Monday, July 4, 2011
Don't look now, but the Consumer Discretionary sector is less than 10 basis points away from its bull market closing high reached on May 12th. With a gain of 8.3% since June 16th, Consumer Discretionary has definitely led the overall market higher during the current run. As shown in the second chart below, Consumer Discretionary is the closest to its bull market closing high out of all ten sectors at -0.09%. With the way the market is moving today, the sector could easily close at a new bull market high. The S&P 500 as a whole is now just 2.27% from its bull market closing high.
With market volume below abysmal levels, and with market breadth at the highest in what appears ever, many are wondering how it is possible that the S&P could move by about 70 points in one week. Simple. As the chart below shows, NYSE short interest for the week ended June 15 was the highest in 2011, at 13.5 billion shares, a jump of 333 million share in two weeks, which certainly persisted into the second half of the month, just in time for the market to realize that with QE2 ending, and nobody left to buy bonds, rates have nowhere to go but up. The net result is one of the most epic short squeezes in recent history, coupled with one of the most rapid moves out of bonds and into equities, and if judging by the 5 Year bond, the most rapid ever. What the message from all of this is, aside from the fact that higher interest rates are supposed to somehow be better for the economy, is that the entire market now has adopted a HFT modus operandi, where nobody even bothers to discount, and all the action is reactive. We are not sure about readers, but the fact that the market has lost its most fundamental feature - discounting - is just a little troublesome, if not surprising. Such is life under centrally planned capital markets.
A new survey shows that nearly 40% of senior managers report that job seekers head into interviews with little or no knowledge of the companies where they are hoping to work.
In a survey conducted by an independent research firm, 38% of managers said that interviewees had done hardly any research about the company. The survey was conducted by phone with 1,000 senior managers at companies with 20 or more employees. Here’s what else the managers said, in response to the question, “What do you think is the most common mistake candidates make during job interviews?”
20% – Unprepared to discuss skills and experience
14% – Unprepared to discuss career plans and goals
10% - Lack of eye contact
9% – Late arrival
9% - Limited enthusiasm
When I first started writing about careers, my editor had to excise the phrase, “this may seem obvious, but,” from much of my copy. I’d like to add that phrase here. Before you go to an interview, spend at least 15 minutes on the company’s website. Brandi Britton, a hiring manager at Accountemps, the temporary staffing firm for accounting, finance and bookkeeping that commissioned the survey, says she recently interviewed an applicant who hadn’t even read the online ad. “Some people just send their résumés to any ad that has the word ‘accountant’ in it,” says Britton, who is also a district president at Accountemps parent, Menlo Park, Calif. staffing firm Robert Half International. The applicant didn’t know the required software program and didn’t have the appropriate level of experience. After a few minutes, says Britton, “it was apparent on the applicant’s face that this was not the right job for them.”
Another obvious move: Do a comprehensive Google search, including on Google News, for recent media reports on the company. If you’re applying to a publicly traded firm, a search on Yahoo Finance offers easy-to-use data and recent headlines.
For a slightly more advanced research move, use the “companies” feature on LinkedIn. Go to the home page, and in the middle of the grey bar, click on the “Companies” link. Enter the name of the company where you are interviewing, and you will instantly see which of your connections works at the company, or knows someone who does. Email these contacts and ask if they can spend a few minutes with you on the phone or let you buy them a cup of coffee. You can also click the “follow company” link next to the company name, which will deliver information about new hires, promotions and departures, directly to your LinkedIn home page.
For more information on job interviews, you can read a story about following up, even if you flubbed the interview, here. I also wrote a piece with more general interviewing tips here. A quick look through the archives revealed an Oct. 2010 story I wrote about the results of a survey on executive job seekers’ biggest mistakes, here. When headhunters were asked about senior-level applicants’ most common misstep, 44% of them said the answer was poor preparation, including not doing adequate research on the company.
