Facebook IPO Windfall if Open to its Users

Imagine how awesome it would it be for Facebook (NYSE: FB) to offer its shares via a social IPO™. With some 800 million users of its now iconic social networking platform, the new king of the internet might score yet more points with its “friends” if it were to offer them access to the company’s IPO. Beyond being just a brilliant public relations maneuver, such access to the new shares should allow the company to achieve an even better valuation than it might otherwise.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

For Facebook a Social IPO Would Rock

Just do the math. With 800 million active users, if it were to offer its shares at $100 per, Facebook could generate $80 billion if each of its members bought just one share. Valuation aside, the unsophisticated marketplace would likely bid up Facebook’s value beyond the $100 billion valuation some sophisticated investors say Facebook is worth. And given that there would likely remain strong demand among many institutions, Facebook might then achieve an even greater than $100 billion valuation.

Furthermore, the news of a social IPO would likely push more people globally to join the social network, giving lift to the company’s intrinsic value. Thus, like a Newton’s Cradle, the metal balls that rock each other in perpetual motion on executive desks across the country, Facebook’s members would drive its share value as its share offering drives membership growth. I think that’s just brilliant.

As is, the Facebook IPO is the most heralded and anticipated since Google’s (Nasdaq: GOOG) blockbuster offering about a decade ago. The offering’s proceeds and valuation should exceed Google’s and other major internet IPOs like that of Zynga (Nasdaq: ZNGA), Groupon (Nasdaq: GRPN), Vonage (NYSE: VG), Orbitz Worldwide (NYSE: OWW) and LinkedIn (Nasdaq: LNKD). Just the news of Facebook’s registration sent the shares of stocks that might benefit from Facebook’s valuation soaring. Renren (Nasdaq: RENN) and Zynga (Nasdaq: ZNGA) took off like rockets late last week.

I only wonder if the bankers at Morgan Stanley (NYSE: MS), the investment bank said to be heading up Facebook’s offering, have considered this novel idea. If not, just a tiny cut from the commission would do me just fine fellas.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Q4 GDP Growth Severely Flawed

Fourth quarter Gross Domestic Product (GDP) was reported higher, but the growth rate fell short of economists’ views. Stocks started lower on the news Friday and kept that way as a closer look at the data shows it has gaping holes in it. Thus, American economic activity may not be as supportive of stocks as valuations had accounted for up to today. Our analysis of the GDP report and our global economic outlook certainly advise for investor restraint.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Q4 GDP Warning

The government reported Friday that fourth quarter GDP grew 2.8%, which was well above the third quarter growth rate of 1.8%. Yet, stocks fell at the start of trading, leaving casual observers wondering what gives. Just ahead of closing, the SPDR Dow Jones Industrial Average (NYSE: DIA) was still roughly 0.6% lower, while the SPDR S&P 500 Index (NYSE: SPY) was off by 0.2%. That can be partially explained by the shortfall of Q4 growth to economists’ expectations, which were set at a +3.1% consensus based on Bloomberg’s survey. Still, you would think the much better growth would outweigh a few tenths of a point here or there. Well, that would be a correct assessment, so the reaction of stocks must be defined by a more complex set of factors, and those can be found in the details of the data.

The two most significant issues detracting from the best quarterly GDP growth since Q2 2010 both tie into consumer spending. First, and most importantly, GDP was lifted 1.94 percentage points by a build in inventories. Some are saying that this is okay, since third quarter growth was penalized by 1.35 percentage points due to an inventory draw down, however, I see no relevance. Despite the promotional environment of the fourth quarter, the aggregate performance of retailers was poor. This was also apparent by the December Retail Sales data. In other words, discounters like Wal-Mart (NYSE: WMT) and Costco (Nasdaq: COST) may have continued to steal market share alongside bargain online salesmen like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY), while general operators like J.C. Penney (NYSE: JCP) and poor performers like Sears (Nasdaq: SHLD) now employ reinvention strategies to save themselves. In electronics, the success of Apple (Nasdaq: AAPL) and Amazon seems to come at the cost of Research in Motion (Nasdaq: RIMM) and Hewlett-Packard (NYSE: HPQ). Thus, on the whole, a soft economy leaves a competitive environment that can no longer support all players.

The other point that I see as significant came from the growth of the services sector in Q4, which only managed 0.2%, according to the government. Our services dominant economy cannot sustain significant economic growth without robust activity in services. Also, as I’ve pointed out in the past, the sales galore and holiday imploring environment of Q4 is likely to cost consumption in Q1, if not further. Without demand for services, what then will drive our economy?

Regarding the sustainability of economic growth, we also find issue in another factor that helped to drive spending in Q4. Americans dipped into their savings in order to fund consumption. The government noted that the personal savings rate, which measures savings as a percentage of personal income, fell to 3.7% in Q4, from 3.9% in Q3. Clearly, there’s only so far Americans can dip into savings, and considering the private debt problem that our nation still faces, there’s only so far this factor can drive our economy.

Therefore, and in conclusion, the market is just in its determination to penalize stock valuations now. Also, given the pitfalls that litter our path forward, including European economic recession (20% of American exports sold there) and geopolitical deterioration (Iran et al), investors are correct to proceed with caution.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Noise Still Drowns Out Housing Data

Over the last month or so the weekly mortgage activity data produced by the Mortgage Bankers Association has been choppy to say the least. That is because of the imperfect adjustment for holidays, including Christmas, New Year’s and in this week’s data, Martin Luther King Day. However, moving forward, except for President’s Day on February 20, there should be very little noise in the data, barring wild swings in weather. Therefore, we should be able to get a clearer sense of the trend in housing, and as the weather warms, an early idea about the spring surge some real estate pundits expect.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Noise Drowned Housing & Economic Data

This week’s Weekly Application Survey, covering the week ending January 20, included the Martin Luther King Jr. holiday. It was a bank holiday, and so comes to play in mortgage activity. For the week, the MBA’s Market Composite Index fell by 5% from the week before, handicapped by what we see as inadequate adjustment for the business drop-off that occurs on the Friday before and the Tuesday that follows every three day weekend. I’ve originated this viewpoint and continue to put it forth here.

