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Post by jeffolie on Aug 30, 2011 14:51:26 GMT -6
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Post by jeffolie on Aug 30, 2011 19:14:57 GMT -6
Fear
Investors are afraid. Investors are the rich that spend for new, more expensive consumer items including new cars .... 'Average consumers below the rich class merely account for about 39% of consumer spending while rich consumers almost equal their portion of spending at about 37%'
Investors are afraid because the volatility (VIX) jumped driving away individuals, humans from the stock market ... into safe havens such as government short term debts in Germany & America (Treasuries) or a little into metals.
Investors that are afraid pulled back on some consumer buying.
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Post by unlawflcombatnt on Aug 30, 2011 22:43:46 GMT -6
Investors are moronically afraid that other investors won't invest in stock market, and maintain the current overvaluation of stocks.
What they should be worried about--but apparently have no concern over whatsoever--is the decreasing demand of American consumers due to the rising unemployment and wage suppression that have reduced the buying power of American consumers.
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Post by jeffolie on Aug 31, 2011 10:43:28 GMT -6
Investors are moronically afraid that other investors won't invest in stock market, and maintain the current overvaluation of stocks. What the should be worried about--but apparently have no concern over whatsoever--is the decreasing demand of American consumers due to the rising unemployment and wage suppression that have reduced the buying power of American consumers. I agree. Overwhelmingly, investors remain in the top tier of wealth and income resulting in money over and above their abundant lifestyles that they use with the purpose of " living off the profits " rather than working for a living. Their goals often include gaming the system with tax loopholes such as "carry interest" for hedge funds that results in even more wealth/income inequality. Rather than striving to improve average Americans opportunities, this upper tier strive to improve the upper tier's profit opportunities net of taxes. Some in the upper tier donate to their favorite causes with their overwhelming investment profits while ignoring or even promoting unfair practices such as Bill Gates demanding more foriegn computer workers rather America computer worker. Steve Jobs created the biggest splash while building Apple to the size of Exxon but does not even donate (see today WSJ) to charities and builds his products through Foxxcon in China, Brazil, etc. where workers commit suicide at unusually higher rates.
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Post by unlawflcombatnt on Aug 31, 2011 11:39:01 GMT -6
Investors are moronically afraid that other investors won't invest in stock market, and maintain the current overvaluation of stocks. What the should be worried about--but apparently have no concern over whatsoever--is the decreasing demand of American consumers due to the rising unemployment and wage suppression that have reduced the buying power of American consumers. I agree. Overwhelmingly, investors remain in the top tier of wealth and income resulting in money over and above their abundant lifestyles that they use with the purpose of " living off the profits " rather than working for a living. Their goals often include gaming the system with tax loopholes such as "carry interest" for hedge funds that results in even more wealth/income inequality. Rather than striving to improve average Americans opportunities, this upper tier strive to improve the upper tier's profit opportunities net of taxes. Some in the upper tier donate to their favorite causes with their overwhelming investment profits while ignoring or even promoting unfair practices such as Bill Gates demanding more foriegn computer workers rather America computer worker. Steve Jobs created the biggest splash while building Apple to the size of Exxon but does not even donate (see today WSJ) to charities and builds his products through Foxxcon in China, Brazil, etc. where workers commit suicide at unusually higher rates. Well said, Jeff. Gates and Jobs make me sick. Both receive many (and undeserved) accolades about their business know-how. And both have mastered the art of suppressing American wages by the dual, complementary actions of outsourcing jobs to cheap labor markets, and importing cheaper foreign workers to further suppress American wages. What "geniuses" and "humanitarians" they are...Not. More like traitors and opportunists IMO.
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Post by jeffolie on Sept 2, 2011 12:26:44 GMT -6
Global Recession, Right Here, Right Now: Japan's Capital Spending Plummets; Eurozone PMI, UK PMI, US ISM ex-Inventory, China Exports in Contraction It's time to stop debating whether or not the US or Europe is headed into recession. The facts show the entire global economy is in recession. Global Recession Supporting Data-Points •Euro zone’s manufacturing purchasing managers’ index fell to a two-year low of 49.0 in August, down from a preliminary reading of 49.7. (Business Insider) •PMI’s contractions in Ireland, France, Italy, Spain and Greece. (Business Insider) •Germany’s manufacturing PMI slowed to its lowest level since September 2009, slumping to 50.9, well below an initial estimate of 52.0. (Business Insider) •US Manufacturing ISM ex-inventory Growth in contraction (Mish) •Japan's PMI fell at three-month low (Financial Times) •PMI Readings in Switzerland, Sweden Drop (Financial Times) •British manufacturing PMI falls 49, a 26-month low, in contraction (MarketWatch) •Germany private consumption fell for first time since Q4 2009, Manufacturing growth slowest in 23 months (Reuters) •Japan Capital Spending Plummets 7.8% In Q2, Expectations were 1% Increase (RTT) •US Construction Declines 3.5% vs. Same period in 2010 (US Census Bureau) •China exports to US contract, PMI barely above contraction (Reuters) •Container traffic at Port of Long Beach drops 3.17% smack in face of normal Christmas season ramp-up (Bloomberg) •Canada GDP unexpectedly declines led by a 2.1% drop in exports(Bloomberg) •Brazil Unexpectedly cuts interest rates .5% to combat recession.62 of 62 Analysts Miss Call on rate cut (Mish) •Taiwan's PMI dropped to 45.2 in August, the lowest reading since January 2009 (Reuters) •German economy grew just 0.1 percent in the second quarter (Reuters) •Switzerland, economy grew at its slowest pace since 2009, as a record strong Swiss franc also bites into exports. (Reuters) •Retail Giant in Australia Warns of Massive Price Deflation and Falling Sales, "Hardest Christmas in Retailer Lives" Coming Up (Mish) •US Zero Jobs Growth, Unemployment Rate Flat at 9.1%; Charts, Graphs, Details (Mish) Ten Things to Remember 1.Prior stimulus in the US is dead, having run its full course 2.There is no incentive in the US Congress for more stimulus 3.Austerity measures have yet to hit Italy and France 4.Austerity measures will continue to bite Spain, Greece, Ireland 5.Germany export machine will die without the rest of Europe 6.QE3 will fail much sooner than QE2 as interest rates already extremely accommodating 7.Gold may respond well to competitive currency devaluation schemes 8.The Eurozone is highly likely to breakup although timing is unknown 9.Global equities and commodities are priced for perfection. 10.Perfection is not happening. Additional Reads Talk of avoiding recession when the global economy is clearly in one and fundamentals are horrendous is sheer lunacy. In case you missed them, please consider .... •US In Recession Right Here, Right Now globaleconomicanalysis.blogspot.com/2011/09/global-recession-right-here-right-now.html
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Post by jacquelope on Sept 2, 2011 20:44:06 GMT -6
Investors are moronically afraid that other investors won't invest in stock market, and maintain the current overvaluation of stocks. What they should be worried about--but apparently have no concern over whatsoever--is the decreasing demand of American consumers due to the rising unemployment and wage suppression that have reduced the buying power of American consumers. They're not worried - they're increasing their investments overseas.
