Archive for August 2013

Weekend Open Thread   4 comments

Just a reminder for my non-U.S. readers, but this is Labor Day weekend in the U.S., so U.S. markets will be closed Monday. I will resume posting on Tuesday.

As you can tell, I am posting everything early today. This is because I will be out of touch for the rest of the weekend. Today, my family and I are heading up to Atlanta for Dragoncon. I will be in geek heaven! It will also be the first time for my kids going to Dragoncon, so that will be fun too.

At the risk of name-dropping, here are a few of the people scheduled to be at Dragoncon this weekend: Ed Asner, Avery Brooks, John de Lancie, Michael Dorn, Eliza Dushku, Terry Farrell, Ernie Hudson, The Mythbusters (Jamie Hyneman and Adam Savage), Lee Majors, Lindsey Wagner, Malcolm McDowell, George Takei, David Warner, and Billy Dee Williams. But the really BIG celebrity will be…William Shatner! That is worth the price of admission alone! It isn’t often you get to see Captain Kirk, the Priceline Negotiator, T.J. Hooker, and the Big Giant Head (remember Third Rock from the Sun?), all in one person!

Anyway, here is your early weekend open thread, where you can discuss anything you like. Today, I offer you a few scientific measurements from my daughter:

2,000 mockingbirds = 2 kilomockingbird
1,000,000 aches = 1 megahurtz
Time between slipping on a peel and hitting the pavement = 1 bananosecond
1,00 pounds of Chinese food = Won ton

Enjoy the long weekend folks!

Posted August 30, 2013 by edmcgon in Blog stuff, Humor, Open Thread

Traders Corner   Leave a comment

With the low volume we have had this week, it is easy for the professional traders to “window-dress” their portfolios for month-end. Don’t be surprised if we go up today.

The S&P 500 levels to watch today:

UPSIDE: 1639 (August 21st’s low), 1641 (August 28th’s high), 1645-1646 (4 data points), 1652 (2 data points), 1654 (June’s high), 1656 (2 data points), 1658-1659 (4 data points and the 50 day moving average), 1663-1664 range (2 data points), 1670 (20 day moving average), 1679 (August 15th’s high), 1682-1684 (4 data points), 1686 (August 9th’s low), 1688-1693 (12 data points), 1695-1696 (3 data points), 1698-1700 (2 data points and July’s high), 1703 (August 5th’s low), 1705 (August 6th’s high), 1707 (August 1st’s high), 1709 (2 data points and the all-time high), and 1720 (top of the Bollinger Bands).
LAST CLOSE: 1638.
DOWNSIDE: 1629-1630 (2 data points), 1627 (August 28th’s low), 1619 (bottom of the Bollinger Bands), 1604 (July’s low), 1597 (April’s high), 1581 (May’s low), 1572 (March’s high), 1560 (June’s low), and 1560 (200 day moving average).

Posted August 30, 2013 by edmcgon in Daytrading, Investing, Market Analysis

Ed’s Daily Notes for August 30th   8 comments

And I find, I’m sighing softly as I near
September, the warm September of my years
September of My Years by Jimmy Van Heusen and Sammy Cahn

Another month-end approaches…

Wall Street Journal: U.K. Parliament Rejects Syria Action

Hail Britannia!

The U.K. vote against military strikes in Syria is a tough blow to Prime Minister David Cameron’s domestic political fortunes.

…The government lost a vote—by a tally of 285 to 272—that would have supported in principle military intervention in Syria, where Western governments have said President Bashar al-Assad’s regime carried out a deadly chemical-weapons attack on civilians last week. Members of all major parties—including Mr. Cameron’s Tories—opposed the measure.

Mr. Cameron said it is clear that the British Parliament, reflecting the view of the British people, doesn’t want to see the U.K. get involved in military action and “the government will act accordingly.”

The outcome marks a significant moment in British politics—it is highly unusual for a prime minister to be defeated on foreign policy and raises the prospect of whether the U.K.’s role on the world stage going forward.

I beg to differ. I think it shows the British Parliament, as representatives of the British people, have shown a great deal more common sense than their PM. I would hope the U.S. Congress would also show the will of the American people in such a way, who are also against military action in Syria.

