• The effects of raising the minimum wage CBO report
• Wait!  Take that CBO as the state with the highest minimum wage has created the most jobs Bloomberg
• With robotics, production lines became more streamlined but more is to come with analytics, energy efficiencies and more McKinsey
• For all the foot stomping, just "who" earns over $400k a year anyway?  MoneyNing
• Five "power weapons" the Pentagon wants to cut (I'm sure there are plenty left over) Blooomberg Video
• Google invests $50M in auction.com (just buy EBAY - I'm long!) Bloomberg

It makes me insane when the Fed says inflation remains subdued.  Subdued?  idk where they live but my rent in 2013 went up 7% and this year, 9%.  A 2-liter bottle of CocaCola used to be .99 cents.  Now it's $1.99.  Don't even get me started on the ridiculous increase in crude oil versus a few years ago (doubled) and how small a bag of my favorite chips has become 1/3 the size for the same price.  Oh, that's right.  They don't include food and energy (the stuff that always goes up).

Last time I looked, housing cost was still included in inflation numbers but yet today a minimum wage person would have to work two weeks just to pay the rent.  Forget about the electric, cable, phone or food.  Oh wait, let's see if we qualify for a free Obama phone and food stamps (sarcasm).  I'm sorry but I hope they raise the minimum wage.  The government should not have to subsidize workers to survive because minimum wage has not risen along with cost of living.  They two should go hand-in-hand if you ask me.

Is the Fed not doing the math or are they intentionally cooking the books so that the Corporate Welfare continues?  It's a joke; plain and simple.

Image courtesy of Upworthy

• White House report on raising minimum wage. Slideshare  64 studies show there is no discernible impact on employment (not to mention higher wages flowing into consumer spending and boosting demand)
• Notes from this weekends Merrill Lynch conference call:  Russia vs Ukraine.  What investors want to know.  Why, sanctions and what's the end game?
• Let's take a look at past Geopolitical concerns and how much markets sold off (and recovery time) BusinessInsider
• Russia has given the Ukraine a 3 a.m. deadline to surrender or "face a storm". Skynews
• The new thing from Apple.  "CarPlay" hands free phone, messaging, maps etc for your car. Coming out in Mercedes and (down the line) in other vehicles as well.  Now we know why Tim Cook was meeting with Elon Musk from Tesla

• Meanwhile Dr. Copper .............. http://screencast.com/t/ln6lJhVB

• What happened to DeMark's prediction of a crash? Mr.Top Step
• 85 people (only 85) own over 1/2 of the WORLD's wealth.  Let that sink in a minute.  Oxfam.og
• Markets won't like this tension (watch crude oil and PMs).  Russian troops encircle UK bases; urging troops to defect NYTimes
• They're not out of the woods yet.  52% of workers in France want to leave the Euro. Mish Global Economic
• Always good to see Stocktwits talking up on two stocks which are long in Kos's port $EBAY and $MELI.  Glad to have them aboard! lol
• What Americans really do with their income tax refunds TheBlaze
• Who knew.  There *is* a magical day to book and get the cheapest airfare. Huffington Post

• The argument to lift the ban on crude oil exports Bloomberg
• How big oil (and Senators) are positioning at the Senate Energy and Natural Resources Committee Bloomberg
• A 3pm gold "fix"?  This study says it began in 2004. Bloomberg
• That's what I've been saying.  Fed may have to let inflation run hot to meet goals. Reuters
• Markets spooked as confirmation came of Russian troops taking over two airports in the Crimean area of the Ukraine.  UN to hold closed-door session this weekend to discuss situation. Reuters

• "There’s no way that we are not going to have massive problems in China." BloombergView
• Let the bidding begin for Elon Musk's battery gigafactory.  Bloomberg
• Possible defaults in some WMPs don’t reflect a “big problem”.  Wait, 60% of GDP is no big deal? Bloomberg
• Retailers deep discounts bring in buyers BUT weigh on margins.   IBD
• China's property boom continues to rise relentlessly. Global Property Guide
• Why Facebook bought Whatsapp (think "get the teenagers back")  Sequoia Capital
• Business investment flows continue sluggish (but the stock market doesn't seem to care)  Califa Beach Pundit
• It has never ceased to amaze me the ridiculous amounts the US government spends on it's military (20% of budget) yet when you stand back and look at things, it becomes even more ludicrous.  For example the 19 aircraft carriers we have afloat whereas China only has one and it's not even in commission yet.  BusinessInsider   More aircraft carrier numbers at Wikipedia
• After the close, CME lowers margin requirements on WTI Crude http://www.cmegroup.com/tools-information/lookups/advisories/clearing/files/Chadv14-085.pdf
• The Top 10 Emerging Technologies For 2014 BusinessInsider