Purchase Activity, which measures mortgage application activity tied to the purchase of homes, fell by 5.4% from the week just prior. I again attribute this decline to the holiday impact, despite the adjustment by the MBA. On an unadjusted basis, this index fell by 9.7%. However, we still cannot use this data in pure form in our forecasting or investment assumptions, for the reasons aforementioned.

The Refinance Index fell by 5.2%, again on the holiday noise. Mortgage rate direction varied across mortgage categories. For instance, the average contracted rate on 30-year fixed rate mortgages with conforming loan balances (417,500 or less) increased to 4.11% from 4.06% the week before. While the points decreased for 80% loan to value ratios, the effective mortgage rate still rose. As for jumbo loan balances (greater than conforming), the average contracted rate for same term fixed rate mortgages fell slightly to 4.39%, from 4.4%. While points rose here, the effective rate still decreased. FHA sponsored loans saw the average contracted rate on 30-year fixed rate loans rise to 3.97% from 3.91% the week before. Average contracted rates on 15-year fixed rate mortgages rose to 3.4% from 3.33%.

Even the four-week moving average of the Market Composite Index seems to me seasonally skewed as it moves out of the holiday inclusive period. For the latest period, this average was up 4.12%, and it should continue higher as it leaves the holiday season behind.

As we move forward, the weekly data faces little distraction, except for what may come from weather and also President’s Day in February. Thus, those of us studying this data point, and others, will get a clearer view to which to base more solid forecasts upon. That said, this benefit will not account for what may lie ahead of us, which I’ve begun talking about in recent columns. In fact, in my latest article, I based a sell call on paper profit rich homebuilders on this view. Today’s mortgage activity data, along with the Pending Home Sales Index decline and FHFA House Price Index’s monthly price increase have the relative shares of Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), J.P. Morgan Chase (NYSE: JPM) and K.B. Home (NYSE: KBH) trading mixed at this hour. K.B. Home was up 2.9% near noontime, while J.P. Morgan and Wells Fargo were lower by about 1%.

Article should interest investors in Savings & Loan stocks including Alaska Pacific Bankshares (OTC: AKPB.OB), Allied First Bancorp (OTC: AFBA.OB), Astoria Financial (NYSE: AF), AMB Financial (OTC: AMFC.OB), Ameriana Bancorp (NasdaqCM: ASBI), Anchor Bancorp Wisconsin (Nasdaq: ABCW), Bancorp of New Jersey (AMEX: BKJ), Bank Mutual (Nasdaq: BKMU), BankAtlantic (NYSE: BBX), BankFinancial (Nasdaq: BFIN), Banner (Nasdaq: BANR), BCSB Bancorp (Nasdaq: BCSB), Beacon Federal (Nasdaq: BFED), Berkshire Hills (Nasdaq: BHLB), Blackhawk Bancorp (OTC: BHWB.OB), Blue River Bancshares (OTC: BRBI.OB), Bofi (Nasdaq: BOFI), Broadway Financial (Nasdaq: BYFC), Brookline (Nasdaq: BRKL), Brooklyn Federal (Nasdaq: BFSB), Camco Financial (Nasdaq: CAFI), Capitol Federal (Nasdaq: CFFN), Carver (Nasdaq: CARV), Cecil Bancorp (OTC: CECB.OB), Center Financial (Nasdaq: CLFC), Central Federal (Nasdaq: CFBK), Chicopee (Nasdaq: CBNK), Citizens South (Nasdaq: CSBC), CKF Bancorp (OTC: CKFB.OB), Clarkston Financial (OTC: CKFC.OB), Clifton Savings (Nasdaq: CSBK), Close Brothers (OTC: CBGPY.PK), Columbia Banking (Nasdaq: COLB), Consumers (OTC: CBKM.OB), Dime Community (Nasdaq: DCOM), Enterprise (Nasdaq: EBTC), ESB Financial (Nasdaq: ESBF), ESSA Bancorp (Nasdaq: ESSA), Eureka Financial (OTC: EKFC.OB), FedFirst Fin’l (Nasdaq: FFCO), FFD Fin’l (Nasdaq: FFDF), FFW (OTC: FFWC.OB), First Bancorp of Indiana (OTC: FBPI.OB), First Bancshares (Nasdaq: FBSI), First Capital (Nasdaq: FCAP), First Clover Leaf (Nasdaq: FCLF), First Defiance (Nasdaq: FDEF), First Federal Bancshares of Arkansas (Nasdaq: FFBH), First Financial Holdings (Nasdaq: FFCH), First Independence (OTC: FFSL.OB), First Investors Fin’l Services (OTC: FIFS.PK), First Niagara (Nasdaq: FNFG), First Robinson (OTC: FRFC.OB), First Security Group (Nasdaq: FSGID), First South (Nasdaq: FSBK), Flagstar (NYSE: FBC), Flatbush Federal (OTC: FLTB.OB), Flushing Financial (Nasdaq: FFIC), Greene County (Nasdaq: GCBC), HF Financial (Nasdaq: HFFC), HMN Fin’l (Nasdaq: HMNF), Home Bancorp (Nasdaq: HBCP), Home Federal (Nasdaq: HOME), HopFed (Nasdaq: HFBC), Hudson City (Nasdaq: HCBK), Indiana Community (Nasdaq: INCB), Investors Bancorp (Nasdaq: ISBC), Jacksonville Bancorp (Nasdaq: JXSB), Jefferson Bancshares (Nasdaq: JFBI), Kaiser Federal (Nasdaq: KFFG), Kearny Fin’l (Nasdaq: KRNY), Kentucky First Federal (Nasdaq: KFFB), Lake Shore Bancorp (Nasdaq: LSBK), Louisiana Bancorp (Nasdaq: LABC), LSB Fin’l (Nasdaq: LSBI), Malvern Federal (Nasdaq: MLVF), Meridian Interstate (Nasdaq: EBSB), Meta Fin’l (Nasdaq: CASH), NASB Fin’l (Nasdaq: NASB), Naugatuck Valley (Nasdaq: NVSL), New England Bancshares (Nasdaq: NEBS), New Hampshire Thrift (Nasdaq: NHTB), New York Community (NYSE: NYB), North Central Bancshares (Nasdaq: FFFD), Northeast Community (Nasdaq: NECB), Northwest Bancshares (Nasdaq: NWBI), OceanFirst (Nasdaq: OCFC), Ocwen (NYSE: OCN), Oneida (Nasdaq: ONFC), Park Bancorp (Nasdaq: PFED), Parkvale Fin’l (Nasdaq: PVSA), Pathfinder Bancorp (Nasdaq: PBHC), People’s United (Nasdaq: PBCT), Provident Community (Nasdaq: PCBS), Provident Fin’l (Nasdaq: PROV), Provident Fin’l Services (NYSE: PFS), Provident New York (Nasdaq: PBNY), Prudential Bancorp of PA (Nasdaq: PBIP), PSB Holding (Nasdaq: PSBH), Pulaski Fin’l (Nasdaq: PULB), PVF Capital (Nasdaq: PVFC), QC Holding (Nasdaq: QCCO), River Valley Bancorp (Nasdaq: RIVR), Riverview Bancorp (Nasdaq: RVSB), Roma Fin’l (Nasdaq: ROMA), Salisbury Bancorp (AMEX: SAL), SI Financial (Nasdaq: SIFI), Southern Missouri (Nasdaq: SMBC), Sterling Fin’l (Nasdaq: STSA), Teche Holding (AMEX: TSH), TF Fin’l (Nasdaq: THRD), Timberland Bancorp (Nasdaq: TSBK), United Community (Nasdaq: UCBA), United Community Fin’l (Nasdaq: UCFC), United Fin’l Bancorp (Nasdaq: UBNK), Valley Fin’l (Nasdaq: VYFC), Washington Federal (Nasdaq: WFSL), Waterstone Fin’l (Nasdaq: WSBF), Wayne Savings (Nasdaq: WAYN), WSB Holdings (Nasdaq: WSB) and WVS Financial (Nasdaq: WVFC).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Mortgage Activity No Reason to Rally