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Post by unlawflcombatnt on Sept 3, 2011 12:31:55 GMT -6
Investors are moronically afraid that other investors won't invest in stock market, and maintain the current overvaluation of stocks. What they should be worried about--but apparently have no concern over whatsoever--is the decreasing demand of American consumers due to the rising unemployment and wage suppression that have reduced the buying power of American consumers. They're not worried - they're increasing their investments overseas.Just another reason why we need to put high Tariffs on imports--at least those from China. Tariffs will make those overseas investments a lot less "profitable," since there is every intention of selling those foreign-made goods in the US. The US is the world consumer of last resort. That needs to end right now. ----------- As an aside, do you ever see an American made car in movie sets from Europe? I've never seen one. As far as I'm concerned, that means we should never see a European-made care in this country, either. I don't fault Americans for buying them. I fault our Government for letting them in.
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Post by graybeard on Sept 3, 2011 13:03:58 GMT -6
Actually, the French movie "A Man and a Woman" was built around a 1966 Mustang. en.wikipedia.org/wiki/A_Man_and_a_WomanFord and GM have been building cars in EU since about 1910, but they're built for the EU market: mostly smaller and more fuel efficient. The Jaguar X-type and a Volvo are built around the Ford Mondeo chassis. I don't have such a problem with products from EU countries that have an equivalent wage cost to ours. Their one big advantage is govt healthcare, which doesn't burden the manufacturers. GB
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Post by jeffolie on Sept 15, 2011 10:14:53 GMT -6
August was the start of the double dip recession .... as will be defined by the government, but the government will hide this for about 2 years through revisions to data. ========================================= [from MarketWatch.com today] 1. Jobless claims rise ... Initial applications for unemployment benefits reach the highest level in nearly two month. 2. U.S. consumer prices jump 0.4% in August 3. Negative Philly Fed index worse than forecast 4. New York–area manufacturing activity dips ------------- Retail Sales: The "Real" Consumer And Their Recession-Level Spending By Doug Short September 14, 2011 The Retail Sales Report released this morning shows that retail sales in August were flat. The first chart shows the complete series from 1992, when the U.S. Census Bureau began tracking the data. I've highlighted recessions and the approximate range of two major economic episodes. The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact. After the cliff-dive of the Great Recession, the recovery in retail sales has taken us (in nominal terms) 2.9% above November 2007 pre-recession peak. advisorperspectives.com/dshort/charts/indicators/Retail-Sales.html?Retail-Sales.gif Here is the same chart with two trendlines added. These are linear regressions computed with the Excel Growth function. advisorperspectives.com/dshort/charts/indicators/Retail-Sales.html?Retail-Sales-regression.gif The green trendline is a regression through the entire data series. The latest sales figure is 7.7% below the green line end point. The blue line is a regression through the end of 2007 and extrapolated to the present. Thus, the blue line excludes the impact of the Financial Crisis. The latest sales figure is 16.9% below the blue line end point. We normally evaluate monthly data on a month-over-month or year-over-year basis. The August no-growth is discouraging, although the 7.2% increase over August 2010 gives a more positive perspective. On the other hand, a snapshot of the larger historical context illustrates the devastating impact of the Financial Crisis on the U.S. economy. The "Real" Retail Story: The Consumer Economy Remains in a Recession How much insight into the state of the economy does the nominal retail sales report offer? The next chart gives us a perspective on the extent to which this indicator is skewed by inflation and population growth. The nominal sales number shows a cumulative growth of approximately 137% since the beginning of this series. Adjust for population growth and the growth drops to 93%. And when we adjust for both population growth and inflation, retail sales are up only 18% over the past two decades. advisorperspectives.com/dshort/charts/indicators/Retail-Sales.html?Retail-Sales-four-views.gif The charts below give us a rather different view of the U.S. retail economy and the long-term behavior of the consumer. The sales numbers are adjusted for population growth and inflation. For the population data I've used the Bureau of Economic Analysis mid-month series available from the St. Louis FRED with a linear extrapolation for the latest month. Inflation is based on the latest Consumer Price Index. August retail sales adjusted accordingly also rose 0.5% month-over-month but only 4.2% year-over-year, about half the nominal increase. advisorperspectives.com/dshort/charts/indicators/Retail-Sales.html?Retail-Sales-adjusted-for-population-and-inflation.gif Consider: During the past 21 years, the U.S. population has grown by over 22% while the dollar has lost about 39% of its purchasing power to inflation. When we adjust accordingly, the rebound in retail sales from the bottom in April 2009 merely gets us back to the per capita spending of May 1999, over twelve years ago. Retail sales have been recovering since the trough in 2009. But the "real" consumer economy, adjusted for population growth is still in recession territory — 9.4% below its all-time high in January 2006. As I mentioned at the outset, nominal retail sales were flat in August. However, gasoline prices essentially act as a tax on economic growth: The more we spend on gasoline, the less we have to spend on other goods. With this concept in mind, let's look at the real, population-adjusted retail sales excluding gasoline. advisorperspectives.com/dshort/charts/indicators/Retail-Sales.html?Retail-Sales-ex-gas-adjusted-for-population-and-inflation.gif By this analysis, adjusted retail sales ex gasoline fell 0.2% in August from the previous month and rose a mere 1.1% year-over-year, but it is down 11.3% below its all-time high in January 2006. The Great Recession of the Financial Crisis is behind us, but a close analysis of retail sales suggests that the recovery has been weak. And in "real" terms — adjusted for population growth and inflation — the consumer economy clearly remains in recession. advisorperspectives.com/dshort/updates/Retail-Sales-in-Review.php--------------- ".... I prefer screwflation over stagflation because of the regressive impact on middle and lower class families' standard of living and that they have no investments that rise with inflation or money printing and in fact usually have their wealth tied up in declining or negative home equity while the upper 20% of earners usually have investments that will rise in 2011 outside of their home equity. Screwflation is my top 2011 topic because its 2011 increase impacts the most Americans even while joblessness will grow on a percentage basis .... " unlawflcombatnt.proboards.com/index.cgi?board=general&action=display&thread=8394
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Post by unlawflcombatnt on Sept 15, 2011 11:38:29 GMT -6
Adjust for population growth and the growth drops to 93%. And when we adjust for both population growth and inflation, retail sales are up only 18% over the past two decades. An 18% growth rate in retail sales over 20 years is less than 1%/year in per capita terms. (That's assuming that inflation is not higher than what the Government claims it is.) Since GDP should parallel Retail Sales growth, it means per capital GDP growth is really averaging less than 1% as well. So much for Reaganomics and its aftermath.