Ever since the famous Stanley Druckenmiller Op Ed published in early May, which called for an outright default of the US, saying it would not be the end of the world, and in fact the US would emerge stronger as a result of finally taking the first steps to getting its fiscal house in order, there has been a visible shift regarding the US debt ceiling discussion, with republicans (so far) digging in and refusing to budge on the issue. After all, on the surface Druckenmiller is absolutely correct: with interest rates near record lows for the past 3 years, interest payments would be manageable for a long time even if general rates were to surge due to the Treasury's fixing of low cash coupons over the past 3-4 years, amounting to about 20-30% of all annual tax receipts. There is however one very big problem with this argument, one which we pointed out back inApril 2010 when we said that "What people don't realize is that...unless the UST can roll its debt not on a monthly but now weekly basis in greater and greater amounts, the interest rate doesn't matter. All it takes is one semi-failed auction and it's game over as hundreds of billions in bills become payable." Enter the always forgotten maturing debt argument. And as a just released presentation by the Bipartisan Policy Center titled "Debt Limit Analysis" reminds us, aside from the actual deficit funding math, which is that in August there is a $134.3 billion cash shortfall that has to be funded with debt, there is a far greater risk. Or, put numerically, 467.4 billion far greater risks. This is the amount of debt that matures through August 31, and has to be rolled over or the US is bankrupt... in every sense of the word. Once again, America's politicians and media get broadsided by the definition of gross versus net. Because, in reality, the inability to issue more debt post August 3 means a halt to all new debt issuance. Which, unfortunately because it means Geithner's scaremongering is actually correct, would imply the end for the debt ponzi.
Below is the maturity schedule in August from the BPC:
And their commentary, which recaps what we said 14 months ago:
- Treasury must “roll over” almost $500 b in debt that matures during August 2011
- New debt is issued and the proceeds are used to repay the maturing debt plus interest due
- Treasury will require market access throughout August to avoid defaulting on maturing debt
- About $380 b in short-term T-Bills maturing, plus $90 b in long-term securities
- Quarterly refunding auction on August 15
And that's not it. On a Net basis, there is in addition another $134.3 billion in deficit that must be satisfied somehow. Alas, after August 3rd it will become impossible to plunder savings accounts going forward which means a game over in the kick the can down the road game:
Breaking down the spending side:
The BPC's observations on what happens on August 4 absent a deal are rather spot on:
- If the debt ceiling is not raised by August 2, all three ratings agencies will put the United States on watch for a downgrade, at a minimum. Fitch (6/8/11):
- “If the debt ceiling is not raised by the [X Date] and timely and full payment of its obligations, including Treasuries, is not secure, the U.S. sovereign rating will be placed on Rating Watch Negative.”
- An actual downgrade would cause major losses among holders
- Even without downgrade, it is likely that rates would increase, perhaps significantly
- Less likely, but possible, that Treasury would lose market access during such an unprecedented event and default
As a reminder we are now 32 days away from D-Day, and about 60 days from the need to fund half a trillion, all of it with new gross debt issuance.
To date, there has been no progress in D.C. at all. Will there be progress in the next 4 weeks? They better, or as demonstrated, the extend and pretend game, contrary to the well-meaning intentions of the likes of Drucknemiller, is about to come to a very violent end.
Full presentation link.Debt Ceiling Analysis
|MONDAY, JULY 4|
|TUESDAY, JULY 5|
|10 am||Factory orders||May||0.9%||-1.2%|
|WEDNESDAY, JULY 6|
|10 am||ISM non-manufacturing||June||54.0%||54.6%|
|THURSDAY, JULY 7|
|8:15 am||ADP employment||--||38,000|
|8:30 am||Jobless claims||7/2||424,000||428,000|
|FRIDAY, JULY 8|
|8:30 am||Nonfarm payrolls||June||115,000||54,000|
|8:30 am||Unemployment rate||June||9.1%||9.1%|
|8:30 am||Average hourly earnings||June||0.2%||0.3%|
|10 am||Wholesale inventories||May||--||0.8%|
|3 pm||Consumer credit||May||--||$6.2 bln|