Seasonal influences are still at play in the weekly mortgage application data produced by the Mortgage Bankers Association (MBA), but soon, we should see real improvement. That said, the latest reported increase is no reason to get giddy about a real estate recovery.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

No Reason to Rally

Over the course of the last several weeks, we’ve continuously pointed out the seasonal noise we see in the data produced within many economic metrics. One of the data points we’ve keyed on has been the MBA’s Weekly Applications Survey. Activity dropped off significantly in the weeks of December, as Americans were too busy shopping, preparing their homes, visiting with friends, baking and cooking to spend time applying for a mortgage. Even despite the lowest mortgage rates of the year, they kept from refinancing, and certainly there were some refinancing opportunities created by those historical troughs.

However, now that we’re fully immersed in 2012, the data should begin to reflect economic value adding opportunities like those offered in the mortgage market. The latest period, reported today, still included the New Year’s Day holiday, and so is not clean of noise. For the week ended January 6, though, the MBA’s Market Composite Index (of mortgage activity) picked up 4.5% on a seasonally adjusted basis.

Besides discussing the seasonal influences on data in recent weeks, we’ve also discussed the imperfect work of seasonal adjustment, especially in dynamic periods like the current times. You can see just how hard it must be to make this adjustment based on historical data by simply looking at the unadjusted change, which this week marked a 34.4% increase against the week just prior.

We’ve noted that three-day holidays likely give adjusters a problem because they fail to fully account for the soft business activity that occurs the day before the weekend begins and the day after the holiday. There is certainly a slacking of business activity during those crossover periods as people prepare for the holiday and also return from a tiring or relaxing weekend and reenter into “work mode.”

Alas, all that noise will be going away over the weeks ahead, and the market should begin to take advantage of low mortgage rates, though depending upon weather now. Many strategists, economists and housing specialists are pointing to a true spring selling season this year, given supply rundown and employment improvement (so called). I’m a skeptic with regard to labor, again due to seasonal ringers in the data and other issues described in my labor market work.

Rounding out the most recent week’s data for financial sector and housing enthusiasts, the seasonally adjusted Purchase Index increased 8.1%. Remember, the Purchase Index measures activity tied to the purchase of a home. Homebuilder investors will likely add this news to their lists of reasons to rally the industry’s shares, but it’s not a solid data point to build on in that regard. Filling in the rest of the data, the unadjusted Purchase Index increased 41.9%. The MBA’s Refinance Index increased 3.3% from the week before.

Take note now, dear smoke and mirror crew, because what is useful here is the year-to-year comparisons. In that regard, the Purchase Index was severely lower against the prior year period, down 17.9%. That doesn’t sound like a reason to buy homebuilders to me, but you won’t find that information in the current frenzied flurry of news on the industry, except from me. I’ll have more to say on the homebuilders specifically in the near future, so stay tuned.

