Wednesday, January 31, 2007

50% reported lower profit margins so far.....

in normal times this should be a vital reason to bring stocks down or at least to limit the upside. especially when the forecast from wall street was a further increase .........
normalerweise ein gewichtiger grund um aktien gen süden zu schicken oder aber zumindest das potential gen norden zu beschränken. besonders dann wenn wall street eine weitere expansion der margen erwartet hat.

i dissagree slightly that rising wagens are the main reason for the shortfall in margins. the obvious reason is that in a marketplace the comeptitors put preassure on the margins. when ever there is money to be made the competition will erode margins and drive profits down. (just watch intel vs amd, motorola vs nokia vs samsung vs sony ericsson, its for sure not only the labor cost....... ) and with excess capacity and this should be no surprise. but still wall street is expecting a further rise from already rekord levels...... what will happen if the economy slows down ........

i stimme nicht damit überein das gehälter der hauptgrumnd für die erosion der margen ist. ich denke das vor allem der beinharte wettbewerb dazu führt das die margen abschmelzen. (man beachte nur intel vs amd, nokia gegen den rest der handywelt, etc....hier liegt der druck sicher nicht an den gehaltskosten) und mit mehr als genug verfügbarer kapazität sollte das auch keine überraschung sein. was passiert wenn sich die wirtschaft abkühlt dürfte ebenfall klar sein.....

here is one of the best takes so far on margins, profits and stockperformance so far from hussman (very good)

Rising Wages Weigh on Profit Margins, May Curb U.S. Stock Rally

Feb. 1 (Bloomberg) -- Profitability at U.S. companies is shrinking as wages rise at the fastest pace in six years. That may make stock gains harder to come by, if history is any guide.
Profit margins, or earnings as a percentage of sales, reached a record in 2006 after rising in 18 straight quarters. That helped propel a four-year bull market and sent the Standard & Poor's 500 Index to a six-year high.

Now, almost half of the S&P 500 companies to report fourth- quarter earnings have said margins shrank or were unchanged, including Motorola Inc., the world's second-largest mobile-phone maker, and Citigroup Inc., the biggest U.S. bank.
Stock prices tend to follow the direction of margins, said Jack Ablin, who oversees $50 billion at Harris Private Bank in Chicago. ....

``This market isn't particularly attractive,'' said Michael Vogelzang, who oversees $2.4 billion as chief investment officer at Boston Advisors LLC. ``If things are as good as they get in corporate America, there's only one way for them to go.'' ...
Not Since Eisenhower
Since 1979
, shares have declined on five of the six occasions when profit margins fell at least 0.5 percentage point from a peak, ..... All five times, the S&P 500, excluding financial shares, slid at least 16 percent in the next 12 months.
The current streak in margin increases for S&P 500 members, excluding financial companies, is the longest since a 19-quarter period ended in the third quarter of 1966, ..... The S&P 500 reached its lowest in almost three years in October 1966.

Margins at the end of 2006 were 7.6 percent, the highest since at least 1954, ..... The S&P 500 hasn't fallen by more than 15 percent during the share rally that began in October 2002. ...

.... ``We're already witnessing strains on profits.'' .....

Ian Scott, global equity strategist at Lehman Brothers Holdings Inc. in London, is more equivocal than Ablin about the link between profitability and share prices..... Stocks may actually get a boost when profits peak because investors will be more willing to pay up for stable earnings, shifting assets to the biggest companies from the smallest ( of course someone attempts to spin muß ihn einfach mögen...den spin)
Slowing Productivity
``We doubt that the peak point for profitability will mark the peak for the market,'' ...

As wages have risen, productivity growth has slowed. Output per hour of work climbed at an annual rate of 0.2 percent in the third quarter of 2006, down from a 1.2 percent rise in the second quarter and 4.3 percent in the first three months of the year. From 2002 to 2005, productivity increased an average of 3 percent.

``The big swing issue right now is going to be wages,'' ...... ``If you see any sort of meaningful contraction in margins, it's going to put pressure on equities, because I don't think right now the market is discounting more than a modest pullback.''

Analysts still expect 73 percent of companies will report higher margins this year, from 60 percent that achieved increases last year, figures from Morgan Stanley show. Similar forecasts each of the past two years proved too high, ....( with profits also at a highs vs the gdp really courageous...nachdem auch die gewinne im verhätnis zum gdp auf dem top sind wirklich mutig....)

``We are more comfortable looking for flat to slightly down margins,'' ......

......``The last thing you want to do is put money in at the top,'' Vogelzang said.

