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Stock Splits Go `Out of Fashion’ for S&ampP 500 Index Members Chart of Day

by on June 8, 2010

By David Wilson June 8 (Bloomberg) — Three companies in the Standard & Poor’s 500 Index are splitting their shares this week. A decade ago, this would have been a routine number. Now it qualifies as a deluge. The CHART OF THE DAY displays the number of splits in S&P 500 stocks each year since 1995, as compiled by S&P. Last year, AmerisourceBergen Corp. was the only company in the index to go this route. The highest total for the past 10 years was 38 splits, recorded in 2004. That’s less than half the peak of 100 in 1997. “Traditionally, splits were used to keep stocks in a price range,” Howard Silverblatt , a senior index analyst at S&P, wrote yesterday in an e-mail. “The concern was that if prices were too high, investors, especially individuals, would not buy them.” The issue has faded and splits have gone “out of fashion,” Silverblatt wrote. Data compiled by Bloomberg supports his conclusion. Of 17 stocks in the S&P 500 that closed at more than $100 yesterday, seven have never been split: AutoZone Inc. , CME Group Inc. , First Solar Inc. , Goldman Sachs Group Inc. , Google Inc. , IntercontinentalExchange Inc. and Mastercard Inc. Two other stocks, Intuitive Surgical Inc. and Priceline.com Inc. , have only had reverse splits. These moves effectively made a single share more costly rather than cheaper, as splits do. Express Scripts Inc. fell below the $100 threshold after yesterday’s completion of a 2-for-1 split, the first for an S&P 500 stock since AmerisourceBergen took the same action last June 15. General Mills Inc. will carry out a 2-for-1 split today, and Danaher Corp. will follow suit on June 11. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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U.S.’s $13 Trillion Debt Poised to Overtake GDP Chart of Day

by on June 4, 2010

By Garfield Reynolds and Wes Goodman June 4 (Bloomberg) — President Barack Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation’s annual economic output, a step toward what Bill Gross called a “debt super cycle.” The CHART OF THE DAY tracks U.S. gross domestic product and the government’s total debt, which rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund. The lower panel shows U.S. annual GDP growth as tracked by the IMF, which projects the world’s largest economy to expand at a slower pace than the 3.2 percent average during the past five decades. “Over the long term, interest rates on government debt will likely have to rise to attract investors,” said Hiroki Shimazu , a market economist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest publicly traded bank. “That will be a big burden on the government and the people.” Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co. in Newport Beach, California, said in his June outlook report that “the debt super cycle trend” suggests U.S. economic growth won’t be enough to support the borrowings “if real interest rates were ever to go up instead of down.” Dan Fuss , who manages the Loomis Sayles Bond Fund, which beat 94 percent of competitors the past year, said last week that he sold all of his Treasury bonds because of prospects interest rates will rise as the U.S. borrows unprecedented amounts. Obama is borrowing record amounts to fund spending programs to help the economy recover from its longest recession since the 1930s. “The incremental borrower of funds in the U.S. capital markets is rapidly becoming the U.S. Treasury,” Boston-based Fuss said. “Do you really want to buy the debt of the biggest issuer?” (To save a copy of the chart, click here.) To contact the reporters on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net ; Wes Goodman in Singapore at wgoodman@bloomberg.net .

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Interbank Lending Market `Died With Lehman’ Bankruptcy Chart of the Day

June 1, 2010

By Mark Gilbert and Matthew Brown June 1 (Bloomberg) — Banks have all but stopped lending to each other, driving transactions in the interbank market to the lowest level since August 1994 and undermining the validity of the suite of interest rates known as Libor. The CHART OF THE DAY shows loans between U.S. commercial banks have slumped to $153 billion from a peak of $494 billion in September 2008, the month that Lehman Brothers Holdings Inc. filed for bankruptcy protection. The London interbank offered rate is used to set interest charges on $360 trillion of financial products worldwide, according to the Bank for International Settlements. “The interbank market died with Lehman Brothers,” said David Keeble , head of fixed-income strategy at Credit Agricole Corporate and Investment Bank in London. “Libor is a strange beast, because the market that it’s based upon barely exists. It’s going to take a couple more years to recover, and even then will never regain its former glory.” Loans between banks have evaporated after central banks around the world pumped cash into the banking system by lending money in exchange for debt securities following at least $1.8 trillion of writedowns and losses by financial institutions as of May 18. U.S. commercial banks turned to the Federal Reserve for short-term borrowing after Lehman’s bankruptcy led to a collapse in trust amongst financial institutions, and the Fed opened its discount window to banks. “There’s a lot more certificates of deposit that get issued instead of interbank lending, because they’re eligible if you want to turn them into cash more quickly,” said Keeble. “The whole structure has changed.” (To save a copy of the chart, click here.) To contact the reporters on this story: Mark Gilbert in London at magilbert@bloomberg.net ; Matthew Brown in London at mbrown42@bloomberg.net

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Gulf of Mexico Oil Spill Causes $95 Billion in Stock Damage: Chart of Day

May 25, 2010

By David Wilson May 25 (Bloomberg) — BP Plc’s leaking oil well in the Gulf of Mexico has done as much as $95 billion in financial damage to shareholders of companies associated with the spill. The CHART OF THE DAY shows the combined drop in market value for BP, Anadarko Petroleum Corp., Cameron International Corp., Halliburton Co. and Transocean Ltd. since the leak began at the Macondo well, according to data compiled by Bloomberg. Percentage losses for these companies in U.S. trading appear in the top panel. Their total capitalization tumbled to $207.1 billion yesterday from $296.8 billion on April 20, as the bottom panel shows. Japan’s Mitsui & Co. , which has a 10 percent stake in the well, lost another $5.3 billion in market value. The declines may be partly attributable to a slumping U.S. stock market. The benchmark Standard & Poor’s 500 Index dropped 11 percent during the period as Europe faced a financial crisis, underscored by a European Union-led bailout of Greece. Even so, the six companies collectively lost $62 billion more in market value than the S&P 500’s drop would suggest. BP , Macondo’s operator, accounted for about two-thirds of the loss. Transocean ’s Deepwater Horizon drilling rig was lost in an explosion that triggered the spill. Anadarko holds a 25 percent stake in Macondo, which used blowout-prevention equipment from Cameron and drilling services from Halliburton . (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Euro Slump Bolsters Prospects for European Grain Exporters: Chart of Day

May 20, 2010

By Rudy Ruitenberg May 20 (Bloomberg) — This year’s 14 percent slump in the euro is buoying prospects for the region’s farmers as buyers from Algeria to Thailand pick cheaper European Union grain over U.S. supplies. The CHART OF THE DAY compares the performance since March of milling wheat for November delivery traded on NYSE Liffe in Paris with December-delivery wheat on the Chicago Board of Trade. The Paris contract advanced 11 percent since mid-March while Chicago grain fell 3.4 percent over the same period. “We’re seeing huge demand for European wheat in the global market because relative to other major exporters it’s the cheapest,” said Luke Chandler , head of agricultural research at Rabobank in London. “The currency has been a huge driver.” The euro fell to its lowest against the dollar since April 2006 yesterday on concern that measures to contain Europe’s sovereign-debt crisis will curb economic growth. The EU, the world’s biggest wheat producer, will expand output by 4.5 percent in the 2010-11 season, according to estimates from the U.S. Department of Agriculture. Paris-traded wheat is at the equivalent of about $175 a metric ton, compared with about $190 for Chicago wheat. France’s crops office raised its forecast for wheat shipments yesterday amid bigger-than-expected purchases by countries including Algeria and Yemen and new demand from destinations including Thailand. To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net .

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Euro Slump Bolsters Prospects for European Grain Exporters: Chart of Day

May 20, 2010

By Rudy Ruitenberg May 20 (Bloomberg) — This year’s 14 percent slump in the euro is buoying prospects for the region’s farmers as buyers from Algeria to Thailand pick cheaper European Union grain over U.S. supplies. The CHART OF THE DAY compares the performance since March of milling wheat for November delivery traded on NYSE Liffe in Paris with December-delivery wheat on the Chicago Board of Trade. The Paris contract advanced 11 percent since mid-March while Chicago grain fell 3.4 percent over the same period. “We’re seeing huge demand for European wheat in the global market because relative to other major exporters it’s the cheapest,” said Luke Chandler , head of agricultural research at Rabobank in London. “The currency has been a huge driver.” The euro fell to its lowest against the dollar since April 2006 yesterday on concern that measures to contain Europe’s sovereign-debt crisis will curb economic growth. The EU, the world’s biggest wheat producer, will expand output by 4.5 percent in the 2010-11 season, according to estimates from the U.S. Department of Agriculture. Paris-traded wheat is at the equivalent of about $175 a metric ton, compared with about $190 for Chicago wheat. France’s crops office raised its forecast for wheat shipments yesterday amid bigger-than-expected purchases by countries including Algeria and Yemen and new demand from destinations including Thailand. To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net .