Homebuilders are up again today despite insight like this, with the SPDR S&P Homebuilders (NYSE: XHB) up 1.4% in late afternoon trading Wednesday. The shares of K.B. Home (NYSE: KBH) and Hovnanian (NYSE: HOV) are up near 13% on the day, with shares of Lennar (NYSE: LEN) up 6.1% partly on its own news. Financials are not missing a beat either, with big home financer Bank of America (NYSE: BAC) up 3.3% and the Financial Select Sector SPDR (NYSE: XLF) up 0.8%.

Be warned though, because the latest days' rise has been driven more by greed than by reason, in my view. Don't label me as a perennial pessimist though, because I suggested investors get into homebuilders last year. I see the latest move as indicative of subtle signs for housing, ample hope for investor profit and complete ignorance of the importance of Europe to the U.S. economy and the growth of emerging markets.

Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), BB&T (NYSE: BBT), CIT (NYSE: CIT), Bank United (NYSE: BKU), First Citizens (OTC: FCNCA.PK), Synovus (NYSE: SNV), United Bankshares (Nasdaq: UBSI), Hampton Roads Bankshares (Nasdaq: HMPR), WesBanco (Nasdaq: WSBC), City Holding (Nasdaq: CHCO), Sandy Spring (Nasdaq: SASR), First Citizens (OTC: FCBN.OB), SCBT Financial (Nasdaq: SCBT), Wilmington Trust (NYSE: WL), WSFS Financial (Nasdaq: WSFS), Southside Bancshares (Nasdaq: SBSI), Stellar One (Nasdaq: STEL), Union First Market (Nasdaq: UBSH), Eagle Bancorp (Nasdaq: EGBN), First Bancorp (Nasdaq: FBNC), Ameris (Nasdaq: ABCB), The Bancorp (Nasdaq: TBBK), First Community (Nasdaq: FCBC), Capital City (Nasdaq: CCBG), Financial Institutions (Nasdaq: FISI), National Bankshares (Nasdaq: NKSH), Citizens & Northern (Nasdaq: CZNC), Charter Financial (Nasdaq: CHFN), Seacoast Banking (Nasdaq: SBCF), TIB Financial (Nasdaq: TIBB), American National (Nasdaq: AMNB), United Community (Nasdaq: UCBI), Middleburg Financial (Nasdaq: MBRG), Heritage Financial (Nasdaq: HBOS), Zions Bancorp (Nasdaq: ZION), East West Bancorp (Nasdaq: EWBC), City National (NYSE: CYN), Bank of Hawaii (NYSE: BOH), SVB Financial (Nasdaq: SIVB), Westamerica (Nasdaq: WABC), Cathay General (Nasdaq: CATY), Umpqua (Nasdaq: UMPQ), Glacier Bancorp (Nasdaq: GBCI), Pacific Capital (Nasdaq: PCBC), PacWest (Nasdaq: PACW), Western Alliance (NYSE: WAL), First National Alaska (OTC: FBAK.OB), First Interstate Bancsystem (Nasdaq: FIBK), Nara (Nasdaq: NARA), West Coast (Nasdaq: WCBO), TriCo (Nasdaq: TCBK), Territorial (Nasdaq: TBNK), Washington Banking (Nasdaq: WCBO), Bank of Marin (Nasdaq: BMRC), Hanmi (Nasdaq: HAFC), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), United Bankshares (Nasdaq: UBSI), Bank of New York Mellon (NYSE: BK), MB Financial (Nasdaq: MBFI), Astoria Financial (NYSE: AF), New York Community (NYSE: NYB), Hudson City (Nasdaq: HCBK), People’s United (Nasdaq: PBCT), First Niagra (Nasdaq: FNFG), Capitol Federal (Nasdaq: CFFN), Washington Federal (Nasdaq: WFSL), Investor’s Bancorp (Nasdaq: ISBC), Northwest Bankshares (Nasdaq: NWBI), Sterling Financial (Nasdaq: STSA), Ocwen (NYSE: OCN), Flagstar (NYSE: FBC), Provident (NYSE: PFS), Colombia Banking (Nasdaq: COLB), Kearny (Nasdaq: KRNY), Brookline (Nasdaq: BRKL), Dime Community (Nasdaq: DCOM), Flushing Financial (Nasdaq: FFIC), Danvers (Nasdaq: DNBK).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

How the 24-Hour Retail Cycle Skewed Labor Data

On almost all accounts, December’s Employment Situation Report was interpreted as good news. However, I see a problem that was only partially broached by the popular press last week. I think a seasonal and unique to 2011 factor supported the labor market last month. This, combined with other seasonal factors I’ve been pointing out throughout December, could be exaggerating job gains. If I’m right, given the short-term nature of this impact, we’ll see some counteracting data in early 2012. Compounding this contrary view of the economic situation, the recession overcoming Europe and the economic growth decay in China are not going to pass without impact to a vulnerable American economic state.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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How the 24-Hour Retail Cycle Skewed Labor Data

The Labor Department reported the unemployment rate fell two-tenths of a point to 8.5%, from 8.7%. December’s report also showed an addition of 200K nonfarm payrolls. Both data points represented improvement and both reached above the expectations of economists, who were reportedly looking for an 8.7% unemployment rate and the addition of 150K jobs, based on Bloomberg’s survey. So why did economists fall short?

I think evidence of this is readily available in the report itself. What caught my eye initially was the increase in the average workweek, which was lauded by many talking heads in the popular press. Average hours worked rose to 34.4 hours, up from 34.3, marking an unexpected increase against economists’ views.

