Apple's Product Announcement: Watching the Pot Boil

     That's how it's felt watching the market so far today. The question is what Apple releases beyond what is known. We know they're going to unveil IPhone 6 today but what will it's exact features be? I'm pretty much doubled down on Apple as I not only have a bunch of its stock but also am long GTAT with 20 calls for the Sept 26 $17/50 strike.

     What investors of GTAT will look at is just how much of a nod Apple gives the use of Sapphire vs. Gorilla glass in its new phone and other products. On the other hand, owners of Corning's stock probably hope the opposite though Corning insists that it would have no problem meeting any new need for Sapphire Apple might need.

     http://www.cnbc.com/id/101984704

     There is some danger being long Apple I know. They've had a tremendous run which can't possible go on forever and why not use this occasion to lighten up? In addition, the release of the IPhone 5 was ultimately a plateau in the stock that it has only returned to now with the ramp up to this moment.

      What investors seem to want is something really new-there's been talk of a wrist watch-which presumably could use Saphiire's scratch resistant surface-and now there's talk of a new 'holy grail'-automatic payments.

       This is the kind of pressure Apple is under. This need to constantly be creating something brand new is perhaps not the best way to get a pot to boil. We shall soon see.

        http://www.cnbc.com/id/101984704

The Stock Market, NFL Week 1 and Being Lucky and Good

     I talked about my new NFL betting strategy the other day. As those who have read my blog in the past know I do like to trade in stock options-basically if I think a stock may be headed lower I buy puts and in it and if I think it will rise I buy calls.



     What I've found when I tell other people about this is that most have a reflexive fear of 'gambling.' I think there's also a notion out in the popular consciousness that it's ok and in fact good to 'invest' but 'betting on stocks' isn't investing. Of course, when you talk to an economist the confusion builds as while some might call buying or selling stocks-or the related options-'investing' and most others may call it 'betting' and 'gambling' economists might actually call it 'saving' or perhaps 'speculating.'



      When I think back to my initial foray into the market back in 2007, I think what drove me there to begin with was that I was struck by the fact that the yield on savings accounts were so low-ironically comparing the interest rates on bank accounts back then to today that now looks like a Golden Age of yield.



       We can debate what the meaning of 'Secular Stagnation' is-a big part of which is an alleged drop in real interest rates. However, one thing I tend to think the SecStag group has right-and even Sumner seems to somewhat be on this train-is that we may be in for a long period of low rates.



       On the other less gloomy hand David Beckworth has argued that there has not been a long term drop in interest rates.



        http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/14/heres-why-larry-summers-is-wrong-about-secular-stagnation/



        This seems wrong as back in 2007 I was frustrated that you could find no rates more than 4% and now you're lucky if you can find a 1% rate. It sure seems like this will be the case for a long time-part of this though may be what Keynes talked about; our tendency to assume the future will be like the present and recent past.



       However, when you remember that these are nominal rates, you see that real interest rates have not dropped quite as much as nominal rates make it seem though they have still dropped. In 2007 if the nominal interest rate was 4% so was the inflation rate so that there was basically no yield. Now with basically a zero nominal rate and an inflation rate of about 1.5 we actually are paying banks to hold our money.



        So my initial interest in stocks was for higher yield which would seem to lend some validity to economists calling stock investing or 'speculating' saving. If buying a stock is saving though what is buying say 10 calls on it? Is this now speculating? With options you risk your entire principle but don't have to put such a large absolute amount as you do for buying the stocks outright.



        My move into options was caused by the 2008 recession and bear market-these actually started in late 2007-and my realization that the plum days for buy and hold were over. Of course, once I realized how much I could make in options my interest in buying and selling stocks waned. I felt like I wanted more than just a high yield savings account.  I was now entranced by the idea that it's possible to make money into more money when it's laying idle-maybe even especially when it is. Here at least Piketty is right: the goal of capital is to hit that Zarathustrian point where the Spirit of Gravity that says 'what goes up must come down' is reversed and where passive money multiplies itself. I don't agree with those though who feel that wealth should solely be a product of one's own savings however.


        So now I've dipped my toe into a new way for passive money to grow-betting on the NFL; I'll probably try the NBA when it starts.


       So how did it go? It actually went swimmingly and I have to say in achieving this I was both lucky and good. I was good in that I got all three of the games I was looking at right: Seattle over Green Bay, the Eagles over Jacksonville and the Steelers over the Browns. I only ended up betting on the first two games and actually made a mistake in that I had meant to only bet straight up in these two games and I actually mistakenly bet the spread.