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London Air Pollution Is Worse Than Frankfurt, Beats Athens: Chart of Day

May 7, 2010

By Alex Morales May 7 (Bloomberg) — London, host of the 2012 Olympic Games, missed European Union air pollution goals three days a week on average in 2008, almost five times more failures than is allowed by EU law and seven times as often as Frankfurt. The CHART OF THE DAY shows London’s number of “days in exceedance” for particle pollution was 156 in 2008, the most recent year for EU air-quality data. That compares with 22 in Frankfurt and 35 for the bloc’s regulatory limit. London hasn’t dipped below 100 violations in any of the eight most recent years of data. Athens missed the target every year since 2001 except 2004, when it was the last European city to host the Summer Olympics. The pollutants can hamper breathing and stem from vehicle emissions, construction sites, factories, dust and sea salt. Volcanic ash can also contribute. “Worryingly, it looks likely that air-quality laws will be breached in London every year up to and including the 2012 Olympics,” said Simon Birkett, founder of the Campaign for Clean Air in London. An estimated 4,300 people die each year in London from long-term exposure to dangerous particles, he said. Failure to meet the EU goals in force since 2005 could result in fines of 300 million pounds ($449 million). The European Commission in December rejected the U.K.’s request for a compliance extension until 2011. After Mayor Boris Johnson published a new air strategy for London in March, the U.K. now plans to re-apply for an extension for the capital by summer. The figures for 2009 are due in September, and new measuring methods may help London. One monitoring station, at Marylebone Road, recorded 115 breaches in 2009 using techniques in place since the 1990s, according to the London Air Quality Network website. Under the new system, that would fall to 60 and the 21 violations so far this year would be reduced to 14. To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net .

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U.S. Stocks to Fall as Chronic Unemployment Reaches Record: Chart of Day

April 27, 2010

By Hideki Sagiike and Masaki Kondo April 27 (Bloomberg) — The Standard & Poor’s 500 Index is poised to fall as chronic unemployment rises to a record among jobless Americans, according to Mitsubishi UFJ Securities Co. the brokerage unit of Japan’s biggest bank by market value. The CHART OF THE DAY shows the S&P 500 and ratio of Americans jobless for more than 27 weeks relative to the total number of unemployed. The equities gauge has jumped 80 percent from a more than 12-year low on March 9, 2009, even as long-term joblessness surged to 44.1 percent in March, almost double the level a year earlier and highest since records began in 1948. The lower panel tracks overall unemployment, which has declined 0.4 percentage point since reaching a 26-year peak in October. “The government’s stimulus measures have driven up stock prices” and helped disguise the unemployment problem, said Seiki Orimi , a senior investment strategist at Tokyo-based Mitsubishi UFJ. “Stocks will fall, at some point. For now, people in the market are tricking themselves” into believing in a U.S. jobs recovery. Consumer spending accounted for about 70 percent of the world’s largest economy in the fourth quarter, when gross domestic product expanded at a 5.6 percent annual rate, the fastest pace in more than six years. Output in the three months to March probably expanded 3 percent, based on the median forecast of 60 economists surveyed by Bloomberg. The S&P 500 may fall as much as 5 percent in an “overdue” decline, according to a technical analysis this month by Thomas Schroeder , managing director at Chart Partners Group Ltd. Jobless Benefits The U.S. posted a budget deficit for a record 18th straight month in March, reflecting gains in government spending to boost the economy. President Barack Obama signed a bill on April 15 extending jobless benefits for hundreds of thousands of Americans to June 2, and urged Congress to pass another measure offering them for the rest of the year. “Historically, people unemployed for more than six months experience a significant deterioration of vocational skills and face severe difficulties in finding their next job,” Richard Koo , chief economist at Tokyo-based Nomura Research Institute Ltd., wrote in a report on April 20. (To save a copy of the chart, click here.) To contact the reporter for this story: Hideki Sagiike in Tokyo at hsagiike@bloomberg.net ; Masaki Kondo in Tokyo at mkondo3@bloomberg.net

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Small Caps Seen Rising From 24-Year High Relative to S&P 500: Chart of Day

April 26, 2010

By David Wilson April 26 (Bloomberg) — Smaller U.S. companies will add to their stock-market lead even after rising to the highest prices relative to larger businesses in 24 years, according to Michael Shaoul , Oscar Gruss & Son Inc. chief executive officer. The CHART OF THE DAY illustrates the ratio between the Russell 2000 Index, whose companies have a median market value of $490 million, and the S&P 500, with a median capitalization of $11.1 billion. Last week’s closing level was the highest since July 1986, according to data compiled by Bloomberg. The Russell 2000 rose for the fifth straight week, its longest streak in a year. For the year, the small-cap index advanced 19 percent through last week, beating the S&P 500’s 9 percent gain. The ratio is likely “to gain considerable ground before this rally has run its course,” Shaoul wrote today in an e-mail to clients. The Russell 2000’s performance during the next slump in stocks will be “the ultimate proof,” he added. Assuming the index holds up relatively well, investors can expect a “multi-month period of outperformance” from small caps, he wrote. The Russell 2000 surpassed the S&P 500 by 1.7 percentage points last year, when stocks rallied, and 3.7 points the year before, when they plunged. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Citigroup Credit Cards Show Dependence on Overseas Consumers: Chart of Day

April 20, 2010

By Anthony Feld and Courtney Schlisserman April 20 (Bloomberg) — Purchases using Citigroup Inc. credit cards are accelerating outside the U.S. and still contracting in North America, adding to evidence that foreign consumers are leading the recovery from the global recession. The CHART OF THE DAY shows the breakdown in first-quarter purchases using Citigroup-branded cards on a year-over-year basis. Transactions made with Citigroup-issued credit cards rose 23 percent in Asia, a second straight increase, while the dollar amount of charges in North America fell 10 percent. Purchases were also up in Latin America and Europe. These differences may help explain why Federal Reserve Chairman Ben S. Bernanke is poised to keep interest rates low until the labor market improves enough to allow for a sustained pickup in Americans’ spending. Manufacturing is at the forefront of the U.S. recovery, with factories producing more to satisfy growing overseas appetites for exports. “The global backdrop has been quite helpful to U.S. corporations that are globally diversified while the U.S. consumer is busy healing,” said Julia Coronado , a senior economist at BNP Paribas in New York. U.S. “consumers don’t want debt right now. That definitely slows the speed limit of the recovery. With the recovery likely to remain moderate, it will take the labor market years to heal and the Fed is on hold for a while.” The Fed has reiterated it will keep rates low for “an extended period.” In contrast, the central banks of India and Australia have already raised interest rates. Singapore this week announced a one-time revaluation of its currency and China announced measures to cool its real-estate market. Citigroup, which said yesterday that its first-quarter profit more than doubled, is the third-largest issuer of credit cards in the U.S. behind No. 1 JPMorgan Chase & Co. and Bank of America Corp. To contact the reporters on this story: Anthony Feld in New York at afeld2@bloomberg.net ; Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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Corporate-Bond Rally Foreshadows Gains in U.S. Bank Stocks: Chart of Day

April 19, 2010

By David Wilson April 19 (Bloomberg) — U.S. bank stocks are poised for gains because they have only begun to catch up with a surge in corporate bonds, according to Ian Scott , a global strategist at Nomura International Plc. The CHART OF THE DAY compares the industry’s stock performance relative to the Standard & Poor’s 500 Index with a Moody’s Investors Service index of yields on Baa-rated corporate debt, the lowest investment-grade category. The latter is shown in reverse because falling yields translate into rising prices. “Bank stocks have hardly responded” to the rally in bonds, Scott wrote in an April 16 report, even though the S&P 500 Banks Index has more than tripled since March 2009. This is the industry gauge used in the chart, which is similar to one published in his report. The group fared much better in the early 1990s, when the stocks kept pace with corporate bonds as banks rebounded from real-estate losses, in his view. Rebounds in mortgage-backed securities and leveraged loans , made to debt-laden companies, also signal that the rally in U.S. banks’ share prices “has further to run,” the report said. “U.S. credit measures have improved across the board,” Scott wrote. “None of these improvements has yet to be reflected in either the absolute or relative performance of bank stocks.” He recommends that investors have more money in global banks than their weighting in benchmark indexes would suggest. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Bank Profit Imbalances That Fueled Crisis `Are Re-Occurring’: Chart of Day

April 13, 2010

By Mark Gilbert April 13 (Bloomberg) — Record low U.S. interest rates are boosting the profitability of financial companies, creating the same kind of imbalances that fueled the credit crisis, according to Jim Reid, a Deutsche Bank AG strategist in London. The CHART OF THE DAY tracks finance industry profit in billions of dollars, measured by the yellow line, against earnings for non-finance companies in green and nominal U.S. gross domestic product, shown by the red dotted line. “It seems incredible that financials are now scaling their 2006/2007 heights again,” Reid wrote in a research note published yesterday. “The dramatic imbalances are re- occurring.” In July 2008, Reid said that U.S. banks had made “excess profits” of about $1.2 trillion in the previous decade, compared with how much they should have made based on economic growth, and that those excesses would be wiped out. Since then, U.S. financial firms have written down the value of their assets by about $1.15 trillion, according to Bloomberg data. “We are now all well aware that rather than overhaul a financial system that arguably contributed to the problems of the last two to three years, the authorities have created the conditions for the industry to thrive,” Reid wrote this week. “Only time will tell how the regulators and politicians will decide to address these imbalances.” (To save a copy of the chart, click here.) To contact the writer of this story: Mark Gilbert in London at magilbert@bloomberg.net

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Commodities to Disappoint Investors, Deutsche Bank Says: Chart of the Day

April 1, 2010

By Chanyaporn Chanjaroen April 1 (Bloomberg) — Commodities, the worst performer among five asset classes in the first quarter, will continue to “struggle” as the dollar strengthens and China seeks to restrain growth, according to Deutsche Bank AG. The CHART OF THE DAY shows the S&P GSCI Total Return Index of commodities falling 0.9 percent. A Barclays Capital index gauging total returns on dollar-denominated corporate bonds dropped 0.3 percent and the Deutsche Bank Currency Returns Index fell 0.1 percent. The Bloomberg/EFFAS index of U.S. debt with a maturity greater than one year rose 1.1 percent and the MSCI World Index of equities added 2.7 percent. “The performance of commodities could be considered particularly disappointing since global investors selected this asset class as the most likely to post the best returns in 2010,” Michael Lewis , head of commodities research at Deutsche Bank in London, said in a report. “We expect the complex will continue to struggle heading into the second quarter.” Commodity returns have been sapped by futures markets mostly being in contango, with near-term contracts trading at a discount to those maturing at later dates. Investors in index- linked funds wanting to maintain their positions pay a premium as contracts expire. That may ease as concerns about immediate supply worsen and markets flip into backwardation, paying investors a premium as they roll contracts. China, the world’s largest consumer of everything from copper to iron ore, has lifted banks’ reserve requirements this year amid concern that asset bubbles are forming. A stronger dollar increases the cost of commodities denominated in the currency for those holding other monies. To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net .