We know the retail sector added another 28,000 jobs in December, but the reason behind it was simply attributed to the holiday shopping season. However, there were dynamic factors at play that reached beyond normal seasonal trend. Many stores stayed open 24 hours or otherwise extended their hours of operation through the holiday shopping period of 2011. It was a trend that was initiated by Target (NYSE: TGT) and Wal-Mart (NYSE: WMT) at the formal start of the shopping period, which this year even preceded Black Friday. Operating managers kept the lights on at select Macy’s (NYSE: M), Toys “R” Us and Old Navy, which is owned by The Gap (NYSE: GPS), among other stores. Clearly, doing so requires additions to the workforce count, which would boost December employment beyond the usual seasonal additions at retailers. However, those extraordinary additions would be quickly let loose post the holidays, and so do not present as strong an economic signal as perhaps some see in the December data.

A portion of the holiday’s temporary additions to the employed pool is also notable in the Transportation and Warehousing segment, where the courier and messenger industry contributed 42,000 of the segment’s 50K in workforce growth in December. UPS (NYSE: UPS) and FedEx (NYSE: FDX) each make public notice of the increase on seasonal demand. With this regular trend well understood by the market, it seems to be overlooking the dynamic change in the creative marketing and operation of the retail industry, which I believe also drove increased workforce counts.

What’s not accounted for in this argument is the 23,000 job increase in manufacturing. I suspect this growth is being driven by the increasing effort in domestic energy production, which is a secular trend and a real driver for ongoing employment. Likewise, the long-term growth in health care has been driven by secular demand on the aging demographics of America, and this would also support manufacturing. I see the mining increase driven by the rising prices of commodities, including gold, silver and rare earth metals. Again, manufacturing is indirectly aided.

Jobs have been created over the course of the year, which is reflective of the slowly improving economic environment. There’s no denying that. However, my concern is that new burden lies ahead, driven by deep recession in Europe and related slowing growth in the domestic economies of the emerging markets. Given that the late 2011/ early 2012 market has fed off what has been viewed as a healthy holiday shopping period, I worry about a different reality that could be reported by retailers for the quarter. That reality should reflect leaner profit margins and many earnings shortfalls on the stores’ deep discounting and long hours of operation, as desperate retailers sought any pull possible to lure market share. Thus, I suggest investors take the holiday-relative economic data for what it is, full of noise and distortion.

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Housing Starts for the Suckers in Pottersville

The popular press, radio and television media celebrated the “strong housing starts” reported for November Tuesday. The shares of homebuilders had a good time too, with the SPDR S&P Homebuilders (NYSE: XHB) up 5.3%. However, after a look at the report, I say bah humbug! That’s because while housing starts ran at a higher rate, they occurred in a specific segment of the market that I suggest offers few good tidings for the real estate market. It’s a great sign for the likes of Mr. Potter, from It’s a Wonderful Life though.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Housing Starts for the Suckers in Pottersville

Housing Starts rose a strong 9.3% over October’s revised rate and an astounding 24.3% over last year’s sad affair. Building Permits ran at a 5.7% higher rate than in October and posted an impressive 20.7% increase over the prior year period. Yet, Starts at an annual rate of 685K and Permits at a rate of 681K were far less impressive after closer inspection of the data.

The reason for my lack of enthusiasm should be obvious, but is clearly not to an undiscerning majority, nor to investors in Hovnanian (NYSE: HOV), PulteGroup (NYSE: PHM) or Beazer Homes (NYSE: BZH), who all enjoyed double-digit gains Tuesday. However, I expect the gains in homebuilders will prove fleeting. You see, most of the activity occurred in multi-family housing, not in single-family homes. Single-Family Housing Starts only increased 2.3% over October’s rate, to 447K, and Single-Family Home Permits only rose by 1.6% over October’s rate, to 435K.

Multi-family projects could be intended to house renters. A housing start measures the start of construction of a project intended for residential use. The properties do not necessarily need to be presold. Therefore, the 32.2% increase in structures intended to house five or more family units may very likely be for a Pottersville-like purpose, to house the “suckers in Potter’s slums,” from the famed and seasonally appropriate film. We should not be surprised, given today’s higher credit standards, increased levels of unemployment and underemployment, and a population less likely to attain home ownership. This is not something to celebrate, though, not in my view.

Single-family starts were on the rise in the Northeast and the West though, increasing 35.7% and 10.7%, respectively. Single-family starts in the Midwest and the South fell 14.5% and 1.3%, respectively. Multi-family projects were on the sharp rise in both the Northeast and West as well, though, so there appears to perhaps be a housing shortage being filled. It makes sense that distressed property inventory would first be absorbed by the population dense Northeast and West. Generally speaking, this is a development that should be expected, given the length of the period with little construction and the continued growth and maturation of the population. However, it’s too early, and the data is too limited to make such a call.

Besides, with our economic view, and the related stumbling block we see for housing over the near-term, any green shoot that may sprout should be quickly dried out. In conclusion, I’ll hold my excitement for when single-family starts initiate a rising trend, and more importantly, when economic healing drives increased general demand for housing.

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Today’s Republican Disconnect with America

I sat up late the other night watching the C-SPAN coverage of the House of Representatives debate on the payroll tax break and unemployment benefit extensions. I was appalled by the Republican positions, and the recurring tone I keep hearing from the party I use to call my own and whose conservative values I continue to agree with. I’m now an independent due to the perversions that have eroded each party’s core message. Economically speaking, I see neither current version of the Republican nor Democratic Party as holding the perfect cure to what ails us. While another article might discuss my concern with the Democratic Party’s embrace and promotion of immoral practices for the sake of personal liberation, this article is focused on the Republican disconnect with America or the great poverty stricken segment of America. This broken rail was once again evidenced in the latest legislative lunacy.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Today's Republican Disconnect with America

In case you’ve been caught up in holiday shopping or catching up with work before your holiday vacation, our Congress is currently entangled in a messy legislative debate over the future of the payroll tax cut and unemployment insurance benefits. Basically, last year’s program extensions need to be renewed again this year, or those temporary benefits will expire. If that happens, Americans will face new burdens at a still vulnerable time for our economy.