      Seattle, however, had no trouble beating a 5 and 1/2 point spread against the Packers blowing them out 36-16 and the Eagles actually fell behind 17-0 in the first half at home against the Jaguars and yet somehow managed to not just rally in the second half but beat the 10 and 1/2 point spread with under two minutes left returning a Jaguar int for a TD.


       Of course, as usual, when things go well, I can't quit while I'm ahead and did what I had promised myself I wouldn't: put money on the Giants tonight. I managed to stop myself from betting the G-Men will win outright-though I think they might, but simply have money down that they will beat the 6 and 1/2 point spread. What I'm thinking is that this spread is absurd.


      I tend to think that the Giants are at least a little underrated-though I'm biased of course and I know this. However, looking at the Lions, I feel like they're definitely overrated. Everyone seems to be forgetting that this is a game between two 7-9 teams in 2013-everyone acts as if the Giants are the only 7-9 team-some act as if they were 3-13-while acting as if the Lions were 13-3.


       To top it off, the last game for both teams was a 23-20 Giants win over Detroit to end last season. So have the Lions now gained 10 points over since then? I very much doubt that. I notice that when you ask people why the Lions are such big favorites then answer 'Matthew Sheppard...' but wasn't he here last year and the year before that? How good were the Lions then? It reminds me when people year after year thought Dallas would be great because well, 'Tony Romo...'


      Incidentally, no one ever seems to remember that Brady won't be in NE forever. I was not surprised that they lost yesterday as they are not a great team at all on the road; they are only a great team at home; they were 4-4 on the road last year and 8-0 at home.  Besides that, games with the Dolphins are exactly the kind of volatile long time rivalries where anything can happen regardless of who may be better or worse in a particular year and the Dolphins often have the Pats number in Miami-much as the Jets often have the Dolphins number, etc.


     I was surprised though that they went from a double digit half time lead to losing the game in the second half by double digits. This is very out of character by them and we'll have to see if this is a sign they're finally losing their mojo-it's very early of course but that was very unusual.


     I wouldn't touch their game this week in Minnesota with a 10 foot pole and notice that they are only3 point favorites-the odds makers must realize how poor a bet they are on the road.


     The games I am looking at this week are: the 49ers easily over the Bears in San Fran, the Seahawks over the Chargers in SD-though of coruse I want to see how the Chargers perform tonight and I do think they are pretty good, the 'Hawks are the 'Hawks. They are just a very good bet to win any game wherever they go.


     On the other hand I have the Bengals who are a very good bet to win a game at home-8-0 last year but 2-6 on the road.


       


   


         


    

Jim Cramer: Draghi Pulls a FDR

     This is the spectre he raised this morning on CNBC's Squawk on the Street likening ECB President Mario Draghi's latest moves to FDR. Draghii has now official pulled a play out of Bernanke's playbook with the ECB's foray into QE-the ECB also lowered interest rates. 

     "The European Central Bank has acted in the face of stalling European growth. Cutting three main interest rates, including one that was already negative, ECB President Mario Draghi also announced plans to buy private-sector assets, suggested quantitative easing is still on the table and that rates are the lowest they will go. The message was clear that banks should accept this, start borrowing money from the ECB and lend it to the real economy."

      http://blogs.wsj.com/moneybeat/2014/09/04/ecb-live-what-will-mario-draghi-do-now/

       To be sure whether or not this is kind of QE is up to some debate-semantics-but no one questions taht this is virgin territory as it were for the way  behind the curve ECB. 

         I'm a big Cramer fan and I also liked his imagery of FDR. He expiciltly made the poiint that it was a conscious decision of his to reference not Draghi following Bernanke but rather as following FDR. In many ways Scott Sumner would probably agree with Cramer here-he too has talked about 'Rooseveltian Resolve'-Bernanke wrote a paper on this. 

         http://delong.typepad.com/sdj/2013/03/ben-bernanke-1999-rooseveltian-resolve.html

          https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CDYQFjAC&url=http%3A%2F%2Fwww.themoneyillusion.com%2F%3Fp%3D3587&ei=Q5UIVKLsDZTG7AaYx4HgCw&usg=AFQjCNHmpPwYaUhDjv5rRjNke1u-9ZJqhQ&sig2=E-rxfDISBAKdqx8Rf2yHxQ&bvm=bv.74649129,d.ZGU

         However,  what Sumner praises FDR for was what he did about the gold standard. Cramer described Draghi here as basically an end run around the Germans in order to get an 'autobahn' project, basically a New Deal for the Eurozone. 

