Microsoft, An Xbox Company

With all the chatter of Microsoft breaking above $30 and investors comparing the stock to Apple, they have forgotten a key element.  Windows has the Xbox platform and as of late it has been a big portion of the company.  Last quarter in the over $20 billion of Microsoft revenue, more then $4 billion was from Xbox.  Apple may be winning when it comes to desktops, but they haven't even entered the console arena.  In the future years the console area may be what propels Microsoft stock.

For those that don't believe in the power and future success of Windows 8,  those skeptics can be squashed by merely mentioning Xbox.  The future of Microsoft may lay in the next generation of the video console.  With Xbox growing as a portion of revenue and continually creating revenue through the Xbox live platform, its profit potential is huge.  The recent 15% y/y growth was merely from updating the product.  What will happen when they revolutionize it?  The days of consumers fighting over the gaming products at the store are far from being may in the past.  As the next round of consoles looks to enter the market in the next few years, Microsoft may once again be propelled to the forefront.  Consumers will once again do anything to get an Xbox.

Many fail to realize the potential of Microsoft.  With the intelligence and money on hand Microsoft can do just about anything.  Who's to say that the next version of the Xbox will not have Skype integrated in it?  Microsoft has revolutionized products in the past and brought one of the most successful gaming consoles to market.  In the future they may revolutionize the Xbox and make it a household phenomenon, even more so then it is.  Microsoft has the ability to revolutionize our home entertainment system through the means of a little black box.

The Windows platform is merely one leg Microsoft stands on.  In the coming years the Xbox portion of Microsoft will grow and may be the main leg Microsoft stands on.

"Whether it's Google or Apple or free software, we've got some fantastic competitors and it keeps us on our toes." - Bill Gates

The 10 Forgotten Months Of 2012

As February draws to a close, take a look at the last three months shown below.

Things have seemed substantially better since December.  Everything from jobs to housing.... Wait was that about housing?

Supply has been declining, but prices have not been improving.  This suggests either a decrease in demand or a real underlying issue (housing has not bottomed).

Remember last year when we were all tricked into everything being better?  Well it seems the trickster has just changed its name from housing to jobs. Below is the S&P from last year.  Investors seem to have forgotten the market can go down.  Below shows that the market can decline and do so very rapidly.

S&P 2011

Investors have forgotten that a calendar year has 12 months.  We are merely two months in.  With so much of the year still unknown and having come so far, this momentum cannot be sustained.  As the recent home data has been hinting at, things are not 100% better.  This correlates to your returns in 2011 not being 100%.  Hate to be the bearer of bad news, but things are likely to get worse before they get better.  It seems investors are counting their chickens before they hatch, and in reality 2012 has 10 more months to play out.  Beware that 2012 sounds more and more like 2011 and as we all know history has a tendency to repeat itself.  

"The Truth is incontrovertible.  Malice may attack it, ignorance may deride it, but in the end, there it is." - Winston Churchill

Winter Renovation Means No Spring Renovations

Both Lowe's and Home Depot report a good quarter supporting the story of housing recovery. The true reason that the winter quarter was good for these companies was renovations. Americans have quit moving out of their homes and instead have been upgrading aggressively. The previous statement does not suggest a housing recovery, but instead a fear of Americans getting back into the housing market. Gary Balter a Credit Suisse analyst states: "We encourage investors to look past the near term and think about double-digit margins for all when housing recovers." Not only is he wrong, he is dead wrong.  My Anything But Housing article brought attention to the massive revisions downward of existing home sales, which don't bode well for the housing recovery. If homes aren't moving, then the good numbers of Lowe's and Home Depot are merely suggesting mom and pop upgrading their kitchen or bath.

Where do these stocks go from here? If you are a believer in the housing bottom and full fledged recovery, then these stocks are going to double and we are going to Dow 17,000. In the real world where fear finally slips back into this market, these stocks could be risky. The good housing data that has been coming out since the beginning of the year will turn negative sooner then later. As we saw last week the numbers are no longer stellar and this suggests the housing bottom may not be here yet. If the housing data turns negative, these stocks will be hit the hardest. Both Lowe's and Home Depot have had stellar runs in the past 6 months and they may have gotten substantially ahead of themselves.