On the bright side, the lack of British involvement means anything President Obama does will have to be scaled back. Good!

New York Times: ‘The Great Shift’: Americans Not Working

Looking at these two charts together is a quick way to become demoralized about the American economy:

27economix-unemployment-blog480

27economix-participation-2007-blog480

Yes, the unemployment rate has fallen. But almost the entire reason it has fallen is the drop in the number of people in the labor force — either working or actively looking. As Binyamin Appelbaum has noted, the share of adult Americans with jobs is essentially unchanged over the last three years.

In a brief new report from Express Employment Professionals, a staffing firm, the company’s chief executive, Bob Funk, refers to the problem as “the great shift.” This shift long predates the recent financial crisis, too. The labor force participation rate peaked more than a decade ago.

…If the decline stemmed largely from an aging work force, it would be much less worrisome. But the initial wave of baby-boomer retirements plays only a small role in the drop; the labor force participation rate has fallen almost as sharply for people aged 25 to 54 as it has for the overall adult population.

As the report notes, economists are not entirely sure what has caused the shift.

Keep this in mind when we get the U.S. Employment Report next Friday. As the article above concludes:

…the decline in labor force participation almost certainly receives too little attention. Each month, small changes in the unemployment rate receive great scrutiny. We often overlook just how flawed a measure of the job market that rate has become over the last 13 years.

AP News: Fast-food workers stage largest protests yet

Fast-food workers and their supporters beat drums, blew whistles and chanted slogans Thursday on picket lines in dozens of U.S. cities, marking the largest protests yet in their quest for higher wages.

The nationwide day of demonstrations came after similar actions organized by unions and community groups over the past several months. Workers are calling for the right to unionize without interference from employers and for pay of $15 an hour. That’s more than double the federal minimum wage of $7.25 an hour, or $15,000 a year for full-time employees.

Thursday’s walkouts and protests reached about 60 cities, including New York, Chicago and Detroit, organizers said. But the turnout varied significantly. Some targeted restaurants were temporarily unable to do business because they had too few employees, and others seemingly operated normally.

One thing which was conspicuously absent in the above story is the turnover rate at fast-food businesses:

Washington Post: Fast food workers are staying longer on the job–and wanting more

Workers in the fast food industry are walking off their jobs Thursday in what is being called the industry’s largest ever strike. The protestors, expected to strike in more than 50 cities, are trying to drum up public attention and raise the minimum wage from $7.25 to $15.

What’s unusual about their efforts is that they aren’t protesting the actions of a single company or necessarily trying to organize themselves as part of a labor union, even if they’re being supported by labor groups. Rather, they’re trying to enact change at the national level, altering federal law.

That’s at least in part because most fast food workers are employed by individual franchisees, and the high turnover rates in the industry have historically generated little interest in workplace change. If you’re only staying in a job for six months, after all, you’re unlikely to care much about making it better. For years, the fast food industry was one of the “100 percent turnover” industries: Businesses that started the year with one workforce but would entirely replace it–at least once, if not more–by year’s end.

But that ratio has been creeping steadily downward. A report in QSR, the “quick-service restaurant” industry’s major trade publication, shows that turnover was as high as 120 percent in early 2009, but dropped to around 90 percent in 2011. A spokesperson for the National Restaurant Association says its 2010 Operations Report puts employee turnover at “limited-service” restaurants at just 60 percent. Meanwhile, figures from the Bureau of Labor Statistics show that turnover in the “accommodations and food services” industry was 84 percent in 2001 but dropped to 61 percent by 2012, slightly higher than the nadir in 2010 of 57 percent. Those numbers include restaurants and businesses that pay more than the fast-food industry–so they’re likely lower than for those who truly hold “McJobs”–but they also show a general decline.

There’s an obvious reason for the drop: Unemployment. When it’s low, it’s harder to get people to stay in jobs, particularly low-wage ones. When it’s high, it’s easier, and turnover drops. The older ages of fast food workers are also surely having an impact on turnover, too: With roughly 80 percent of the industry’s workforce now older than 20, they’re more likely to be in need of steady employment and less likely to be seeking jobs for temporary periods of time.