           Cramer isn't always right but he's always worth listening too and Iet's hope he's right on not just the market picks he gave us today but also his NFL pick: he has Seattle beating Green Bay. I just made my first ever bet on an NFL game with Seattle over Green Bay. The reason why I think this is a good idea is it's straight up. GB is a very good team lead by one of the best QBs in the NFL with Rogers but Seattle in recent years has been a total lock at home.

           I put $600 on them and after this I'll try a bet on the Eagles over Jacksonville in Philly. The Eagles surely have to be as close to a sure thing at home against the Jags as you're going to get-they're Cramer's team of course. So this weekend Cramer and I are simpatico on football as well-not a bad place to be in either the NFL or the markets.

The NY Giants: What a 5-0 Preseason and $.50 Cents Will Get You

      It will get you a cup of coffee assuming that's what coffee costs now a days as I'm not a coffee drinker I wouldn't know-is it more like $1.00 now I'm thinking?


      Certainly no one is giving the Giants anything for their 5-0 preseason. Overall the sentiment seems to be very pessimistic on the G-Men. On this morning's Mike and Mike show, Mike Gralic picked them dead last in the NFC East with a 4-12 record, while Mike Greenberg had them 6-10 and second to last-the only thing gratifying for me is that he had Dallas last at 5-11.


       Overall, the predictions are quite bearish for the Big Blue this year. That they went 5-0 in preseason has been totally discounted. All anyone talks about is the subpar performance of Eli Manning and the first string offense.


       "Eli Manning finished the preseason 20 of 41, for 188 yards and one touchdown. In what was basically 1 1/2 games of football, it's not what the Giants were expecting. "


         http://www.nj.com/giants/index.ssf/2014/08/eli_manning_breaking_down_his_final_giants_appearance_of_the_preseason.html


         

        Giant fans perhaps shouldn't take the dire too much to heart. While he had only one touchdown, at least he didn't throw any interceptions. Will he be able to adjust to the West Coast offense, will he get on the same page with Reuben Randle? The thing to keep in mind is that 41 throws over 5 games-even if you spin it as 1 1/2 games, it was spread out over 5 weeks and no matter how you want to look at it, is a lot of time. In any NFL season your only going to learn so much in 1 and 1/2 weeks.


        There hasn't been much focus on what the G-Men did do right. There was just one pick by Eli. Then there was the very impressive play of the second and third units under the West Coast offense. Yes, I know these are only scrubs, but at the least the Giants scrubs were a lot better with the West Coast offense than opposing defenses were at stopping them. Then there was the great play of the running game-134.6 per game.


         More than anything, Giant fans should keep in mind that in 2007 the overall sentiment of NFL prognosticators was no better than now about the Giants. The Giants are rarely the darlings of August. More than once they've been the stars of January however.

It's Official: Hello Kitty is a Girl and the Market Again Drops on Russia

     This is now a fact as it's been confirmed by the 'experts'-yes, she is a girl-not a cat. Joe Kiernan of CNBC seemed quite shaken by the news this morning and it seems that many reacted the same way but I've always thought she was a girl. I think the point is not that she's a cat herself but that she's a 'young, smart girl'-as we have now been informed-who really likes cats.

     In the past I've had people come up with all kinds of weird theories as to what Hello Kitty is-that she was a cat was a lot more plausible than someone who thought she was a he!! This person I have in mind was actually a female which made it even harder for me to figure out.

      http://www.washingtonpost.com/blogs/compost/wp/2014/08/27/hello-kitty-is-not-a-cat-everything-is-a-lie/

       So I have some happy closure there even as others are in angst. While this makes sense to me, here's what doesn't: the market sold off today with stories that Putin has opened up a 'third front'-in the Ukraine.