"No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.” - Warren Buffett

American Real Estate: A Depreciating Asset

During the end of last week housing once again came into focus.  The housing data were not as glorious as the bulls had expected.  The price of homes was a key data point, and was not positive for the housing story.  With home prices at the lowest they have been in 10 years the housing recovery lacks a key component.  With the endless depreciation of the real estate market, investors and consumers alike must ask; Why would I buy a house if it will continually to loose value?

No investor, no competent consumer would buy an asset with a declining value.  This is not only a basic investment policy, it is mere common sense.  Not only were the home prices low last week, but existing home sales were also revised negative for January as referenced in my previous housing article.  Treating declining home prices as an asset; would you purchase real estate?  Evaluating home prices in an equity sense, they are not at the point in which a purchase would be wise.  We all have heard the saying, "don't try to catch a falling knife."  This quote references that idea that if you try to pick a bottom in a market you will likely get financially hurt (in this case it looks as though you might knick an artery).  This undefined bottom results in a housing market that does not support a recovery and instead supports continual economic turmoil.

For those more economically minded readers, the housing market can be broken down into a simple supply and demand explanation.  With the value of homes decreasing into the future, consumers will buy less of this product, decreasing demand (becasue even the average american knows not to loose money.  Builders are beginning to produce more houses (as references in multiple news sources) and that along with the current supply will cause an increase or stagnant supply.  With demand decreasing and supply fluctuating minimally prices will decrease or remain stagnant in the future.

"Americans now know that housing prices can go down and they can go down by 10, 20, 30 and in some cases, 40 or 50 percent.  We know they can go down. But for five years, we thought they could only go up." - Bill Gross

Restaurants Up, Gas Up, What's Up?

Oil has been just up, up, and away in the recent weeks.  With major concerns of Iran and the possible threatening of supply, oil traders are worried and running up the prices.  The indices are still threatening the bear by attempting to break through the resistance levels.  With such great performance from the restaurants over the past few months, one should wonder: Will they be the leg that drags us down?  Take a look at Buffalo Wild Wings and Chipotle.

What do those graphs tell us?  They tell us a very simple idea; that the restaurants perform well when Americans have money to burn, and they perform poorly when oil is expensive.  With cheap gas prices and a cheap winter (cheap oil, not very cold) restaurants have fared well.  This will all change momentarily with the new increased price of oil.  Many forget that the recessionary consumer has been plagued with a tight budget before and has learned how to pinch pennies.  As I referenced in The Real Walmart Story (Featuring Dollar General) the consumer knows how to combat these higher prices by changing their shopping habits.  So those that expect continued good results from their restaurant picks, need to either reconsider their positions, or buy some oil to hedge.

"If you or me go to the gas station to fill up our car and it costs us much more than we expected, it will zap our discretionary income. We won't have the extra money to buy that washing machine or new winter coat-all big ticket items that are important to economic growth." - Maria Bartiromo 

Children, The True Apple Consumer

Go out to dinner.  Go to your local park.  Go to any suburb in America. What do all these places have in common?  They have young children playing on the iPad.  That is right. Those of you who don't have children may have missed the trend.  The new toy of choice has a huge price tag and it isn't matchbox cars.  Many parents build their lives around their children; that also remains true when dealing with their purchasing habits.  The iPad is not just for business or Facetiming your family.  The iPad has many uses, and as announced recently will have its future place on college campuses.  The existence of the world of apps with many children oriented games have truly captured the spirit of the youth.

That being said, now my concerns must be raised.  What has got me nervous is the fact that neither the failure of a dividend or the lack of a stock split.  My fears find merit in the recent faltering of Apple.  Steve Jobs was meticulous in standard and the preciseness of his product and its creation. This allowed him to revolutionize Apple.  Now that Apple has become the giant that it is, we need to see Tim Cook revolutionize with the times.  As mentioned earlier, the iPad has a huge pull with children and the youth.  Apple may have realized this to a certain extent, though they fail to revolutionize the style or amenities of the iPad.  Wouldn't it revolutionize the tablet market if they changed the size or made the product waterproof?