While the U.S. saw their home prices plunge and begin to recover, China and Canada have still been in what's been considered a housing price bubble.  China even more worrisome when you consider their large shadow banking system (alleged to be 25-30% of their entire financial system) which runs behind the scenes and basically ignored by larger banks.  They are, after all, providing a service to small business and investor but at risk and what cost? 

(China home price index to the left - Canada's home pricing index to the right. )

In 2013 Fitch estimated China's shadow banking system represented an astounding 60% of GDP.  Yep, 60% and no one's paying attention to the children in the playground?  Mind blowing.   For all the complaints here in the US over government regulation, they are there when we need them; pulling on the reigns and don't wait until the child runs into traffic in front of a truck.  Well, they usually don't.

In any case, China's credit-market gauges are triggering alarm bells, as banks grow cautious in lending to each other while investors prefer the safest government bonds.  Tightening credit markets; where have I heard that before?  The spread between the two-year sovereign yield and the similar-maturity interest-rate swap, a gauge of financial stress, reached 121 basis points on Feb. 19, the widest in Bloomberg data going back to 2007.

Many have been concerned if their China's housing bubble (and Canada's too although it's odd not many talk about it - China must grab more headline reads) and pondering if a crunch in China would lead to a 2nd global meltdown.  It hurts my brain just thinking about it but maybe that's why many Corporations are holding vast amounts on cash on their balance sheets......just in case.

Premier Li Keqiang, we await your further efforts to curb leverage in China.  Will you de-value your Yuan or let the failures begin?  Things cannot go up indefinitely and the Fed will be easing off the QE pedal in the US.   I am not short China nor Canada and their charts (GXC EWC) seem to be tightening; eventually a move one way or another will come.  Should they beware the Ides of March?

Last week BTIG's Dan Greenhaus tried to dismiss the talk of the January effect (calm investors) stating “Normal corrections” tend to be anywhere from 5-8%, which is basically what we had/are having. If that’s the case, and our underlying fundamental views have not shifted (they have not), then stepping into markets down more than 5% should prove rewarding over time.  Of course me, being a skeptic of MSM (and everything out there for that matter), caught the last two words "over time" and raised an eyebrow.  Seriously?  Over time?  Most small investors won't risk more than 10% of any position.  Many only $100 if possible and this prompted me to poke around a little further on this January effect *thang*

The Street seems to buy the theory "When the first five trading days of the new year are positive, the month of January ends positive 76% of the time. When the month of January is positive to start the year, the stock market finishes the year positive 82% of the time."   While Barry Ritholtz is clearly more skeptical Lots of analysts, including Ed Yardeni, note the data is statistically significant. But whether it should affect your strategy is an entirely different question. My conclusion is that it shouldn’t....."

There's the nuance again "affect your strategy".   Of course we still want to be long in our 401k and IRA accounts Barry but come on.........we'd prefer to have some hedges if we're in for more pain.  Not just sit and wait it out.  We know how well that worked out in 2001 and 2008.  Big funds can afford to "wait it out" and have huge draw downs while fully hedged with Puts but us little guys...........were all but wiped out.

My strategy?  Buy low and sell high so at this point I'm still curious about this January barometer.

Historically how has it performed?  I don't mean since 1990...........but going way back; say to 1950.  Enter the market historian, StockTradersAlmanac.

Historic work like this blows me away. (click on image to enlarge)  Not only did they determine that a negative January had a 80% effective rate of forecasting full year returns, but if Dow took out the December low AND closed negative in January, the forecast jumped to an 88% accuracy rate.  Now that's the sh**

The "why" could be any number of things.  Currency changes causing funds to liquidate some holdings to meet margin calls.  Fears over BRIC stability (which come and go).   Fear of Fed tapering, economic data, bad retail sales (blame the weather!), spike in natural gas possibly hitting balance sheets and triggering a recession or maybe the five-year bull run simply needs a breather.  As Art Cashin pointed out, bull markets tend to have a five-year shelf life and we're dangerously close.  Throw a dart and take your pick but it doesn't much matter to me.