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Post by jeffolie on Sept 26, 2011 16:24:34 GMT -6
August decline according to the FED Conflict of interest Because the FED committed to a very large 'twist' operation ($400 B) and the government benefits from lower inflation numbers ( Social Security cost of living is tied to govt's inflation numbers) plus the FED's portfolio benefits when mortgage rates decline ( FED holds mortgage backed securities), the FED has a CONFLICT OF INTEREST to reduce interest rates and a punishing result when interest rates rise. The below Chicago FED generated National Activity must be suspect to tweaking, manipulating the published data. ================================= Chicago Fed Says Economic Activity Weakened in August By Doug Short September 26, 2011 According to the Chicago Fed National Activity Index for August, economic activity weakened, but the three-month moving average does not signal a recession. Here are the opening paragraphs of the report: Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index decreased to -0.43 in August from +0.02 in July. Contributions from three of the four broad categories of indicators that make up the index declined from July, and three of the four were negative in August. The index's three-month moving average, CFNAI-MA3, ticked down to ¨C0.28 in August from -0.27 in July. August's CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. Likewise, the economic slack reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. [Download PDF News Release] The Chicago Fed's National Activity Index (CFNAI) is a monthly indicator designed to gauge overall economic activity and related inflationary pressure. It is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed's website. The index is constructed so that the historical index average is zero. Postive monthly values indicate above-average growth, negative values indicate below-average growth. The first chart below is based on the complete CFNAI historical series dating from March 1967. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of coincident economic activity. I've also highlighted official recessions. see chart: advisorperspectives.com/dshort/ch....o-Fed-CFNAI.gifFor a clearer look at the recent behavior of the index, here is a closeup view since 2007. see chart: advisorperspectives.com/dshort/ch....-since-2007.gifThe next chart highlights the -0.7 level. The Chicago Fed explains: When the CFNAI-MA3 value moves below -0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. Conversely, when the CFNAI-MA3 value moves above -0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended. With the exception of the 1973-75 recession, the -0.7 level has coincided fairly closely with recession boundaries. The 1973-75 event was perhaps an outlier because of the rapid rise of inflation following the 1973 Oil Embargo. Otherwise a cross below the -0.7 level has synchronized within a month or two of a recession start. A cross above the level has lagged recession ends by 2-4 months. see chart: advisorperspectives.com/dshort/ch....-indicator .gif The next chart includes an overlay of GDP, which reinforces the accuracy of the CFNAI as an indicator of coincident economic activity. see chart: advisorperspectives.com/dshort/ch....NAI-and-GDP.gifHere's a chart of the CFNAI without the MA3 overlay ¡ª for the purpose of highlighting the high inter-month volatility. Consider: the index has ranged from a high 2.57 to a low of -4.78 with a average monthly change of 0.59. That's 8% of the entire index range! see chart: advisorperspectives.com/dshort/ch....-volatility.gifFurther underscoring the volatility is the roller-coaster list of CFNAI monthly headlines from 2010 forward. Increased Sharply (January 2010) Slowed (February 2010) Improved (March 2010) Continued to Improve (April 2010) Continued to Expand (May 2010) Declined (June 2010) Rebounded (July 2010) Weakened (August 2010) Slowed Further (September 2010) Picked Up (October 2010) Slowed (November 2010) Improved (December 2010) Slower (January 2011) Near Average (February 2011) Improved (March 2011) Weakened (April 2011) Remained Below Average (May 2011) Again Below Average (June 2011) Improved (July 2011) Weakened (August 2011) As monthly chart depicts and the headline verbs reinforce, it's unwise to read very much in the data for any specific month. The 3-month moving average is the number to watch. The Long-Term Economic Trend In the final chart I've let Excel draw a linear regression through the CFNAI data series. The slope confirms the casual impression of the previous charts that National Activity, as a function of the 85 indicators in the index, has been declining since its inception in the late 1960s, a trend that roughly coincides with the transition from manufacturing to a post-industrial economy in the information age. see chart: advisorperspectives.com/dshort/ch....-regression.gif advisorperspectives.com/dshort/up....ivity-Index.php
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Post by unlawflcombatnt on Sept 26, 2011 22:48:38 GMT -6
Never saw the movie. Not surprising, since it was a "French" movie. I still haven't seen any American movies showing US cars in Europe--not a one. That actually underlies my point--the cars were built in the EU. As far as I'm concerned, those are foreign-made cars, made by foreign workers. Unlike you, I have HUGE problems with that. The EU countries put VATs on their goods which reduce their prices in the US, and raise them in the European Union. That's has the same effect on US imports & exports as a European Union Tariff on American imports. That's completely un-acceptable. As I've stated and elaborated on previously, VATs have a selectively beneficial effect on relatively small countries (which applies to ALL EU countries), compared to the US. Their export potential to the $12 trillion US consumer market is huge, compared to the domestic market of any single EU country (Germany being the largest at ~80 million, vs. the US's 310 million.) The EU does not play fair on trade, and neither should we when dealing with them. We need to slap compensatory Tariffs on everything coming out of Germany, Britain, and France--as they have overpriced US goods in their import markets while functionally subsidizing their exports to the US market. But again, I would go 1 step further than "compensatory." I'd slap Tariffs of EU goods that were 20% ABOVE being compensatory to offset their 40+ years of unfair trade and stealing part of the US consumer market from American producers (and workers).