        While this may be very bad geopolitical news, what exactly is the market thinking this means today? If  Putin succeeds in his offensive in the Ukraine this is very lamentable but I don't know if anyone really knows what it means for equities. Maybe that's the answer-'uncertainty'-though we saw the market sell off sharply in late July over this very same 'uncertainty.'  So even though we had some good numbers in today like unemployment filings down under 300,000 again-298,000, and a GDP number revised up for the second quarter to 4.2% all that matters its the Ukraine

       
         http://www.cnbc.com/id/101954403

          In part no doubt the market just needs a reason to sell off as we are again at all time highs and the market has been up basically every day for the last two weeks. Right now, I remain bullish. I saw this as an excuse to buy the dip-buying 20 more BAC $16 calls for Sept 26 bringing me to 80 of those. I need just a mild snap back in BAC and JNJ to make some decent cash. I was up 102% until today-since I had bottomed out before the rally at 70% down. However, today, I dropped off 7%. So am I up or down altogether math majors? LOL. I know Greg knows the answer to this one.

        http://diaryofarepublicanhater.blogspot.com/2014/08/bank-of-america-pays-doj-17-billion.html

        P.S. For the actual geopolitical analysis, it seems that Putin is acting not at all from strength but desperation. The sanctions may hurt the Europeans but surely will hurt Russia much more. The ban on many food imports is surely a classic case of biting off your nose to spite your face.


       

       

Why Conservatives Always Accuse Krugman of Lying and de Blasio's Natural Experiment on Housing

     He said that this piece he did on the so-called 'Texas Miracle' of Rick Perry brought out a lot of the haters. In it he argues that the main reason so many are leaving big cities and states like NY for small states with conservative governors like Rick Perry is not because of low taxes and regulations on rich people and rich companies but lower housing prices.

     "But why are housing prices in New York or California so high? Population density and geography are part of the answer. For example, Los Angeles, which pioneered the kind of sprawl now epitomized by Atlanta, has run out of room and become a surprisingly dense metropolis. However, as Harvard’s Edward Glaeser and others have emphasized, high housing prices in slow-growing states also owe a lot to policies that sharply limit construction. Limits on building height in the cities, zoning that blocks denser development in the suburbs and other policies constrict housing on both coasts; meanwhile, looser regulation in the South has kept the supply of housing elastic and the cost of living low."

      "So conservative complaints about excess regulation and intrusive government aren’t entirely wrong, but the secret of Sunbelt growth isn't being nice to corporations and the 1 percent; it’s not getting in the way of middle- and working-class housing supply."

      "And this, in turn, means that the growth of the Sunbelt isn't the kind of success story conservatives would have us believe. Yes, Americans are moving to places like Texas, but, in a fundamental sense, they’re moving the wrong way, leaving local economies where their productivity is high for destinations where it’s lower. And the way to make the country richer is to encourage them to move back, by making housing in dense, high-wage metropolitan areas more affordable."

      "So Rick Perry doesn't know the secrets of job creation, or even of regional growth. It would be great to see the real key — affordable housing — become a national issue. But I don’t think Democrats are willing to nominate Mayor Bill de Blasio for president just yet."

      http://www.nytimes.com/2014/08/25/opinion/paul-krugman-wrong-way-nation.html?ref=opinion

       What makes conservatives so crazy over Krugman in a piece like this? I think it's conservative economists in part like Sumner and his readers who hate such pieces and after reading it declare him a 'liar.' I recall Mark Sadowski-not to pick on Mark just he's an example I recall, there are many such complaints-saying that what bothers him about Krugman is that 'he knows better.'

       There is a feeling that he sells out his knowledge for his personal ideology. To me this always seems a little convenient-conservative economists evidently don't believe that conservative economists ever prostitute their knowledge for political reasons but if true this is hard to square with what we saw from Greg Mankiw and Glen Hubbard during the 2012 race when they were in the pay of the Romney campaign.

         To be sure, a lot of what is believed by mainstream economists is considerably more conservative than what laypeople believe-think about things like the minimum wage-the average person bought into the MW in the 30s-in any case they elected FDR who put in place, then they continued to elect him and others like him who also believed in it. Or take 'price gouging'-most people think it's wrong for say a gasoline company to raise prices sharply during a hurricane-as a few did during Hurricane Sandy on Long Island, though most to their credit didn't.

         Most economists don't have a problem with such 'gouging' they chalk it up to the workings of supply and demand. Indeed, they would go on to argue that such 'gouging' has a salutatory effect as it prevents shortages.

          In any case, what ended the problem of long lines in Long Island was when the government imposed 'odd-even' days where some could only get gas on even days, some could only get it on odd days, so in this case, government was  the answer.

          Similarly with rent control. I saw in the comments that Krugman was criticized for not mentioning rent control. To make matters worth he praised de Blasio's agenda for low housing prices-no doubt many economists would complain that this is unlikely to be Pareto optimal.

           http://www.nyc.gov/html/housing/assets/downloads/pdf/housing_plan.pdf

           The de Blasio plan is about all the things conservatives hate-if prices are too high it must be because of rent control; get rid of that and prices will be nice and low after supply is back at it's equilibrium level.