I'm personally placing more weight into historical performance and 88% accuracy is pretty damn impressive if you ask me.  Go ahead and back fill S&P.  Test that 50day SMA and even the highs.   I'll be waiting and placing more hedges, expecting another leg down.  If they're right, my portfolio will be somewhat protected.  If they're wrong, I'll still sleep better at night and at my age.......that's tough to come by.

Full disclosure:  My port is heavily long with a few hedges.  I am looking to protect those longs (unless stopped out on those recently added).

If so, blame Mother Nature.  I dread seeing my next heating bill and will most likely be selling a kidney on Ebay to cover the cost.  A 2011 research paper by James Hamilton highlighted how historically, recessions occurred after a spike in crude oil prices.  Well what do you think we're witnessing in nat gas here?  Sure, it's an enormous short squeeze but what will the record snowfall, cold temperatures AND a spike in natural gas do for revenues, earnings and consumer spending? 

I'm surprised MSM media isn't talking about this more.  Sure, they're mentioning the slow down in the retail sector (charts already showed that) but what about the "R" word?  Oh wait, their job is to prop up and distract "entertain".  I almost forgot.

"When E.F. Hutton talks, people listen" was the mantra in the 1970's and 80's where commercials typically featured an business man at a holiday party or casual get together and when asked what his broker, E.F. Hutton said, everyone in the room froze, heads turned..........hanging on his every word.   Nowadays there's no doubt in my mind that when Art Cashin, the seasoned, ice cube-marinating stock market veteran talks, Chicago traders such as myself listen.  

Bull markets have a maximum shelf life of five years, and Wall Street may soon approach the end of this one, UBS' Art Cashin told CNBC on Friday.  If the S&P 500 drops below 1,770, he added, the markets could see a wave of secondary selling.

"It's a little bit of catch-up for 2013," he said on "Squawk on the Street." "We've gone for an awfully long time without a correction. Bull markets tend to have a maximum life of five years. We're getting awfully close to that."

What do your tea leaves tell you?  Is it time for some safety? 

Full CNBC article here and Art's video here.

Of no surprise is that many of these names are in the phone/tablet and cloud arena.  One however that I am very interested in watching is the lawsuit between Aereo and large broadcasters (FOX, CMCSA, CBS and DIS).  Little, tiny underdog Aereo won the initial round in court however an appeal to the Supreme court ruling later this year is a make or break for broadcasters who typically do not charge for local channels for those with antennaes. 

I actually find it a thing of beauty that Aereo (who just began it's service in Cincinnati yesterday; it's eleventh U.S. city), saw that flaw and utilized it to their revenue model benefit.  Broadcasters are stuck between a rock and a hard place.  If they begin to "charge" for local with an antennae (pay for local tv?), the risk losing millions (of buying Americans) who will simply obtain local channels through their cable provider......and we will witness the slow death of local news channels.  What about the NFL and MLB who utilize local channels to reach their fans?  How will they be affected?

Sports franchises are already threatening to go with the "pay" model in sympathy with large broadcasters but given a weak economy where we're already paying for cable and streaming services such as Netflix, I ask you is their ploy merely a bluff or are they Russian Roulette with only one chamber empty rather than filled? 

If the Supreme Court upholds the initial ruling, broadcasters will be backed against the wall in order to have a slice of Aereo's revenue pie............and with that I believe they'd be an enormous short play.  The price action will begin to reflect that in the months leading up to the Supreme Court decision as large investors (who have inside knowledge) will begin distribution.

They're stomping their feet and pounding the desk that it's just not fair...but that's American innovation for you.  What a pity, my heart bleeds.

Other than Google, few digital companies have the ability to reach an entire populace, which classically could only be found on TV.  If Facebook’s plan works, it could lure in tons of ad revenue as marketers shift their focus from television to digital.

“Avoid saying anything negative about YouTube – leave the impression of the user experience up to them” Facebook tells its adtech partners in a leaked, confidential deck that teaches them to sell Facebook’s video ads. The 32-page document details Facebook’s plan to beat television with reach and YouTube with targeting, and spills the beans about an overhaul to video insights slated for Q1 2014.

