Problems that could be tackled using time series data: ● How the value of a country’s stock index has varied with that country’s macroeconomic fundamentals ● How the value of a company’s stock price has varied when it announced the value of its dividend payment ● The effect on a country’s exchange rate of an increase in its trade deficit. In all of the above cases, it is clearly the time dimension which is the most important, and the analysis will be conducted using the values of the variables over time.
Why Bankers Don't Like Reggie: How Many "One Time" Items Do We Need To Make An Item No Longer "One Time"? Featured font size decrease font size increase font size Print E-mail Comments (1) Tweet me! 20131009 162741 271 x Before I get started, I just want everyone to know that I always declared that There's Something Fishy at the House of Morgan (Wednesday, 27 April 2011) . Here are a few historical graphics to bring you up to speed to what should now be painfully obvious, re: JPM! I have warned of this event. JP Morgan (as well as Bank of America) is literally a litigation sinkhole. See JP Morgan Purposely Downplayed Litigation Risk That Spiked 5,000% Last Year Is Still Severely Under Reserved By Over $4 Billion!!! Shareholder Lawyers Should Be Scrambling Now Wednesday, March 2nd, 2011. Traditional banking revenues: manifest destiny as forwarned - Weakening Revenue Streams in US Banks Will Make Them More Susceptible To Contingent Risks Okay, now back to today's news... JP Morgan reported this morning and we got more of the same, simply that much harder to ignore. On Thursday, 06 January 2011 I posted " As JP Morgan Other Banks Legal Costs Spike, Many Should Ask If It Was Not Obvious Years Ago That This Industry May Become The "New" Tobacco Companies ". Today Bloomberg reported JPMorgan’s Dimon Posts First Loss on $7.2 Billion Legal Cost to mounting litigation and regulatory probes. No surprises here. We saw it coming two years ago and warned accordingly. As excerpted: The third-quarter loss was $380 million, or 17 cents a share, compared with a profit of $5.71 billion, or $1.40, a year earlier, the New York-based company said today in a statement. Shares of the company rose 2.6 percent at 7:50 a.m. after profit adjusted for one-time items beat analysts’ estimates. ... The pretax legal charge was $9.2 billion, compared with $684 million a year earlier. Litigation reserves at the end of September were $23 billion, the bank said, adding that “reasonably possible” losses in excess of those reserves were $5.7 billion. And the (now perennial) kicker... JPMorgan rose to $53.90 in New York trading from $52.52 at the close yesterday. Earnings adjusted for one-time items were $1.42 a share, exceeding the $1.30 average estimate of 20 analysts surveyed by Bloomberg. Pray thee tell me, how many times do "one time" items have to occur before they're no longer considered "one time" items???!!! JP Morgan "found" earnings in the form of reserve releases (again), from the press release: $1.60 billion pretax benefit; $992 million after-tax ($0.26 per share after-tax increase in earnings) from reduced reserves in Consumer Community Banking Now, we've seen this movie before haven't we? The following is an excerpte from a post I made TWO YEARS AGO!: As Earnings Season is Here, I Reiterate My Warning That Big Banks Will Pay for Optimism Driven Reduction of Reserves . Time will tell if I am correct, but the trends are still moving in my favor. From Bloomberg: JPMorgan Chase Co. and the biggest U.S. banks face billions of dollars in legal costs related to their role in the financial crisis, threatening their profits and the stock price gains they made in 2010, analysts said. JPMorgan, the second biggest bank by assets, reported $5.2 billion of legal costs in the first nine months of 2009, compared with a gain of $10 million in the same period a year earlier. The costs would rise if the bank reserves for multibillion-dollar lawsuits by Lehman Brothers Holdings Inc . and the trustee liquidating Bernard L. Madoff’s firm. ... JPMorgan’s third-quarter net profit of $4.4 billion, up 23 percent from the year earlier, would have been larger if it hadn’t set aside $1.3 billion of pretax income for lawsuits and $1 billion for mortgage repurchases. Banks haven’t yet reported their results for the fourth quarter. Of course, there are a few tidbits missing from this statement that can add to its accuracy. Let's see... Where did those profits come from? Again, you will find divergence between how BoomBustBlog reports and that of mainstream financial reporting. See JP Morgan’s 3rd Quarter Earnigns Analysis and a Chronological Reminder of Just How Wrong Brand Name Banks, Analysts, CEOs Pundits Can Be When They Say XYZ Bank Can Never Go Out of Business!!! Sunday, October 17th, 2010 In a Nutshell, JPM’s quarterly results were downright horrible – as we expected and warned of in our previous quarterly analyses (see notes at bottom of page)… JP Morgan’s Q3 net revenue declined 11% y/y (-5% q/q) to $24.8bn as investment banking revenue declined 18% y/y (-9% q/q) to $12.6bn from $13.9bn in the previous year and net interest income declined 2% y/y (-2% q/q, off of a combination of ZIRP victimization and a rapidly shrinking asset base and loan book) to $12.5bn versus $12.7bn in the previous year. Non-interest expense increased 7% y/y (-2% q/q) to $14.4bn as compensation expenses to net revenues remained broadly flat (28% vs 27.5%) while non-compensation expenses to net revenues jumped to 33% vs 23% in the corresponding period last year. As a result of “Fraudclosure” we expect this number to skyrocket next quarter. Overall, the efficiency ratio (total expenses-to-net revenues) increased to 60% vs 51% and we expect this ratio to spike next quarter as well as the banking business becomes even more expensive. Click to enlarge… However, despite a decline in net revenue and increase in non-interest expenses (both of which appear to be part of an obvious trend), profit before taxes was up 22% y/y as provisions for credit losses were slashed by 60%. JPM decreased its provision for credit losses despite no evidence of a substantial, sustainable improvement in credit metrics (please reference As Earnings Season is Here, I Reiterate My Warning That Big Banks Will Pay for Optimism Driven Reduction of Reserves ). Provisions have lagged charge-offs for two consecutive quarters in a row. As a result, banks allowances for loan losses have decreased to 4.9% in Q3 from 5.1% in Q2 and 4.7% in previous year. Although under provisioning has helped the bank to mask its dearth in profits it has also materially undermined its ability to absorb losses if economic conditions worsen. The Eyles test, a measure of banks ability to absorb losses, has consequently worsened to 1.9% in Q3 from 3.7% in Q2 and 5.9% in Q3 09. Wait a minute! If Reggie Middleton complained about reserve pulling and legal expenses 1,2 and 3 years ago and was proven right, how are the occurence of these items in 2013 to be considered "One Time" items???? Exactly! ZeroHedge puts it succinctly: In short: of the firm's $1.42 in pro forma EPS, a whopping $1.59 was purely from the addback of these two items.
How to increase home prices in the face of stagnant household incomes. Submitted by drhousingbubble on 11/02/2012 13:20 -0400 Federal Reserve fixed Housing Market Las Vegas Real estate Underwater Homeowners It is easy to get swept into the momentum of the housing market. The Federal Reserve has managed to push interest rates to historically low levels creating additional buying power for US households. As we enter the slower fall and winter selling season, there is unlikely to be any major changes until 2013 as the election year concludes. We do face major challenges ahead. This current momentum in housing isn’t being caused by flush state budgets or solid wage growth. No, this is being caused by low inventory, big investors crowding out households, and a concerted effort to push mortgage rates lower. If you simply follow the herd, you would think that prices are now near peak levels again (or soon will be) and household incomes are hitting record levels. Let us examine where things stand today deep in 2012. California and nation It is clear that 2012 has pushed home prices higher overall. This has occurred both on a nationwide basis and also for California. Yet California home prices are far away from that peak reached in 2006. However, some mid-tier markets never really corrected and we are now seeing flippers selling homes for prices that are near peak levels. The argument is that overall things corrected but then this is applied to niche areas where prices are now back near peak levels (at least with the current prices being seen with some flips). The low inventory and the narrative that the bottom is here is causing a flood of people to buy especially with low interest rates. In lower priced areas, a good portion of the market is being over bought by Wall Street and big money investors . This is still anything but a normal market. US home prices It is evident that US home prices have hit a new trend in 2012. Prices are moving up. Yet the driving force behind this is low interest rates, low inventory, and the high amount of investors buying up properties. Keep in mind that low interest rates and especially investment buying is finite. This money will dry up. In housing what you want to be seeing is sustainable appreciation in combination with rising household incomes and a healthy employment market. Those should be the driving forces instead of the Fed committing to another $500 billion of MBS purchases via QE3. Median household income This is the one argument that is always missing from the home boom 2.0 narrative. Is it possible to have sustained rising home prices when household incomes are falling or stagnant? It isn’t and the Fed and banks are fully aware of this. So the Federal Reserve has decided to push affordability via low rates as far as they can. It is a win-win for the financial industry. They can unload properties at much higher prices courtesy of the low interest rate. Some people think this comes at no expense. It does. Carrying a negative interest rate is pummeling those on fixed incomes and also, with one out of seven Americans on food stamps many are seeing those monthly deposits not