It’s not like you’d think

Last week I was in New York City for a conference put on by S&P.  Everyone that heard where I had been said something along the lines of “Oh I LOVE New York! “ or perhaps “That’s my favorite place to go.”  While I too love going to NYC, I got a very quick reminder that things there don’t always work like you’d think.  As a country we watch a lot of TV and movies.  Many of those movies and shows take place in New York City, which means you see a lot of the quintessential “actor hails a cab” type scenes.  It’s the way to get around and it’s easy.  The city is chock full of cabs…when you need one you just walk to the street, throw out your hand, and one pulls over to whisk you away to your destination.

That’s how the movies have trained us to think of cabs.  With that in mind I’d like you to picture our recent trip to NYC.  We stayed at a hotel in lower Manhattan and I was absolutely shocked at how much horn-honking goes on in the city.  The horns were so constant that at first I thought Godzilla might be attacking the Island. Then I realized that it’s just how New Yorkers communicate with each other in traffic…I think they use horns instead of turn signals.  Whatever the case…the system works for them.  Around midnight the horn-honking marathon was still going strong, and as I lay wide-awake in bed I began to wonder if this is why NYC is also called “the city that never sleeps”.

On “Day 1” in the city we had to catch a cab to the S&P building which was just a few miles away.  Mr. Brian Hey and I walked down to Delancey Avenue, crossed the street, and quickly took up a spot where we could hail a cab.  I could see perhaps 20 cabs in the immediate vicinity.  I threw my hand out just like in the movies…and the cab blew right by me.  “Hmmm.  Must have someone in the back” I thought.  The next cab approaches and I throw my hand out and he too blows by me without a glance.  “Geez…strike two”. 

After the third cab passed us like we were invisible I looked at my watch.  We planned to be at the S&P building 15 minutes early…if these cabs keep it up we might only have 5 minutes to spare.   Now we decided to switch to the other side of the intersection…maybe our luck would be better over there.  No dice.  I hold my hand out and the driver just looks at me shaking his head in a “No” gesture.  Time is getting tight…we decide to split up.  Brian went back to our original destination and I stayed on the north side of the intersection.  Surely if we split up we’d increase our odds of getting a cab.  Cabs are going by faster than the second-hand on my watch.  It’s unbelievable that in a city bursting with cabs we can’t get one to stop.  

Eventually we decide that it’s time to initiate “Plan B”.  “Plan B” isn’t so much a “plan” as it is a last resort…we have to start walking…and fast.  I broke out my iPhone and used it to navigate us on our hike.  The plan was to hike through Little Italy, skirt the edge of China Town and then push into the heart of the financial district.  If we were lucky we’d get there just as they shut the conference room door. 

Little Italy was a ghost town at that time of day so we blew right through it.  After a few blocks we entered China Town, which was a much different story.  Now in addition to navigating with the GPS we had to move in and around a fairly thick crowd that included pedestrians, bicyclists, skateboards, delivery trucks, workers unloading the delivery trucks, along with construction workers and their machinery.  The only method of transportation I didn’t see was someone on a pogo stick.  We even saw a basketball court with one half being used for basketball and the other side full of people doing Tai-Chi amid the hustle and bustle.  Crates of raw seafood and boxes of strange vegetables lined our way along an impossibly small and cluttered sidewalk…it was a labyrinth of chaos with a very unique blend of sights and smells… we were strangers in a strange land…and we still had no cab.

We popped out the far side of China Town with a shot-clock that was running really low.  In the distance I could see the edge of the financial district.  It was a few blocks away which meant that we had to cross another three or four intersections just to get to the next big group of cabs.

The conference was scheduled to start at 9:00 AM.  When that hour struck we were again standing on a street corner with a hand out in the air.  Finally we got a cab.  Once you’re in the cab it’s a pretty easy gig…he got us there right away.  You just have to remember not to open the door on the street-side of the cab or you could get killed by a passing cab that I suspect still wouldn’t stop even if he hit you.  Always get out on the sidewalk side…here you might get hit by a bicycle but it’s the lesser of two evils.

Ultimately we walked into the conference about 20 minutes late.  The morning commute had gone nothing like we expected.  It was longer and more difficult than we could have possibly imagined when we drew up our “Plan A” the night before.

The economy hails a cab

The NBER told us that the recession ended in June of 2009.  The average yield on the 10-year Treasury in June of 2009 was a 3.72%.  After almost three years in “recovery mode” the 10-year is at a 1.71%, the unemployment rate is still north of 8.00%, the Fed is still on hold at 0-25 bps, economic problems are still raging in Europe, and there is a whole menu of other problems you could pick from if you really wanted to go further in the analysis.

Like trying to catch a cab in NYC, gaining economic momentum in this “recovery” may not be as easy as we might have thought.  By all accounts our “recovery” has been a modest one.  What makes matters worse is that the very modest gains we’ve made here at home have been offset by a worsening global picture.

Europe

The story that won’t go away is Europe.  It won’t go away because they keep kicking the can down the road…and no matter how fast or slow you are travelling…you’re eventually going to get to the can again and have to deal with it.  Perhaps my favorite headline of the day is from the Wall Street Journal who wrote: “In Europe, Time for Plan B, Only There’s No Plan, and No Time”. 

Worries about the future of the Euro are dominating market activity today as a key EU summit is held to discuss growth in Europe.  The short story here is that it’s causing a flight to safety in US Treasuries.  The 5-year Treasury auction just went off and it posted a new record low…it came off at 0.74%...the prior record was in the mid 80 bps range. 

As we move into the summer of 2012 we appear to be on same pattern we had in 2010 and 2011 where predictions of growth gave way to problems and lower yields that started in the second quarter and got worse as we moved deeper into the summer.  If you want a refresher on how this pattern has worked over the past few years just pull up the Market Update piece titled “It’s like Déjà vu all over again” that I sent out on 5/8/12.  It provides a nice recap of how this cycle has developed over the past few years. 

Zuckerberg gets de-friended

The Treasury curve is up across the board this morning.  The 10-year spot is up half a point to trade at a 1.71% and the Dow is off roughly 200 points to trade at 12,312. More people are “de-friending” Facebook today as Bloomberg is reporting that there is already a lawsuit being filed against the underwriters.  I’m not an “Equity IPO Historian” but I’d have to guess it’s rare for both an IPO and a lawsuit against the IPO to be filed in the same week.

That’s it from here.  If you have any questions or if there is anything I can be doing for you just let me know.