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U.S. Stocks’ Quarterly Gain Makes for Minimal 10-Year Return: Chart of Day

March 31, 2010

By David Wilson March 31 (Bloomberg) — This quarter’s gains in U.S. stocks have made them so costly relative to earnings that returns for the next 10 years may be minimal, according to Dylan Grice , a strategist at Societe Generale. The CHART OF THE DAY displays a price-earnings ratio for the Standard & Poor’s 500 Index that’s based on average profits for the past decade, as compiled by Yale University Professor Robert Shiller . Grice used the data to reach his conclusion, outlined in a report today. Shiller’s cyclically adjusted ratio stood at more than 20 times earnings this quarter as the S&P 500 headed for a fourth straight quarterly gain, the longest winning streak since 2007. The index rose 5.2 percent through yesterday. “The risk is there — as it always is — but the returns aren’t,” Grice wrote. The Shiller P/E is within the highest of five ranges since 1881, when his calculations begin, the report said. When the S&P 500 was similarly expensive, returns averaged 1.7 percent a year for the next decade, according to Grice. The comparable figure for the lowest range was 11 percent. Stocks also cost too much relative to “intrinsic value,” based on his projections for earnings and asset values. He made that judgment after analyzing shares of non-financial companies in the FTSE World Index , a benchmark for developed markets. “So what do you do?” he asked in the report. “Go take a holiday if you can,” rather than buy stocks. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Hedge-Fund Returns Are Being Dragged Down by `Hidden Bias’: Chart of Day

March 30, 2010

By David Wilson March 30 (Bloomberg) — Hedge-fund returns are worse than industry figures would suggest because many funds on the brink of failure stop reporting on their performance, according to a new academic study. These omissions create a “hidden survivorship bias” because funds in their last 12 months of existence are left out of the data, the study found. The gap in returns between these failing funds and others averaged 0.54 percent a month, or about 6 percent annually, for 1994 through the first quarter of 2009. The CHART OF THE DAY shows the average monthly percentage differential for each full year studied as a white bar. There is also a blue line, depicting a similar return gap between failed funds as of March 2009 and survivors. The average for the latter was just 0.26 percent a month. Both gauges were relatively low in 2008 as a credit crisis sent stocks and bonds plunging and weighed on returns across the industry, according to Seton Hall University Professor Xiaoqing Eleanor Xu and her co-authors on the study, TIAA-CREF’s Jiong Liu and Seton Hall’s Anthony L. Loviscek . They found that 31 percent of all funds failed that year, more than double the annual average of 12 percent for the study period. There were 1,089 that collapsed, according to a database compiled by the University of Massachusetts Amherst and used in the research. Failures among funds of hedge funds and commodity trading advisers brought the total to 1,983. Hedge funds should “be subjected to standard reporting procedures, including random audits,” to increase the accuracy of data on their performance, the authors concluded. Their study was posted March 17 on the Social Science Research Network and cited yesterday on Seeking Alpha, a financial blog. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Loan Spread Points to Restraints on U.S. Housing Market: Chart of the Day

March 19, 2010

By Alex Tanzi and Courtney Schlisserman March 19 (Bloomberg) — The spread between rates for conforming and so-called jumbo mortgages signals the housing market will be restrained for some time. The CHART OF THE DAY graphs the difference between rates on 30-year mortgages of less than $417,000, called conforming loans, and non-conforming mortgages of the same maturity using data from Bankrate.com. While the spread narrowed over the past year, the average 30-year rate on a jumbo mortgage is about 80 basis points higher. A basis point is 0.01 percentage point. Before July 2007 during the housing boom, the difference was about 20 basis points. After a record number of foreclosures and two years of job losses, banks have been hesitant to make home loans, especially jumbo mortgages not backed by Fannie Mae or Freddie Mac. The spread “absolutely means it’s more difficult for people who own those more expensive homes to sell them and less desirable for homebuilders to build those types of homes,” said Nigel Gault , chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. Brian Bethune , Gault’s colleague, said rates for both conforming and non-conforming loans may rise when the Federal Reserve ends its $1.43 trillion mortgage debt purchase program this month. “I’m not really convinced the credit markets and the housing market are strong enough to withstand” that, Bethune said. To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net ; Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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Worst Returns Fail to Make U.S. Telephone Stocks Cheap: Chart of the Day

March 16, 2010

By Lu Wang and Rita Nazareth March 16 (Bloomberg) — Telephone companies in the U.S. including AT&T Inc. have posted the worst returns during the yearlong rally in the Standard & Poor’s 500 Index, and their shares are expensive considering their growth prospects. The top panel on the CHART OF THE DAY shows phone shares have risen 21 percent since March 9, 2009, the smallest advance among 10 industries in the S&P 500. The bottom panel shows the group’s PEG ratio, calculated by dividing its price-to-earnings multiple by forecast profit growth, is the highest at 2.8, according to data compiled by Leuthold Group LLC. The high valuation suggests AT&T and Verizon Communications Inc., the biggest U.S. telephone companies, may keep lagging behind, said Keith Wirtz , who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc. in Cincinnati. The group is the only one among 10 where analysts don’t foresee profit growth this year, according to average estimates compiled by Bloomberg. “These are going to be slow growers for a while because of the level of competition,” said Wirtz, whose firm is underweight phone stocks, meaning it owns less than their representation in benchmark stock indexes. “They may be pricey if you put on a three-to-five-year perspective.” The combined PEG ratio for the nine phone companies in the S&P 500 is twice the figure for the entire index, data from Minneapolis-based Leuthold show. To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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Optimism Makes a Comeback After Year-Long U.S. Stock Surge: Chart of Day

March 12, 2010

By David Wilson March 12 (Bloomberg) — Bullishness on U.S. stocks is beginning to emerge after the market’s rally in the past year, according to a gauge derived from data compiled by the American Association of Individual Investors. The CHART OF THE DAY displays the percentage-point gap between bulls and bears, based on 52-week averages, since 1990 among respondents in weekly surveys done by the association. The Standard & Poor’s 500 Index is also included. This week, optimists outweighed pessimists for the first time since January 2008, three months after the previous bull market ended. The average rose to 0.64 point from minus 0.26 a week ago, thanks to an increase in the number of participants expecting higher share prices in the next six months and a decline in those anticipating losses. Even after the gain, the barometer is near its lows in April 2003, when the previous bull market was getting started, and April 1994, when the Internet bubble was about to begin inflating. The average hit bottom at minus 1.98 and minus 2.48, respectively. The 52-week moving average is designed to smooth out week- to-week fluctuations in the survey results. This week’s figures, for example, showed bulls rose to 45.3 percent from 35.9 percent a week earlier and bears sank to 29.4 percent from 37.9 percent. The level of bullishness is “relatively neutral” for stocks, Kevin Lane , managing partner of Fusion Analytics Research Partners LLC, wrote yesterday in a posting on the Big Picture blog. Prices are unlikely to tumble at this point, he added. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Triple Whammy of Costs, Taxes, Inflation Sinks Stock Returns: Chart of Day

March 11, 2010

By David Wilson March 11 (Bloomberg) — U.S. stock investors made far less in the past half century than the Standard & Poor’s 500 Index’s performance would suggest, according to David Bianco , chief U.S. equity strategist at Bank of America Merrill Lynch. The CHART OF THE DAY shows the S&P 500’s annual total return before and after accounting for trading and management costs, dividend and capital-gains taxes, and inflation. Bianco included the comparative data in a report two days ago. While the S&P 500 returned an average of 9.5 percent annually for the 50-year period, the comparable figure after all the adjustments was a mere 1.3 percent, according to Bianco’s calculations. Both averages are geometric, a multiplication- based method often used to calculate average returns. The gap between these returns has narrowed over time, the report said, and stocks ought to trade at higher multiples of projected earnings as a result. “Current levels of inflation, investment taxes and equity ownership costs are lower” than in past years, Bianco wrote. “We expect them to remain so for the foreseeable future.” The shifts justify a so-called forward price-earnings ratio for the S&P 500 that’s seven points higher than the 50-year average of 15, in his view. A decline in real, or inflation-adjusted, interest rates also supports higher valuations for stocks, he wrote. The real yield on 10-year Treasury notes is about 1.5 percent, less than half the 3.4 percent average for the past 50 years. Bianco expects the S&P 500 to end the year at 1,275, a projection that’s 11 percent higher than yesterday’s close and 3.3 percent above the average estimate in a Bloomberg survey of brokerage strategists. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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States Will Cut More Workers to Offset Declining Revenue: Chart of the Day