going so far when they go shopping for food. Ultimately the cost is being shouldered by those who can least afford it. Ironically this flood of investors has also pushed rental prices higher as well creating a double-whammy. LA Tiered home prices Probably one of the better measures of price is the Case Shiller Index. This looks at repeat home sales so we are measuring apples to apples. The median price is also important but it is prone to changes with the mix of sales. Right now, the big drop in foreclosure resales is causing prices to surge. Yet it is important for trend shifts and also because the media and the public rely on this for their purchasing behavior. As you can see from the chart above, each tier in Los Angeles County has shifted up a bit. We are far from peak prices and given the mania in certain areas , you would think this would be rising much faster. You are not missing anything. For those thinking they are missing something you might as well go to Las Vegas and try your hand at the tables. There is a mini mania in prime areas of California happening right now. As you see from the above charts, household incomes simply do not justify this movement. The momentum right now is in favor of higher prices but for fleeting reasons. Home sales and trends If things are so hot, why are home sales not running at a higher pace? The 12 month moving average is running a little bit higher than 35,000. This is the pace we’ve had since 2009 when the market was flying off a cliff. From 1998 to 2007 the moving average was above 45,000 sales per month. So what really is going on then with prices rising so fast overall? The explanation comes from a few items: -1. Inventory is low (we even hear complaints from real estate agents about this) -2. Low rates increased leverage in the face of falling incomes (refer to earlier chart) -3. From the bottom everything is higher (the increase is big from the bottom but put into context, still has us way below the 12 month moving average from over a decade ago) -4. You are competing with big money investors This is why sales are not exactly off the charts given all the favorable elements that are being perceived. For this market to continue on this path, nothing from the above can be removed. Keep in mind that with the “fiscal cliff” some items on the table include the mortgage interest deduction cap. This will hit California hard especially in these mania locations. There is no reason for the nation to allow mortgage interest deduction above a certain level (i.e., $500,000 or capped at certain income levels). “( LA Times ) But since only about one-third of taxpayers itemize on their returns — the rest opt for the standard deductions — who's really getting these tax savings? As you might guess, people who have higher incomes are more likely to itemize and claim mortgage interest and other housing deductions. Citing the latest data on the subject, published by the IRS in 2009, Kolko found that only 15% of households with incomes below $50,000 took itemized deductions, while 65% of those with incomes between $50,000 and $200,000 did. Just about everybody with incomes above $200,000 — 96% — itemized on their returns.” And guess who was number one on the list? “California ranked No. 1 in the size of home mortgage deductions, with $18,876 on average. Next came Hawaii ($16,730), the District of Columbia ($16,720), Nevada ($15,502), Washington ($14,262), Maryland ($14,162) and Virginia ($14,094).” There is little reason for the mortgage interest deduction to allow for such a large write-off especially when the typical US home price ranges from $150,000 to $170,000. We are in massive debt and for the nation to subsidize expensive California housing does not make sense. Underwater Even with home prices moving up we still have over 9,000,000 underwater homeowners. This is a sizeable number. The above chart highlights underwater mortgages at various increases or decreases in home prices. The distressed inventory is still large but is decreasing. The thing with the housing market is that it largely isn’t a market anymore. So with all of these market incentives and the fiscal situation looming next year, there has to be a catch. We have yet to see household incomes increase. The economy is still on shaky ground. Yet in many pocket markets you have people ignoring the macro economy and just running around their little enclaves with blinders on. Hot money is flowing in. There is no doubt about that. Yet it is not sustainable. Since election years usually produce very little change, we’ll have to wait until 2013 to see if this trend actually has some real teeth. Do you think household incomes are important when it comes to home price? Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information. Average: 4 Your rating: None Average: 4 ( 6 votes) Tweet drhousingbubble's blog Login or register to post comments 4553 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Rising home values in the face of stagnant incomes A theory on the bounce and slog housing market. A modern day feudal system for real estate The resurgence of the low down payment market The Canadian Real Estate Bubble?
