocks Lower Because … They Just Are, Dammit!

The Dow Jones Industrial Average (DJIA) is down for the third straight day. News outlets that have to attribute it to something attribute it to “global tension,” which does appear to be running a bit higher than usual. But the entire exercise of watching an index from one day to the next is a bit silly from the start.

A more interesting question asked by some commentators is, “Does this mean that the bull market is over?” The short answer is no, it doesn’t, but not for the reasons that most people think. The reality is that we have been in a secular (or long term) bear market since 2000, roughly the start of what we call a “Managed Depression,” and this small correction is nothing but a regression to the mean that proves it.

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Greed Beats Fear – For Now

The the sun beats out beads of sweat and the kids laze at home without school to worry about. It’s summer, the season of loafing. Typically this is the time of year when there’s work to be done and jobs are plentiful but the stock market takes a gentle pause.

Not last year, and not this year. The stock market is hitting new highs as investors find US securities the safest and most promising investment on the planet. But just like last year, the pace of job growth is still not accelerating beyond the roughly 190k jobs created every month. It’s a decent pace, but not what we need to claw out way out of the six year hole and bring back the boom. Barataria called that one completely wrong.

It’s past time to get serious about income inequality – or really the lack of opportunity for those who don’t have money to invest.

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Whither, Twitter?

The question always comes up in about the same way whenever I have a new client seeking social media advice.

Client: “I don’t get Twitter. Can you explain it to me?”
Me: “It’s like a personalized news ticker and public chatroom.”
Client: “That’s it? That’s all there is to it? Why is there all the hype?”

At this point, we have less dialogue and more handwaving. People who aren’t on twitter already don’t “get it” and will probably never become users. That’s reflected in their falling growth rate, down to 4% each quarter. And it’s starting to show up in their stock price now that the six month lockup period is over, allowing insiders a chance to sell. It’s below $33 a share, down 25% from the first day of the IPO last November. It’s worth about $19B total, about the same as Facebook’s tab to buy WhatsApp.

Is Twitter dead? No, MySpace and AOL are still around – but that’s where it’s headed at this rate.

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Summertime Party! (For Now)

The US government ran a surplus in June!  Stocks are at all-time highs!  The party is starting in a big way in the normally lazy daze of summer.  Are you ready to join it?

Not so fast.  Barataria has been a source for positive economic news for at least a year now, but it’s always been tempered with caution.  Things are turning around, yes, but the headlines hide the work that still needs to be done to make this into something much bigger.   It’s up to all of us, really, to find a way to make it happen.

But we do have a party, at least as long as Ben Bernanke is buying.  He’s a fun guy, really.

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Buy in May, Let it Play?

It’s May Day, and it’s more than the traditional first day of (real) Spring and the worker’s holiday.  It’s also the day that the old stock market adage “Sell in May and go away” kicks in.  Why is that?  It’s hard to say exactly why, but Wall Street traditionally takes a long summer break.  The S&P 500 since 1928 has risen on average 1.83% from May to October, but 4.98% from November through April.  The summer is also a period of high volatility and danger, so smart investors often skip the warm seasons.

Not this year.  The huge rise of 9.3% in the S&P 500 so far in 2013 might be enough to scare some people into profit-taking, getting out while the getting is good, but many advisers say you should stay in this year.  That includes Nouriel Roubini, better known as Dr. Doom, the New York University Econ prof who famously predicted the housing crash.  The faith in the stock market is impressive, but is it realistic?

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Banking (and Insurance) Should Be Boring

Man Behind Desk:  “Mr. Brain, As you know, we here at Fiero & Company are re-re-insurers.    We provide insurance to re-insurers, who insure insurance companies.”
Brain:  “Is that lucrative?”
Man:  “Take a look.” (opens drawer)
Brain:  (big eyed smile) “Ahem!”
- Pinky and the Brain, S1E2, “Of Mice and Man

One of the basic principles of Barataria is that “Banking should be boring”.  The main argument against financial regulation is that it stifles innovation.  Yet that hallmark of the 2000s has been the source of excessive risk and nearly all the trouble we find ourselves in today.  When banking is boring, the world is quiet and stable and those of us not in financial dealings have a decent chance of actually getting ahead.

The same is true of insurance.  That’s not only true as a matter of policy, it’s apparently true as a matter of making a lot of dough.

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Forbidden Fruit?

How can a company have too much money?  If you believe hedge fund manager David Einhorn, Apple certainly does.  Many in the tech industry “view their self-importance by the size of bank accounts,” according to this Apple investor, and he’s aggressively promoting a unique way of distributing the $137B Apple cash reserve to shareholders ahead of the company’s annual meeting on 27 February.

While Apple’s attitude is on trial – in the courts, the stock market, and the media – it’s hardly an unusual position for a technology driven manufacturing company.  What is unusual is how Einhorn is approaching that pile of cash and how it is distributed.  This may be more evidence that the days of corporate raiders as we know them are over and a potential new golden era for tech companies is ahead.

Right now we still have a fight to finish before anyone can claim victory.

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