As a bull on Apple, my only fear is not that they fail to keep up with the times, but rather fail to stay ahead of the trend.  Steve Jobs made his name by creating the trend,  if Tim Cook doesn't do the same in the coming years, we will be speaking of Apple as we speak of Research In Motion today. If you support the bull theory on Apple, remember what made Apple a giant (creating new markets, the smartphone and tablet) and make sure that they still are actively doing what makes them great.

Steve Jobs was set in his ways, and by being so he made Apple an economic force to be reckoned with.  Though as anyone who has studied the history of the American icon Henry Ford, he was similarly set in his ways, and this led to the near end of the great motor company.  Ford motor company was eventually saved by Henry's heir, when the company eventually stepped outside its comfort zone.  Tim Cook must show the world that he is not only capable of leading Apple down new avenues, but that he can succeed in doing so.
Many die hard apple supporters may think the above analogy has no merit to it.  If Apple was to reorient its strategies, thus changing the size of the iPad, or to implement another device some other company will capture that market.


"You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new." - Steve Jobs

The U.S. Recovery Will Be Built On Anything But Housing

With home prices at the lowest point in 10 years, one cannot claim the a recovery will be built on the back of the housing industry.  Many key economist believe that the recovery of the  United States will be based on the housing aspect of our economy.  These experts fail to realize the effects that the housing bubble had on the consumer side of the market, the bubble has popped and even those able Americans that can afford a home won't buy one.  For the U.S. recovery to be fueled by housing, prices need to increase, not decrease.  Putting the housing bubbles in different terms that are much easier to understand, lets consider Netflix.  After seeing Netflix rise to its high over $300 and fall to $70, would anyone buy today thinking it will once again go back to $300 tomorrow?  No, after a bubble pops a consolidation period is needed and prices will reestablish in a more realistic area, and those prices may be closer to the bottom then the top.  With prices at these levels for housing, a full fledged housing recovery is out of the question.  Yes profits can be made, but the expectations for this sector are outlandish.


Looking at the recovery from a less intuitive aspect and more of a numbers standpoint, things are not much better.  Existing home sales were revised down last month.  This speaks volumes,  the existing home sales is not a straight increase and is not as rosy as was first perceived.  We have also been at these levels before, and also gone back the other way.  Investors should be leery of what is yet to come.  Not only that but MBA purchase applications were down as well.  The markets once again shrugged off this negative news, though in fact things are not looking so picturesque.

Now that the true picture of the housing industry has been established, it must be explained why the recovery cannot be build on the back of the housing industry.   The key point mentioned this morning was that home prices were at a 10 year low.  This means that if any contractor wanted to build a new home his margins would compressed dramatically.  The only way he could combat that problem being that all his cost are fixed (land, lumber, etc.) would be to decrease his labor cost.  Though he may be able to squeeze cost elsewhere the contractor would see the best results via employing less people or cutting wages. Those looking for the housing industry as the source of the american recovery will have to look elsewhere.  The idea that the housing industry will fuel the recovery comes based on the idea that it will help put america back to work, but with home prices at the levels they are, it may put your neighbor back to work, but you are still on unemployment.


"Sometimes your best investments are the ones you don't make." - Donald Trump

The Real Walmart Story (Featuring Dollar General)

Looking at the disappointing numbers out of Walmart, one tries to piece the story together.  The economy may well be recovering, but is the improvement substantial enough to see Walmart shopper move up to premium retailers?  Obviously the answer is a no, the economy may be looking better from an investor standpoint, but with increasing fuel cost Walmart customers are still pinching pennies.  The information provided this morning by the company gives insight into what may be happening.  Looking at the numbers Walmart 4th quarter profits took a beating and the company warned investors that they should expect margin declines in the future.  this leads one to wonder, why is Walmart not excelling in current market conditions? The two word answer, is Dollar General.