September Retail Sales: Seasonal vs Non-Seasonal - Spot The Difference Submitted by Tyler Durden on 10/15/2012 09:31 -0400 Great Depression St Louis Fed Just when we thought we may finally get one decent economic data point which even we could get excited about, we decided to look at the Non-Seasonally Adjusted September retail sales data. After all the $4.7 billion seasonal increase in headline retail sales was the second highest ever (in absolute terms, second only to 2004). Turns out our curiosity was an enthusiasm-dowsing mistake, as a number which on the surface looked good, was hardly validated by the Not-Seasonally Adjusted number, which plunged by $31.9 billion . How does this September sequential change compare to previous years? See the chart below and decide for yourselves if the massive NSA plunge in September 2012 merits the second best seasonally adjusted retail sales increase in history. If anything, the 2012 spread of SA vs NSA retail change is most comparable to that from September 2007. As a reminder, this is 2 months before the 2nd Great Depression officially started. Source: St Louis Fed Average: 4.285715 Your rating: None Average: 4.3 ( 7 votes) Tweet Login or register to post comments 9960 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Is It The Weather, Stupid? David Rosenberg On What "April In January" Means For Seasonal Adjustments Initial Claims In Holiday Shortened Week Drop To 350K From Upward Revised 376K Due To "One-Time Factors" Seasonal Adjustments: Big Swing Factor? Retail Sales Beat Expectations, As Empire Index Misses, Negative For Third Month In A Row The Strangest Number In Today's Jobs Number
http://www.huffingtonpost.com/2012/09/17/tax-cuts-for-the-rich_n_1889686.html?utm_hp_ref=business A new study by the nonpartisan Congressional Research Service has found that over the past 65 years, tax cuts for the rich have not led to economic growth and instead are linked to greater income inequality in the United States. The study found that cutting taxes for the rich does not increase saving, investment, or productivity growth . "The top tax rates appear to have little or no relation to the size of the economic pie," the study said. Two graphs show the lack of connection between tax rates for the rich and economic growth: The authors noted that top-tier tax rates could have an effect on "how the economic pie is sliced." The study noted that in 1945, when the richest families had to pay a marginal tax rate of more than 90 percent, the top 0.1 percent of U.S. families accumulated 4.2 percent of all income gains. In 2007, in contrast, when the top marginal tax rate was 35 percent (which it still is), the top 0.1 percent of U.S. families captured 12.3 percent of all income gains. Two graphs from the study show a clear connection between higher taxes for the rich and less income inequality: Those findings are inconvenient for the Romney campaign. In a continuation of trickle-down economic theory, the Republican presidential nominee has argued that cutting taxes for the rich would "stimulate entrepreneurship, job creation, and investment," thus "breathing life into the present anemic recovery." Romney has said he wants to extend all of the Bush tax cuts , while President Obama wants to extend those tax cuts only on the first $250,000 of taxable income. Romney also wants to slash marginal tax rates and taxes on investment income , as well as eliminate the estate tax -- all of which would disproportionately benefit the rich . A recent study by Owen Zidar, a PhD student in Economics at the University of California at Berkeley, also found that tax cuts for the rich are not correlated with economic growth . But Zidar did find that tax cuts for the bottom 90 percent of income earners can stimulate economic growth and job creation. (Hat tip: the New York Times' David Leonhardt .)
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