Don’t Worry…You Can Rely on The Super Bowl Indicator!

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First some thanks. I spoke on Thursday night to the McCombs Alumni group in Austin.  It was a great crowd and a lot of fun.  I appreciate all of the blog readers coming out.




Now, on to what I read today…




1. Markets

The market dropped 115.70 points today. Apparently, investors have lost that lovin’ feeling about the economic recovery.  I think that there are many fears in the market, including the possibility of China slowing their growth, worries over sovereign debt and fears that our economy will slow in the 2^nd half of the year when the stimulus is done.  Commodities are down, stocks are down and the euro is down.  The Dow is down 2.9% for the month – and there’s one day left.




January barometer. The median increase for the market from February through December is 10.4% if January is an up-month and .28% if January is a down-month.




Don’t worry…the Super Bowl indicator has great news for us! The Super Bowl indicator says that if an “original” NFL team wins the Super Bowl, the stock market will rise for the year.  It has been right 34 out of 43 years.  Two “original” teams are in the Super Bowl this year.  For those of you who aren’t quantitative or into game theory, that implies that the winner will be an original NFL team.  The fact that people talk about stupid crap like this irks me.  As an aside, I’ve done a study and found that on days when I pass gas between 8 AM and 9 AM, the market seems to rally.  (I’ll be starting a subscription-based service for people who want real-time info on this indicator but aren’t able to stop by my office.)  We are a nation of freaking morons.




The Dow Jones-UBS Commodity Index is down 6.6% in 2010.




2. The Economy

Bernanke was awarded a second four-year term. The Senate voted 77 – 23 to hold a confirmation vote.  (Seventeen Republicans, five Democrats and one independent voted no.)  He was then confirmed by a 70 – 30 vote.  The big issue is whether Bernanke is now in political trouble and will have to pull the trigger quickly in order to fight potential inflation.




Inflation expectations rising. The spread between TIPS and regular Treasuries indicates that inflation expectations have increased from 2.25% (in March) to 3% today.




Friday’s GDP release. The market is expecting a big GDP number on Friday (5% annual increase).  Much of this will come from inventory declines slowing.




The Greece crisis. Greece has to raise $76 billion this year.  Approximately 70% of this must be raised in the first six months.




Euro continues to drop. The euro is at a seven month low.  Note to self…don’t try to combine 16 different countries with one currency.




Lets all make promises. Spain said it will give details on Friday concerning $70 billion in cuts through 2013.  I will also be announcing details on my plans to start helping out around the house.




Japanese deflation. Japan’s core consumer price index fell 1.3% (YOY) in December.  A leading indicator predicts a 2% drop in January (YOY).




3. Bailout

Small business lending. The $30 billion of TARP money that the President is pushing towards small business loans represents approximately 4.3% of the $700 billion in small-business loans held by US banks and S&Ls.




Lots of smaller banks. There are 7,500 financial institutions with less than $10 billion of assets.  If we split the $30 billion equally, each bank would get $4 million.




More absurdity over the AIG bonues. Approximately 95% of AIG Financial Products division agreed to take a smaller retention bonus if they got it sooner.  Listen to this…they are getting 10% less and they are getting their money six weeks earlier.  It’s a no-brainer.  Any way you can get your hands on this money before any problems arise…I would do.  Now, we’ll hear the spin about how much was recovered.  (These bonuses were part of the $168 million in retention bonuses that caused outrage this past year.  The employees had said that they would return $45 million, but only $19 million has been collected.)  The firm still has outstanding derivatives of $940 billion.




Is this going to help? The federal stimulus plan earmarked $8 billion for high-speed rail projects.  California will receive the biggest slice: $2.34 billion.  But, the California plan will cost $42 billion.

Building this rail system could create 600,000 construction-related jobs  and 450,000 permanent jobs over the next decade.  I’m not sure how they came up with these numbers.

California already approved a $10 billion bond for the project.