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equity office $38 billion takeover ....sign of the times

i think there is no better example to describe the weird markt action these days like the sale/bidding of equity office (eop). i´ve heard their last conference call in october 2006. today they anounced the full year results without a call. ttp://

ich denke es gibt kaum ein besseres beispiel um den "merkwürdigen" markt zu beschreiben als den kauf von equity office. ich habe seinerzeit den conference call vom oktober gehört. heute sind die jahreszahlen leider ohne call veröffentlicht worden.

you can see in the chart that since this call the bidding war between blackstone and vornado startet. blackstone has taken the lead with over $ 38b cash including debt. vno is considering another offer (including stocks).

UPDATE: vno just offered $56 a share. i think it is safe to say that this is not enough to outbid the cashoffer from blackstone

wie man am chart schön sehen kann ist der bieterkampf zwischen blackstone und vornado danach initiert worden. z.zt. führt blackstone mit einem gebot von 38 mrd $ in cash (inklusive schulden). vno erwägt ein höheres angebot (allerdings zum teil in aktien finanziert)

i think it is time to review some quotes from the call in oktober where the stockvaluations were round about 30% lower. i´m really not an expert on reits. but after this call a 30% pemium. and a softening us economy.........

es ist an der zeit sich einige zitate aus dem call erneut anzusehen. wie man nach diesen aussagen nochmal satte 30% auf den kurs draufschlagen kann ist mir rätselhaft......

review conference call:

"it is a little bit crazy out there"

we are having $3 b assetsales on the block ( with an estimatetd gain of $700 mio). if we would have no tax restriction we would like to sell billions more.

money should be used to pay back debt. deleveraging is key.

powerhouse balance sheet is key goal

deals done (from others) in the market at a caprate of 4,5%. very hard to make numbers work. very very agressive biddings.

average debt yield at the end of 2006 at 6,31%

i think it is save to say that since then the us economy has not improved........

denke es ist richtig zu sagen das sich seitdem die us konjunktur nicht gerade verbessert hat.....

and of course blackstone is now doing just the opposite. piling on a mountain of debt. for sure a higher yielding debt than the 6,31% .... maybe they can sell the assets faster then the eop as a reit. they better hurry up......they are in danger to make a mess in one´s pants.....

blackstone macht nun genau das gegenteil von dem was das managment machen wollte. schulden bis unters dach. und sicher teurer als die exitierenden 6,36%. das einzige was sinn machen könnte ist das die keinerlei restriktionen beim zerlegen haben. dafür sollten sie sich aber beeilein. bei der kleinsten marktverschlechterung geht das ansonsten in die hose......

but this is a one way bet on rising property prices and increasing rents. the occupancy rate for 2006 is already at 92%. that leaves not much more room for improvement.

eine einzige wette auf weiter steigende immopreise und mieten. der vermietungsgrad lag 2006 bei sehr guten 92%. nicht mehr viel raum für ne optimierung.

not much room for error / no safety net

on top of this is that the dividend yield is under 3%, the pe is very high and looks more like a competitor to google :-) ( The regional Bloomberg property index trades at 22 times earnings, compared with 61 times for the U.S. measure and 26 times for the European one) etc......

dazu kommt noch das die dividenrendite bei 3% liegt. das kgv ist sehr hch und erinnert eher an google als an einen reit. lt. bloomberg reit kgv für die usa bei 61!

and even one of the best funds managers out there says that this is a good point to exit the us reit market

disclosure: short us reits

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Australian buyout spree could end in tears

good to hear some honest words from a ceo of a major bank. unfortunately he is by far the minority. some big players in the us are increasing their exposure (just ask morgan stanley etc....)

tut gut ehrliche worte von einem hochrangigen bänker zu hören. in der zwischenzeit fahren gerade in den usa einige häuser ihr engagement gen norden ( morgan stanley etc....)

National Australia Bank Ltd. (NAB) chief executive John Stewart said Wednesday the local multibillion dollar private equity market is starting to overheat and is headed for a correction. (i think it could be a severe correction...., tippe auf ne "ernsthafte" korrektur...)

Stewart told shareholders at NAB's annual meeting the boom in private equity could "end up in tears". .

NAB - which ranks as Australia's largest bank with a market value of A$65.9 billion - is "very cautious" about its own participation. ( with a pe 16/17 there is really no room for error..../ bei nem kgv von 17 bleict auch kein raum für fehler....)

"We are a big player in private equity but we don't hold it," he said. Stewart said the NAB Capital unit, which originates most of the bank's private equity business, repackages the loans and sells the risk on to institutions. (like hedge funds, pension funds etc....thin ice.../ dünnes eis....)