Facebook slams other digital properties, stating  ”A lot of time is spent by people on mobile with Google properties, YouTube, Yahoo!, MSN, AOL, Twitter and Pinterest…And more total time is spent on mobile on Facebook and Instagram than all of those combined.” It’s that scale, the ability to reach hundreds of millions of people quickly, that Facebook hopes will attract the world’s biggest advertisers.

Facebook’s pitch for video ads breaks down to three things, as explained in this excerpt from the presentation:

1.You want to be where people are. Changing consumer behavior should shape where you spend your marketing dollars.

2.You want to reach all of the people who matter to you. Facebook has unparalleled targeted reach.

3.You want to be in the most engaging digital real estate, which, as you just saw, is Facebook’s News Feed.

That's the message being sent out based on McKinsey's latest executive survey and the first thing that comes to mind for me, is FX money flow.  Here are a few excerpts:

Global executives are increasingly positive about the direction of the world economy, though in our latest survey on economic conditions, the source of their optimism has shifted away from emerging markets and toward the developed world. For the first time since we posed the question 18 months ago, respondents say they no longer expect developing markets to lead global economic growth over the next decade. Instead, they expect developed markets—and an improving Europe in particular—to advance future growth.

Executives in emerging markets were cautious in June. Now, amid continued reports of slowing growth, volatile currency movements, and sociopolitical instability, they are particularly gloomy over the state of their home economies.  In fact  41% say economic conditions in their countries are worse now than they were six months ago, compared with just 13 percent of their peers in developed economies.

Not surprisingly, given the ongoing crises in Egypt and Syria, executives see geopolitical instability as a rising risk to growth, both global and domestic. The share of executives who cite geopolitical instability as a risk to global growth in the coming year rose to 69 percent in the current survey, up from 51 percent in June.

Read all survey results at McKinsey.com

While discussing the upcoming Twitter IPO and whether we were going to "get in" if shares became available, Matt offered up this interesting read on Twitter's acquisition of MoPub and what a game changer it is.  I highly recommend:

WTF is MoPub?

MoPub is the world’s largest mobile ad exchange. That means people trade eyeballs on mobile devices for money through the technology MoPub provides. And they do it billions of times a day.

“The two major trends in the ad world right now are the rapid consumer shift toward mobile usage, and the industry shift to programmatic buying.”

That’s absolutely right. Those are the only trends in the ad world that matter, and........... Twitter is betting big on both of them. It’s a bigger, ballsier bet than my former employer (FB) ever made, and it puts Twitter way ahead of any other social media player. I hate the douchey cant of MBA-speak, but to the extent we can use the term ‘game changer’ without puking in our mouths, this move is that.

There are only two real sources of data in this world, both stemming from browsing: There’s the browsing data the advertiser knows (e.g., you looked at a Canon 6D camera on my site, and I still want to sell you that camera), and there’s the browsing data the publisher knows (e.g., you were on the Wall Street Journal Technology page today). The former gets used by the advertiser to hunt you down and figure out what ad to show you. The latter gets injected into the data stream in some way that hopefully increases the value of advertising to that publisher. The data about the camera the advertiser will never part with, as it’s too valuable. The data from the publisher is only occasionally valuable, and if so, it’s of fluctuating quality. The publisher is willing to part with the data, but the question is whether the data is any good and will anyone pay for it. Often, the answer is ‘no’.

Enter Twitter: They know whom you’ve followed, what you’ve Tweeted, as well as what pages on the Web you’ve browsed. Remember, there are Tweet buttons over the entire Internet, which means they know what websites you’ve visited. That’s very valuable data they can suddenly inject into the real-time ebb and flow of browsing data. It’s also longer-lived. What marketers call the ‘intent window’ of camera shopping might last only last a week or two, but your interest in Lady Gaga indicates a certain demographic category that won’t change for years. And only Twitter knows that (well, and Facebook, but they’re not doing much with it).   Read the full article here

Now if you'd like to be totally freaked out, take a few minutes to checkout this Ted Talk by Gary Kovacs:  Tracking our online trackers (one of my favs)  http://www.ted.com/talks/gary_kovacs_tracking_the_trackers.html