NYC deficit. New York City is trying to close a $4.9 billion deficit.  The city is trying to reduce the work force by 1.4%.




Debt ceiling. Regardless of what party you support (personally, I dislike both intensely), this should piss you off.  The Senate voted 60 – 39 to raise the federal government’s borrowing limit to $14.3 trillion (currently at $12.4 trillion).  This was purely along party lines.  I have no problem with the fact that one party wants to reduce spending.  But, if we don’t raise the debt ceiling, we default.  This type of vote is pure politics.  It’s reflective of the crap that is killing our country.




Commission to work on debt problem.  For the second time in a week, the Senate rejected a proposal to establish a commission to examine the debt problem.  I’m glad that there’s no need to work on this – we only have a $1.4 trillion deficit this year.  Considering the fact that these morons can’t agree to have a commission, I’m pretty confident that any commission will be really successful.




4. Company News

There are 140,000 apps for the i-phone. I have an i-phone (long story there) and today I counted up how many apps I have.  It came out to zero.  I’m old.




Amazin’ Amazon. Amazon’s sales increased 42% in Q4 and net income increased 71%!  Operating margins increased from 4.1% (year ago) to 5% in a really competitive environment.  Revenue was $9.52 billion and the estimates are that the Kindle business accounts for approximately 10% of that.  Amazon estimates that Q1 will see a revenue gain between 32% and 43% (YOY).   The stock has risen 150% in the last year.

For books published in both paper edition and digital, there are 1.67 paper books sold for every Kindle book.




Toyota working on problem. Toyota has found a solution for the gas-pedal problem that is affecting the 2.3 million vehicles recalled this week.  If approved by the National Highway Traffic Safety Administration, production of the new part will start next week and dealers would receive it within the next two weeks.




Premature acceleration. There have been 2,200 incidents of sudden acceleration in Toyota and Lexus vehicles in the last ten years.




Huge defense contract. Lockheed Martin has one huge contract with the government: the F-35 Lightning II will cost $300 billion.  It’s the Pentagon’s biggest contract ever.  Full production will take five years.  Eventually, this plane could account for 30% of sales.  (Last year, sales were $45.2 billion.)




Microsoft’s quarterly profits increased 60% (YOY). Sales rose 14% — a good sign after three quarters of shrinkage.  Most of the good news came from the Windows division.  With high unemployment, more people have the time for computers which crash.

Microsoft has increased its share of the search market from 8.3% to 10.7% (December 2008 vs. December 2009).

Office 2010 is due out in June.




Ford, the “non-bankruptcy car manufacturer,” had its second consecutive quarterly profit and its first profitable year four years.  Revenue increased 22% in the quarter.  Revenue for the full year fell 14%.  The company has too much debt ($34.3 billion) and has to make a $1.5 billion of interest payments each year.




5. Random

Lots of cyber attacks. Approximately 20% of 601 surveyed companies said that they had been a victim of a cyber attack in the past two years.




Trading down. About 2/3 of consumers said that they had traded down to less expensive consumer goods over the past year. More than ¾ of those traders said that the cheaper products were as good or better than what they replaced. McKinsey predicts that customers will be slow to return to premium brands.




J.D. Salinger, author of “Catcher in the Rye,” died on Wednesday at the age of 91. As a typical teenage boy, I was pretty sure that I was Holden Caulfield.  I was googling quotes tonight and the big one that I saw a lot was Holden saying, “I hate phonies.”  I should read this again…I think I still relate to Holden.  As Jenny explained to me, apparently it’s very possible that I could age without maturing.  I don’t think that I understood what she was saying at the time, but I’m starting to think that “thank you” wasn’t the appropriate response.  (A lot of things are starting to come together.  She looked angry when I said thank you.  It was somewhere between 8 AM and 9 AM and I had simply thought that she was simply working on her own alternative to the Super Bowl indicator.)

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