Above is a graph depicting the stock performance between Dollar General and Walmart over the past year.  The chart makes obvious the story this article is attempting to make a point of.  Dollar general due to its limited square footage and fewer employees can offer lower prices.  This by no means suggests that the Walmart business plan is failing, it is merely bringing light to the fact that consumers are truly pinching pennies.  As gas prices continue to speed higher, consumers will continue to look for way to save money.  Dollar General gives shoppers the benefit of not only better prices, but allows the to avoid the headaches of the Walmart superstores.  The graph above tells it all and today not only continues to reaffirm the struggling consumer but suggest that they are being even more frugal than was expected.

"There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else." - Sam Walton

What Zynga's Price Action Says About Facebook

Facebook recently filed its S1 for its IPO sometime in the coming year.  The enthusiasm about Facebook could be seen throughout the financial markets, particularly with money pouring into Zynga.  Facebook has been and will be the most anticipated IPO of 2012.  Similarly, Zynga was the most anticipated in 2011 and we all know how that traded on its first day.  Facebook will likely be a different story, with retail and institution investors battling to get shares.  Price action on Facebook will be very exciting on the first day of trading, and will likely bring back the movements not seen since the tech bubble.  The point that investors should pay attention to is the recent price action in Zynga.  Zynga's recent fluctuations can be used as a signal what is in the future for Facebook.  Below is a graph of Zynga since its IPO with a few highlighted points to be discussed.

As obvious through the chart, the sentiment when the stock went public and for some time thereafter was negative.  This sentiment changed dramatically when talk of Facebook raised enthusiasm for the stock.  As arrow 1 shows, the stock reached new highs on Facebook optimism.  Investors could not trade Facebook so they played the second best option.  What does this mean?  This means that investors are dying to get in Facebook and will do so in any shape or form.  In reference to Facebook, this suggests exciting price action in the future.  Observing arrow 2, we see a dramatic drop in the stock occurred.  Understanding the deep drop gives us a hint of what to expect with Facebook.  Arrow 2 reflects bad earnings by a company that was expected to perform well (they value my time on Facebook at over $100, a laughable idea being that I have never clicked on an advertisement).  Those that get into the stock pre-earnings will likely loose there pants, until we see a stronger revenue machine.  This was followed by arrow 3, which represents renewed enthusiasm once again for Zynga.  Facebook will likely follow the same trend described above in Zynga.  The stock will trade on optimism and make big moves that investors will not want to miss.  At the same time it will be extremely over valued and the numbers will fail to support the valuations.  Most likely investors will not care and as arrow three shows will continue to get back in the stock even after bad news.  Use Zynga as an omen of Facebook and take notes because when the price action happens in Facebook it will happen fast.  

"Facebook was not originally created to be a company. It was built to accomplish a social mission -- to make the world more open and connected. Simply put: we don't build services to make money; we make money to build better services." - Mark Zuckerberg

GE And The Tale Of Lacking Global Growth

As the indices climb to newer and newer highs on better worldly economic news it is always good practice to observe the true barometers of global growth.  One of the companies that captures the global growth story (or lack of one as this article will point out), is General Electric.  General Electric operates many subsidiaries throughout the world and when it recently reported its quarterly earning had analyst looking at it to gauge the global growth story.  With GE telling the markets that global growth was lacking by missing on the revenue line. The image below shows GE's massive sell off since the financial crisis in 2008 and its massive recovery back to those levels......

What should raise true concerns is the graph below comparing General Electric to S&P over a five year period.  The discrepancies seem obvious through the graph.  Would one not expect GE to be a contributing factor, if not a leading element of the recent rally if the growth story home and abroad where true?

What should strike fear in the global growth bulls was GE's profit from home and business solutions dropping a whopping 41 percent.  That statistic in itself speaks mounds, saying that the growth many in expected is just not present.  If Americans are not building houses and not renovating houses, then they in fact not spending money where it needs to be spent for a recovery.  General Electric in the current quarter is looking for growth abroad and excluding a recessionary Europe which they see weakness in.  General Electric admits their is a problem in Europe, when will the financial markets?  Many claim Europe has not had an effect on our markets, but it already has.  Comparing the concerns raised by GE to those raised in the Export To Where? article, the earnings that about global growth should raise questions.