March 8, 2010

By Anthony Feld and Courtney Schlisserman March 8 (Bloomberg) — U.S. state and local governments are likely to keep cutting jobs even as the broader labor market shows signs of emerging from the worst slump since World War II, economists said. The CHART OF THE DAY shows combined employment by state and local governments fell for eight straight months through February. The streak of losses was the longest since two years of declines ending in 1983. State and local governments, which account for about 13 percent of gross domestic product, have so far cut a total of 192,000 jobs since August 2008, when employment peaked at 19.8 million. “There’s a lot of state and local government cutbacks still coming ahead,” David Rosenberg , chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in a Bloomberg Radio interview today. State and local governments are scaling back as a decline in property values erodes their tax base. Forty-nine of the fifty states are legally bound to balance their budgets. John Herrmann , a senior macro strategist at State Street Global Markets LLC in Boston, forecasts that more than 750,000 state and local jobs could be cut before governments start hiring again in two or three years. In February, state and local governments reduced employment by 25,000, while the federal government added 7,000, the Labor Department said last week. The increase at the federal level reflected in part the hiring of 15,000 temporary workers to conduct the 2010 census. To contact the reporters on this story: Anthony Feld in New York at afeld2@bloomberg.net ; Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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Credit Default Swaps Show Kazakhstan Beating California: Chart of the Day

March 1, 2010

By Michael B. Marois March 1 (Bloomberg) — Bill Lockyer compared California , the world’s eighth-largest economy , to Kazakhstan, the Central Asian oil exporter whose gross domestic product is one-sixteenth as large, to demonstrate that bonds sold by the state treasurer will be repaid even as legislators try to close a $20 billion budget gap. While “California has never missed a general obligation bond payment in its entire history,” according to Lockyer’s spokesman, Tom Dresslar , this CHART OF THE DAY shows that California 5-year credit default swaps cost 100 basis points more than those of Kazakhstan, Central Asia’s biggest energy producer. The derivative contracts are insurance agreements generally used to protect bondholders against default. A basis point is 0.01 percentage point. “We’re not bankrupt,” Lockyer told lawmakers at a hearing in Sacramento on Feb. 24. “We’re not going to be bankrupt.” Lockyer, 68, plans to sell as much as $5 billion of municipal debt starting the week of March 8 , as California, which accounts for about 13 percent of U.S. gross domestic product, faces a $20 billion budget deficit during the next 16 months. State Controller John Chiang has warned he may need to pay bills with IOUs for the second consecutive year. Kazakhstan and California, the lowest-rated U.S. state, share a Baa1 ranking, three steps above non-investment grade, from Moody’s Investors Service. California was given a BBB by Fitch Ratings and A- by Standard & Poor’s, four levels above non-investment grade. Both companies rate Kazakhstan lower, at BBB-, one step above high-risk, high-yield junk. The cost of California’s credit default swaps has risen 90 percent since October, to $303,000 to protect an investment in $10 million of bonds, according to data compiled by Bloomberg. Kazakhstan’s takeover of BTA Bank , the country’s largest at the time, helped push the cost of such swaps linked to government debt to a peak of 1,650 basis points on Feb. 24, 2009. To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

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Greece Credit-Default Swaps `Cabal’ May Be Just Sideshow: Chart of the Day

February 25, 2010

By Shannon D. Harrington Feb. 25 (Bloomberg) — The credit-default swaps traders being blamed by German and French leaders for fueling fears of sovereign debt crises would be doing so with less than 1 percent of the governments’ outstanding debt being wagered. The CHART OF THE DAY shows the net notional value of credit swaps on 10 European countries including Greece, Spain, Italy and Portugal, as reported by the Depository Trust & Clearing Corp. The $108 billion figure, which is the maximum amount on the line if all of the countries were to default, is 0.98 percent of the $11 trillion in outstanding debt of those countries. In Greece, where the heaviest complaints about credit-swaps trading have been leveled, bets of $9 billion compare with $267 billion of debt. “It’s very easy to point the fingers at this sort of murky cabal of CDS traders, but in this case, it’s hard to argue with the fundamentals,” said Tim Backshall , chief strategist at Credit Derivatives Research LLC in Walnut Creek, California. “To move the government bond market 40 basis points on the back of less than $10 billion notional exposure to Greece in the CDS market seems a bit of a stretch.” European leaders have said trading in the contracts fuels speculation that can distort perceptions and have warned hedge funds about trying to profit from the problems on the continent. German Chancellor Angela Merkel’s government is considering ways to “tighten up rules” in the market. French Finance Minister Christine Lagarde said Feb. 17 “we should examine the suitability” of credit swaps. It’s not the first time regulators have blamed traders of the contracts for exacerbating market declines. After the collapse of Lehman Brothers Holdings Inc. in 2008, New York Attorney General Andrew Cuomo opened an investigation into whether traders were manipulating the market to spread rumors about financial companies and drive down stock prices. Unlike in corporate bond markets, where the amount of swaps is closer to the debt of companies, trading in government bonds has led the decline, Backshall said. “If anybody’s really been watching the bond spreads, they’ve been the canary in the coal mine here,” he said. To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net

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Homebuilding Stocks Seen Rising Too Far, Too Fast: Chart of the Day

February 22, 2010

By David Wilson Feb. 22 (Bloomberg) — Homebuilders’ soaring share prices this year are anything but “a signal of things to come,” according to Brian Belski , chief investment strategist at Oppenheimer & Co. “Earnings growth and operating performance remain deeply depressed” three years after they collapsed, and the industry is unlikely to return to profitability any time soon, Belski wrote today in a report. As the CHART OF THE DAY shows, the Standard & Poor’s 500 Homebuilding Index — composed of D.R. Horton Inc. , Lennar Corp. and Pulte Homes Inc. — ended last week with a 21 percent gain for the year. The advance compares with a 0.5 percent loss for the S&P 500. Homebuilders were the year’s third-best performers among 134 industry groups in the S&P 500, according to data compiled by Bloomberg. The groups that did better each had one member: Eastman Kodak Co. for photo products and Harman International Industries Inc. for consumer electronics. Rising home prices are largely responsible for builders’ stock gains, Belski wrote. The S&P/Case-Shiller 20-city price index hit bottom last April and had gained 5 percent from its low through November. December’s reading is due tomorrow. “Higher prices are, of course, a key component of a sustainable recovery,” he wrote. “But they’re not enough by themselves.” Housing starts and building permits don’t bode well for an industry rebound, in his view, and neither does the yield differential between mortgage securities and Treasuries. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Tiger Woods’s Televised Apology Freezes Wall Street Trading: Chart of Day

February 19, 2010

By Michael Patterson and Eric Martin Feb. 19 (Bloomberg) — For a few minutes, Tiger Woods was bigger than Ben S. Bernanke. The CHART OF THE DAY shows that a day after the Federal Reserve chairman and his colleagues raised the rate charged to banks for direct loans, investors took time out from trading to watch Woods apologize for his marital infidelity and “repeated irresponsible behavior.” New York Stock Exchange volume fell to about 1 million shares, the lowest level of the day at the time, in the minute Woods began a televised speech from Ponte Vedra Beach, Florida, headquarters of the U.S. PGA Tour. Trading shot to about 6 million when the speech ended, the highest for any period except just after exchanges opened, data compiled by Bloomberg show. Trading on all U.S. bourses declined during the press conference, falling to 456 million shares from an average of 576.8 million during the five previous 15-minute segments, Bloomberg data show. “You couldn’t escape it,” said Michael Nasto , the senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “It was everywhere. You have one of the best athletes of our time involved in something like this. Every channel you were on had the press conference.” The top player in the World Golf Rankings, the 34-year-old Woods said he would return to the sport that has made him a billionaire but had no timetable. Woods had been on an indefinite break from golf since saying in December that he had been unfaithful to his wife. He hadn’t spoken publicly since a single-vehicle traffic accident outside his home on Nov. 27, which was followed by often lurid media reports detailing extramarital affairs. To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net ;m Eric Martin in New York at emartin21@bloomberg.net .

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U.S. Financial-Market Stocks Are Ripe for Rebound: Chart of the Day

February 18, 2010

By David Wilson Feb. 18 (Bloomberg) — Shares of U.S. financial markets are due for a rebound because they are relatively cheap and trading in futures and options is accelerating, according to Jonathan Casteleyn , an analyst at Susquehanna Financial Group LLLP. As the CHART OF THE DAY shows, the stocks have failed to keep pace with the Standard & Poor’s 500 Index since June, when the S&P 500 Specialized Finance Index reached last year’s high. The industry gauge consists of four exchanges — CME Group Inc. , IntercontinentalExchange Inc. , Nasdaq OMX Group Inc. and NYSE Euronext — and Moody’s Corp., the credit-rating company. Specialized finance ranked 119th out of 134 groups in the S&P 500 this year as of yesterday, according to data compiled by Bloomberg. Its index fell 8 percent as the U.S. stock benchmark slid 1.4 percent. The decline left the industry valued at 17.8 times earnings, down from 26 times last June. Options buying and selling has climbed 9 percent this year from the same period of 2009 and futures trading has increased 15 percent, Casteleyn wrote today in a report. These markets have expanded even as stock trading has fallen 16 percent. “Watered-down implementation of financial reform” is another potential plus, the report said. This year’s losses have taken place as lawmakers consider barring banks from trading for their own account and the Commodity Futures Trading Commission seeks limits on the number of contracts a trader can hold. Casteleyn has “positive” recommendations — equivalent to “buy” — on CME , ICE and Nasdaq OMX. His rating on NYSE Euronext is “neutral.” (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Euro `January Effect’ May Signal Further Weakness, MIG Says: Chart of Day