In most industries, high turnover prompts company leaders to invest more in their workforce so they don’t have to spend money to retrain workers or lose the institutional knowledge of long-term staffers. Those economics may not apply as well to the fast food industry, says Nelson Lichtenstein, director of the Center for the Study of Work, Labor and Democracy at the University of California, Santa Barbara. “They want a certain amount of turnover,” he says. Employees that stick around longer get higher wages, he says, and it’s become increasingly less costly to replace workers: The advent of computer-based training programs over the past 20 years has significantly lowered the cost of getting new workers up to speed.

So do the longer tenures mean fast food workers will start forming unions? Labor experts appear doubtful: Even with longer stays on the job, turnover is still high, and the franchise ownership structure of the industry makes that unlikely. That said, longer tenures help to explain why these protests are getting bigger and more prevalent now. Says Lichtenstein: “a more permanent workforce leads to people having a more permanent stake in the job.”

Add in the fact that fast-food businesses are already low-margin operations, and the likelihood of getting increased wages here is small. Adding a dollar or two to the cost of a burger will eventually send customers away, which will end up closing many fast-food businesses. In the end, a higher wage will leave even fewer low-end jobs for workers. This is not exactly what we need in an already weak economy.

Bloomberg: Scandinavia’s Weakest Nation Finds Welfare Habits Too Costly

Scandinavia’s weakest economy can no longer afford the kinds of entitlements its citizens were raised on, according to Danish Finance Minister Bjarne Corydon.

“We live in a world of global competition for jobs,” the 40-year-old minister said in an interview in Copenhagen. “For any finance minister wanting to be taken seriously, it’s something to deal with. That requires a modernization of the welfare state.”

Denmark this week cut its economic forecast and predicted a widening budget deficit. The AAA rated nation, whose economy contracted 0.2 percent in the first half, needs to contain welfare spending or risk losing the respect of investors, Corydon said. Danes, who like Swedes and Norwegians, are used to generous jobless pay as well as state-financed education and health care, need to learn that those privileges come at a cost, he said.

…From 2000 to 2012, average hours worked in Denmark fell 8 percent, according to the Organization for Economic Cooperation and Development. Danes spent 1,431 hours working last year, 24 percent less than the OECD average, the Paris-based group estimates.

The development has left the country’s workforce less productive. Since 2000, Denmark’s unit labor costs have risen 30 percent, compared with an 11 percent increase among its trade competitors, according to a 2012 OECD study.

Denmark’s $320 billion economy, which shrank 0.5 percent in 2012, is trying to adjust to the fallout of a property boom that started early last decade. While house prices have slumped about 20 percent since a 2007 peak, wages haven’t dropped enough to restore competitiveness, the OECD says.

Though Danes with jobs earn more and work less, on average, than their rich-world peers, out-of-work Danes in some cases earn even more than those in low-skilled jobs.

An Aug. 27 report by the Economy Ministry showed that about 250,000 Danes have no economic incentive to give up their unemployment benefits and take a job. That compares with 2.64 million people in full- and part-time jobs, according to Statistics Danmark.

I guess Margaret Thatcher would say this about Denmark:

They’ve got the usual Socialist disease — they’ve run out of other people’s money.

Bloomberg: Gold Mine CEOs Hoard Cash as Strikes Loom in South Africa

If you need another reason to own gold, here you go:

South Africa’s four biggest gold producers are hoarding cash and lining up access to more as the companies prepare for what would be the first industrywide strike since 2011.
Sibanye Gold Ltd. (SGL) boosted its cash balance sevenfold to 2.09 billion rand ($200 million) by June from December, AngloGold Ashanti Ltd. (ANG) has arranged to borrow more from banks if needed, filings show. Like their peers, Gold Fields Ltd. (GFI) and Harmony Gold Mining Co. (HAR) have scrapped dividends this month as unions prepare to ballot members over work stoppages.

“If we are, let’s say, bullied into a situation that we don’t like, we can ride out the storm for a very long period of time,” Sibanye CEO Neal Froneman said. “That was the reason behind putting cash in the bank.”

The 142,000 miners at South Africa’s seven-largest gold producers are preparing to bring the country’s biggest mineral-export industry to a standstill, which the Chamber of Mines says would result in 349 million rand of revenue losses daily. The four largest producers say bullion’s 16 percent slump this year means a decade of above-inflation pay raises must be halted as they seek to reverse losses and avert a repeat of violence that has marred operations since last year.