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Post by jeffolie on Sept 27, 2011 9:52:10 GMT -6
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Post by jeffolie on Sept 30, 2011 8:10:02 GMT -6
August again shows recession level data".... Real disposable incomes fell 0.3% in August after a 0.2% decline in July. This is the first back-to-back decline since July-August 2009. "....Adjusted for inflation, real spending on goods decreased 0.2%, while spending on services rose 0.1%. " ... Real spending on durable goods increased 0.1% after surging 2.2% in August. Spending on non-durable goods decreased 0.4% after a falling 0.5% in August. ==================================================== Sept. 30, 2011 Incomes fall for first time in almost two years Wages decline; savings rate falls to maintain spending growth (MarketWatch) — Americans dipped into their savings to spend in August as their incomes fell for the first time in almost two years, the Commerce Department estimated Friday. This pushed the savings rate down to the lowest level since November 2009, the government said. Income fell a seasonally adjusted 0.1% in August, which was the first decline since October 2009. Wages and salary income, which is key for consumer spending, decreased 0.2% in August. It was the biggest decline since November 2010. Consumer spending increased a seasonally adjusted 0.2% in August, down from a revised 0.7% gain in July. Real consumer spending, that is, adjusted for inflation, was unchanged in August. Wall Street economists had expected a weak report, in part because of the dismal August nonfarm payroll data released earlier in the month that showed a decline in average hourly earnings and no job creation. Economists surveyed by MarketWatch expected a flat reading in income and a 0.1% gain in spending. With spending rising faster than incomes, the personal savings rate fell to 4.5% of disposable income from 4.7% in July. It was the lowest savings rate since November 2009. The economy grew at a sluggish 1.3% rate in the second quarter as consumer spending slowed to a 0.7% rate, the slowest pace since the fourth quarter of 2009. Despite Friday’s weak report, economists expect a faster pace of spending in the third quarter because of the jump in July that was led by auto purchases Inflation moderated slightly in August. The core personal consumption expenditure price index was up 0.1% in August, below economist expectations of a 0.2% gain and the smallest increase since March. On a year-on-year basis, the core PCE index is up 1.6% through August. The headline PCE price index rose 0.2% in August compared with July. Headline inflation is up 2.9% in the past year, up from 2.8% in July. Real disposable incomes fell 0.3% in August after a 0.2% decline in July. This is the first back-to-back decline since July-August 2009. Adjusted for inflation, real spending on goods decreased 0.2%, while spending on services rose 0.1%. Real spending on durable goods increased 0.1% after surging 2.2% in August. Spending on non-durable goods decreased 0.4% after a falling 0.5% in August. . www.marketwatch.com/story/incomes-fall-for-first-time-in-almost-two-years-2011-09-30
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Post by jeffolie on Sept 30, 2011 8:31:40 GMT -6
Real GDP Per Capita, Year-over-Year Change and the Next Recession By Doug Short September 30, 2011 Note from dshort: This commentary is an update of my original post last month based on the Q2 Second Estimate of GDP. The Third Estimate, released yesterday, does not change the grim outlook for real per-capita GDP or the recession warning implicit in the latest real GDP YoY percent change. -------------------------------------------------------------------------------- My monthly updates on GDP and its revisions feature column charts illustrating real GDP. These have the advantage of highlighting the patterns of change and the correlation between negative GDP and recessions. Click for image advisorperspectives.com/dshort/updates/Real-GDP-Per-Capita.php Real GDP Per-Capita Growth For a better understanding of the historical context, here is a chart of real GDP per-capita growth since 1960. For this analysis I've chained in current dollars for the inflation adjustment. The per-capita calculation is based on the mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence my 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data series is available in the FRED series POPTHM. I used quarterly population averages for the per-capita divisor. Recessions are highlighted in gray. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale. Click for image advisorperspectives.com/dshort/updates/Real-GDP-Per-Capita.php The real per-capita series gives us a better understanding of the depth and duration of GDP contractions. As we can see, since our 1960 starting point, the recession that began in December 2007 is associated with a deeper trough than previous contractions, which perhaps justifies its nickname as the Great Recession. In fact, at this point, 13 quarters beyond the 2007 GDP peak, real GDP per capita is as far off the all-time high as the trough that followed the Oil Embargo in 1974-1974. We can also see that the recovery from the last recession has flattened out over the past three quarters. Year-Over-Year (YoY) GDP Percent Change and Current Recession Risk Economists vary widely in their opinions about the present-day recession risk. The official call on recessions, of course, is the domain of the National Bureau of Economic Analysis, which makes the determination on recession start and end dates several months — sometimes more than a year — after the fact. The next chart shows the YoY change in real GDP from the earliest quarterly data in 1947. I've again highlighted recessions. The red dots show the YoY real GDP for the quarter in which the recession began. The blue dot shows the latest YoY real GDP. Note: Unlike the previous chart, this one does not include a per-capita adjustment. Click for image advisorperspectives.com/dshort/updates/Real-GDP-Per-Capita.php As the chart illustrates, the latest YoY real GDP, at 1.6% (revised upward from 1.5% in last month's GDP estimate), is below the level at the onset of all the recessions since the first quarterly GDP was calculated — with one exception: The six-month recession in 1980 started in a quarter with lower YoY GDP (1.4% versus today's 1.6%). And only on one occasion (Q1 2007) has YoY GDP dropped below 1.6% without a recession starting in the same quarter. In that case the recession began three quarters later in December 2007. In his 2011 Jackson Hole speech, Chairman Bernanke observed that "growth in the second half looks likely to improve." Our look at YoY GDP percent change suggests that we must indeed see stronger second half growth to avoid the recession that now appears to be a definite risk. If Q3 real GDP shows a continuation of the current trend, the NBER will likely pick a month in Q2 as the beginning of a new recession. advisorperspectives.com/dshort/updates/Real-GDP-Per-Capita.php
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Post by jeffolie on Sept 30, 2011 15:48:47 GMT -6