The Payroll Tax break against Social Security payments would lift that rate back up to 6.2% from its current 4.2% break rate. Your shock is well-founded, as those tax cuts are shorting the same Social Security program that is already handicapped if not doomed. And yes, we are underfunding it even worse than usual today as part of an effort to stimulate spending and the economy. There is, however, a new budget-minded focus within Congress that is seeking ways to fund these cuts. For instance, the savings from the Iraq troop withdrawal have been put forth as one potential source. The Democrats would like to bank those savings against the budget deficit and instead institute a new surtax on those Americans with incomes of more than $1 million. As you may have guessed, the Republican Party opposes any tax increase, even if it be upon those who can afford to offer a helping hand now.

This legislative issue weighs for Americans who are already earning a steady income, though it is surely critical to part-timers with a shortage of fund flows. Another issue at hand could more significantly affect America, as it supports Americans who have no other source of income currently. It is what keeps people housed and from committing crimes of necessity; it is what keeps hope alive.

Unemployment benefits have proven inadequate for the massive pool of long-term unemployed Americans displaced by this deep economic recession and sluggish follow through. With the unemployment rate last listed at 8.6%, though arguably closer to 8.8%, given the drop in workforce count in November, it is clearly not yet time to cut off the unemployment benefit extension program (which takes insured unemployment to 99 weeks). The House Republicans are seeking to pass legislation that will ease coverage to 59 weeks after January 1. Of course, the percentage level of the unemployed more importantly represents about 13.3 million Americans, not including the disenchanted and desperate. Furthermore, the Republican version of aid would reportedly leave more than 3 million Americans high and dry immediately, with no other source of income to make mortgage or rent payments, or basically to survive.

Believe it or not, that’s not where the disconnect ends. You see, Republicans also want to make it harder for those people, who would still qualify, to qualify for unemployment insurance benefits. This obstacle to the critical aid that pays the rent for many who are jobless through little fault of their own would present itself via mandatory drug tests. The argument posed on the floor of the House for this was “to ensure benefit recipients are employable,” because if they are on drugs then they are likely to lose their next job. In other words, they are deemed to have a more important problem that should be addressed first, before our fellow Americans are awarded the insurance benefits they paid for through regular cuts from their weekly pay checks. Don’t forget that we pay directly for unemployment insurance; it’s not an unfunded social program. Next, I suppose, Republicans would ask seniors to pass a drug test to determine whether they should receive their hard-earned social security checks. This is obscene!

However, that’s still not where the lunacy ends. The bill passed by House Republicans, which was doomed to fail in the Senate or by the President’s pen, also calls for the building of the Keystone XL Pipeline, which, oh by the way, I support. As you might have guessed though, that was not in last year’s legislation. Rather, it’s the effort of the GOP to stick an energy action into an employment bill under the premise that it is a job creator. Clearly, the construction of a pipeline would create jobs, whether the tens of thousands or the 100K to 280K long-term total touted by some in the Republican Party, or about 20,000 or so that is more likely immediately. But it is misplaced within this bill. In fact, each particle of this legislation should be independent of one another, for the purpose of clarity and the sake of the American people.

The President and the Democrats were terrified that the House Republicans would pass this bill and then leave town (before the Senate could pass its own version), thus leaving the onus of unemployment benefits on the shoulders of the President and his party. Americans wouldn’t remember the pipeline or the drug test if the Senate voted the bill down or if the President vetoed it as promised. Rather, they would remember that “the Democrats and President Obama killed a critical bill, and thus left unemployed Americans helpless while raising taxes on the rest of us.” So, the Democrats held up the 2012 budget through political means, threatening to shut down the government and probably incite a sovereign rating downgrade, “because the Republicans went home for the holidays and left the nation’s business undone.”

One thing remains clear. The nation’s capitol is still disjointed and has not learned the lesson it should have by the hands of Standard & Poor’s (NYSE: MHP). We cannot afford to leave our fate now in the hands of Fitch or Moody’s (NYSE: MCO), who with S&P, have the power to drive paradigm shift in global confidence in American treasuries and the dollar. It’s about time the rhetoric ended in Washington and our elected representatives quit the political games and got some important work done. Break these bills apart and vote on them individually as they deserve, or at least resolve to form a best fit and get Americans what they need now. Remember, first do no harm!

Please share your opinion via the comment tab below. And let’s have some fun: please use this opportunity to guess who I favor for President in 2012.

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Greece has More Bargaining Leverage than its Politicians Understand

When former Greek Prime Minister Papandreou proposed a referendum for the Greek people to decide on whether to accept continued austerity and the “grand barter” agreed to by Greece’s new troika of slave masters, we learned something. As European bond yields went soaring from Spain across to Italy and even up to France, and as European kingpins arms went flailing up into the air in complaint, something became plainly clear. Greece has more bargaining leverage than its politicians understand.

Our founder, Markos Kaminis, earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Greece has Bargaining Leverage

What is unclear is whether he knew what he was doing or not, but the former Greek PM was ridiculed across the American popular press and across Europe for his ignorant, if not negligent action. Though, we questioned within these pages whether it might be pure genius or simply his soft heart at work behind the untimely and completely unexpected political posture. We also wondered if the respected legend of Greek politics might even be reading our column, considering that we had suggested Greece’s politicians ask Greeks what they wanted just days before Papandreou’s so-called shocking proposal.

How the move will work out for PASOK in February remains unclear, but I would assume the sacrifice of Papandreou will save some seats in Parliament. It even gives PASOK a chance at the premiership, something that was highly improbable otherwise. But more importantly, we should take note of the reaction of Greeks, which was one of introspection; of the markets, which was catastrophic; and of the look in the eyes of European leaders, which was one of fear.