“This is a tipping point of the industry,” David Davis, a Johannesburg-based analyst at SBG Securities Ltd., said by phone on Aug. 23. “The gold mines are taking action to put their operations into positive cash flow at this gold price. Hunkering down on wages is part of that strategic plan. They can’t afford it.”

Posted August 30, 2013 by edmcgon in Economy, Market Analysis, News, Politics, Precious Metals

August 29th: Ed’s Daily Portfolio Summary   27 comments

GNW: 0.18 to $11.89 ( 1.54% , 26.89% overall)– bought at $9.37
IAU: -0.09 to $13.66 ( -0.65% , 4.35% overall)– bought at $13.09
NNVC: 0.04 to $1.19 ( 3.48% , 153.19% overall)– bought at $0.47
YHOO: 0.19 to $27.30 ( 0.70% , 13.04% overall)– bought at $24.15

OVERALL: +0.08%

Posted August 29, 2013 by edmcgon in Open Thread, Portfolio

Traders Corner   11 comments

The S&P 500 levels to watch today:

UPSIDE: 1639 (August 21st’s low), 1641 (August 28th’s high), 1645-1646 (3 data points), 1652 (2 data points), 1654 (June’s high), 1656 (2 data points), 1658-1659 (4 data points and the 50 day moving average), 1663-1664 range (2 data points), 1673 (20 day moving average), 1679 (August 15th’s high), 1682-1684 (4 data points), 1686 (August 9th’s low), 1688-1693 (12 data points), 1695-1696 (3 data points), 1698-1700 (2 data points and July’s high), 1703 (August 5th’s low), 1705 (August 6th’s high), 1707 (August 1st’s high), 1709 (2 data points and the all-time high), and 1724 (top of the Bollinger Bands).
LAST CLOSE: 1634.
DOWNSIDE: 1629 (August 27th’s low), 1627 (August 28th’s low), 1623 (bottom of the Bollinger Bands), 1604 (July’s low), 1597 (April’s high), 1581 (May’s low), 1572 (March’s high), 1560 (June’s low), and 1559 (200 day moving average).

Posted August 29, 2013 by edmcgon in Daytrading, Investing, Market Analysis

Ed’s Daily Notes for August 29th   4 comments

We get the second revision to the 2nd quarter U.S. GDP today at 8:30 am EST. The first guess at it was a 0.7% increase.

Bloomberg: Vodafone in Talks With Verizon Over U.S. Wireless Stake Sale

Vodafone Group Plc is in talks to sell its 45 percent stake in Verizon Wireless to U.S. partner Verizon Communications Inc. in what would be the biggest deal in more than a decade.

The carriers are in advanced discussions about a sale of the holding for about $130 billion, according to people with knowledge of the matter. Verizon is working with several banks to raise $10 billion from each, or enough to finance about $60 billion of the buyout, said two of the people, asking not to be identified because the talks are private.

From Verizon’s perspective, what concerns me is they might be taking on too much debt to get this deal done. Their dividend payout ratio is already 379%. Double or more their debt/equity (which is already 57%), and that dividend is in danger.

For anyone who is holding Verizon (VZ) for the long-term, you can probably maintain your position, but expect a bumpy road for the next year. For anyone looking to buy it, I would wait a quarter at least, and maybe 2 or 3 quarters. You will get a much better price later.

Posted August 29, 2013 by edmcgon in Economy, News, Stocks

August 28th: Ed’s Daily Portfolio Summary   Leave a comment

GNW: 0.09 to $11.71 ( 0.77% , 24.97% overall)– bought at $9.37
IAU: 0.00 to $13.75 ( 0.00% , 5.04% overall)– bought at $13.09
NNVC: -0.03 to $1.15 ( -2.54% , 144.68% overall)– bought at $0.47
SCO: 0.23 to $27.11 ( 0.86% , 0.86% overall)– bought at $26.88 today
YHOO: 0.11 to $27.11 ( 0.41% , 12.26% overall)– bought at $24.15

OVERALL: +0.06%

Posted August 28, 2013 by edmcgon in Open Thread, Portfolio