"Face reality as it is, not as it was or as you wish it to be." - Jack Welch

U.S. National Debt A Bigger and Bigger Concern

The Greece debt issues have been shaping investors and traders daily routines for quite some time.  With the shift in focus from the U.S. economic issues to that of Europe many have forgotten about our countries own dire financial situation.  Talking down another countries economic decisions and dire positions comes with ease.  As we in the U.S. claim we will not make the Greece mistake, we fail to realize that we are in the midst of making that mistake.  The welfare state of Greece has many striking similarities to that of the great United State.  The issue that should strike fear in the minds of all of us is that the U.S. does not have a lender of last resort like the Greeks.  The concern that the debt ceiling struck in the financial markets in the last year will likely resurface in the future as it becomes election season.  When the national debt comes to the forefront in the coming months, the situation will look much dire, because in fact it is. This also can be related to Greece, proving that throwing money at the issue does not merely solve it, but may in fact be a hindrance down the road.  Below is Rick Santelli putting our national debt in a simplified household debt form and putting the realistic perspective on the dire predicament.

"The time to repair the roof is when the sun is shining." - John F. Kennedy

How Far Will We Fall?

With the continued unknown outcome of the situations abroad, uncertainty runs rampant throughout the financial markets.  Many have tried to quantify the effects of certain negative outcomes on the markets, but these estimates are rarely accurate.  As I suggested in Another Greeceful Weekend many will try to advocate things are fine when they are not. When the market turns to have its pullback, which many bears have awaited, what point is opportune to get back in the market?  For quite some time buying on the dip has been quite beneficial to many investors, but this strategies future is questionable.  The real deciding factor in the pullback story is the catalyst that causes the market to trend lower (or drop off completely).  When markets have come as far and gone so aggressively as they have in the recent past, when a reversal occurs it will likely be a dramatic one.  To clarify, a reversal is not one of these days when we are down a little bit off some not great news, a reversal is when some real negative news comes out.  The world appears to be much more investor friendly this year then last, but recall everyone opinions before the markets sold off last summer.  If you don't recall, things were rosy, look at the decline in jobless claims last year, everything seemed to be in a full fledged recovery.  The rosy picture turned harshly negative and combined negative news had a intense effect on the market.  Negative news will once again surface again and most likely when you least expect it.  Be apprehensive of buying the dip because the bottom may be falling out from under you.

"I like to listen. I have learned a great deal from listening carefully. Most people never listen." - Ernest Hemingway

Another Greeceful Weekend

And they say Greece will be just fine...

"Failure is simply the opportunity to begin again, this time more intelligently." - Henry Ford

Bullish Sentiment The Real Red Flag

For the past few months the bulls have had their day, with continual moment upwards and not a pullback in sight.  The volatility of last year all but seemed to vanish as a new calendar suggest a brand new market.  Did the S&P just happen to switch its style up, or is the old volatile S&P of last year hidden behind the mask of good economic news?  With so many investors calling the S&P to higher and higher levels, one just has to wonder, is this not a mere replication of what we saw last year?  The retail investors seems to get caught in the trap over and over again with all the experts saying candidly that we will move higher levels.  We at some point will move to the new highs, but will do so with fewer economic headwinds.  The events around the world are by no means settled and only look to get worse, both economically and politically.  All the good economic news has surely made investors feel warm and fuzzy on the inside, but when bad news comes out once again (which it will, because it always does) the bullish world will see a short and sudden death.  Those suggesting that the market will continue to infinity and beyond in the coming months and years are just plain wrong.  The U.S. led the world into the great recession and we must wait for the rest of the world to experience this economic downturn before the U.S. is able once again to lead the world into a recovery.  With that being said, the increased bullish sentiment we have seen is a mere red  flag that investors need to be leery of.