ECRI founder Lakshman Achuthan calls this a new recession, I agree the govt's agency will call this a recession when the agency finally declares it in as long as 2 years from now. ECRI founder Lakshman Achuthan interpretation of ECRI's often referrenced charts has an excellent track record while its weekly chart has rarely produced a bad call if one bases the call on the government's agency which now declares when recessions starts. Lakshman Achuthan interprets these below. ====================================== Economy faces new recession: ECRI Investors should expect frequent downturns, sharp market volatility (MarketWatch) — The U.S. economy is headed for another recession that government intervention cannot prevent, and such downturns will occur more often, the Economic Cycle Research Institute said Friday. “This is a new recession; it’s not a double dip recession,” said Lakshman Achuthan, co-founder of ECRI, in a telephone interview. “We can’t avert it.” “We are seeing the weakness spread widely,” Achuthan said. “There’s a contagion, like a wildfire among the forward-looking indicators that’s not going to be snuffed out. The nature of a recession is not a statistic. It’s a vicious feedback loop. Sales fall, production falls, income falls and that depresses sales. We’re in that and it’s going to run its course.” Weekly Leading Index is weak. Government’s effort to stimulate the economy, coming from both the Federal Reserve and the Obama administration, is a case of too little, too late, Achuthan observed. Politicians and central bankers simply can’t move as fast as the business cycle, he said. “Even in the best of times, government intervention is too small; it’s dwarfed by the business cycle,” Achuthan said. “Earlier this year these leading indicators were turning down and starting to weaken. Maybe there was a slim chance back then. Today it’s water under the bridge.” Read more: Debt-crisis expert Satyajit Das sees more troubles for Europe. Expect more frequent recessions A second recession in as many years will lead to higher unemployment, lower tax revenue, and poses obvious challenges for stocks, but investors should get used to more frequent up-and-down cycles, Achuthan said. “We are in an era of more frequent recessions,” Achuthan noted. The long, benevolent expansions of the 1980s and 1990s that created a generation of stock investors and an equity culture in the U.S. are relics of the past, he said. Going forward, he added, business cycles will be shorter and sharper — as was true in the 1970s and in fact for much of the country’s history. Accordingly, since economic recoveries will be more fragile and easily derailed, investors should expect continued heightened volatility for stocks, he explained, “If you have a big negative shock it can take a mild- or even medium- intense recession and make it really bad,” Achuthan said. That said, no indicators currently are suggesting the economy faces a Great Recession comparable to 2008, Achuthan added. “But I can’t rule it out either,” he said, “because the Great Recession was great in part because of the shocks” including the failure of Lehman Brothers in September 2008 that froze the financial markets. Nowadays, Achuthan said, the debt crisis in Europe is the most obvious potential trigger for a protracted breakdown in the global economy. Still, he said, “If that crisis is somehow averted, it doesn’t mean were OK. We’re still going to have a recession. If that crisis is not averted, that recession has a likelihood of being worse.” Investors, meanwhile, will have to adjust their thinking about how they buy and sell stocks, he added. “Bear markets are associated with recession,” Achuthan said. “If you have frequent recessions the equity risk premium gets elevated and can’t come down.” In that scenario, stocks tend to trade in a range and investors have to be more nimble and more watchful. It’s an environment not unlike the sideways market of 1966-1982. In those years, said Achuthan, “You could make a fortune if you weren’t buying and holding.” www.marketwatch.com/story/economy-faces-new-recession-ecri-2011-09-30?dist=afterbell
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Post by jeffolie on Sept 30, 2011 16:06:52 GMT -6
ECRI Makes a Recession Call By Doug Short September 30, 2011 Today the ECRI publicly announced that the U.S. is tipping into a recession. Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there's nothing that policy makers can do to head it off. ECRI's recession call isn't based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down — before the Arab Spring and Japanese earthquake — to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes. In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not "soft landings." Read the report here. The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted another week-over-week decline, now at -7.2 from last week's -6.7. The interim high of 8.1 was set in the week ending on April 15. For a close look at this movement of this index in recent months, here's a snapshot of the data since 2000. Click for image advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php Now let's step back and examine the complete series available to the public, which dates from 1967. The ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions. Click for image advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turned negative 17 times when no recession followed, but 14 of those declines were only slightly negative (-0.1 to -2.4) and most of them reversed after relatively brief periods. Three other three negatives were deeper declines. The Crash of 1987 took the Index negative for 34 weeks with a trough of -6.8. The Financial Crisis of 1998, which included the collapse of Long Term Capital Management, took the Index negative for 23 weeks with a trough of -4.5. The third significant negative came near the bottom of the bear market of 2000-2002, about nine months after the brief recession of 2001. At the time, the WLI seemed to be signaling a double-dip recession, but the economy and market accelerated in tandem in the spring of 2003, and a recession was avoided. The question had been whether the WLI decline that began in Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The eight quarters of positive GDP since the end of the last recession supports the ECRI stance. The WLI Versus Other Macroeconomic Indicators For additional perspective on the performance of this indicator, see Comparing the ECRI Weekly Leading Index with Two Key Competitors, which highlights the curious behavior of the WLI following the 2008 Financial Crisis. Click for image advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php The ECRI Weekly Leading Index appears to be more sensitive to upturns than either the Philly Fed's ADS Business Conditions Index (ADS) or the Chicago Fed's Current Activity Index. advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php
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Post by jeffolie on Oct 2, 2011 11:15:28 GMT -6
Wages/income -.4% adjusted for population & inflation (govt's inflation number) Consumers break into 2 buying groups of almost equal weight: 1. below the rich class merely account for about 39% of consumer spending 2. while rich consumers almost equal their portion of spending at about 37% ( ' U.S. Economy Is Increasingly Tied to the Rich ' blogs.wsj.com/wealth/2010/08/05/us-economy-is-increasingly-tied-to-the-rich/ ). Buying group 2. rich consumers still get paid so well that they can shrug off 'temporary' set backs in income and investments resulting in the rich consumers reducing the spending often only if their individual situations were catastrophically changed. Buing group 1. below the rich class respond more quickly to declining wages/income. The "Wages/income -.4% adjusted for population & inflation (govt's inflation number)" does not break down to distinquish these 2 almost equal buying/consumer groups. My view is that the 'average American has been in a regular depression' since at least the 2008 collapse and that "everything the ‘average American family’ buys goes up in price and everything they own goes down in value. ... I prefer screwflation over stagflation because of the regressive impact on middle and lower class families' standard of living and that they have no investments that rise with inflation or money printing and in fact usually have their wealth tied up in declining or negative home equity while the upper 20% of earners usually have investments that will rise in 2011 outside of their home equity. ..." ===================================== "Real" Disposable Income Per Capita: Down 0.4% from Last Month By Doug Short September 30, 2011 Earlier today I posted my monthly update of the year-over-year change in the Personal Consumption Expenditures (PCE) price index since 2000. My focus was on PCE data as a measure of inflation. Now let's look at the PCE data to