Not only is it eye opening from an advertising point of view on behavioral tracking, but if you have children or teenagers, you may raise an eyebrow even further.  Enjoy

September is guaranteed to be packed with drama for the markets wall of worry.  As if Syrian tensions weren't scary enough.  Reuters outlines, not only will non-farm payrolls be highly important (will the Fed taper or no based on it) but German elections, Abe's 3rd phase of economic policy and of course, Obama's nomination for the next Fed Chairman.  (yes I'm completely ignoring the debt ceiling as a concern because it's not)

A few months back, it was Janet Yellen everyone felt would replace good old Ben Bernanke as the next Federal Reserve Chairman however as September nears, it's Larry Summers who has pulled away from the pack as the 5/2 odds on favorite, at least according to PaddyPower. 

Not being particularly interested in his resume bur rather what his views were on monetary policy and the like, I pulled these quotes from ft.com which should lend insight into Mr. Summer's beliefs on QE and Fed intervention.  Clearly he's slightly more hawkish when it comes to the use of QE.  I particularly liked his comment "if we have slow growth, we're not going to keep thinking 5.5% unemployment is normal".   Thank you Larry for admitting what the rest of us already know.  7.5% is the new 5.5%.    Of major interest is also Mr. Summers, while not thrilled about QE, does endorse the use of stimulus packages so spur spending and job growth.......which the market would love.  I can already hear the cheers for infrastructure stimulus once again.   So the guy's not all bad. 

Just as Obama was left to clean up Bush's mess, now it appears Summers will be left to taper QE and dig out of the Fed's debt bubble.  I don't think they could pay me enough to take the job but truly if they tap you to "serve your Country", can you actually say no?  Please add any thoughts or comments you may have below.  Enjoy.

"The stock market is overvalued." "The stock market is undervalued."

Which one of these statements is true?

Both are, thanks to quirks of the most popular way of measuring a stock's valuation: the price/earnings ratio.

While no one disagrees about what the "P" is when calculating the ratio, there is no consensus on how to define earnings-per-share. One of the biggest points of dispute: whether to use analysts' earnings estimates for the coming year or reported company earnings from the previous 12 months.

Comparing ratios calculated in these two ways is little better than comparing apples to oranges, according to Cliff Asness, managing partner at AQR Capital Management, an investment firm with $84 billion of assets under management. In an email, he went so far as to say that those who compare P/Es in this way are engaging in a "sleight of hand," though he allowed that many may "not be aware of the mistake they are making."

Consider the S&P 500's current P/E based on trailing earnings. For the four quarters through June 30, the index's earnings per share amounted to $91.13, according to S&P Dow Jones Indices. That translates into a P/E ratio of 18.2, which is higher than 79% of comparable readings since 1871, according to a database maintained by Yale University Professor, Robert Shiller.

Many bulls try to wriggle out from this bearish sign by focusing on estimated earnings.

According to FactSet Data Systems, the consensus forecast from Wall Street analysts is that earnings from companies in the S&P 500 will be $122.01 a share next year, which translates into a P/E ratio of 13.6. That is 6% less than the 14.5 median of historical P/Es in Mr. Shiller's database.

There is a catch: Forward-looking P/Es are almost always lower than those based on trailing earnings—often much lower. There are at least three reasons why, says Anne Casscells, a managing partner at Aetos Capital, which runs several hedge funds. First, corporate earnings usually rise from one year to the next. In addition, analysts' estimates focus on what's known as "operating earnings," a looser category than the actual reported earnings used to calculate the average of past P/Es.

And last but not least: Wall Street analysts' predictions tend to be way too optimistic.

These three factors conspire to make forward-looking P/Es 24% lower on average than those based on trailing earnings, according to a study by Mr. Asness and Ms. Casscells into the two types of P/Es from 1976 to 2003.

Assuming this difference persisted over the entire 140 years in the Shiller database, the median forward-looking P/E has been just 11. The S&P 500's current forward-looking P/E of 13.6 is therefore 24% above the median—not 6% lower.

The stock market doesn't have to fall just because its P/E is above historical norms, of course. Ms. Casscells points out that the P/E ratio, like other valuation measures, exerts only a weak gravitational pull on the stock market's near-term direction. And it is always possible that "this time will be different," she says.

