The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

During the seemingly endless runup to the compromise agreement on taxes that appears to be a done deal, the rhetoric from some corners sounded generally like this (emphasis mine):

“…the Democrats’ tax hike would force job creators to cut back or eliminate employee benefits, switch full-time jobs to part-time, and replace end of the year raises and bonuses with pay cuts, layoffs, or relocating to countries with lower tax and regulatory burdens.

“These are serious decisions that face our job creators as a direct result of the failure to prevent massive tax hikes.

“At a time when our economy is struggling to recover, why would we raise taxes on anyone who could create a job?  Why would we, even partially, want to impede our nation’s path to economic recovery?”

The refrain that “no one ever got a job from a poor person” has been an ever-present argument that tax cuts for the wealthy must be extended.

Now, the “wealthy,” the “job creators” – however one defines that term — got Bush tax cuts in 2001 and 2003 and subsequently produced what can only be described as tepid job growth.  In July 2003, private sector employment was 108.231 million, its trough under Bush.  53 months later — in December 2007 — it peaked at 115.574 million (~140k/month on average, barely sufficient to keep up with new entrants into the labor market).  That’s an average annual growth rate of 1.5%, compared to a rate over the past 72 years of 2.0% (and don’t even ask about the Clinton era).

So, for those who have trumpeted maintaining the status quo on taxes for higher-income “job creators,” I express my sincere hope that we start to see some 250k+ NFP prints, as the shoe is now on the other foot.

The ball is in your court — let’s get those “job creators” cranking . . .

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Back on the Kudlow Report at 7:00 pm this evening with Jim Rogers . We are discussing the Markets, the Fed, the new Tax Deal, and Jimmie’s favorite asset class Commodities.

My takeaway:

• Tax deal on top of the QE2 is a positive for the economy, adding potentially $900B over 2 years

• As far as Equities are concerned, it is a short term net positive; Same for Commodities.

• One would imagine this would be dollar negative, but given the woes in Europe, perhaps not so much.
• This could lead to the final gasp of the great Bond bull market that began in 1982;

• Ultimately, this is likely to end with a significant pain across all asset classes.

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Video is posted here.

The Bureau of Labor Statistics just released its most recent Job Openings and Labor Turnover (JOLTS) data, and the number of job openings increased to 3.4 million (from 3.0 million last month; it was a gain of +351k openings, to be precise).  Consequently, the number of unemployed per job opening has declined from 6.25 (Oct. 2009, which was the cycle peak) to a current 4.41.  This is a positive development (as noted by the BLS headline:  Job openings in October highest since August 2008) , but there is still much more work to be done.

For those who relish the chart porn (and who doesn’t?), here are a couple of graphs that get to the heart of the matter (all data via BLS.gov):

Sadly, while the chart above reflects some improvement in the labor market, it would appear that improvement is coming almost entirely from an increase in the number of job openings (denominator) and not a decrease in the number of unemployed (as we see month after month via the BLS Household Survey).  That picture is captured below, in which I plot the number of unemployed against the number of job openings (referred to as the Beveridge Curve, though that generally references the job vacancy rate and unemployment rate):

The place to be in the chart above is the upper left quadrant (i.e. jobs plentiful with few unemployed).  Unfortunately, as the recession took hold, we moved gradually to the lower right quadrant (few job openings and high number of unemployed).  While our line now appears to be moving higher, we need to see it also move to the left, signifying a decline in the number of unemployed, and that’s not happening (yet).

2003-05 vs 2009-10

click for bigger graphs

chart via Bloomberg

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Bloomberg’s chart of the day discusses the 2003 low/rally with  a few strategists comparing the run with the 2009 bottom/rally. The focus for the conversations was whether 2005 made for a good comparison with 2011.

Similarities include an erratic advance in 2003-04 that are somewhat parallel with 2009-10, as well as unusual market leadership.

Where I find major differences is the speed and depth of the drop. In 2008-09, it was across the board, while in 2000-03 was longer and more heavily Nasdaq focused. The context of coming before and after a major global financial crisis is a major differentiator. The snapback has been much sharper as well:

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My preferred analogy this entire run has been 1973-74 markets. It is far more analogous:
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1974 versus 2009 Bottoms

graph via The Chart Store

Two firms I have more than a passing relationship — Yahoo Finance and StockTwits — have formally announced a deal to place the curated StockTwit content directly onto Yahoo Finance. (I am a regular on Yahoo Finance, and FusionIQ offers several products in the stock twits marketplace).