....Merger & acquisition activity in Australia more than doubled last year to a record US$103.4 billion, according to data firm Dealogic, with the market ranking as the region's most active outside Japan. ......

With the board of Australian icon Qantas agreeing in December to a A$11 billion bid from a consortium led by Macquarie Bank Ltd. (MBL.AU) and Texas Pacific Group (TPG.XX), analysts say no company seems out of reach.

"We have now got private equity coming in and they are starting to look at very well run companies. And we see this often in any cycle where things just go too far," he said.

Central Bank Also Has Concerns

Westpac chief executive David Morgan said in November the big four bank is reluctant to play a key role in the wave of debt-funded buyouts, citing the high leverage of many of the deals.

"We are very, very wary about the private equity segment, have very low exposure to it and are approaching it very, very cautiously," Morgan said after unveiling the bank's annual profit.

the chairman of consortium member Allco Finance Group (AFG.AU), has questioned the sustainability of the private equity boom with deals being done at increasingly high leverage.

"If we neglect to ensure sustainable cash flows, if and when the markets turn down, we will see a crisis," Coe told Dow Jones Newswires in an interview this week.

"If we gear the bejesus out of business, we will see a crisis."

Reserve Bank of Australia Governor Glenn Stevens in December warned the trend toward more leveraged deals could heighten the risks to Australia's continued financial stability.

Paul Masi, the chief executive of Merrill Lynch in Australia, says buyouts have become more debt laden over the last few years.

"In the private equity space, deals were typically two times geared, now they are seven times geared," Masi told Dow Jones Newswires in an interview last month. ( add to this the explosion in australian hedge funds.......dazu noch die explosion der australischen hedge fonds....)

"There is some pretty heavy leverage in the system that is being manufactured, and I don't think that has been really completely understood.

"But to get the returns people want, gearing levels are going up. As long as the cycle stays good, it's fine." ......Australia's equity market is "highly vulnerable to the slightest disruption".

"It's all too easy, and in my view, the step up in private equity activity has brought a real complacency to the market. The market seems to think private equity will take them out of everything," he said in a client newsletter Tuesday. ( same globally , afdter every warning multiple "possible" bidders/buyers are in the news....dasselbe weltweit, nach jeder warnung werden diverse "mögliche" bieter/käufer genannt.)

Aitken estimates there is at least 400 basis points of "private equity hype" reflected in the country's benchmark S&P/ASX200 index. (close to 7% )

"And that's the 400 basis points that will be wiped out in the pending trading correction as bond yields rise," he said. The index fell 0.7% Wednesday to 5773.4 points.

Craig James, chief equities economist at Commonwealth Securities, urged investors to show "great diligence" in terms of assessing the potential impact of private equity on the market, with rising global interest rates posing a risk. ( or just rising spreads!)

"The fallout would be if one of these transactions goes south and that leads to an unraveling across financial markets," said James. .....

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timeless...The way to grow poor. The way to grow rich..

could be also from 2007. amazing isn´t it.........

das könnte auch aus dem jahr 2007 stammen, oder.......?

"The way to grow poor. The way to grow rich"

Lithograph by Currier & Ives, 1875. from Pictorial Americana ( click on the headline for more historic or timesless images)


but this phenomenon is spread around the globe. just watch the headline from china today

diese thematik liegt wohl in der natur des menschen und ist nicht regional begrenzt. man beachte nur die heutige news aus china.

"China's Stocks Tumble Most in 21 Months"

China's stocks tumbled the most in at least 21 months after lawmaker Cheng Siwei said the country's shares are overvalued, fueling speculation the government will step up efforts to keep funds from flowing into the market....``Concern is mounting that the government will intervene to pop the bubble.''

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Tuesday, January 30, 2007

Sam Lieber VIDEO/ reit funds manager , honest view on the mania

click on the headline to see the interview. very good/honest comments on the us and global reitmarket. also on the blackstone offer for eop. . for more details click on the labels at the bottom

ehrliche einschätzung zur reitmania (us und weltweilt). bitte auf die überschrift für das interview klicken. mehr info unter dem label am ende des posts

disclosure: short reits

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Monday, January 29, 2007

pimco´s gross on liquidity / hall of fame

wow. another "must read" from pimco. they are really connecting the dots. and gross has it right with his quote:

my critical point is that asset prices are no longer entirely a function of the real economy: it can be just the reverse.....

donnerwetter. noch ein geniales teil von pimco. hier werden schön alle punkte zusammengeführt. und das zitat von gross (oben ) sagt alles.