February 8, 2010

By Anna Rascouet Feb. 8 (Bloomberg) — The euro may have already peaked against the dollar this year and be heading for further declines for the balance of 2010, according to MIG Bank SA. The CHART OF THE DAY shows that in seven of the 11 years since the euro’s start in 1999, the currency reached its highest or its lowest annual levels against the dollar in January. In 2002, the euro reached its low on Feb. 1. The high for this year was attained on Jan. 13, when the 16-nation currency climbed to $1.4579, before dropping as much as 6.8 percent to a 2010 low of $1.3586 at the end of last week. “It’s interesting how few people realize the propensity for euro-dollar to post either the year’s high or the year’s low at the start of January,” Paul Day , chief market analyst at MIG Bank in Neuchatel, Switzerland, said in an interview. “Historical precedent may indeed suggest that the 2010 high for euro-dollar has already been made. It’s interesting how consistently this January effect has performed.” The euro fell 0.3 percent to $1.3678 on Feb. 5. The currency has dropped 4.5 percent this year. The median of 40 forecasts compiled by Bloomberg is for the euro to rise to $1.42 by year-end. (To save a copy of the chart, click here.) To contact the reporter on this story: Anna Rascouet in London at arascouet@bloomberg.net

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Euro `January Effect’ May Signal Further Weakness, MIG Says: Chart of Day

February 8, 2010

By Anna Rascouet Feb. 8 (Bloomberg) — The euro may have already peaked against the dollar this year and be heading for further declines for the balance of 2010, according to MIG Bank SA. The CHART OF THE DAY shows that in seven of the 11 years since the euro’s start in 1999, the currency reached its highest or its lowest annual levels against the dollar in January. In 2002, the euro reached its low on Feb. 1. The high for this year was attained on Jan. 13, when the 16-nation currency climbed to $1.4579, before dropping as much as 6.8 percent to a 2010 low of $1.3586 at the end of last week. “It’s interesting how few people realize the propensity for euro-dollar to post either the year’s high or the year’s low at the start of January,” Paul Day , chief market analyst at MIG Bank in Neuchatel, Switzerland, said in an interview. “Historical precedent may indeed suggest that the 2010 high for euro-dollar has already been made. It’s interesting how consistently this January effect has performed.” The euro fell 0.3 percent to $1.3678 on Feb. 5. The currency has dropped 4.5 percent this year. The median of 40 forecasts compiled by Bloomberg is for the euro to rise to $1.42 by year-end. (To save a copy of the chart, click here.) To contact the reporter on this story: Anna Rascouet in London at arascouet@bloomberg.net

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Goldman May Lose Record Profit as Bid-Ask Spread Shrinks: Chart of the Day

February 3, 2010

By Bryan Keogh and John Detrixhe Feb. 3 (Bloomberg) — Goldman Sachs Group Inc. and JPMorgan Chase & Co. will find it tough to reproduce last year’s record trading revenue as the difference between bid and offer prices in credit markets narrows to the tightest in almost 18 months. The CHART OF THE DAY shows how the gap between prices at which traders offer to buy and sell credit-default swaps on North American companies has shrunk to 6.1 basis points, from as high as 20.4 in October 2008 and 16.3 in March. Historically wide spreads on everything from derivatives to bonds, representing fees earned per trade, helped fuel the recovery in bank earnings. “It’s much tougher to earn those” profits now, said Adolfo Laurenti , deputy chief economist at Mesirow Financial Inc. in Chicago. “The more efficient the market is, the narrower the spread is supposed to be.” Goldman Sachs’s revenue from fixed-income, currencies and commodities trading surged to $23.3 billion in 2009, while JPMorgan posted fixed-income markets revenue of $17.6 billion. The return to pre-crisis spreads may reduce the industry’s profitability at the same time regulators are threatening to curb risk taking. Justin Perras , a spokesman for JPMorgan, and Goldman Sachs spokesman Michael DuVally , both in New York, declined to comment. Bid-ask spreads on the 125 companies that are part of the Markit CDX North America Investment Grade Index Series 13, a benchmark for the credit-default swaps market, averaged 6.3 basis points this year, compared with 10.4 in all of 2009 and 9.7 in 2008, CMA data show. The spread averaged 4.2 basis points in 2007. A basis point is 0.01 percentage point. Credit-default swaps are derivatives, contracts with values derived from assets or events, including stocks, bonds, commodities, currencies, interest rates or the weather. Banks, hedge funds and insurance companies use the swaps to insure bonds and loans against default or to speculate on the creditworthiness of countries and companies. (To save a copy of the chart, click here.) To contact the reporters on this story: Bryan Keogh in New York at bkeogh4@bloomberg.net ; John Detrixhe in New York at jdetrixhe1@bloomberg.net

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Microsoft’s Windows Outpaces Apple in Customer Satisfaction: Chart of Day

February 1, 2010

By Dina Bass Feb. 1 (Bloomberg) — Microsoft Corp. got a bigger boost in customer satisfaction from its latest computer operating system than rival Apple Inc. did from its most recent upgrade. The CHART OF THE DAY shows that respondents giving Microsoft a positive grade for satisfaction rose to 67 percent in the week after the Oct. 22 release of Windows 7, from 64 percent the day before it went on sale, according to YouGov Plc , a London-based market-research firm. Microsoft’s satisfaction rates rose 14 percent through the end of the year. Apple’s Aug. 28 release of its Snow Leopard software resulted in a boost of 1 point to 65 percent in the first week. Through the end of the year, the increase was 6.9 percent. The percentage of customers satisfied with Microsoft reached 73 percent on Dec. 31, the highest since YouGov started surveying in 2007. Microsoft’s reputation is benefiting from the positively reviewed Windows 7, after some customers held off personal-computer purchases to avoid the product’s predecessor, Vista, said Matt Rosoff , an analyst at Kirkland, Washington- based Directions on Microsoft. “People are saying, ‘Okay, Microsoft got its mojo back,’” he said. “People who were thinking about buying a new PC are more likely to do so now. You’ll see slightly better sales.” Rosoff said the boost is probably also due to the June release of Microsoft’s overhauled Bing Internet search engine. Microsoft’s Windows runs more than 90 percent of the world’s personal computers. The Windows division, Microsoft’s most profitable, accounted for about a quarter of the company’s sales last fiscal year. “We’re encouraged that we’re delivered a version of Windows that meets what our customers want: a simpler PC that fits with their life,” said Tami Reller , a Windows vice president. Apple declined to comment, said Bill Evans, a spokesman for the Cupertino, California-based company. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Plentiful-Job Gauge Shows Imminent Rebound in U.S. Payrolls: Chart of Day

January 29, 2010

By David Wilson Jan. 29 (Bloomberg) — Economists who expect a revival of U.S. employment growth this month have history on their side, according to Thomas J. Lee , a JPMorgan Chase & Co. strategist. Lee cited an index derived from the Conference Board’s monthly consumer-confidence surveys as evidence that a rebound is imminent. The indicator tracks the percentage of respondents who say jobs are plentiful. The CHART OF THE DAY shows the index’s readings since 1967 and highlights six times that they rebounded from a low. In each case, payrolls started to rise within two months after the gauge turned higher, Lee noted in a report yesterday. The jobs index rose to 4.3 percent this month after two straight months at 3.1 percent, its lowest reading since 1983. The rebound signals the number of jobs will start climbing by February, the report said. Employment will rise by 20,000 this month, according to the average estimate in a Bloomberg survey of economists. Two-thirds of the 24 participants expected an increase. Payrolls dropped in December by 85,000, the 23rd decline in 24 months. Lee recommended that investors buy so-called domestic cyclicals, or shares of companies that have the most to gain from U.S. economic growth. He singled out financial stocks as especially attractive. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Apple Tablet Computer Enters Market That’s Never Taken Off: Chart of Day

January 27, 2010

By Ian King Jan. 27 (Bloomberg) — Apple Inc.’s tablet computer will need more than a snazzy design to fire up a product category that consumers have largely ignored, according to IDC. Tablet shipments are forecast to drop to less than 1 percent of the U.S. mobile-computer market next year, as the CHART OF THE DAY shows. This year, manufacturers will ship about 523,000 tablets in the U.S., IDC estimates. “There are rumors that Apple is looking at more than 2 million in shipments this year. Good luck,” said David Daoud , an analyst at the Framingham, Massachusetts-based research firm. “Unless they really have a well-articulated strategy, that’s going to be a huge challenge.” IDC may revise its predictions after it learns more about Apple’s new device, Daoud said. Apple hasn’t revealed any details about the tablet, which analysts expect to be released at a company event today. The rumors alone have prodded the top personal-computer makers — Hewlett-Packard Co. and Dell Inc. — to re-examine the category, he said. Until now, no company capable of delivering content along with a well-designed device has entered the market, Daoud said. That’s relegated tablet computers to “a drop in the bucket.” “Apple being Apple, they already have an infrastructure in place to provide content,” he said. “They are way ahead of the PC guys in that sense.” To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net

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Hedge Funds Make Record Oil Bets as Freeze Spurs Prices: Chart of the Day

