While nothing will stop Wall Street’s sales force and CNBC shills from hyping the lie that the worst is past, we think you’d have to be a fool to bet on it.
-Rick Ackerman
Consumer borrowing unexpectedly surges in March
WASHINGTON (AP) -- Consumer borrowing rose in March at the fastest pace in four months, more than double the increase of the previous month, in what was seen as a sign of rising economic stress.
The Federal Reserve reported Wednesday that consumers increased their borrowing at an annual rate of 7.2 percent, compared with a 3.1 percent rate of increase in February.
The gain was much larger than economists had been expecting and reflected strong borrowing on credit cards and also in the category that includes auto loans. The increase in consumer debt totaled $15.3 billion at an annual rate in March, much bigger than the $6 billion increase that economists had been expecting.
Economists said consumers were being forced to make greater use of their credit cards during hard economic times when they are being battered by job losses, soaring gasoline prices and higher food costs.
"This represents distressed borrowing. Consumers need cash and they have turned back to their credit cards to fill the void left by lost jobs and weaker incomes," said Mark Zandi, chief economist at Moody's Economy.com.
http://biz.yahoo.com/ap/080507/consumer_credit.html
Retailers report mixed results in April
NEW YORK (AP) — Consumers gave some of the nation's retailers a little relief in April after months of dismal sales, but business was helped by heavy discounting that could hurt first-quarter earnings.
Sales reports issued early Thursday showed that shoppers — who are contending with rising gas prices, sagging home and worries about their jobs — bought the basics at discounters and wholesale clubs. That made Wal-Mart Stores Inc. and Costco Wholesale Corp. among the top performers. Most mall-based apparel stores, whose merchandise falls into the category of discretionary items, struggled.
Analysts expect only a modest uptick in sales in May and June as consumers spend tax rebate checks that are starting to arrive.
http://ap.google.com/article/ALeqM5iUDvPEJ3EGEZ-t-4PjFke9ELUiuQD90HEO6O0
I don't know how truly "unexpected" the rise in Consumer Debt was in March, but unexpected or not, Americans were paying with plastic in March at an alarming rate. Any "strength" in retail sales in April were most likely bought and unpaid for with even more plastic. It is interesting to note that consumers are literally being forced to reign in "discretionary spending" at the rising expense of necessities. Heck, for all we know, consumers were spending their "tax rebate checks" before they even got them, with the plan to pay for the goods next month...by making the minimum payment on their credit card balance, of course. "Economic growth" bought and unpaid for is doomed to horrific failure.
It is a fact that 1st Qtr GDP numbers were goosed by high inventories. Retailers have been forced to deep discount their merchandise just to create some cash flow. Expect retail earnings in the 2nd Qtr to be absolutely abysmal. The general equity indexes were up again today in the face of mounting bad economic data. Scratching my head has yielded few answers about the obvious levitating act.
Stocks rise modestly even as oil extends record high run
NEW YORK (AP) -- Wall Street closed a quiet session with a moderate advance Thursday, with energy and other commodities companies leading the market as oil prices extended their record-breaking run.
The price of crude oil swept past $124 a barrel in late New York Mercantile Exchange trading, while gasoline rose to a new record of its own at the pump, climbing to a national average of nearly $3.65 a gallon.
Although the rising price of oil ignited concerns about inflation on Wednesday, knocking the Dow Jones industrial average down more than 200 points, stocks managed to hold on to their gains even as oil rose Thursday. Some of the big gainers were the companies that would benefit the most from higher commodities prices -- the oil companies and metals producers like Alcoa Inc. -- and they helped lift the major indexes.
Financial stocks were the worst performers of the day. Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis, said investors likely are still jittery over the sector, with continued concern about whether the companies have problems on their books beyond subprime mortgages. "Our guess is that the worst is not over for the financials on a fundamentals basis," he said.
http://biz.yahoo.com/ap/080508/wall_street.html
The "worst is not over for the financials"? What a shocking revelation. Even more shocking is the "news" that the Market Indexes were led higher by resource companies. If you ever need proof that Market Indexes like the Dow are misleading as to the "strength" in the markets, today is that proof.
On another note regarding market indexes. Would somebody please explain to me how the Dow Jones Transportation Average can rise when Oil prices are rising by leaps and bounds. Honestly, it escapes all reason. There's "irrational" market behavior, and then there's insane market behavior. How can the stocks of transportation companies be rising when their costs are rising at rates that could potentially bankrupt a number of them.
On March 20, 2008, the price of Oil settled at an interim low of $98.65. Today Oil rose to an intraday high, and new record, of $124.39. Oil prices have risen 26% since March 20. TWENTY-SIX PERCENT! It would be reasonable, if not rational to expect that Transportation Stocks would be in a death spiral about now. But not in America, where stocks are guaranteed to go up, up, up by the mysterious man, and his mischievous money machinations behind the curtain.
On March 10,2008 the Dow Jones Transportation Average hit an interim low of 4399. Today the Dow Jones Transportation Average closed at 5225, 222 points below it's 52 week high. The Dow Transports have risen 18.7% while Oil has risen 26%. How? If I knew I'd be a very wealthy man.
Here's some research that is even more shocking and confounding. On May 10, 2007 Oil was at $63.96. That same day in 2007, the Dow Transports were at 5122. The math is simple. Oil was $60.73 cheaper than it is today, or 95% cheaper. [Holy Crap!] The Dow Transports were ONLY 103 points lower than it is today. The price of Oil has come within 5% of doubling in the past 365 days, and transportation stocks are down ONLY 2%!? Hey, I'm not making this up.