Lets use Google as an example of what happens if you punch up any stock in Yahoo Finance. The left hand margin has a new entry called “Market pulse.” Select that and you pull a stream of all the comments from StockTwits that have the symbol GOOG in it. These include user generated charts, commentary, analysis and research — live and in real time.

This is a game changer versus the prior versions of online stock discussions. Three factors make this an enormous improvement over the static message boards of olde:

1) Social Network for Stocks: Stocktwits has all of the features of Twitter — you can see how many followers a person has, who they follow, how many tweets, etc. Hence, this introduces a “Wisdom of Crowds” factor into the previously anonymous, unreliable stock commentary.

2) Curated Messages: Much of the usual nonsense of stock comments — touts, pump-and-dump-ers, trolls, etc. have been removed. What you left with is a stream of honest commentary. Its the internet equivalent of peer review.

3) Embeddable Charts, Video: Chart.ly is a division of Stocktwits, and it has an incredibly user friendly technology that allows the easy sharing of charts and screencasts.

The bottom line is that StockTwits is a powerful platform that can b a disruptive technology. It has the potential to upend online stock discussions.

It may even help to identify the next generation of emerging analysts and fund managers.

I was speaking to Pete, my head trader yesterday. I asked him if he thought traders would jump on any tax deal. His answer? Only if people traders are foolish.

Turns out we have both a deal and a rollicking response from the traders.

The deal:

• Extend all Bush income tax cuts for two years
• Reduce worker payroll taxes for one year (4.2% in 2011, from the current 6.2% rate)
• More favorable treatment to business investments
• Temporary reinstatement of the estate tax at 35%; 5 million estates and under exempt from estate tax
• Extension of jobless benefits for the long-term unemployed.

The response:

Stocks rose, copper (+2.8%) and gold (+1%) climbed to all-time highs. Treasuries fell. The Dollar Index slipped. Bloomberg reported US actions are “offsetting concern that Europe’s debt crisis will spread further.” European stocks gained 1.2%.

Across the pond, the EU is about to formally approve Ireland’s bailout (no word on Portugal or Spain).

The year end melt up continues. I suspect we have just taken a major step towards suckering in mom and pop — leading us ever closer to that elusive denouement.

Its a fair guess that any top has been pushed deeper into 2011 . . .

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click for updated Futures

Okay, I’ll admit it: I am a bit of a shopper.

I enjoy finding items, gadgets, books, etc. Not just high end items, but products that are fun, well designed, interesting or unusual.

If you have people on your list who are tough to shop for, here are some suggestions from me to you. (We did a few of these last year and they were well received. I can continue to post my favorite eclectic oddities if the crowd likes.)

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• Great Summit: The Master Takes: Duke Ellington, Louis Armstrong: (1961) One of the all time great jazz recordings.

An overlooked gem, even by fans of Duke and Satchmo. This is one of my favorite jazz recordings.

($8.99)

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• Capresso 465.05 10-Cup Coffeemaker with Conical Burr Grinder and Thermal Carafe: The first thing I did after we renovated our kitchen (plaster dust was still in the air)  was order this coffee maker.

This is the upgrade to the Capresso 455, which longtime readers might recall as the antidote to our infamous “Your coffee sucks!” post.

($212.36 )

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• Californication: The Third Season: Californication has become my favorite premium cable series, and the first 2 seasons were brilliantly written, slyly acted, and surprisingly funny.

If you don’t anyone who you can give this to as a gift, you can stream it for free on Netflix. (You’ll thank me)

$28

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• Billy Jealousy White Knight Gentle Daily Facial Cleanser: On a trip to Dallas, I stayed at the hotel Zaza. In the bath room, I found these samples of various Billy Jealousy men’s products — shave cream, shampoo, etc., but the stand out was the Gentle Daily Facial Cleanser.

For the metrosexual on your gift list

($20).
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• Bee: Melding art and science, photographer Rose-Lynn Fisher puts the electron microscope images to use to reveal the microscopic majesty of these natural wonders.

BEE presents sixty astonishing photographs of honeybee anatomy in magnifications ranging from 10x to 5000x.