understand what the latest numbers are telling us about a key driver of the U.S. economy: "Real" Disposable Income Per Capita. The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. Click for image advisorperspectives.com/dshort/updates/DPI-Monthly-Update.php The Bureau of Economic Analysis (BEA) use the average dollar value in 2005 for inflation adjustment. But the 2005 peg is arbitrary and unintuitive. For a more natural comparison, let's compare the nominal and real growth in per capita disposable income since 2000. Do you recall what you we're doing on New Year's Eve at the turn of the millennium? Nominal disposable income is up 46.6% since then. But the real purchasing power of those dollars is up a mere 13.9%. In fact, real disposable personal income is at a level first attained in October 2006 and remains about 1.2% below the level at the beginning the 2007-2009 recession. Real DPI has remained essentially flat for the past 12 months, down 0.5%. Click for image advisorperspectives.com/dshort/updates/DPI-Monthly-Update.php The mainstream media focuses on nominal disposable income with little or no attention to population or inflation adjustment. Thus today's business headlines speak of a 0.1 percent MoM decline in disposable income versus the 0.4% decrease when population and inflation are included. The "real" story in the latest PCE data is one of continued economic weakness. advisorperspectives.com/dshort/updates/DPI-Monthly-Update.php
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Post by jeffolie on Oct 12, 2011 15:43:57 GMT -6
Pulse of Commerce Index: "Alarming News" for Q3 and Beyond By Doug Short October 12, 2011 The latest Ceridian-UCLA Pulse of Commerce Index (PCI), a measure of the economy based on diesel fuel consumption, is now available. The published report highlights the 1.0% decline in September with the subtitle "This is alarming news for the third quarter and beyond." Here is an excerpt from the report followed by a pair of charts to illustrate the behavior of this indicator, the second of which adjusts for population growth. The Ceridian-UCLA Pulse of Commerce Index (PCI), issued today by the UCLA Anderson School of Management and Ceridian Corporation fell 1.0 percent in September on a seasonally and workday adjusted basis, following a 1.4 percent decline in August and a 0.2 percent decline in July. In the last three months, the PCI has declined at an annualized rate of 10 percent per year as illustrated in the figure above. This rate of decline has been exceeded only in the deep recession of 2008/09, and equaled only once outside of a recession in March 2000. In other words, since June, trucking activity has been receding at a pace that would be expected to show up in other economic measures soon. Two or three more months like this would confirm an official recession (PDF full report) The first chart shows the PCI index unadjusted and seasonally adjusted. As we can readily observe, the index had been trending up since end of the Great Recession, but it has yet to achieve the highs of the immediate pre-recession months and now appears stalled. In fact, we're tracking at approximately the same range as November 2005. Click for an image advisorperspectives.com/dshort/updates/Pulse-of-Commerce-Index.php In the chart below the 3-month moving average of the PCI is shown with the dotted blue line. The solid line is the same moving average of the data series adjusted for population growth based on the Bureau of Economic Analysis mid-month population data, which is available from the St. Louis Federal Reserve here. Click for an image advisorperspectives.com/dshort/updates/Pulse-of-Commerce-Index.php Interpreting the Data "Alarming news for the third quarter and beyond" is a major theme in the latest Ceridian-UCLA report, a theme that echoes, with less dramatic certainty, the latest recession call of the ECRI. The workday and seasonally adjusted three-month moving average of the index is in fact stalled at the pre-recession level of November 2005. However, on a population adjusted basis, the current index level is about where it was in February 2004. advisorperspectives.com/dshort/updates/Pulse-of-Commerce-Index.php
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Post by jeffolie on Oct 17, 2011 14:28:03 GMT -6
Denninger's rant leaves no doubt, like my August call that a recession started most likely in August " ... Here Comes The Double Dip ... the "recovery" meme has just run out of gas.... This report is just flat-out terrible ..." ===================================== 2011-10-17 Here Comes The Double Dip (Empire) Sorry folks, the "recovery" meme has just run out of gas.... The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to deteriorate in October. The general business conditions index remained negative and, at -.5, was little changed. The new orders index hovered around zero, indicating that orders were flat, while the shipments index rose above zero to 5.3. The inventories index stayed below zero, a sign that inventories declined. The indexes for both prices paid and prices received fell, but remained positive, suggesting that price increases moderated. The index for number of employees rose several points but was at a relatively low level of 3.4, while the average workweek index was negative for a fifth consecutive month. The future general business conditions index dropped six points to 6.7, its lowest level since early 2009, while future indexes for prices paid and prices received declined. Yuck. There is utterly nothing to indicate success in "reflating" or "restarting" the economy here. Nothing. This report is just flat-out terrible, no ifs ands or buts. I wish there was some other way to put this, but there isn't. What's worse is that the composite is now sitting just about where it was in 2010 and just before it all went to hell in 2008. So what we have here is more validation for my beliefs: The Fed delayed but did not avoid the contraction in 2010 with its "QE2", and in engaging in that program it weakened both itself and the government in general by destroying both's ability to respond in the future to financial stress. Now we have the stress in Europe and elsewhere and the economy is falling apart into an environment where the people know they got rooked. This is not a good situation and of course those in Congress that could have stood up for what's right rather than what's politically expedient didn't do so. You're about to get the bill for your stupidity Washington. market-ticker.org/akcs-www?post=196083
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Post by jeffolie on Oct 19, 2011 9:53:48 GMT -6
Denninger's rant leaves no doubt, like my August call that a recession started most likely in August " ... Here Comes The Double Dip ... the "recovery" meme has just run out of gas.... This report is just flat-out terrible ..." ===================================== 2011-10-17 Here Comes The Double Dip (Empire) Sorry folks, the "recovery" meme has just run out of gas.... The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to deteriorate in October. The general business conditions index remained negative and, at -.5, was little changed. The new orders index hovered around zero, indicating that orders were flat, while the shipments index rose above zero to 5.3. The inventories index stayed below zero, a sign that inventories declined. The indexes for both prices paid and prices received fell, but remained positive, suggesting that price increases moderated. The index for number of employees rose several points but was at a relatively low level of 3.4, while the average workweek index was negative for a fifth consecutive month. The future general business conditions index dropped six points to 6.7, its lowest level since early 2009, while future indexes for prices paid and prices received declined. Yuck. There is utterly nothing to indicate success in "reflating" or "restarting" the economy here. Nothing. This report is just flat-out terrible, no ifs ands or buts. I wish there was some other way