Random Thoughts…

1) You can blame me for being a contrarian, but I usually don’t trust any of the news that is published. Sensational news, all the more. Except for a few editorials here and there, written by a certain clique of authors, I am skeptical of every news item.

Here’s an example from Bloomberg and an explanation as to why I would not take it at face value.

July 14 (Bloomberg) — Sales at U.S. retailers rose in June, helped by incentives at car dealers and higher gasoline prices that boosted service-station receipts. Purchases excluding automobiles and gasoline dropped for a fourth consecutive month. While the increase in total purchases reinforces forecasts for economic growth to resume this quarter, analysts anticipate job losses and falling home values will weigh on household budgets and mute a recovery.

Wait a minute. Did some mention recovery? Hmm. Ok.

Gas prices have been shooting through from $1.5 to $2.6 recently. Given that almost everyone in the US (except for NY residents I guess) travel to work by an automobile (car/truck/SUV), the demand for gasoline is usually inelastic. If gasoline prices have been rising, then so will overall purchases.

And then, this comes – Purchases excluding automobiles and gasoline dropped for a fourth consecutive month. Other Purchases like semi-luxury and disposable income stuff you mean? Ah, I see.

And then, this… While the increase in total purchases reinforces forecasts for economic growth to resume this quarter…Hmm, where was the increase Mr. Author? How can rise in purchases due to inelastic and essential commodities reinforce your forecast for economic growth? Taking out gasoline, your net purchases for the economy actually decreased and not increased. So, the economy is in what it is – serious crap.

Nowadays, with all the greenshoots stupidity flying around, media will say anything.

2) Did you look at Goldman Sach’s results? Spellbound and Astounding, aren’t they? I mean, an average bonus of $770k per employee (no typo, it is $770k), you only wish you were working for GS. Couple of points here -

a) Big credit to Goldman for those results. However (and there is always a ‘however’ if the bonus of one company’s         employee is $770k while the rest of the economy is in tatters with not even a minimum wage available), Goldman          used taxpayer’s money to backstop all its derivatives thereby bringing cost of capital close to zero. Investing money      whose cost of capital is close to zero – heck, even I can generate atleast 15-20% every year.

b) Other employees, don’t be jealous. The average bonus, say for a 2nd year or a 3rd year analyst is around $50-65k.    Combine that with NYC state taxes (50% for bonuses), the analyst will probably just end up with $25-30k. That’s a            crap load of money but nothing in comparison to the $770k that is getting marketed. So, chill.

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