The twin barrels of financial innovation and globalization have significantly complicated the forecasting of asset returns in recent years. Two domestic bubbles in the last decade are testimony to the power of levered money and the recirculation of price insensitive reserves back into U.S. financial markets.

......, what now appears to be confirmed as a housing bubble, was substantially inflated by nearly $1 trillion of annual reserve flowing back into U.S. Treasury and mortgage markets at subsidized yields, as well as innovative funny money mortgage creation which allowed anyone to buy a house at escalating and insupportable prices. Bond, stock, and real estate trends then, have recently been increasingly at the mercy of relatively price insensitive and levered financial flows as opposed to historical models of value or the growth of the real economy itself. ..... This foreign repatriation produced artificially low yields, (perhaps 50-100 basis points confirmed in numerous Federal Reserve staff reports and speeches in recent years) which in turn drove housing values to unsustainable levels as recently as six months ago – the estimated peak in national home prices. (add to this china........)
...., my critical point is that asset prices are no longer entirely a function of the real economy: it can be just the reverse. The real economy is being driven by asset prices, which in turn are influenced by financial flows of non-historic origin, composition, and uncertain longevity. What used to be an Economics 101 “CIG + exports-imports” analysis leading to predictions for interest rates and stock prices has turned into an Economics 2007 analysis of corporate buybacks, international reserve flows and hedge fund/private equity positioning seeking to front run or take advantage of the first two. And it’s not simply a question of analyzing the animal spirits or “exuberance” of investors wherever they may be. Corporations are buying back stock with their historically high profits not really because they’re enthusiastic about their own company’s value, but because they have little else to do with the money.Likewise, foreign central banks and petroreserve recyclers are turned on more by capping their own currencies or geopolitical considerations in the Middle East.

Investors have no more significant example of the influence of financial flows on asset prices than tracking the pace of the U.S. trade deficit in the 21st century.... there is likely near unanimity that it is now responsible for pumping nearly $800 billion of cash flow into our bond and equity markets annually. Without it, both bond and stock prices would be much lower, the $800 billion for instance representing 3 - 4x our current federal budget deficit. Almost perversely, then, an increasing current account deficit supports and elevates U.S. asset prices as the liquidity from it is used to buy stocks and bonds.......
Notice that in 2001 a monthly trend reversal of $10 billion ($120 billion annually) neatly coincided with a 20% decline in stock prices and a flat bond market despite a developing recession. ..... The draining of $120 billion from the foreign cash flow pump appeared to have magnifying, “it’s different this time,” effects on both. ......

Although the above historical analysis is subjective and vulnerable to “sampling error” (economist speak for too short a modeling timeframe) there is an inherent logic to it:

more money in the “bank” – asset prices go up; fewer deposits – asset prices go down or perhaps up less.

..... Financial derivatives ....allowing homeowners to lever home prices, institutions to compress risk spreads, and almost all assets to occupy a seemingly permanently higher plateau based on increased liquidity and perceived diversification of risk across the system. I have my doubts about this permanent plateau, but the market seemingly does not......

With that important caveat, let me proceed to analyze another source of increased cash flow that has markedly influenced asset prices in recent years. I refer to corporate profits and their meteoric rise since the 2001 recession, increasing from 5¼% to nearly 9% of GDP as shown in Chart 2.

While normally much of that rise of over $400 billion after tax dollars (almost identical to the pump provided by our increasing trade deficit over the same period) would have been reinvested in physical plant and equipment, this time it was not. more

Combined, the total rise in corporate share buybacks and the financing for bond and stock markets via the increasing trade deficit have injected an average of perhaps $1 trillion annually of purchasing power into our asset markets since the end of the 2001 recession. Because hedge funds and levered players of all types have been aware of this trade deficit/share buyback “put” and have acted upon it, the incalculable but conservatively estimatable pump from these two sources alone have poured in several trillions of purchasing power per year. Take that money and use it to invest in further high powered and levered financial instruments such as CDOs, CPDOs, and 0% down funny money mortgages of all varieties and you can understand why asset markets have done so well in recent years, and why, as my initial Outlook sentence suggested, it is so hard to analyze “value” in asset markets these days. Prices are increasingly being determined by value insensitive flows and speculative leverage as opposed to fundamentals. (read this full block twice! diesen absatz zur not zweimal lesen)

...... The suggestion of no more bottles of beer on the wall comes from several sources, the first of which appears in Chart 1 as a recent reversal in the trade deficit. While some of this improvement is due to the standard dollar weakness of the past 12 months and its dampening impact on imports, much of it is due to the decline of oil since August/September of 2006. Follow with me if you will a projection by PIMCO analyst Ramin Toloui in Chart 4 that depicts the change in trade flows at a given dollar price of oil. read this excellent piece on the topic