           It is true, that in Krugman's recent textbook with his wife and fellow economist, Robin Weil, he criticizes rent control. So this is probably the sort of thing these conservative economists have in mind.

            If nothing else, though, economists should welcome de Blasio's '10 year plan'-no doubt this will be compared to Lenin and Mao's plans-as it gives them what they always tell us they need so dearly but so rarely get-a natural experiment. 

Burger King, Inversion, the Corporate Tax Rate and the Lies of Robert Pittenger

     I'm sort of giving the meaning of the world 'lie' a wide berth where simply being wrong is declared a 'lie'-call it the Scott Sumner berth. Still, you have to shake your head a little after seeing North Carolina Republican Congressman Pittenger on how we have the highest tax rates in the world and 'this is just shameful, shame on us.'

   http://video.cnbc.com/gallery/?video=3000305862

    This all goes back to the fallout over Burger King's merger with the Canadian company Tim Horton-the irony, is that while the stocks were up on the news, and BK is presumably doing this at least in part for 'inversion' purposes, Jim Cramer actually argues that these are two less than spectacular companies hoping that the two of them can somehow be spectacular together and while BK may be doing this for Canadian tax rates, Timothy Horton is doing this to make themselves somehow more 'American.'

    http://www.cnbc.com/id/101947959

    Many criticize 'tax inversion'-where American companies try to get a lower foreign tax rate. The answer to GOPers like Pittenger is just lower the corporate tax rate to nothing as this is both 'fair' and will allow us to 'compete.'

     I love having some knuckle dragging Republican from the South with all their racist and sexist policies-at this point it's pretty much impossible to vote while black down there with the not so Supremes gutting the 1964 Civil Rights Act-and they are also just destroying a woman's right to choose-come up and lecture the civilized country on how they should run things. Yeah we should start picking up North Carolina policies-first we should get a Confederate flag and then we should make draconian cuts to unemployment insurance. That would please Sumner no doubt.

     https://www.google.com/webhp?sourceid=chrome-instant&rlz=1C1ASUT_enUS524US524&ion=1&espv=2&ie=UTF-8#q=scott%20sumner%20north%20carolina%20unempoyment%20insurance

    http://www.themoneyillusion.com/?p=25754

    http://diaryofarepublicanhater.blogspot.com/2014/03/unemployment-benefits-and-my-scott.html

    I know that Sumner often represents himself as 'unsure' of what the effects of this are, but that's all just part of his sophistry: have no doubt he opposes UI benefits and would never criticize any rollback of them. Part of the illusion that Sumner tries to foster-and this is quite right as this is what he calls his blog-is that economics is this value free field where what matters is 'economic science' not ideology-it's the discipline's deceit going back to Friedman's 'postiive vs. normative' conundrum. I wouldn't deny that economists don't really try to learn and understand in a scientific manner. However, at the end of the day, what decides actual policy? At some point someone has to make a choice which will not be pristine but will come with this policymaker's ideological baggage.

     We all have beliefs-or 'ideology' to use a loaded term. My feeling is that a Sumner opposes things like UI or the minimum wage for the same reason I support them. Ethical beliefs that can be informed but never fully overthrown by facts alone no matter how scientific-and the jury is till out on how scientific econ is anyway.

      http://noahpinionblog.blogspot.com/2014/06/big-ideas-in-macroeconomics-book-review_8748.html

      At most none of us get beyond the realm of correlation-to really being able to rigorously prove causation too often. This is why Sumner overdoes it when he accuses Obama for instance of 'lying' about tax rates after Obama-when you look at it, it comes down as usual to how you define certain terms, certain assumptions, etc.

       On the inversion issue, I feel like someone like Pittenger is just sputtering a soundbite that is very misleading. Of course, Sumner wouldn't criticize him for this. What Pittenger should say is that US nominal corporate tax rates are the highest in the world. Once you adjust it to real rates, we don't have the highest corporate rate in the world or anywhere close.

        As for 'corporate tax reform' many big corporations don't even want tax reform-the current effective rate for large corporations is 12%-why would GE for instance want a 'reform' of the tax? Pittenger, of course, will play his usual game of blame the Democrats for all the world's ills but he is certainly not advancing the cause of reform by being so misleading.