Blog Posts by Aaron Task

  • “Unwavering” Housing Bull “Grateful” for Wall Street Buyers

    Recent reports on U.S. housing show a market enjoying a robust recovery, one strong enough to generate fears of another bubble. On the flip side, a conventional critique is the housing market is being driven largely by institutional investors vs. private buyers, as cited here yesterday by The Guardian’s Heidi Moore and today in NYT’s Dealbook.

    In other words, the recovery is illusory and another consequence of the Fed's easy money policies, which favor Wall Street speculators vs. Main Street America.

    Related: Homeowners Got ‘Screwed’ Once Before, Now It’s Happening Again: Barofsky

    Ian Shepherdson, chief economist at Pantheon Macroeconomics, addresses both concerns in the accompanying video.

    To the idea the housing market is being driven largely by institutional investors vs. private buyers, the economist has a counterintuitive response: “I’m hasty to be dismissive of the investors,” Shepherdson says. “They got the market going and I’m grateful for them.”

    Similarly, he turns worries

    Read More »from “Unwavering” Housing Bull “Grateful” for Wall Street Buyers
  • ‘Sell in May and Go Away’ and Other Sayings Best Ignored

    Sell in May and go away? Not so much this year. The Dow and S&P are each up around 3.5% and the Nasdaq by nearly 5% heading into Friday’s session, which is shaping up to be a snoozer as far as major averages go. In recent trading, the Dow and S&P were each down 0.2%, the Nasdaq by 0.1%.

    Of course, “sell in May and go away” refers to the market’s historic pattern of performing best for the six months from Nov. 1-April 30 and worst from May 1-Oct. 31. Since 1950, the Dow has posted an average gain of 7.5% in the “best six months” vs. a paltry 0.3% advance (and some historic declines) during the May-October timeframe, according to The Stock Traders’ Almanac.

    In other words, “sell in May” might yet prove to be a good strategy in 2013 and the tally doesn’t really count until the end of the “worst six months” period.

    On the other hand, this May’s gains suggest the folly of following any number of pop-culture market indicators, including (but not limited to): The Super Bowl Indicator, the

    Read More »from ‘Sell in May and Go Away’ and Other Sayings Best Ignored
  • Sallie Krawcheck: Big Banks Still Don’t Have Enough Capital

    Banks are “certainly safer than they were” in 2008 but they’re far from failsafe, according to former senior banking executive Sallie Krawcheck.

    “I think banks and money funds will do just fine in a bad market, in a very bad market, and a very, very bad market,” says Krawcheck, who recently acquired 85 Broads, a global women's network. “But I do worry about a very, very, very, very bad market.”

    Specifically, the former Citigroup CFO and head of wealth management at Bank of America worries that banks “continue to be hardly really well capitalized” -- which is a polite way of saying they’re still undercapitalized.

    Dismissing the new Basel III capital requirements as “the most complicated construct the world has ever known” – and poorly conceived to boot – Krawcheck prefers to look at banks’ “plain old-fashioned leverage ratio” as the best indicator of health.

    Back in 2008, many large banks went into the downturn with leverage ratios of 2% of assets, meaning “you can take a loss of 2%

    Read More »from Sallie Krawcheck: Big Banks Still Don’t Have Enough Capital
  • Larry Kudlow: Bernanke Was Right and I Was Wrong About Inflation

    In recent years, the “growth vs. austerity” debate has been raging in academic and policy circles. In recent weeks the growth crowd have been claiming victory, citing:

    • Research showing Carmen Reinhart and Kenneth Rogoff’s seminal work on debt-to-GDP levels contained numerous errors and was not so conclusive as originally believed. (Related: Did Harvard Economists Make an Excel Error that Led to Economic Austerity?)
    • The European Commission granting Spain, Portugal, Greece, Italy and France, among other nations, greater leniency on planned adoption of budget cuts and other austerity measures.
    • PIMCO’s Bill Gross told The Financial Times: “The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You’ve got to spend money.”

    As a former advisor to Ronald Reagan and diehard supply-sider, Larry Kudlow is no Keynesian. “I am for government austerity” and believe “a smaller government with

    Read More »from Larry Kudlow: Bernanke Was Right and I Was Wrong About Inflation
  • Google and Tesla: Too Late to Touch?

    A day after topping $900 for the first time ever, Google shares were taking a bit of a breather Thursday, recently trading down 1.2% to $905.

    Meanwhile, Tesla shares continued their phenomenal run, jumping 6% to over $90 in recent trading following last night’s news that founder Elon Musk will invest $100 million of his own money into the firm, which announced plans for a 2.7 million share secondary offering.

    In the accompanying video, I discuss these two red-hot stocks with Barry Ritholtz, CEO of Fusion IQ and author of The Big Picture blog. Ritholtz has no position in either name but no shortage of opinions either:

    Google

    Ritholtz is impressed with Google’s technological prowess and strategy of “throwing stuff against the wall to see what works.” In this regard, the search giant has a big advantage over Apple, which he says “has to hit a home run every time or nearly hit one.”