"I always tried to turn every disaster into an opportunity" - John D. Rockefeller

Baltic What?

The transports seem to be the focus of the news today and they suggest that the markets may be overbought.  The concern for the transports and what they are saying reminded me of a once influential barometer of growth, the Baltic Dry Index.  This index has been left far in the rear-view mirror.  Those who forgot the Baltic Dry Index may end up losing the most.  Yes the Index is broken to a certain extent, but the underlying reason that the Index has become broken is the true point of dire concern.  Taking a look at U.S. equity markets and the markets abroad, in particular in the emerging markets, we see a massive run up.  This implies growth has occurred and growth expectations persist.  Comparing this to the Baltic Index, the barometer of shipping throughout the world, these growth stories just do not match up.  If the economies are growing throughout the world (excluding Europe), as many experts are suggesting, why is the Index obliterated.  The index does have an influx of ships due to the expected growth that was cut short by the 2008 financial crisis, but if that were the case the declines are still not reflective of the global growth story.  Markets throughout the world happen to be pricing in dramatic growth, but the index through which much of these goods are shipped is pricing in decline.  The story does not add up and should make even a die hard bull leery.

"Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body - the producers and consumers themselves." - Herbert Hoover

Amazon Hatred

With all the talk of Apple in the news, it seems that the tech giant Amazon has been left behind.  Apples previous quarter performance was stellar, and that of Amazon was lackluster.  A war has been waging between these two tech giants, and it looks like Apple has won another battle.  The war has just begun and the final battle is going to be years in the making.  To support this argument the kindle fire must be considered.  Many believe that this tablet is no competition for the iPad, those critics are correct.   What the critics fail to grasp is that the Kindle Fire has no desire to be the iPad.  The Kindle Fire falls into its own bracket and attempts to capture a different part of the populous that cannot afford the iPad, or may just not want a bulky tablet.  These critics (or die-hard Apple fans) of Amazon fail to realize that in may take the second or third Kindle Fire to begin truly capturing market share from Apple, but when it does it will be a battle to the death.  Imagine if the first iPhone had come out in a market with other smartphones that had similar capabilities, it would not have survived because it was not by any means exceptional.  In fact it was extraordinary because it had no competition.  Apple went on to critique the iPhone product and that is why they sold the 4s so well last quarter.  When Amazon critiques their Kindle they will be a force to be reckoned with.

"Success is a lousy teacher.  It seduces smart people into thinking they can't lose." - Bill Gates  

The Buffett Point That Everyone Seemed To Miss

Buffett somehow gave the impression that he hated the gold medal and bonds.  This is merely a misconception that the uneducated have formulated.  The point that Buffett was trying to make was simple, money idol becomes money wasted.  Gold represents a medium, a currency, a means of exchange.  Buffett has no concern with his capital (his currency), he cares about his return, his gain.  Idol principle is merely an obligation, because one must find another place to put it to good use (another investment).  Buffett has returned to the basics of investing, the ideals that have made him successful.  These same ideals made those before him millions and will make those after him billions.  It is this idea that money should be used to make income and gain.  Yes gold has had a gain for a time being, but is this sustainable like an industry like oil, which we are dependent on into the future?  The answer is no, means of currency fluctuates over time, just ask those who bought gold at $250.  My point is not to say gold, fixed income, or even storing money under your mattress has no purpose.  Rather, my point was to bring at the ideals which Buffett was conveying in his statement, the basics of investing.  It is these basics that led us astray in the past (look at 2008).  Buffet was looking at the long term future of gold, where it would be in ten years.  What he was doing was making the masses aware of the bubble, and by all means ride the bubble.  Just make sure that stop is handy.

"Concentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket." - Andrew Carnegie

Pop Goes The P/E Bubble

Investors and analyst as of lately are pushing the idea of markets being undervalued here and abroad.  These barons of the market use the P/E ratio as one supporting pillar of their argument.  This argument is an easy one to buy into due to its appealing story and the recent market uptrend.  Though taking a look at the data, a different story unfolds.