As you can see, the recent $20 reversal in per barrel oil prices results in a reduction of $100 billion or so in the annual trade deficit, and a like amount of liquidity extraction from bond and stock markets, much more if associated leverage is unwound. Granted, some would claim that there will still be $700 billion or so of purchasing power coming into our markets, but higher asset prices in a levered economy are dependent on greater and greater injections of liquidity, not less. Should oil hold in the $55 range, this extraction of high powered 100+ proof alcohol from the markets will be noticeable. (chart shows the 10 year yield in the timeframe when oil has plunged. in large part due to some very poor bond auctions with low indirect/foreign bidders..... zeigt die rendite der 10 jahresanleihe während öl stark gefallen ist. zurückzufüren auf einige schwache bondauktionen mit einem niedrigen auslandsanteil....)

The second source of vulnerability comes from the corporate buyback stash, a trend itself as Chart 3 points out that is beginning to level off and reverse. Peter Bernstein, in a recent January missive, suggests that corporate profits as a % of GDP cannot continue to grow at the same pace. “Everybody else” he writes “is going to want a piece of that juicy action. Employees will demand higher wages, customers will demand lower prices, and the government will levy higher taxes.”
.... share buybacks could be cut back by a good $100+ billion in the near term future.
..... The risk markets (including bond term premiums) if not drunk, are definitely not walking a very straight line.
Stocks, credit spreads, and yes intermediate and long term bonds relative to a likely unwavering Fed Funds rate in 2007’s first half, may stagger shortly.

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us homeowner vacancy rate

after this construction frenzy no wonder........ nach dem bauwahn kein wunder..........

The number of vacant homes waiting to be sold surged 34% to 2.1 million at the end of 2006 compared with the end of 2005
The vacancy rate for owned units jumped to a record 2.7% from 2.0% a year earlier. From 1965 to 2005, the homeowner vacancy rate had never been above 2%
Homeownership rate unchanged near 69%
At the end of 2006, the firm clocked the national rental vacancy rate at 5.5%, up slightly from 2005's numbers.....

this glut should have an big impact on inflation. isn´t it ironic that the surge in houseprices didn´t have any effect on the upside in inflation ........thanks to the us is an excelent piece on the topic "owner equivalent rent" from tim "Home Ownership Costs and Core Inflation"

diese flut von immobililen wird einen massiven einfluß auf die inflationszahlen haben. komisch nur das während des booms der effekt kein effekt auf der plusseite vorhanden (bitte link oben lesen)war.... so sind sie halt..die us statistiken... wie auch bei den substitutionen hier im cartoon
with the owner equivalent rent making up over 40% of the cpi number one can imagine the effect on the "phony" inflation number. add to this others creative measures of inflation like the "substitutes" ............. and then you know that you can trust the official numbers........

da die miete (oder genauer gesagt die gefühlte miete) 40% des inflationskorbes ausmacht dürfte hier in nächster zeit ein gewaltiger entlastender effekt auf die (in der berechnung lachhaften) inflationszahlen zukommen. dürfte anlass für die fed sein die zinsen zu senken.

Expenditure category
Food and beverages 15.7
Housing 40.9
Apparel 4.4
Transportation 17.1
Medical care 5.8
Recreation 6.0
Education/communication 5.8
Other goods & services 4.3
Total, all items 100.0

more on this topic from mish, calculated risk and mike larson

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Mad London House Prices? We've Seen Nothing Yet

i really don´t know where to start. i think you should read the disclamer from bloomberg .

bei diesem bericht weiß man kaum wo man anfangen soll. denke zuerst ein hinweis auf den disclamer.

" Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own"

the full piece from this guy sounds more like from someone who is joking or writes "satire" columns. i can´t belive that this guy works for bloomberg. lets hope that he puts his money where his mouth is ....... buy london properties hand over fist........none of his arguments makes any sense. none! when you read his opinion it looks like london is still a bargain.... maybe this was written for the "fools day" and was released early due to a glitch......

der komplette bericht kann normalerweise nicht von einem bloomberg mitarbeiter kommen. hört sich eher nach einem satirischen komentar oder einem bericht der bildzeitung an. ich wünsche ihm das er sein ganzes geld im londoner immobiliensektor investiert (versenkt...). keines seiner argumente hält betrachtung statt. keines. ghet es nach ihm ist london immer noch auf schnäppchenniveau. die einzige erklärung für diesen bericht ist das er ursprünglich für den 1. april gedacht war und irrtümlich zu früh veröffentlicht worden ist.