    Related: Stop Asking: Google Is Not the New Apple

    Still, Ritholtz is concerned about a potential problem in

    Read More »from Google and Tesla: Too Late to Touch?
  • In 2006, Congress passed the Military Lending Act, which was designed to prevent predatory lenders from targeting men and women in uniform. But a new report from ProPublica and Marketplace entitled Beyond Payday Loans suggests aggressive lenders have merely shifted tactics and are still very actively going after military personnel.

    Rather than a loophole, installment loan companies and so-called payday lenders have found huge gaps in the Military Lending Act, says Paul Kiel, a ProPublica reporter and co-author of the series. “We found in states that allow these types of products the [legislation] defined what it targeted pretty narrowly.”

    As Marketplace reports: The Military Lending Act set a national interest rate cap of 36 percent APR (annual percentage rate) for loans to military members and their families (excluding mortgages and auto finance loans).

    The Act covered three specific types of loans: payday loans (short-term, due in one lump sum after a borrower’s payroll check

    Read More »from Predatory Lenders Still Target Soldiers: ‘Desperate People Accept Any Terms’
  • With the S&P (^GSPC) setting a series of new highs and the Dow (^DJI) flirting with 15,000, many U.S. investors have overlooked developments that are arguably even more dramatic: Japan's Nikkei 225 is up more than 50% in the past six months and overnight breached 14,000 for the first time since 2008.

    For those unaware, Japan’s rally began late last year when now Prime Minister Shinzo Abe campaigned on a platform to boost economic growth via massive fiscal and monetary stimulus. The gains continued following his election victory and accelerated after Abe appointed Haruhiko Kuroda to run the Bank of Japan; last month, Kuroda announced plans to double the BOJ’s monetary base by the end of 2014.

    Related: “Obscene” Stimulus Will Trigger ‘Made in Japan’ Crisis in 2013: Mauldin

    “You can wonder about political independence of the central bank…but investors, like they bet on the Fed, are saying ‘if the Fed can do it to the U.S. [markets] the Bank of Japan can do it in Japan,’” says Stephen

    Read More »from Nikkei Surges 50%: Japanese Revival a “Potentially Serious Opportunity,” Roach Says
  • Occidental Petroleum chairman Ray Irani lost his job Friday after 76% of shareholders opposed his reelection, the latest high-profile executive to be shown the doors.

    He won’t be able to collect unemployment but, in this case, getting fired might be the best thing to happen to the longtime oil executive: Irani stands to receive an exit package of over $50 million if his departure is considered a “termination” vs. a merely $20 million package had he retired at the end of 2012, The WSJ reports.

    The heft of Irani’s golden parachute adds a bit of absurdity to the excess of his tenure at Occidental: Always among America’s most highest-paid executives, Irani’s overall compensation from 2004-2012 totaled over $1.1 billion.

    Two years ago, shareholders voted to remove Irani as CEO, in part because of a backlash against his outsized compensation given Occidental shares were lagging major competitors. Scheduled to retire at the end of 2014, Irani sought to install a former executive as CEO,

    Read More »from $50M for Getting Fired? OXY’s Ray Irani Takes C-Level Excess to New Heights
  • The “Most Overpriced, Oversupplied, Over-owned Market in History”

    The U.S. Treasury this week announced plans to retire $35 billion in notes, the first time the government has paid down debt since 2007.

    It’s a significant milestone for Treasury and $35 billion is a lot of money for mere mortals, but barely a drop in the $16.7 trillion bucket of our nation’s debt.

    Among others, Michael Pento, president of Pento Portfolio Strategies, believes the U.S. Treasury market is a massive bubble destined to pop with devastating consequences.

    U.S. Treasuries are “the most overpriced, oversupplied and over-owned market in the history of American markets,” says Pento, citing current Treasury yields as 550 basis points below the 40-year average, the massive inflows into bond funds (nearly $120 billion from 2008-2012) and the 140% increase in issuance since the end of 2007.

    Unlike most, Pento is willing to put a timeline on when he believes the bond bubble will burst, which is the theme of his not-so subtly titled new book: The Coming Bond Market Collapse.

    Sometime

    Read More »from The “Most Overpriced, Oversupplied, Over-owned Market in History”
  • Michael Pollan: Home Cooking Will Solve America’s Obesity Epidemic

    In his previous best-sellers such as The Omnivore’s Dilemma, In Defense of Food and Food Rules, Michael Pollan examined America’s diet and summed up a very complicated issue in seven words: Eat food. Not too much. Mostly plants.

    In his latest work, Cooked: A Natural History of Transformation, Pollan turns the focus from what we’re eating to how it’s prepared and concludes that cooking at home may be the most important part of our diet...and potentially a solution to America’s obesity epidemic.

    “The most important thing about your diet is not any particular nutrient but that activity,” he says of cooking.

    And, yes, this is very much an economic story when you consider rising health care costs are the number one driver of America’s long-term deficit -- and rising obesity rates are the biggest contributor to the overall increase in health care spending.

    Since the Great Recession of 2008, Pollan notes that more Americans are cooking at home, bulk food sales are up and obesity rates have

    Read More »from Michael Pollan: Home Cooking Will Solve America’s Obesity Epidemic

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