January 12, 2010

By Alexander Kwiatkowski Jan. 12 (Bloomberg) — Hedge funds and other investors have made record bets on higher crude and fuel prices as freezing weather boosts consumption. The CHART OF THE DAY shows the total net number of long positions, contracts betting prices will rise, held by so-called large speculators in New York crude, heating oil and gasoline futures, according to Commodities and Futures Trading Commission data. The lower line shows crude oil prices. “The CFTC data is showing large speculators are behind the current oil rally from $70 a barrel,” said Olivier Jakob , managing director of Petromatrix GmbH in Zug, Switzerland. “Large speculators are now holding all time record net length in WTI, record net length in gasoline, record net length in heating oil.” West Texas Intermediate crude oil rose to $83.95 a barrel in New York yesterday, the highest in 15 months, as the cold snap across the Northern Hemisphere stoked demand for fuel. Crude prices have risen 18 percent in the last month as gasoline futures advanced 17 percent and heating oil 15 percent. Over the same period, the net number of WTI crude contracts held by large speculators has risen 60 percent to 108,835, while gasoline bets have climbed by 52 percent to 73,642, according to CFTC data. Gasoil holdings have gained 65 percent to 50,377 contracts, the data show. Large non-commercial speculators include hedge funds and exchange traded funds. To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

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Frontier Markets Fail to Emerge, Trail Stocks’ Global Rally: Chart of Day

January 5, 2010

By David Wilson Jan. 5 (Bloomberg) — Frontier markets emerged as a separate class of stocks at an inopportune time. Indexes designed to track these markets, which tend to be smaller or less developed than emerging markets, were introduced in the first six months of a worldwide bear market that began in October 2007. Merrill Lynch & Co., MSCI Inc. and Standard & Poor’s were among those to bring out their own gauges. As the CHART OF THE DAY shows, MSCI’s frontier-market index lost more than its benchmarks for emerging and developed markets as stocks tumbled — and failed to keep pace with their rebound since last March. The chart begins in November 2007, when daily calculations of the frontier index began. The indicator now covers 25 countries, from Argentina to Vietnam. The past 10 months of lagging performance defied a prediction by Michael Hartnett , Merrill Lynch’s chief global equity strategist, who cited two conditions for a rebound in a March 31 report. Oil had to rise above $60 a barrel and “global risk appetite” had to recover for these markets to turn around, he wrote at the time. Crude climbed as high as $82 a barrel in New York trading last year. The MSCI Emerging Markets Index jumped 74 percent in the last nine months of 2009, signaling that investors were more willing to take risks. Hartnett, whose firm is now known as Bank of America Merrill Lynch, declined to answer e-mailed questions yesterday about the outlook for frontier markets. “I have not written on the subject for some time now,” he wrote. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Best Buy Runs Away With Electronics Sales as Rivals Fade: Chart of the Day

December 23, 2009

By Joseph Galante Dec. 23 (Bloomberg) — Best Buy Co. , the largest electronics retailer, outpaced rivals in electronics sales this holiday shopping season by offering discounts on laptops and flat-panel televisions. The CHART OF THE DAY shows consumer spending at Best Buy rose faster than at competitors such as Newegg Inc. , Fry’s Electronics Inc. and RadioShack Corp. , according to Mint.com, a personal-finance Web site that was acquired by Intuit Inc. last month. The site has about 1.8 million users. Best Buy, based in Richfield, Minnesota, captured a larger share of the consumer-electronics market after Circuit City Stores Inc. ceased operations this year and CompUSA closed stores. The company also lowered prices on some products last quarter to compete with Wal-Mart Stores Inc. and Amazon.com Inc., according to JP Morgan Securities Inc. “Their market share gains accelerated through the last quarter,” said Dan Binder , an analyst at Jefferies & Co. in New York. “I expect they’re going to show good numbers this holiday season. They don’t have a major competitor around to nip at their heels this year.” Sales at U.S. stores open at least 14 months gained 8.4 percent in November, Best Buy Chief Executive Officer Brian Dunn said on a Dec. 15 conference call. Mint.com gives users an overview of their bank accounts and credit card statements, and categorizes transactions. The average customer makes about $77,000 a year and is 30 years old. About 65 percent of the site’s users are male, according to the company. To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

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Stocks Lose Yield Advantage as Share Buybacks Dwindle: Chart of the Day

December 15, 2009

By David Wilson Dec. 15 (Bloomberg) — U.S. stocks are losing appeal for income-oriented investors because of companies’ reluctance to buy back shares. The CHART OF THE DAY compares the Standard & Poor’s 500 Index’s yield from dividends and repurchases, as calculated by S&P, with the average yield on bonds in corporate-debt indexes compiled by Moody’s Investors Service. Last quarter’s dividend-buyback yield for the S&P 500 amounted to 3.71 percent, according to an S&P report yesterday. The figure was 1.9 percentage points lower than Moody’s average yield at the end of the quarter, as the bottom panel shows. Both figures were the lowest since the fourth quarter of 2004. Stocks yielded more than bonds on this basis from the fourth quarter of 2007 through the first quarter of this year. They surrendered their advantage as repurchases plunged as much as 86 percent from the record of $172 billion, reached in the third quarter of 2007. “Cash-conscious corporate strategists maintained a close watch, and grip, on expenditures” and steered companies away from buying back stock, Howard Silverblatt , a senior index analyst at S&P, said in a statement. S&P 500 companies repurchased $34.9 billion of shares in the third quarter, S&P said. The total was 61 percent less than the amount spent in the year-earlier quarter, though it was the highest for 2009. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Wall Street Strategists Get Stocks Right, See Further Gains: Chart of Day

December 11, 2009

By David Wilson Dec. 11 (Bloomberg) — Wall Street strategists, who redeemed themselves as equity prognosticators this year, are unanimous in expecting U.S. stocks to rise more next year after a nine-month rally. The CHART OF THE DAY compares the average estimate for the Standard & Poor’s 500 Index, as compiled from Bloomberg surveys, at the beginning of every year since 2005 with the benchmark’s year-end value. Yesterday’s S&P 500 close was 2.2 percent higher than the 1,078 average estimate at the start of this year. In 2008, when the index suffered its biggest full-year loss in seven decades, it trailed the comparable projection by 45 percent. For 2010, the average forecast among nine strategists is 1,234, as shown in the chart. The estimate is 12 percent higher than the index’s closing value yesterday of 1,102.35. Stocks will benefit from a broadening of the U.S. economic recovery and the likelihood that the Federal Reserve will keep interest rates low, according to Thomas J. Lee , a JPMorgan Chase & Co. strategist. “This is close to the ‘Goldilocks’ scenario for equities,” Lee wrote yesterday in a report. His year-end estimate for the S&P 500 is 1,300, which ties him with Oppenheimer & Co.’s Brian Belski for the highest projection among those surveyed. Credit Suisse AG’s Andrew Garthwaite is the lowest at 1,125. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Deterioration Slows in U.S. States’ Tax Collections: Chart of the Day

December 8, 2009

By Pete Young Dec. 8 (Bloomberg) — A slowdown in the deterioration of tax collections may make it easier for U.S. states to close $350 billion in budget deficits forecast in the next two years. The CHART OF THE DAY shows taxes for 44 states declined at a slower rate in the third quarter, the best performance in six months, according to data from the Rockefeller Institute of Government in Albany, New York. The gap between state revenue and spending will widen to $350 billion in the next two years, the Center on Budget and Policy Priorities said last month. More than 40 states have cut spending, and more than 30 increased taxes or fees, the Washington-based center said. “The worst is hopefully behind us,” Lucy Dadayan , a senior policy analyst who co-wrote the Rockefeller report with Donald Boyd , said in an interview. “If you’re comparing to last year, yes, it’s going to be better, but if you’re comparing to pre-recession, it’s still bad.” Third-quarter tax collections slid 10.7 percent to $119.7 billion compared with a year earlier, after falling 16.6 percent in the second quarter. Personal income tax collections, which fell 27.5 percent in the second quarter from a year earlier, lost 11.4 percent in the third quarter. Sales taxes, down 9.5 percent in the second quarter, were off 8.2 percent in the third. To contact the reporter on this story: Pete Young in New York at pyoung13@bloomberg.net .

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Melted Russian Warheads Needed to Ease Uranium-Supply Pinch: Chart of Day

December 2, 2009

By Gianluca Baratti Dec. 2 (Bloomberg) — The world’s atomic-power plants risk running short of fuel within a decade because uranium suppliers can’t build enrichment facilities or recycle Soviet-era warheads fast enough, according to the World Nuclear Association. The CHART OF THE DAY shows forecast global demand overwhelming fuel supply for reactors after 2017, potentially driving up costs for Exelon Corp. and Electricite de France SA, the largest reactor operators in the U.S. and Europe. Fifty-two nuclear reactors are under construction, from China and India to Finland and France, according to an October bulletin from the association. Atomic power is undergoing a revival partly because it produces far fewer greenhouse gases than conventional coal- or natural gas-burning generators. “Due to the wide range of risks and uncertainty for individual project deployment, the enrichment market could be subject to tight supplies by the end of the next decade,” the London-based trade group said in an August finding that it reiterated this month. About 10 percent of global fuel demand will be met with supplies generated through a U.S.-Russia weapons agreement ending in 2013. Under the 1993 accord, Russia retrieves enough bomb-grade uranium from melting warheads and blending the metal with lower-level fuel to feed about 30 U.S. plants that can produce 41,250 megawatts of power. An adequate fuel supply also depends on Areva SA, USEC Inc., Atomenergoprom and Urenco Enrichment Company Ltd. meeting their timetables for new production facilities to increase capacity by at least 15 percent by 2015, the association reported, based on classified information provided by its members. To contact the reporter on this story: Gianluca Baratti in Madrid at gbaratti@bloomberg.net

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Holiday Shopping Losing Meaning as U.S. Economic Barometer: Chart of Day