During recessionary and recovery times we see P/E closer to 10 then 20.  Those claiming that the market is undervalued due to the P/E ratio are misinformed.  Taking it a step farther the "Great Recession" in P/E terms does not look to be a great anything, a more dramatic downside should be obvious through the statistics.  The recessions of yesteryear had a greater effect on P/E for an extended time period.  Comparing current times to those of the great depression (the only similar economic time in history) another pull back in the P/E may be due.  To get to the point, the S&P may be dramatically overvalued contrary to what many of the leaders of finance say.  The information above suggests a pullback rather then any further momentum upward.

"Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception." - George Soros

Export To Where?

Obviously the auto industry in American is seen as a key to a better America.  It just so happens that maybe auto makers are focusing their growth abroad, for example the "imported from Detroit" slogan.  With GM earnings coming out recently and showing a loss of $700 million before taxes concerns should be raised.  The growth of GM, Ford, and the list of many others hinges on Europe and abroad.  Investors fail to realize that these markets are going to come under pressure in the near future.  Europe is on the brink of a recession and if they enter into one many of these emerging market companies will follow.  GM numbers this morning gave insight into the real situation in Europe and abroad.  Many ma argue that the growth of the autos is far beyond Europe, but they fail to realize the repercussions a European recession will have here and abroad.  The autos are telling the markets something and have been for a while, the U.S. recovery is threatened from abroad.

"It's a recession when your neighbor loses his job; it's a depression when you lose yours."- Harry S. Truman

The "True" Cost Of High Gasoline

Many have lost sight of what drives an economic recovery.  With all the focus on better unemployment and a better housing sector, everyone has forgotten the key to this puzzle, cheap gasoline.  As the price at the pump continues to climb higher and higher things are looking worse and worse for the consumer.  AS the price of gasoline increases consumers are adversely affected.  The consumers that are most affected are those in the lower ends of the economy, consumers that we know are already having their pockets squeezed.  These low end consumers are in such dire straights that they have switched their shopping from Walmart to dollar general, to save mere pennies.  The American recovery is going to be built on the backs of all Americans, not just those that can afford to feed big SUV's.  Don't expect a robust recovery until Americans can afford to drive to work.

"Not only our future economic soundness but the very soundness of our democratic institutions depends on the determination of our government to give employment to idle men". - Franklin D. Roosevelt

Living Life With A New Code Of Behavior

With the markets never ending their surge upward, it makes you wonder.  What the markets and the people with money in them fail to realize is this is not an easy fix in Greece or even here in the recovering U.S.  One point that struck home over the past few days while watching the riots in Greece, is the expectation for the Greek people to change.  The Greek people are expected to change their way of life, point blank.  Now compare that to the your world.  Ask yourself, could I take a 20% pay cut on top of minimum wage.  Those reading this obviously don't work for minimum wage, but that is a price decrease from $7.50 to $6.00.  Imagine the effects that would have on our economy.  What many fail to realize is that the Greeks no longer care about the "European Union" but instead care about themselves.  The people that represent the masses, the politicians will do as the people want, and if they don't they will find ones that do.  Those in Greece are expected to live a new life inline with these guidelines that their neighbors set out for them.  Though we may never get to the point when the Greeks are required to change their lifestyle (see them kicked out of the Euro), one thing is for certain, and that is they won't.

Is The VIX Back?

For the past few months the volatility indexes have taken a hard hit.  In the last few days their has been volatility in the volatility indexes themselves.  The VIX has foreshadowed some major events in the past.  Is the VIX foreshadowing something now?  The answer to that question is simple, maybe.  The VIX has broken its downward trend and done so on a high volume.  The volatility indexes may not be heading through the roof, but were dramatically oversold, meaning their is still lots of room to the upside.  With macro and geopolitical fears rampant (watch the evening news) the chances of something dramatic and negative in the future is not unheard of.  At these levels the volatility indexes may be a better place to be then not to be.

"Continuous effort - not strength or intelligence - is the key to unlocking our potential." -Winston Churchill