Rick Santelli as Evidence of the State of the Tea Party

Rick Santelli did a Santelli exchange on CNBC this morning, which I thought was important to re-post as an indicator of how fractured the Republican/Tea Party ideology has become as a result of the beating that the Republicans took in last fall's election.

In this morning's editorial, Santelli focuses on morality and specifically concedes a few important points: 1) fiscal conservatives have the burden of proof and are going to have a hard time defending their position because 2) the election was a referendum on taxation/spending which the Republicans lost and 3) the Democrats have the short term moral high-ground because cutting deficits means withholding payments from seniors, etc.  He rounds out the editorial by warning that the long term morality of saddling future generations with debt is ultimately more important, but his tone suggested to me that he realizes that he's effectively lost the battle for the foreseeable future.  He even admits that most people "make fun" of the way he frames the debate.

Santelli is credited as an ideological father of the Tea Party movement which initially put deficit spending by government as the centerpiece of its platform (but has since been rebranded as a movement of ultra-conservative Republicans).  I suspect that he is a reasonable indicator of the general sentiment shared by many Tea Partiers who are seeing their ideology falter in public opinion.  Ultimately I think that this has some bearing on how the debt ceiling talks play out, because in 2011 freshmen Tea Partiers were leading the charge.  In the current environment they may not be so emboldened.

A Past Time of Uncertainty for Apple

It looks like Apple is set to have another rough day today as the Wall Street Journal reported that the company has cut orders for iPhone components on weak sales.  Apple shareholders are rightly worried, but perhaps can take some solace in another time that investors were skeptical and the company ended up prevailing:

It's easy to forget that for almost a year after the iPhone was initially released it actually looked like Blackberry would dominate the mobile phone market.  Recall that the original iPhone didn't have any third party apps, and the app store didn't open until a year after the first iPhone was released.  During this pre-app period there were real concerns that consumers wouldn't adopt a touch screen and that functions like BBM would draw consumers to Blackberries.  In the year after iPhone's release RIMM outperformed AAPL by as much as 75%.  Once the app store was launched all of that changed though and over time of course the iPhone became dominant.

All this is not to say that Apple shareholders are in the clear, but at least to point out that there has been skepticism about the company's operational abilities before and everything turned out alright.

AAPL vs. RIMM Performance From iPhone's 2007 Release to App Store Launch in 2008

How Bad is This Flu Season?

Frequently this time of year the weather will become a story that people start to discuss as having possible effects on the economy.  Last year the winter was abnormally warm, leading people to hypothesize that there would be better than usual economic activity.  Meanwhile in other years there is often a blizzard or two that hit the northeast and people begin to worry about how that can affect the data (usually weather worries end up being more bark than bite).

This year the seasonal story-line isn't so much about the weather as much as it is about people being under the weather.  WAG and CVS have each had good starts to 2013 based on a bad flu season.  Just how bad is the season though? Below is some data from the CDC comparing this flu season to previous ones.  So far the season is bad but not as bad as the 2009-10 pandemic when we were hit with an attack of the swine.

Source: Centers for Disease Control

Monetary Base Ticks Slightly Higher

The monetary base ticked higher by a non-negligible amount for the first time since QE3 started last week.  The Fed has agreed to purchase more than $150B worth of securities since September but up until now the monetary base has remained relatively flat due to the time it takes for mortgage trades to clear and shifts in other balance sheet items which absorbed some of the growth.  

Interestingly the debt ceiling is a driver of this week's growth as one of the "cookie jars" that is keeping the government running is Treasury's deposit account at the Fed.  When Treasury draws this account down to fund itself the money it spends finds its way into the calculation of the base.

It seems like this should be a turning point for the base, but admittedly it's been difficult to predict the way that the dynamics have played off of each other to keep the Base flat.  Tune in next week for an update on whether paint has dried further.

Did 2012's Best Stocks Beat Estimates by the Most?

The heart of earnings season is fast approaching, but as someone who likes to value companies on a long term basis, it's typically difficult to put a quarterly beat or miss into context.  Still, since there are plenty of people out there who live and die by earnings surprises, here's a look at how much earnings surprises played into the returns of last year's best performing stocks.

In a quarterly-earnings-obsessed-world perhaps it's not too surprising that the best performing stocks of 2012 tended to beat analyst estimates and the worst performing ones tended to miss them.  Below the S&P 500 is broken down into quintiles by performance.  The best performing stocks of last year beat estimates by an average of 4% over the course of the year.  The worst performing stocks missed estimates by an average of 5%.

Top Stocks YTD

We're only 10 days into 2012 so take this list with a grain of salt, but below is a list of the top 20 performers in the S&P 500 year to date.

Data through close 1/9/13

Number of Treasury Secretaries by President

It's expected that Obama will announce tomorrow that Jack Lew will be replacing Tim Geithner as Treasury secretary.  Starting with Alexander Hamilton, there have been 43 presidents but 75 Treasury secretaries.  Lew will be the 76th.

Below is a chart of the number of Treasury secretaries by presidency.  Two term presidents are highlighted.  Surprisingly, there have only been 13 presidents to serve two full terms.  On average each of those presidents has had 2.5 men serve as the head of Treasury (there has never been a woman serve), so there's a decent chance there will be at least one more before Obama's done.

FDR, who served longer than any other president, including for the bulk of the depression, only had two men helm Treasury.  Meanwhile two of the four presidents who had four Treasury secretaries weren't even full one term presidents.  Tyler and Arthur both took over from men who died in office.