November 30, 2009

By David Wilson Nov. 30 (Bloomberg) — Retailers’ performance during the holiday shopping season is less critical for the U.S. economy than it was in past years, according to David Bianco , Bank of America Merrill Lynch’s chief U.S. equity strategist. As the CHART OF THE DAY shows, annual retail sales have fallen as a percentage of gross domestic product for most of this decade, according to data compiled by the Commerce Department. They amounted to 27.6 percent of last year’s GDP, a drop of two percentage points from their peak in 2001. The trend has persisted this year, based on data through September. Sales tumbled 10 percent from the first nine months of 2008 to $2.69 trillion. The totals exclude supermarkets and grocery stores. Bianco made the retail sales-GDP comparison in a Nov. 25 report to illustrate that the rally in U.S. stocks since March is less susceptible to a slump in household spending than many investors believe. About 25 percent of consumer purchases are discretionary items, including music players, handbags and restaurant meals, by his count. Essentials such as housing, health care, energy and food eaten at home account for the rest of their outlays. Companies in the Standard & Poor’s 500 Index are even less dependent on discretionary spending, the report said. Only about 15 percent of earnings come from this source. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Nakheel Bonds Plunge on Dubai Request to Reschedule Payments: Chart of Day

November 27, 2009

By John Glover Nov. 27 (Bloomberg) — Bonds sold by Nakheel PJSC, a real- estate developer controlled by Dubai, plunged more than 50 percent after the Gulf state sought to delay debt payments. The CHART OF THE DAY shows how Nakheel’s $3.52 billion of 3.17 percent Islamic bonds dropped to 50 cents on the dollar, from 71 cents yesterday and 107 cents on Nov. 20, according to Goldman Sachs Group Inc. prices on Bloomberg. The notes were due to be redeemed at 109.5 cents on Dec. 14. The company now wants to postpone the repayment date to at least May 30. The Gulf state wants to extend the maturity of Nakheel’s bonds as part of a debt agreement sought by its parent, government investment company Dubai World, which is burdened by $59 billion of liabilities. The bonds had risen above face value because investors viewed the company as a proxy for the government and because the notes were due to mature next month. “Governments can and do change rules when in a corner,” Ciaran O’Hagan , a fixed-income strategist at Societe Generale SA in Paris, said in a note. “Governments are sovereign and they can surprise and badly hurt investors when their backs are up against the wall.” Nakheel, the Islamic bond market’s largest issuer, is responsible for building the palm tree-shaped islands in Dubai, also home to the world’s tallest tower. (To save a copy of the chart, click here.) To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

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European Companies Turn to Bonds as Bank Loans Dry Up: Chart of the Day

November 25, 2009

By Jana Randow and Simone Meier Nov. 25 (Bloomberg) — European companies are turning to credit markets after losses stemming from the financial crisis left banks reluctant to lend, cutting off corporations from their primary source of financing, according to UBS AG. The CHART OF THE DAY shows the level of corporate bonds in the credit market, in blue, has risen 12 percent over the past year, and bank loans, in yellow, have fallen to the lowest in 13 months. While the euro-region economy returned to growth in the third quarter, banks may remain reluctant to lend for some time, boosting bond issuance further, said Stephane Deo , UBS chief European economist in London. “One of the key reasons why banks remain cautious about lending are future economic prospects,” Deo said. “New debt now comes disproportionately from markets. This is a very unusual pattern.” In the euro area, bank lending accounts for about 70 percent of corporate financing compared with 20 percent in the U.S., according to the European Central Bank. Banks started tightening credit standards in the third quarter of 2007 as a result of the financial crisis, according to ECB statistics. “Companies that have access to the credit market are better off compared to those that have no access,” Deo said. Celesio AG, Europe’s largest publicly traded drug wholesaler, sold 350 million euros ($523 million) in convertible bonds last month, the Stuttgart-based company’s first such transaction. Safran SA, a Paris-based maker of commercial aircraft engines with General Electric Co., said on Nov. 20 it raised 750 million euros in an inaugural five-year bond auction. To contact the reporters on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net ; Simone Meier in Dublin at smeier@bloombert.net

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Thanksgiving Dinner Costs Less to Make This Year: Chart of the Day

November 14, 2009

By David Wilson Nov. 13 (Bloomberg) — Families can anticipate the biggest decline in the cost of preparing Thanksgiving dinner since 2000, according to the American Farm Bureau Federation. The CHART OF THE DAY shows the results of the federation’s annual price survey of so-called classic menu items, including turkey and all the trimmings. The U.S. consumer price index is also displayed for comparison. This year’s survey, released yesterday, put the cost of feeding 10 people at $42.91. The grocery bill fell 3.8 percent, the steepest reduction since its 4.3 percent drop at the start of this decade. The slump was also the first since 2004. “Consumers are benefiting at the grocery store from significantly lower energy prices” and the effects of a U.S. recession, Jim Sartwelle , an economist at the bureau, said in a statement . Crude oil, for example, has cost 44 percent less this year on average than it did in the same period of last year in New York trading. Milk dropped the most out of a dozen items surveyed, according to the bureau. The cost of a gallon of whole milk fell 92 cents to $2.86. Turkey slid 44 cents to $18.65, based on the cost of a 16-pound bird. These two items accounted for most of the overall decline, amounting to $1.70. More than 200 shoppers from 35 states participated in this year’s survey, according to the federation, which has tracked prices since 1986. The costs exclude any promotions or deals available at supermarkets. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Commercial Real Estate Crisis Looming for U.S., Zisler Says: Chart of Day

November 11, 2009

By David Wilson Nov. 11 (Bloomberg) — “A crisis of unprecedented proportions is approaching” in the U.S. commercial real-estate market, according to Randall Zisler , chief executive officer of Zisler Capital Partners LLC. The CHART OF THE DAY displays quarterly returns on commercial property — apartment buildings, hotels, industrial sites, offices and stores — as compiled by the National Council of Real Estate Investment Fiduciaries. Returns were negative for the past five quarters, the longest streak since 1992. Property prices have fallen by 30 percent to 50 percent from their peaks, Zisler estimated yesterday in a report. The plunge has wiped out the equity in most real-estate deals that relied on debt financing since 2005, he wrote. Zisler, whose firm focuses on real-estate investment, estimated that building owners will default on $500 billion to $750 billion of mortgage debt. This equals as much as 54 percent of the $1.4 trillion in loans that will come due in four years, by his count. “Much of the debt is likely worth about 50 percent of par, or less,” the report said. Many banks will end up insolvent as they reduce the value of their holdings, he wrote, adding that regional and community lenders are especially vulnerable. California, in particular, is experiencing a downward spiral in commercial property as prices decline and a growing number of tenants default, Zisler wrote. His analysis was included in Controller John Chiang’s monthly review of the state’s finances. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Plunging Dollar Gives S&P 500 Exporters 2009′s Biggest Gains: Chart of Day

November 10, 2009

By Lynn Thomasson Nov. 10 (Bloomberg) — Shares of U.S. companies with the most overseas sales are doing best this year on speculation the dollar’s decline to an almost 15-month low is boosting earnings. The CHART OF THE DAY shows that shares of Standard & Poor’s 500 Index companies generating more than half of their revenue abroad have beaten those doing business only in the U.S. by 27 percentage points, according to data compiled by Bespoke Investment Group LLC, a Harrison, New York-based research firm. The falling dollar makes American goods more competitive overseas and boosts revenue when foreign currencies are brought back to the U.S. “Lately, I’ve been really focusing on the multinationals,” said Stefanie Yeager , a fund manager at State College, Pennsylvania-based Vantage Investment Advisors LLC, which oversees $450 million. “The U.S. is just slowly coming out of the recession, so companies that are purely domestic still have their problems. The multinationals are really benefiting from the exchange rate.” S&P 500 companies getting more than 50 percent of revenue from outside the U.S. have rallied 48 percent this year, according to Bespoke. At the same time, those with only U.S.- based sales rose 21 percent. The Dollar Index, a six-currency gauge of the greenback’s strength, is down 7.7 percent in 2009. American equities and the U.S. currency are moving in the opposite direction more than ever before. The so-called correlation coefficient using 120 days of data between the Dollar Index and the S&P 500 is minus 0.44, near the level of minus 0.45 reached on July 7. The reading four months ago was the lowest in the currency gauge’s 42-year history. To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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Olympics Sponsors Beat S&P 500, MSCI World Before Vancouver: Chart of Day

November 9, 2009

By Matt Walcoff Nov. 9 (Bloomberg) — Stocks of Olympics sponsors are winning medals for investors even before the Vancouver Winter Games begin. The CHART OF THE DAY shows the Dow Jones Summer/Winter Games Index of 36 sponsors and suppliers for the 2010 Winter Olympics has surged 34 percent since the measure began tracking the Vancouver event on Dec. 22. That compares with 23 percent for the Standard & Poor’s 500 Index and 27 percent for the MSCI World Index. “Olympic sponsors more often than not perform better than the standard,” said Michael R. Payne , a former marketing director for the International Olympic Committee who wrote a book in 2006 on sponsorships. Royal Bank of Canada, sponsor of the Vancouver torch relay, soared 63 percent as the lender beat analysts’ profit estimates three times. Teck Resources Ltd., producer of materials for the medals, increased sixfold after commodities rallied and the company reduced its debt. Coca-Cola Co. and McDonald’s Corp., which have the biggest weightings in the measure, have risen 22 percent and 0.5 percent, respectively. Companies are willing to pay as much as $100 million to sponsor the Olympics and millions more for advertising, proving how much they value the exposure, Payne said. Petro-Canada’s sponsorship of the 1988 Winter Games in Calgary helped transform the image of the oil company, then state-owned and associated with unpopular energy policies, Payne wrote in his book “Olympic Turnaround.” It’s now owned by sponsor Suncor Energy Inc. Not all of the Olympic sponsors have fared well. Nortel Networks Corp. and General Motors Corp., suppliers of telecommunications equipment and cars, respectively, filed for bankruptcy this year and were removed from the index. (To save a copy of the chart, click here.) To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net .