to put this, but there isn't. What's worse is that the composite is now sitting just about where it was in 2010 and just before it all went to hell in 2008. So what we have here is more validation for my beliefs: The Fed delayed but did not avoid the contraction in 2010 with its "QE2", and in engaging in that program it weakened both itself and the government in general by destroying both's ability to respond in the future to financial stress. Now we have the stress in Europe and elsewhere and the economy is falling apart into an environment where the people know they got rooked. This is not a good situation and of course those in Congress that could have stood up for what's right rather than what's politically expedient didn't do so. You're about to get the bill for your stupidity Washington. market-ticker.org/akcs-www?post=196083Another blog states that manufacturing is unchanged near or just below zero ... also interpreting the report as bad without relief: -------------------------- "... The good news is this hasn't gotten much worse. The bad news, the index has been hovering below the 0 line for the last few months, and there is little evidence we'll see a strong pop in the next month, or maybe through the end of the year. None of these are good developments, especially considering that manufacturing was a primary driver of the expansion. ... " see more at: bonddad.blogspot.com/
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Post by jeffolie on Oct 19, 2011 20:37:38 GMT -6
How good is this recession call?" When we look closely at these confidence indictors, we see that the shift in mood began well before the events ... if real household income is a key cause, there is not yet a hint of light in the distance to mark the end ... confidence peaked in 2000 — well before the housing-bubble peak in 2005, and the market peak in 2007, and of course the Financial Panic of 2008 ... " ================================= Consumer, Why So Gloomy? By Doug Short October 19, 2011 Yesterday the NY Times posted a commentary with the speculative title Gloom Grips Consumers, and It May Be Home Prices. The article appeared in print this morning, and it has been widely circulated around the Internet, notably by CNBC. The text is filled with poignant stories of personal struggles since the housing peak and subsequent Financial Crisis. Interestingly enough, today CNBC also published a Reuters item — one (like this commentary) with a question tease as the title: Has Market Sentiment Diverged From Reality? Predictably enough the Reuters piece takes an ambivalent view, but it includes the obligatory warning that negativity could "push the global economy over the edge." Consumer sentiment and small-business-owner optimism are topics I track monthly on this website, and my view of the data puts the secular peak in confidence much earlier than the crash in housing prices and 2008 Financial Crisis. Check the charts below for the all-time high in consumer confidence, whether you use the Reuters/Michigan Consumer Sentiment Index or the Conference Board Consumer Confidence Index. Click image advisorperspectives.com/dshort/commentaries/Consumer-Why-So-Gloomy-111019.php Click image advisorperspectives.com/dshort/commentaries/Consumer-Why-So-Gloomy-111019.php Both show that confidence peaked in 2000 — well before the housing-bubble peak in 2005, and the market peak in 2007, and of course the Financial Panic of 2008. The Small Business Optimism Index, which has a substantial residential real estate component, was buoyed by the housing bubble. It peaked in late 2004, just before the major housing indexes topped out. Click image advisorperspectives.com/dshort/commentaries/Consumer-Why-So-Gloomy-111019.php When we look closely at these confidence indictors, we see that the shift in mood began well before the events focused on in the NY Times and Reuters articles. There is, however, another key data series that better matches the contours of the consumer confidence charts, namely the trend in real (inflation-adjusted) household earnings. Click image advisorperspectives.com/dshort/commentaries/Consumer-Why-So-Gloomy-111019.php Click image advisorperspectives.com/dshort/commentaries/Consumer-Why-So-Gloomy-111019.php As these two charts illustrate, the 21st century has witnessed a loss of purchasing power for most households — a combination of reduced nominal incomes and the impact of inflation. In fact, the average income for U.S. households in their peak earning years has fallen over 13 percent in real terms since the beginning of the new millennium. Click image advisorperspectives.com/dshort/commentaries/Consumer-Why-So-Gloomy-111019.php There is no question that the decline in home values and the festering wounds of the Financial Crisis have both contributed significantly to the decline in consumer confidence. But the origin of the grim mindset of the U.S. consumer correlates with the sustained erosion in household incomes that began years before events discussed in the NY Times and Reuters articles. The consumer has been experiencing a prolonged bout of tunnel vision. And if real household income is a key cause, there is not yet a hint of light in the distance to mark the end. advisorperspectives.com/dshort/commentaries/Consumer-Why-So-Gloomy-111019.php
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Post by unlawflcombatnt on Oct 19, 2011 21:48:24 GMT -6
Interesting graphs. I wasn't aware that consumer confidence had been on such a long-term nose-dive. It kind of parallels the inflation-adjusted value of the stock market. University of Michigan Consumer Confidence is approximately ½ of what it was in 2000. Attachments:
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Post by jeffolie on Oct 20, 2011 13:58:45 GMT -6
The charts show that Profit Margin Squeeze peaks lead recessions, bear markets Yes, this interpretation also has 1 false signal among the last shown 6 recessions. Combined with the recent 'consumer sentiment' charts which have an underlying fundamental cause of declining real wages, this recent peak of Profit Margin Squeeze reinforces my confidence that August 2011 will be near the beginning of a new recession as define by the governments approved agency that now has the responsibility for declaring business cycles (unfortunately this agency takes a long time to sort through revisions of government economic numbers resulting in as much as a 2 year delay before declaring a business peak and/or recession). ==================================================================== Profit Margin Squeeze Remains a Challenge By Doug Short October 20, 2011 The two charts below offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index. The other is an indicator constructed from two data series in the Philadelphia Fed's Business Outlook Survey through today's release. It is the spread between the Philly Fed's prices paid (input costs) and received (prices charged) data. A major risk factor for margin squeeze is the increase in commodity prices over the past several months with the price of oil and gasoline as the dominant factor. Commodity prices have moderated, but the squeeze remains in evidence. So let's take a broader view of these two indicators by viewing them within the context of inflation as measured by the Consumer Price Index. As the first chart clearly shows, the all-time high in the PPI crude-to-finished-goods ratio was in July 2008, the same month that crude oil and gasoline prices in the U.S. hit their all-time highs. The previous ratio high was in the summer of 1973, a few months before the outbreak of the October Arab-Israeli War and the Oil Embargo. Inflation had already been rising in a series of waves since the mid-1960s. But Middle-East events of 1973 were the primary trigger for the nearly ten years of stagflation that followed. The September 2011 ratio is at the 98th percentile of the 775 data points in this series, up from 97 in August and 96 in July. The interim high since the 2008 peak was the 99th percentile in April. Click image