Jan. 29 (Bloomberg) -- After a year of huge price increases for London homes, you would think the market had gone crazy. ( yes, indeed.....)

You haven't seen anything yet. (the ratio doesn´t look like it is stretched....)

London is just following the rest of U.K. real estate. Don't be surprised if the capital's fevered property market doubles in value before this boom runs out of steam. (double from this level......../ne weitere verdopplung.....)

``London and the South East have a lot of catching up to do over the next few years,.....``They have underperformed the rest of the country.'' ( oh boy.......)

It can't have escaped many people's attention that for the last year, the prices of London properties have been rattling ahead like a freight train.

London-based real-estate broker Knight Frank LLC said in January that prime-property prices in the capital were rising at the fastest rate in 27 years. Their values jumped 2.6 percent in December, bringing the increase for the year to 28.6 percent. .... it was the biggest annual increase recorded by the survey since 1979,...( good that the salaries have kept pace.........../ dumm nur das die gehälter nicht mal im ansatz mitgezogen haben)

Indeed, London is the world's most expensive city for prime property,(but it has still lagged the rest of uk?) ...... Prices in areas such as Chelsea and Hampstead averaged $2,244 per square foot in the second quarter of 2006. The same space for Manhattan homes -- on Fifth Avenue, Park Avenue and Madison Avenue near Central Park -- cost about $1,870. (but still room to double.......)

Broom Closets
It doesn't make much difference whether you are at the top or the bottom of the property ladder. HBOS Plc, the U.K.'s largest mortgage lender, said this month that the average price of a London home rose 12 percent last year to 287,176 pounds ($563,000).

Indeed, even the broom closets are pricey -- quite literally. This month, a former cleaner's cupboard measuring just 11 feet 3 inches by 7 feet 3 inches in West London's Chelsea district was valued at 170,000 pounds, according to a report in the Guardian newspaper. You will need to spend an additional 30,000 pounds on renovation as well. (could be this "bargain" thanks to tim )

At more than $4,340 a square foot....."It is an investment," he said, as he stretched his arms the width of the room, laying his palms flat on opposite sides of the wall.

So that is a bubble, right? Surely prices can't keep escalating at that kind of rate. The world will run out of money.

Well, think again. The latest round of London property inflation has probably only just begun. ( this guy is drunk or on drugs....../ der typ mus betrunken oder auf droge sein)

London as Laggard
The London property market has become like the stock market (which isn't that surprising, since many of the people buying the properties make their money from the trading of equities). It doesn't move in straight lines. Like a share price, it does nothing for a long time, then suddenly shoots up. (or breaks....oder bricht ein)

London real estate has lagged behind most of the U.K. for the best part of this decade. And right now it is being revalued.

According to HBOS's property calculator, a home in London that was worth 100,000 pounds at the start of 2000 would have cost 196,246 pounds at the end of last month. That may sound pretty good. But you would have done better elsewhere. The same 100,000 pounds invested in a property in Wales would have been valued at 257,173 pounds. Or in Northern Ireland, the figure was 304,064 pounds. (that argument makes´s like comparing one stock with a pe of 100 to another one with a pe of 90 and label the with 90 as a bargain. rent yields in london are less than risk free uk bonds. looks like a once in a lifetime opportunity........ein tolles argument. ist als wenn man ne aktie mit nem kgv von 100 mit einer vergleicht die nur ein kgv von 90 hat und das als kaufargument anführt. wenn man bei risikolosen uk staatsanleihen mehr an rendite erzielen kann als im londoner immobilienmarkt muß das ne ganz tolle kaufgelegenheit sein......)

Measured against those sorts of gains, the escalation in London house prices looks relatively calm. .....(speechless / sprachlos)

Population Needs Housing
London will catch up. ...... The mayor of London, Ken Livingstone, said in a 2002 report that the population of London would add 700,000 people by 2016, taking the total to 8.1 million.

That will keep property prices moving ahead. All those people surely need to live somewhere.

A broom closet valued at 170,000 pounds may seem like crazy money -- and it probably is.
There is still no reason that it shouldn't cost you 300,000 pounds in three years' time. (this quote is probably one for the hall of fame.../ diese zitat könnte einer für die geschichtsbücher werden...)

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Sunday, January 28, 2007

Tech investors still buying the hype / fleckenstein

thats the reaction(chart) form wall street if you guide down badly. only the promise that things will get better is enough to pump the stock. i think this might be correct if management has a good track record regarding visibility and guidance in the past. but in this case the opposite is the case. wall street at is something fantastic from cramer at work back 2000

nette kursreaktion (chart) wenn man bedenkt das man soeben massiv gewarnt gewarnt hat. alleine die vorhersage das alles besser wird ist heutzutage genug um die aktie ins laufen zu bringen. stimme im prinzip damit überein. das trifft aber nur zu wenn das management einen guten track record in sachen vorhersagen hat und das geschäft gut prognostizierbar ist. hier ist genau das gegenteil der fall.