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Yankee Fans With Cash in S&P 500 Stand to Win From Loss: Chart of the Day

November 4, 2009

By Mason Levinson and Rodney Yap Nov. 4 (Bloomberg) — New York Yankees fans who invest in the stock market may find conflict between a World Series title and a happy holiday season. The Yankees, seeking their 27th championship, lead the Philadelphia Phillies three games to two in the best-of-seven matchup. Game 6 is tonight at Yankee Stadium and a seventh game would be held there tomorrow if necessary. The CHART OF THE DAY compares the historical November and December performance of the S&P 500 Index, the benchmark index for American equities, when the Yankees lose in the World Series to when they win the title. Since the S&P 500 began trading in 1928, it has averaged 3 percent returns for those two months following the Yankees’ 10 World Series defeats; 2.16 percent returns in the 24 years they won the title; and 0.9 percent returns when the Yankees didn’t make the World Series at all. The market does best when New York reaches the World Series — and loses. “All you guys that root for anybody but the Yankees, you’re right,” said Soleil Securities Corp. Chief Investment Officer Vince Farrell , a Bronx, New York, native and Yankees fan. “The Yankees lose, the market does better. Everybody hates the Yankees, so you’re so happy that they’ve lost, and you look at the world with rose-colored glasses.” Two of New York’s previous 26 championships , in 1923 and 1927, came before the creation of the S&P 500. Each World Series game at Yankee Stadium is worth $15.5 million to the New York City economy, according to an estimate by the city’s Economic Development Corp. First Meeting New York swept the Phillies in the teams’ only other World Series matchup in 1950, a championship that was followed by 2.9 percent returns for the S&P 500 that November through December. Since then, December has been the best overall month for the index, with 1.64 percent average gains, followed by a tie between November and April (when Major League Baseball’s season begins) at 1.5 percent, according to Bloomberg data. While the end of the year may or may not bring what’s called a Santa Claus rally on Wall Street due to holiday effects such as bonuses and tax considerations, the Steinbrenner family, which owns the Yankees, has been giving the team’s fans the gifts of high-priced free agents for years. This season, they gave multiyear contracts to pitchers CC Sabathia and A.J. Burnett, and added All-Star first baseman Mark Teixeira for a total contract value of $423.5 million. The franchise’s opening day payroll was $210 million, the biggest in baseball. No Playoffs Without those players, the Yankees missed the playoffs in 2008. The S&P 500 fell 6.52 percent over the final two months. The Phillies did make the postseason, capturing their first championship in 28 years with a five-game World Series win over the Tampa Bay Rays. The S&P 500 rose 5.2 percent in 1980 following the Phillies’ first title. Phillies’ fan Michael O’Rourke , who is chief market strategist at Yardley, Pennsylvania-based BTIG LLC, said he’d prefer not to see a complete replay of last year’s developments. Asked how he’d react if a Phillies’ repeat means another Wall Street slump during the holiday season, O’Rourke said, “I will go out and buy a Yankees cap.” To contact the reporter on this story: Mason Levinson in New York at mlevinson@bloomberg.net .

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Global Trade Blunts Weak Dollar, Fuels Europe Export Growth: Chart of Day

November 2, 2009

By Jeffrey Donovan Nov. 2 (Bloomberg) — The euro’s surge against the U.S. dollar won’t hinder Europe’s recovery from the worst recession in 60 years because revived global trade will blunt the impact of a stronger currency, the Royal Bank of Scotland Plc said. The CHART OF THE DAY shows that euro-area export-related orders rose in October for the seventh time in eight months, according to data compiled by Markit Economics. The gain came even as competitiveness was hurt by the euro’s 17 percent advance in the same period. “The impact of world trade on euro-area gross domestic product is more than three times larger than that of exchange- rate movements,” said Silvio Peruzzo , an economist at RBS in London. “In the euro area, world demand matters more than the currency.” French Finance Minister Christine Lagarde said on Oct. 28 that she wants to see a strong dollar, echoing comments by other officials that the weakening U.S. currency may hinder the nascent recovery in the euro zone by making the area’s exports too expensive. Demand from emerging markets and from within the euro area means that such concerns may be overstated, Peruzzo said. The euro gained 2.5 percent against a basket of key emerging-market currencies during the same eight months when export orders increased, Peruzzo said. (To save a copy of the chart, click here.) To contact the reporter on this story: Jeffrey Donovan in Rome at jdonovan26@bloomberg.net .

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Inventory Cycle Points to V-Shaped U.S. Economic Rebound: Chart of the Day

October 30, 2009

By Shobhana Chandra Oct. 30 (Bloomberg) — Companies in the U.S. are slowing the pace of inventory reductions after a “dramatic” drawdown, setting the stage for a surge in stockpiles that will strengthen economic growth this quarter, say economists at Oscar Gruss & Son Inc. “We’ve just started to form a V, and we expect it to extend up sharply,” said Michael Shaoul , chief executive officer at New York-based Oscar Gruss. “Businesses had been just very traumatized and nervous about a decline in demand, and they’re starting to get over that. We have every reason to believe that economic growth is going to get stronger from this point on.” The CHART OF THE DAY shows the turning point in business inventories. While stockpiles continued to drop from July to September, the reduction of $130.8 billion at an annual pace was smaller than the record decrease of $160.2 billion in the second quarter. The smaller decline contributed 0.94 percentage point to growth last quarter. With inventories running lean, manufacturers will boost production as demand stabilizes. That makes it likelier they will start hiring again. “We have a turn in the process, and it’s going to drive improvement in other economic metrics,” Shaoul said. “As businesses start to rebuild inventories, they’re going to have to go out and hire more people,” he said. The economy expanded at a 3.5 percent annual pace in July through September, the Commerce Department said yesterday, snapping four straight quarters of contraction. (To save a copy of the chart, CLICK HERE) To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Commodities Replace Stocks as Best Asset in Global Poll: Chart of the Day

October 29, 2009

By Brendan Moynihan Oct. 29 (Bloomberg) — Commodities have displaced stocks as the investment that will offer the best opportunity for profit during the next year, according to a global poll of Bloomberg terminal users. The CHART OF THE DAY shows Bloomberg users’ estimates of which asset class will offer the highest returns and the lowest, comparing this week’s poll to a previous one in July, when stocks were the top pick. The shift in customers’ investment preferences coincided with a 27 percent gain in the UBS Bloomberg Constant Maturity Commodity Index and a 17 percent rise in the Standard & Poor’s 500 Stock Index since the July survey. Real estate and bonds also switched positions in the ranking of which asset class would offer the lowest returns. In July, 40 percent said real estate would rate last while 29 percent said bonds. This week’s poll showed 40 percent cited bonds and 24 percent real estate. The poll of investors and analysts on six continents was conducted Oct. 23-27. It was based on interviews with a random sample of 1,452 Bloomberg subscribers, representing decision makers in markets, finance and economics. The poll had a margin of error of plus or minus 2.6 percentage points. To contact the reporters on this story: Brendan Moynihan in Brentwood, Tennessee, at bmoynihan@bloomberg.net

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Apple Surges to Within Striking Distance of Microsoft: Chart of the Day

October 28, 2009

By Mary Childs Oct. 28 (Bloomberg) — Apple Inc.’s 131 percent surge in 2009 has made it the second most-valuable technology company in the U.S., trailing only Microsoft Corp. after record iPhone and Macintosh sales produced better-than-estimated profits. The CHART OF THE DAY shows Apple’s stock-market value trailed Microsoft’s by $52.3 billion last week. Shares of Apple have done almost three times better than Microsoft’s this year and reached a record $205.20 on Oct. 22. Apple Chief Executive Officer Steve Jobs cut iPod prices, introduced a faster iPhone and ran a back-to-school Mac promotion to fuel purchases as Microsoft, founded by Bill Gates, saw sales of Windows for personal computers fall 39 percent, including deferred revenue. “The iPhone is really the growth driver,” said David Pearl , who helps oversee $7.8 billion as co-chief investment officer at Epoch Investment Partners in New York, which owns shares of both companies. “It’s the most profitable product by Apple, more so even than the Mac, and has the biggest growth opportunity.” Apple sold 7.4 million iPhones and 3.05 million Macs in the third quarter, up 7 percent and 17 percent, respectively, from a year earlier. While Apple’s share of mobile handset revenue globally was 8 percent in the first half of the year, it generated 32 percent of the operating profit, according to Sanford C. Bernstein & Co.’s Toni Sacconaghi . In the worldwide PC industry, Apple had 6 percent of sales and 25 percent of operating profit in 2008, the analyst said Aug. 4. Apple has grabbed its biggest share of the home-computer market since the 1990s, said Roger Kay , an analyst at Endpoint Technologies Associates in Wayland, Massachusetts. As the U.S. economy emerges from the worst slump since the Great Depression, consumers will upgrade their operating systems, he said. “It’s been a rocket ship,” Kay said. “Apple thinks it can pry loose more buyers during this transition, and Microsoft thinks it can staunch the flow of users away from them and toward Macs. Everyone’s girding for battle.” (To save a copy of the chart, click here.) To contact the reporter on this story: Mary Childs in New York at mchilds4@bloomberg.net .

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