Greeks suddenly had to approach the situation from the perspective of the nation on the whole, for turning down foreign aid and turning away from austerity measures would also lead to Greece’s disorderly exit from the euro zone. That’s not something that even the hardest hit of Greeks are sure would be in Greece’s best interests. The result of this might perhaps lead an unemployed Greek to a café to think deeply about the issue, rather than to start fires at the steps of the Parliament.

The markets were shocked, with debt yields across other at-issue European states soaring just days after all seemed finally set straight. The markets anticipated an even more serious loss of confidence in the European Union and in the euro zone. After all, if the EU could not cure Greece, due to the interests of Greeks, then perhaps the same result would follow in Spain and Italy, and if Italy, then why not also France. That reality set European politicians straight, so to speak, and allowed us to see clearly that the great homeland of our ancestors did not have to just accept whatever proposals the stern troika declared at us. Indeed, Europe has a stake in Greece, and in keeping it intact in the euro zone.

Therefore, Greek politicians have been grossly underestimating their bargaining position with the troika. The constricting austerity measures shoved down the throats of Greeks do not have to be so burdensome to our economic sustenance, nor to growth. We have the power to demand a longer time-line to meet debt level goals and repayment requirements. We can experiment with creative, growth encouraging policies, and ease austerity on our nation to correct its inherent flaws in a manner less disruptive to a way of living embedded in today’s society. Therefore, social upheaval could be mitigated, and Greece could find a way out of this mess with its integrity intact and the finances of its people in existence. I suggest Greek politicians reconsider, and realize that they hold a stronger hand than they’ve been told. They should reweigh the fact that there is a consistency of Greece’s goals with those of the troika, the greatest of which is to keep Greece within the euro zone.

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Papademos on a Stick

It seems Greeks are coming to grips with the reality that their new leader, Lucas Papademos, may offer a different face to watch on television, but he comes with even stauncher support of the troika’s austerity medicine than the embattled George Papandreou. Indeed, the European Union’s man and once #2 at the European Central Bank (ECB) has openly stated that exit from the euro zone is not an option. Well, Greeks are learning that this means the austerity forced down their throats is also not clearing out. So, it seems, it may not be long before the popular support for Papademos turns out to actually be a sort of marinade.

Our founder Markos Kaminis earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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A Political Sacrificial Lamb

Political jockeying ahead of a likely February election has Greece’s new Prime Minister, Lucas Papademos, being held out on a stick like a souvlaki cooking over the fires of Greek rioters, the IMF and Greece’s European brothers. Papandreou’s referendum concession was either a show of pure stupidity, unequivocal ethical heart or political genius. From the political perspective, Papandreou’s calling on the Greek people to decide whether to go forth with the European plan, and thus accept austerity and also ongoing euro zone membership, forced Greeks to take a second look at the situation and also at the PASOK Party. His stepping back has placed PASOK into a position that allows for potential reconciliation come election time.

New Democracy, not missing a beat and with its eye on February, has been publicly promoting an idea to ditch the digging austerity plan and to instead take a sort of American Republican approach to promote economic growth and trust in trickle-down economics; though the Greek version might look more like Chios mastic’s slow and painful ooze down a dry bark. The other, more radical parties are of course offering more radical solutions.

Needless to say, the political commotion has the troika terrified that tranches of capital dished out to Greece between now and February might end up wasted, sort of like how Zorbas spent his boss’ supply money on drink and women. So the IMF is refusing to dole out any more funds before a pledge is signed by the major political parties, if not all of them, to keep on the path outlined. That path, for Greeks, has been relayed as including the implementation of all already passed austerity measures, but the introduction of no new burden upon them.

So, it would seem Papademos is cooking like a souvlaki on a stick, and it would appear Greeks will have their kabob well done by February. The current popular support of him is thus near certain to turn to a lynching party, with the technocrat set to burn at the stake. Both New Democracy and PASOK are more than willing to step away now to allow the Greeks to pepper up Papademos, get their fill of him, and offer sweet dessert to them in February. But the sugar for that dessert must be acquired now from German and French patisseries.

The lesson long forgotten but to be learned anew is for governments across the globe. The lost wisdom is that the mismanagement of the people’s money results in uprising. The people will turn everything upside down and start all over again before they will bear the pain for the mistakes of faulty leadership.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Europe Comes Together in Desperation

In a matter of a week, the civilized world has witnessed leadership changes atop two democratic nations without election. The reasoning for this abrupt and somewhat unprecedented change in control was “necessity,” and in the place of the apparently inept leaders replaced, we find technocrats who seem perfect for the times.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relevant tickers: NYSE: DB, NYSE: STD, Nasdaq: ITUB, NYSE: UBS, NYSE: WBK, NYSE: LYG, NYSE: BCS, NYSE: CS, NYSE: AIB, NYSE: BLX, NYSE: NBG, NYSE: RY, NYSE: BFR, NYSE: IRE, NYSE: BMO, NYSE: CM, NYSE: ING, NYSE: C.

Europe Comes Together in Desperation

Even though I myself insisted that former Greek Prime Minister Papandreou should query the Greek people before moving forward with the EU’s grand barter, I never in my wildest dreams expected that within hours of publishing, he would actually call for a referendum. After all, such a referendum would effectively decide whether Greece would remain in the eurozone, which was something the Greek government was for months fighting tooth and nail for. Despite the protests and fires that continued on the streets of Greece, it made little sense for the government to give up on a deal that effectively forgave half its debt. We posited that it must thus be a genius political move by George Papandreou, which would effectively give new life to the dead government walking and the PASOK party. After all, the Greek people, if properly educated on the vote, would surely not choose a route that would take them into default and out of the bubble of the civilized European society they have mostly treasured since Greece’s initiation.