It's just too typical. Texas Instruments' earnings report -- weak results, with no hint of what truly lies ahead -- is greeted with upgrades by the experts in the investing community. (watch the jump on wednesday / guckt euch den sprung am mittwoch an)

I have no idea what drives the "thought" process on the part of those folks who buy tech stocks these days. Perhaps they have a romantic notion about how wonderful these names are to own. So they buy them, and therefore the stocks act "OK" -- even though companies report disappointing news. In turn, that stock buying just begets more buying.

TXN bobbleheads gobble it up
Many of you have heard of people "buying the dip." This week I'd like to discuss a variation known as "buy the hype," which is what Texas Instruments bulls did last week as they focused on TXN's sunny forecast rather than its rather weak results.

One would think that when a company such as Texas Instruments misses forecasts badly enough to continue to pile up inventories (as happened throughout last year, as the company failed to anticipate the downturn that's occurred thus far), that company might have to offer some evidence of why it expects future forecasts to be more accurate.

But that was not the case on its recent conference call. Management, which shocked me at their midquarter update with an accurate assessment of their prospects -- what some might call honesty -- was back to its usual tactic: fabricating future demand out of thin air. They said: "This thing will turn around quickly," without offering any data to support their claim. Of course, they weren't held to any details by the dead-fish community, where some in fact upgraded the stock.

.....response with the objective analysis done by my friend Tony Rao, who toils at research boutique
East Shore Partners. ....."The TXN report last night was very negative, missing Street consensus on virtually all metrics. Q4 numbers appeared to be in line, but the Street lowered their numbers after TXN guided down in the beginning of December. Guidance for Q1 was poor -- with revenue guidance at $3.15 billion, versus $3.32 billion consensus, and earnings between 28-38 cents, versus 35 cents consensus. From the guidance, it's obvious that the company has no clue as to what the wireless product mix will be, and whether 3G (third-generation networks that permit a new level of mobile interactivity) sales will rebound from the sharp decline in Q4. TXN had a book-to-bill of .89, which is the lowest bookings rate they've experienced in two years.
So what do they do in this environment? They have begun to reload their fabs (fabrication facilities) in anticipation of increased demand. They have no forecast from handset customers to support this thesis, and the moribund booking rates in Q4 certainly don't support this. They state they are doing this because last time, when handsets turned down in 2004 near year end, when the market rebounded in mid-2005 they could not meet demand. One should note that the falloff in 2004 was much less severe than it is currently. So, they are basically banking on a return of demand. (2004 was an inventory correction. This is, too, plus a weakening of demand.)
This strategy is extremely risky for TXN. If the demand does not materialize, or if it is slower to materialize, or if it is of a lower magnitude than they plan for, they will have a big inventory problem....... The reason the stock is up today is clear in my mind, even though it also makes no sense to me. The Street is taking the fact that TXN is loading their fabs as an indication that 'they know something' and that they must see demand increasing in some material way. .....

Give 'em the old second-half razzle-dazzle That is an accurate assessment. For some time now, it seems that companies have been able to report just about any number, and it doesn't matter as long as they tell everybody -- without even having to produce any supporting data -- that things will get better in the second half.
Optimism on ice, via lower price
To undermine that illusion of invincibility, it's going to take lower stock prices. And what will cause lower stock prices, you might ask? Exhaustion. Exhaustion causes lower prices, regardless of what the bullish crowd wants. And, while occurring in fits and starts, I think that process might be under way.
fleck is short txn

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german business confidence ....lessons for the us from the german real estate slump

it´s been a long time since i´ve posted good or even very good news (with the exception of gold.....). but i think it is time to watch the recent german data. but at the same time the construction data can give some hints how severe the us slump will be. it´s importand to note that the german bubble was very very small compared to the us and driven by large tax breaks to build the eastern part of germany because of the reunification. the bubble never spread to "normal people" and never influenced lifestyle, spending etc. the word "refinancing" (in the meaning of the us) hasn´t been heard here until today.

