Five Things You Need to Know: It Just Doesn't Matter; Producer Price Index; Lehman Results Reveal Curtain Hiding Curtain Hiding the Earnings Wizard; Who is the Average American?; Rich People, Poor People, We're All the Same!
What you need to know (and what it means)!
Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. It Just Doesn't Matter
The Federal Reserve Open Market Committee will announce at 2:15 EST some kind of policy adjustment that really just doesn't matter. That's not what anyone wants to hear, but in the grand scheme of things it's literally true.
- Today the Fed will hold the Fed Funds rates steady, lower it by 25 basis points, or possibly 50 basis points, and maintain the current Discount rate level, lower it by 25 basis points, or possibly 50 basis points.
- Meanwhile, here is what that action will mean in the grand scheme of things:
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- Honestly, is Fed policy anything you want to base an equities trading or investment decision on?
2. Producer Price Index
Producer prices fell more than expected in August, declining 1.4% the Labor Department reported.
- So why the unexpected decline?
- The main reason is the drop in wholesale energy prices, which fell 6.6%, the largest monthly decline since April 2003.
- Of course, more recently energy prices are on the rise again.
- The core readings were interesting and mixed.
- Core crude prices increased 1.3%, the largest increase since April, while core intermediate prices fell 0.5%.
- Bottom Line: this is an August report with little bearing on what September will bring.
3. Lehman Results Reveal Curtain Hiding Curtain Hiding the Earnings Wizard
As we noted yesterday there were a couple of keys we wanted to watch for ahead of Lehman's (LEH) earnings release.
- One, LEH didn't reveal the split among trading asset levels.
- That was pretty much expected.
- And the lack of visibility actually allowed the market to breathe a sigh of relief; sort of like when your court case gets a continuance.
- Two, LEH didn't adjust any of their loan commitments to reflect potential credit market issues.
- What credit market issues?
- Well, issues similar to Blackstone (BX) - also known as The World's Most Greatest Private Equity Firm In the History of the World of Great Financial Private Equity Firms In All of Human History That Has Access to More Money Than Anyone Ever for Big Time Private Equity Deals of the Biggest Major Huge Deals In History... Ever! - and the fact the firm somehow can't scrounge up a mere $750 million necessary for the completion of the PHH Corp. (PHH) sale.
- And didn't China invest $3 billion in Blackstone, The World's Most Greatest Private Equity Firm In the History of the World of Great Financial Private Equity Firms In All of Human History That Has Access to More Money Than Anyone Ever for Big Time Private Equity Deals of the Biggest Major Huge Deals In History... Ever!, as recently as May?
- Yes, but that's a different story.
- Bottom Line: The standoff continues as Lehman pulls back the curtain to reveal the fact that there's a curtain hiding the earnings wizard. Thanks!
4. Who is the Average American?
Good News! According to the Federal Reserve, U.S. households' total net worth rose 2.1% to $57.86 trillion in the second quarter.
- Household net worth in the second quarter rose to about 5.72 times disposable personal income, from a first-quarter level of about 5.66 times income, the Fed's Flow of Funds report showed.
- Assuming there are about 100,000,000 households in the U.S, these figures suggest that the Average American Household, according to the Fed's figures, has a net worth of $578,600.
- Of course, it makes no difference on which rung of the socioeconomic ladder you stand... as long as there is at least one person standing on the rung directly below you.
- Unfortunately, these figures suggest that we're not even standing on the socioeconomic ladder.
- Hey man, a little help over here, throw us a rung!
5. Rich People, Poor People, We're All the Same!
As we said, it makes no difference on which rung of the socioeconomic ladder you stand... as long as there is at least one person standing on the rung directly below you. Be that as it may, and despite vast socioeconomic inequalities, there are actually many similarities between us, standing just below the bottom rung on the ladder, and, say, the world's richest man.
The annual rankings of the world's richest people by Forbes magazine back in March revealed few surprises. Once again checking in at numbers one and two, respectively, were Microsoft's (MSFT) Bill Gates and Berkshire Hathaway's (BRK-A) Warren Buffett. However, checking in at a surprise number 245,674,213 was yours truly, Kevin Depew.
Even more surprising? It turns out that the difference between the world's number one richest person and the world's number 245,674,213th richest person is actually pretty small. Bill Gates and I actually have quite a bit in common.
For example, just as Bill Gates reportedly finds his role as the number one wealthiest person in the world a bit of a burden, so too do I, Kevin Depew, find a similar burden in my place as the 245,674,213th wealthiest person in the world.
While it is true that a guy like me has it easy compared to the 245,674,214th or 245,674,215th wealthiest person in the world, I understand what it's like to wake up each morning knowing that yet another day on the hamster mill awaits, another day striving to maintain my place as the 245,674,213th wealthiest man in the world. And for what? What does it all mean?
Sometimes, like Bill Gates, I wish I could just give it all away. But then, just like Bill Gates, I realize that if I did give it all away I would be evicted from my studio apartment within 30 days. Still, it would be nice to give something away. Perhaps a used book I don't read anymore. Or the Minyanville.com coffee mug that has been in my desk drawer since last September. Ah, to be free of all my useless personal possessions! If only I would not be homeless as a result!
Still, this is not the time for arrogance. Just like Bill Gates, I too remember from where I came. In fact, it wasn't so long ago that I remember very clearly what it was like to be the 245,674,214th wealthiest person in the world. Haha, those were the days. In fact those were the days just last Saturday as I slipped from 245,674,213 to 245,674,214 after losing $186 at the OTB on 3rd Avenue and later buying a hot dog and a beer at PJ Bernstein's. Actually, this dropped me down as low as 245,674,218 for a few minutes until the people ranked 245,674,215 through 245,674,217 received 1) a ticket for speeding, 2) bought a weed-eater at Home Depot and 3) paid for three-days of long-term parking at LaGuardia, respectively.
Yes, people like us, the co-founder of Microsoft, and the Executive Editor for a widely-read online financial infotainment community, we are two of a kind. We know very well how money comes and goes with just the snap of our fingers.
In Bill Gates' case, a snap of the fingers dispatches $100,000,000 to a charitable foundation in Vietnam. In my case, a snap of the fingers causes the waiter at a Vietnamese restaurant to bring me an extra side of peanut sauce, resulting in an extra $1 tip. But the principles are the same. Easy come, easy go.
People like us, we understand that one minute we're on top of the world (or in my case, just ahead of the 245,674,214th wealthiest person in the world), the next minute we're standing in line at a pawnshop hocking our father-in-law's watch, but fortunately not actually having to go through with it because at the last minute we found a crumpled $20 bill in our pants pocket.
Finally, there's the shared thrill of competition. Bill Gates has Buffett and Carlos Slim hot on his heels. I have some guy in Fairfax about to win a $100 in a scratch off lottery ticket hot on mine. But you know what? That's what keeps me fresh, hungry, ready to only hit the snooze bar three or four times in the morning. Look out 245,674,197th richest person in the world, whoever you are, I just found a quarter on the sidewalk. I'm hot on your heels!
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