I suppose one might say this change in Greece made possible what was previously less likely in Italy, the disposal of the embattled and embarrassing billionaire Prime Minister Silvio Berlusconi. Berlusconi had been shy about implementing the austerity measures his European brethren viewed necessary to prevent crisis contagion. The support of his people was worn thin, as his scandalous session as the Italian Prime Minister dragged on. So by putting off financial reinforcement, Berlusconi sought to keep Italians in cafes rather than on the streets of Rome burning his effigy.

Former European Commissioner for Italy, Mario Monti, the technocrat of choice for the job accepted the role over the weekend. Economic expert, Mario Draghi might have better matched with Greece’s turnover to Papademos, but he’s busy in his new post at the European Central Bank. The ouster of Berlusconi came at once and as a condition for the united passage of austerity. Berlusconi’s opponents in the senate determined to not vote, allowing the measures to pass; it then moved forward to the lower house for passage, and so austerity and Monti have been received in Italy.

The latest European tone has me anticipating Christine Lagarde or Jean-Claude Trichet could shortly move into the captain’s chair in France. Perhaps the final maneuver would be the German Finance Minister Wolfgang Schaeuble’s supplanting Angela Merkel in Germany. Could you ever imagine Ben Bernanke as your president without an election to support the choice? It’s all quite baffling, though the intensifying desperation of Europe is adding impetus if not frenzy to these decisions. These latest government changes are explained as necessary to quell political posturing and to allow for unified effort. These implanted leaders are only seen as temporary fixes. Opposing parties view the next election as their opportunity to restore control. However, in the end, the people will decide who will lead them, and they would seem unlikely to punish these new technocrats, who are economic experts seemingly best qualified for the times. Who knows, this may even be a step toward a truly unified Europe.

FYI: In 2009, Wall Street Greek presciently wrote of the coming turnover of European and global governments.

Article is relevant to Deutsche Bank (NYSE: DB), Banco Santander (NYSE: STD), ITA (Nasdaq: ITUB), UBS (NYSE: UBS), Westpac Banking (NYSE: WBK), Lloyds Banking Group (NYSE: LYG), Barclays (NYSE: BCS), Credit Suisse (NYSE: CS), Allied Irish Bank (NYSE: AIB), Banco Latinamericano (NYSE: BLX), National Bank of Greece (NYSE: NBG), Royal Bank of Canada (NYSE: RY), BBVA Banco Frances (NYSE: BFR), The Bank of Ireland (NYSE: IRE), Bank of Montreal (NYSE: BMO), Canadian Imperial Bank of Commerce (NYSE: CM), ING Groep (NYSE: ING), Citigroup (NYSE: C).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

The Fed Forecast Highlights its Failings

The Federal Reserve concluded its Federal Open Market Committee meeting and issued monetary policy Wednesday as usual, but it also adjusted its economic forecasts downward. Last projected in June, before the summer slide, the Federal Reserve reduced its GDP projections for this year and the long-term, raised its unemployment expectations, and hiked its near-term inflation view. In other words, it was an all around bad chew.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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The Fed Forecast Highlights its Failings

The market took it like a champ, with the Dow hanging in the green after the news, and even climbing higher. However, that was probably the result of an already well understood change in the economy since June. Besides, the market had anxiously anticipated the release while edging lower heading into it. Still, what the Fed had to say should have been more concerning to markets, in my view, especially since in our observance, it has generally failed to forecast adequately. This in turn worries me that the Fed’s documented nearsightedness will leave it a day late and a dollar short when the inflation monster inevitably roars in the future. There may be nothing the Fed can do about that, but this is for another article.

The Federal Reserve’s forecast for Gross Domestic Product (GDP) indicates a reduction in consensus expectations (among its forecasters) for growth projections. The GDP forecast for this year has been cut to a range of 1.6% to 1.7%, down from a hopeful 2.7% to 2.9% forecast in June. That’s more than a point lower, quite a difference for a five month interval between publishing. The Fed went ahead and cut its projections for 2012 and 2013 as well, which is yet another indicator of incompetent work. My reasoning for that derogatory judgment is that if the capacity is there, our mature economy should be able to reach absolute levels of productivity over a certain time span, and that should not be dependent upon what was accomplished the year before. We are not India or China, where new ground is broken each quarter.

What the projectors have done here is too simplistic, and that’s a disservice to the American people. They appear to have simply applied changes to prior numbers in their figure-licking. Instead, they might have contemplated the components of their forecasts more completely. This would surely have flown at the Mickey Mouse operation I was confined to for too long, but it should not apply to the most important of economic forecasts for our nation. It is guesswork, and I expect likely to miss reality yet again.

Despite exposing it for its uselessness, we’ll go ahead and fill you in with regard to the rest of the data. The Fed sees unemployment much stickier now than it did in June. Where it had projected unemployment to improve to between an 8.6% and 8.9% rate, it now sees 9.0% to 9.1% for 2011. In 2012, the Fed sees stubborn unemployment only improving to 8.5% to 8.7%, versus the 7.8% to 8.2% it thought it saw previously.

With regard to Core PCE Inflation, the Fed now expects 2011 to mark between a 1.8% to 1.9% rate this year, up from its June expectation for a tamer 1.5% to 1.8% price increase. The Fed’s forecast for between a 1.5% to 2.0% increase in 2012 and 1.4% to 1.9% rise in 2013, tells me it currently sees a mid-to-late year 2012 change in monetary policy; I believe that is where we can currently place expectations to see it begin hiking rates. I think what you can bet will play out, though, is a Fed losing control of the situation, but that issue is for another article.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.