es ist verdammt lang her das ich mit ausnahme von bullishen goldnews positives gebloggt habe. da kann es nicht schaden sich die erstaunliche wiederauferstehung vom "ehemals"(?) kranken mann deutschland anzusehen. und evtl. gibt ja auch der rückblick z.b. auf das bauhauptgewerbe eine indikation wie lange eine branche am boden liegen kann wenn die wie nach der wende aus ner übertreibung kommt. da z.b. die blase in den usa um ein vielfaches größer ist/war finde ich es naiv zu glauben das bereits 12 monate nach dem platzen alles wieder in bester ordnung sein soll und der boden jetzt erreicht sei. propaganda........

for the international readers.

the ifo is by far the most important business indikator for germany and the eurozone. it reflects the sentiment of 7.000 german companies.

chart1: this is the chart for the manufactoring segment. the yellow line shows the expectations, the blue line the current situatian, the red one is the ifo (middle of expectations and current)

the chart on the top right is the one that shows the construction related component.(yellow/expectations, blue/current) you can see how is was flatlining for years. compare this to all the talk in the us that after a bubble five to 10 fold as big hitting the bottom and recovering just 12-18 month after the peak...... spin......

this one is a very long term chart. the red line shows the residential construction. the blue line is for the commercial construction. the yellow line is the public funded construction. you can see a steady sliding down year after year. maybe we can stabilize or even buck the trend despite the vat hike from 16% to 19% in 07. compare this to the illusion that the worst in the us is over.........

one thing that will differ for sure ist that the us or state government will bump up the public construction. here is one example from california / ein unterscheid wird sicher sein das die usa den öffentlichen bau massiv pushen werden (here is the take from mish )

"(debtfueled) $37.3 billion public works rebuilding program could be model for other states"

The four propositions will spend $19.9 billion on roads and public transit, $10.4 billion on school construction, $4.1 billion on levees and other flood-control projects and $2.9 billion on affordable housing

needless to say that germany did just the opposite. control spending and large part to the "euro stabilisation pact" . under the stability pact they had to keep the deficit close to 3%. ironical the germans/bundesbank were the main force to implement this barrier. :-) we feared after the d-mark was replaced by the euro that all the big spenders like italy, spain etc. were undermining the euro..... germany was the first to break the 3%........

überflüssig zu erwähnen das deutschland das gegenteil gemacht hat und auf defizite und verschuldung geachtet hat....... dank an den stabilitätspakt....

ps: the biggest buyers of german real estate in the past years were private equity firms from the uk and the us. they bought almost every big auction available. they control comined close to 1 mio units. (my rough estimate). and even here the first "flips" are happening in 2006 nad 2007 were parcels of the bigger portfolios/blocks are changing hands with huge profits. according to ernst & young almost 50% of the "flips" went to another private equity investor......

kein wunder das uk und us investoren alles an deutschen immonilienwerten erwerben was zu bekommen ist. denke das die aktuell wohl sicher ne knappe mio wohneinheiten unter ihren fittichen haben. (ist nur ne schätzung/ bin für genaue zahlen dankbar, bitte unter kommentaren posten oder mailen) was aber sicher bedenklich ist das im jahr 2006 schon erste portfolios mit riesigen profiten den besitzer gewechselt haben. und über 50% gingen an andere finanzinvestoren........

one final note:

the german economy is highly dependent on their exports and a stong growing world economy. my feeling is that we in germany should enjoy the "good" times as long as they last.......

da die deutsche wirtschaft in erster linie exportgetrieben ist und ne stark wachsende weltwirtschaft benötigt sollten wir die guten zeiten geniessen so lange sie anhalten......

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Saturday, January 27, 2007

It Has Been 928 Days Since the S&P 500 Had a One-Day 2% Decline / ticker sense

a normal market? looks to me like paradise. this streak in the face of risks as far as the eye can see and the biggest bubble/real estate in the bursting....even in germay we have 2% drops in the DAX on almost a quarterly basis. and we are facing the opposite of a real estate bubble. no wonder the vix is at sleep. i will revisit this data when this streak has endet. (maybe in the year 2010.......)

ein normaler us aktienmarkt? paradische zustände. diese statistik ist umso erstaunlicher als diese im angesicht erheblicher risiken und vor allem der größten blase die jemals existiert hat (us immomarkt) erzielt worden ist. selbst wir in deutschland die das gegenteil einer immoblase haben müssen diese art von rückschlägen im dax quartalsweise einstecken. kein wunder also das der vix im tiefschlaf ist. werde diesen post nochmal hervorholen wenn die serie gerissen ist. ( wiedervorlage 2010.....)

It has now been 928 days since the S&P 500 had a one-day 2% decline. The last one was on May 19, 2003 when the Index fell 2.49% on the day. This is the longest streak of its kind for as far back as we can download daily prices. Not that we're superstitious, but knock on wood.