Fisher’s photographs uncover the strange beauty of the honeybee’s pattern, form, and structure

Discover Magazine: “The bee is ready for its close-up. Remarkable”

($19.77)

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• Lords of Finance: The Bankers Who Broke the World: This may be my favorite book of the financial crisis — of 1929. It tells the history of the great depression through the tale of 4 central bankers in the US, UK, Germany and France. Pulitzer prize winner.

(paperback is $12.24)

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• Gnome Be Gone! My wife loves these whimsical sculptures, (it was a a birthday present this year). They are simple yet charming, and come performing in a variety of mischievous activities

Prices range from $29 -139.

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• Etón SCORPION NSP100OR: This Solar or hand cranked LED flashlight has a digital weather radio has AM/FM/NOAA Weather Band, can play music from your iPod, and recharge virtually any cellphone via its USB phone charger. (Bigger version with siren: ARCFR600R)

The perfect gift for your favorite survivalist! ($50)

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Previously:
Snowbound Shopping (December 20th, 2009)

Last Minute Shopping Ideas (December 22nd, 2009)

Yes Virginia, Gift Cards Do Suck . . . (December 17th, 2009)

I was surprised to notice this morning that most of my new Instapaper articles were long form NYT piece. I enjoy reading the long pieces on a lazy Sunday, but I was running around all weekend and didn’t get to it.

Thus, today’s meta-curation is a special NYT edition:

• 10 Questions for Austan Goolsbee (The Caucus)

• Roger Lowenstein in the Magazine section: Jamie Dimon: America’s Least-Hated Banker

• Mounting Debts by States Stoke Fears of Crisis  (Front Page, Sunday Dec 5)

• Destination: LAPTOPISTAN: Where creative laborers can toil in solitude, together. Just don’t talk to your neighbor. (Metropolitan)

• 100 Notable Books of 2010 (Sunday Book Review)

• The Anosognosic’s Dilemma: Something’s Wrong but You’ll Never Know What It Is (Opinionator)

• Mick Without Moss (Style Magazine) Mick Jagger’s stylin’.

What’s on your iPad?

As I tweeted earlier — God, I hate that phrase — Timmy (aka Treasury Secretary Tim Geithner), is now tweeting AND blogging.

The Blog is called “Treasury Notes” (Get it? Notes? Its a LOL-pun!) and it promises to be updated regularly.

As someone who has been blogging for a decade or so, I have a few (Heh heh) suggestions for the Treasury Secretary:

1. Bring in Guest Posters: You have access to a variety of econ insiders. Bring on the occasional guests, like Austan Goolsbee, and Ben Bernanke. They might provide a different take. (plus, they can cover the blog you while you are on vacation!).

2. Personalize It: Skip the dry econo-junk and give us some of your personality — likes, dislikes, etc. I don’t expect Friday Night Jazz, but toss some flavah into it.

3. Allow (moderated) comments: Wanna learn what the public thinks? Allow comments. But not just any comments — the unwashed masses are, well, unwashed. This means you must be a little selective. Make readers register, and screen out the obvious loons. Once you eliminate the demented crazies, gold bugs, and ZH readers, you will be left with some interesting feedback from the public.

4. Blog Roll: All bloggers have a list of favorite sites, you should too (i.e., St. Louis Fed and Recovery.gov). Keep it short, and make sure  LOLFed is part of your blog roll.

5.  Tweeting:  Less is more. Only tweet when you have something to say. Keep it relevant. Also, be sure to add the double-dollar sign (“$$”) so your tweets appear in the StockTwit stream.

6. Post regularly:  A blog that is not updated frequently isn’t really a blog. Give us at least a daily insight — No press releases! — into what you are  thinking about.

7.  Syndication: Don’t even think about spreading your content out. Cross posting on Seeking Alpha, Huff Po, etc. only works for those bloggers with zero visibility. You have a persona; what little traffic you’ll get is not worth diluting your brand.

Click below for the blog.

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Treasury Notes

This chart below comes from the weekly slide deck (December 1, 2010) of Bianco Research (which is “must reading” around here).

I cannot recall ever seeing a chart that put the deficit into such crisp context. (The one variable I’d like to control for is Federal govt as a percentage of GDP).

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Surplus/Deficit As A Percentage Of GNP/GDP

click for ginormous chart

Chart courtesy of Jim Bianco