advisorperspectives.com/dshort/updates/Profit-Margins-and-Inflation-Risk.php The Philly Fed Prices Paid Minus Prices Received Index is an extremely volatile series, which I've illustrated by using dots for the monthly data points. The volatility is so great that the value for any specific month can't be taken very seriously. However, to highlight the underlying pattern, I've included a 12-month moving average (MA). The date callouts show that the comparable levels in the past were associated with inflationary peaks. The latest ratio has dropped to the 67th percentile of the 522 monthly data points in this series. However, the 12-month MA is only 6.2% below the all-time high set in March. Click image advisorperspectives.com/dshort/updates/Profit-Margins-and-Inflation-Risk.php By official government metrics, the CPI and PCE, inflation is not a near-term threat. In fact, the Federal Reserve has been working hard to raise the level of core inflation. Of course, there are many differences between the inflationary decade of the 1970s and the present, not least of which is the rate of unemployment. In August 1973 (first chart above), unemployment was at 4.8%. The latest unemployment number from the Bureau of Labor Statistics is 9.1%. Also, U.S. demographics today are quite different. The oldest Boomers were turning 27 in 1973. They were at the beginning of their careers with decades of wage increases in their expectations. This year they are turning 65, and many are already on Social Security as their main source of income. At present, in light of the unemployment rate and the ongoing demographic shift, rises in commodity prices probably pose more risk of continuing margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to envision in the U.S. economy of this decade. On the other hand, the volatility of commodity prices, especially oil, keeps the topic of profit margin squeeze on the table. The next Philly Fed Business Outlook Survey will be released on November 17, 2011. advisorperspectives.com/dshort/updates/Profit-Margins-and-Inflation-Risk.php
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Post by jeffolie on Oct 20, 2011 15:17:52 GMT -6
update Consumer Confidence in October = collapsing, 'direction of economy' "... October Economic Expectations dropped to -45 after -34. Not much to explain here: this was the lowest print since February 2009. As Bloomberg economist Brusuelas says, "Consumer confidence may be better predictor of direction of economy than spending." ... " ============================================================================= Someone forgot to tell the US Consumer that "Europe is fixed" and that "nobody has heard of Die Welt" according to Jim Cramer, who incidentally said back in May 2008 "how anyone can think housing will get worse from here is beyond me." Because according to the only non-biased and hence non-market moving consumer confidence poll, that of Bloomberg, October Economic Expectations dropped to -45 after -34. Not much to explain here: this was the lowest print since February 2009. As Bloomberg economist Brusuelas says, "Consumer confidence may be better predictor of direction of economy than spending." click for 6 year graph from bloomberg: www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/10/Bberg%20Expectations.jpgOther findings in the weekly poll: Weekly Bloomberg Comfort Index -48.4 for week of Oct. 16 vs -50.8 prior week; two-month high Sentiment among highest earners ($100K+) -11.1 vs prior -9.2 Public “now expects economic conditions to deteriorate regardless of the recent increase in economic activity,” says Bloomberg economist Joseph Brusuelas Seeing “consumer conundrum” where confidence remains relatively bleak despite increase in overall consumption May tap savings, lines of credit to replace worn-out durables, then revert back to behavior consistent paring down www.zerohedge.com/news/us-consumer-hopium-drops-february-2009-levels
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Post by jeffolie on Oct 25, 2011 10:21:31 GMT -6
Oct. consumer confidence weak at recession levels Very interestingly ... the current uptrend in stocks will spur the rich consumers ( about 37% of consumer spending) A stock market decline would hamper the rich consumers only if individually they can not borrow to keep up appearances among their rich circle of friends. ======================================== Oct. 25, 2011 Oct. consumer confidence weakest since March 2009 Confidence Board gauge back at recession levels; expectations (MarketWatch) — Consumers became more pessimistic about both current and future conditions in October, as consumer confidence dropped to the lowest level since March 2009, the Conference Board reported Tuesday. The nonprofit organization said its consumer-confidence index declined to 39.8 in October from a September level of 46.4, which was upwardly revised from a prior estimate of 45.4. Economists polled by MarketWatch had expected a reading of 46 for October. By contrast, when the economy is growing at a good clip, confidence readings are at 90 and above. “Consumer confidence is now back to levels last seen during the 2008-2009 recession,” said Lynn Franco, director of the Conference Board’s consumer research center, in a statement. “Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased. Consumers’ assessment of present-day conditions did not fare any better.” Still, coming readings may improve from October’s “horrible” result, said Ian Shepherdson, chief U.S. economist at High Frequency Economics. “In our view the decline in the index reflects the [mid-September through early October] plunge in stock prices, during which [the S&P 500 index] fell by nearly 10%,” Shepherdson wrote in a research note. “The market has since recovered all this ground, reaching its highest level since early August.” Consumer spending makes up the largest portion of the economy, and economists watch confidence readings to get a feel for the direction of spending. Still, analysts have noted a recent breakdown in the relationship between sentiment and spending. Further, as the labor market has been steadily, though slowly, adding jobs since 2010, some have been expecting somewhat stronger confidence results. However, “the job market, the housing market, and the overall slow recovery in the U.S. economy are clearly cutting deeply into confidence levels,” wrote Jennifer Lee, senior economist at BMO Capital Markets, in a research note. In financial markets, investors drove stocks lower Tuesday, as the S&P 500 /quotes/zigman/3870025 SPX -0.98% and other equity indexes lost more than 1% on Wall Street, while the price of the benchmark 10-year Treasury note /quotes/zigman/4868283 10_YEAR -2.86% rose in a flight-to-safety bid. Read more on the reversal in U.S. stocks after their recent rally. Details suggest dogged doldrums The Conference Board’s expectations barometer fell to 48.7 in October from 55.1 in September. The percentage of those who expected business conditions to be “better” in six months declined, while most expected the same conditions. Also, more expected income to decrease, while most expect the same. Meanwhile, the present-situation index fell to 26.3 in October from 33.3 in September. Those saying business conditions are “bad” rose to 43.7% from 40.5%, while the rest said conditions are either “normal” or “good.” Similarly, those saying jobs are “not so plentiful” rose to 49.5% from 45%. Those saying jobs are “hard to get” declined to 47.1% from 49.4%, and those saying jobs are “plentiful” fell to 3.4% from 5.6%. According to the Conference Board, those with plans to buy a home within six months fell to 3.9% in October from 4.7% in September. And the proportion of those with plans to buy an automobile ticked lower as well, to 11% from 11.1%. Those planning to buy major appliances rose to 45.9% from 40.8%, however. Inflation expectations for 12 months remained at 5.8%. www.marketwatch.com/story/oct-consumer-confidence-weakest-since-march-2009-2011-10-25
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