Still, a proper apples-to-apples comparison negates the bulls' argument that the current market is cheap, she contends.

The investment implication is that one might focus on ways to gradually reduce equity exposure rather than increase it. When you sell any of your shares, for example, don't automatically reinvest the proceeds from those sales in other stocks.

A related implication is that you should begin to shift toward more conservative holdings the portion of your stock portfolio you intend to hold through thick and thin. This means favoring companies with a larger stock-market value, little or no debt, a track record of consistently rising earnings and that hopefully pay a handsome dividend.

Examples are JNJ and PFE,  both of which are at the top of the most-recommended stock list among those advisers beating the market over the past 15 years, according to the Hulbert Financial Digest.

The two companies have much lower debt loads than the average S&P 500 company and relatively high dividends. Johnson & Johnson and Pfizer sport dividend yields of 2.9% and 3.3%, respectively, calculated by dividing the annualized equivalent of each firm's most recent dividend by its current stock price.

One mutual fund that invests in similarly tried-and-true companies is the Vanguard Dividend Growth fund. It also is at the top of the list of most recommended mutual funds among the 15-year market beaters. The mutual fund has an expense ratio of 0.29%, or $29 for every $10,000 invested.

Another fund that invests in similar stocks and is popular among the 15-year market beaters is the Vanguard Wellington Fund, with a 0.25% expense ratio.

Original post found at http://online.wsj.com/article/SB10001424127887323455104579014782497257644.html

Ah, 1978 and U.S. airline deregulation.  What a thing of beauty.  Suddenly there seemed to be a new airline popping up each year, all vying for a piece of the pie in the sky.  Then how to drum up business.  Remember the days of airfare wars?   A new start-up would lower prices to attract business and the big  boys , no longer with the luxury of their monopoly, had no choice but to follow suit as their passenger counts fell in step. 

The consumer was obviously elated!  Even those who previously couldn't afford to visit Grandma in Boca, were suddenly able to take to the skies; kiddies and all.   

Those were the clear benefits of deregulation and the consumer loved it - but corporate profits did not.

Then came the rise of jet fuel.  Did the government intervene to stop it?  If they did, it was too little too late.  (click chart to enlarge)  It doesn't take a rocket scientist to imagine what that did to profits and prices.

Oddly enough with dramatically less demand, fuel prices haven't reverted to the mean.  Hmmm nice isn't it (sic).

So what's a Corporation to do? Back to oligarchy it is.  Obviously let some go to Bankruptcy and buy out the others. 

The final result 40 years later with such consolidation?  Take two steps forward and five steps back  "ticket prices have skyrocketed and consumer choice has diminished"

Long live Capitalism.........*sigh*

It's one thing when prices are lowered to spur demand.  It's an entirely different situation when buyers "demand" lower prices and can hold out until they get it.  Potash names such as POT, MOS and IPI saw a 20% haircut in market cap last month even though potash prices themselves had not "plummeted" as forecast.   So which is the tail and which is the dog?  It would appear the stocks definitely were the leading indicator.   This from the WSJ may just be the tip of the iceberg lettuce.

"Indian potash buyers are (now) demanding discounts for the price of the key fertilizer ingredient as the Russian miner that shook up the sector's cartel system last month ramps up production, threatening to send prices tumbling.

The moves will further pressure shares of global potash miners, who have already lost up to 20% of their stock-market value since Uralkali said in late July that it was pulling out of one of two sales partnerships that together control two-thirds of the nearly $22 billion potash market. Now, the company says it is hiking production to full capacity.

Indian buyers, the second biggest source of potash demand after China, say they are asking for steep discounts on current contracts and will demand lower prices going forward."

Great for the buyers, bad for producers but is it merely transitory?  The problem with this (deflationary) environment will now be determining just how long and "when" conditions are right where producers will be able to begin raising prices once again.  One need only look at steel manufacturers ETF $SLX (click chart to enlarge) to see how they have fared in this area the last five years and we all know how the shippers have fared the last five years.  Not a pretty picture when you cannot increase prices.

If you can withstand the pain, bottom fishing is an option in the ag arena however it certainly looks as though there's more pain to come.  Personally I think the gaps in POT and friends will be filled at some point, and I plan to be waiting there, with long-dated (LEAPS) Puts.