Folks, Goldilocks is living in LaLa Land and a Category 5 Financial Hurricane is sitting just off shore. The government is so broke they have been forced to shut down the coastal radar and layoff all their meteorologists. Wall Street is Deaf, Dumb, and Blind to the destruction that lies just days away imo. Goldilocks economy my ass. This economy reminds me more of the Three Little Pigs and the Big Bad Wolf. And we all know what happens to Pigs on Wall Street. They get slaughtered...
Thursday, May 8, 2008
Wednesday, May 7, 2008
Gold: Sale Ends Today!
DJ: Euro-Zone Retail Sales Post Record On Yr Drop
(DowJonesNewswires)
Euro-zone retail sales posted a record drop on the year in March, but the previous month's figures were revised significantly to show a rise rather than a fall, data released by European statistics agency Eurostat showed Wednesday.
Gold falls as US rises against euro
Gold fell for the first time in four sessions as the dollar rebounded against the euro. Silver also declined.
The dollar rose on speculation the Federal Reserve may raise interest rates to curb inflation. Gold has climbed 26% in the past year, reaching a record $US1033.90 an ounce on March 17, after sliding borrowing costs sent the dollar to an all-time low against the euro.
''We're headed toward the rehabilitation of the dollar,'' said Ron Goodis, a futures trading director at Equidex Brokerage in Closter, New Jersey. ''You give the perception that you're going to raise interest rates and that puts a floor under the dollar, and gold is going to go down.''
http://business.theage.com.au/gold-falls-as-us-rises-against-euro/20080508-2c40.html
LOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOL!!
There isn't a snowballs chance in Hell of the Fed raising interest rates. Period! Interest rates will reach ZERO before you'll see an interest rate increase by the Fed. And Gold will be substantially above $2000 if and when the Fed gets the opportunity to raise interest rates. That is if the Fed is still in existence. Rehabilitation of the Dollar? Not a freaking chance.
Look, this is sooooooooooooo simple. The Dollar was up today because the Euro was weak today. That is all there is to this story. Every ounce of hope pinned on this donkeys ass is based on a weaker Euro. The Euro was weaker today because retail sales in the Euro Zone came up a bit lame today. So the genius' that believe the ECB is the European version of the floundering US Fed assume that now they will cut rates in the Euro Zone to stimulate growth. They believe that because the Euro Zone inflation numbers last month were tame enough to give the ECB cover to cut interest rates...just like the pathetic US Fed would/does do. Ain't gonna happen.
The ECB's mandate is price stability...as in controlling inflation. The ECB understands that by cutting rates, they would only fan the flames of incendiary inflation and make their economy even worse as price rose higher and consumers spend even less. [Hey, just like is happening in the US.] European politicians have wised up to the scam that is the US Federal Reserve. They will not pander to them or anybody else. They understand that a strong Euro will, in the long run, insulate the Euro Zone, and limit the negative effects of US Dollar induced global inflation. High rates of interest in the Euro Zone will not "stop" inflation in the Euro Zone. But a strong currency in a world where commodities are priced in Dollars will go a long ways towards getting "more for your money." Because if you're an American, the crumbling US Dollar guarantees that you will "get less for your money". Why would the Europeans want to follow the Americans into Inflation Hell?
Here's the shakedown. Whether the "credit crisis" is or isn't over is irrelevant. Precious Metals and commodities went on a tear between August 2006 and March 2007 because the Dollar was getting crushed because of the "uncertainty" in the Global Financial System. Many believe that the "credit crisis" peaked with the bailout of Bear Stearns on March 17 by the Fed. That remains to be seen. We doubt that it has... Suffice it to say, this recent leg up in gold, almost $300, was the result of money moving to Gold because of its "safe haven status" in times of economic uncertainty. Gold is ALSO the defacto hedge against inflation. And the inflation train has left the station people. It's destination is unknown, but it is destined to tour the entire globe. What is known is that the throttle on this inflation train is stuck. And a stuck throttle means only one thing...rapid acceleration until the throttle gets unstuck, the train runs off the track, or the train hits a wall. We are certain of only one thing. The inflation train has a packed fuel cell...it won't be slowing down or stopping because it runs out of gas anytime in the near future.
The "sub-prime" mortgage meltdown, that has been the scapegoat for the past eight months of Global Financial Meltdown, could be thought of as and Economic Earthquake. The bigger the earthquake, the greater the potential for aftershocks. It's not unusual for aftershocks to be stronger than the initial shock. If you think this Global Financial Meltdown has come and gone, all the best to you in the future...good luck!
If you think there are aftershocks left to endure...Protect yourself, protect your future, protect your family from the ravages of inflation. Buy, Buy, Buy, Gold and Silver. Sale prices won't last much longer.
(DowJonesNewswires)
Euro-zone retail sales posted a record drop on the year in March, but the previous month's figures were revised significantly to show a rise rather than a fall, data released by European statistics agency Eurostat showed Wednesday.
Gold falls as US rises against euro
Gold fell for the first time in four sessions as the dollar rebounded against the euro. Silver also declined.
The dollar rose on speculation the Federal Reserve may raise interest rates to curb inflation. Gold has climbed 26% in the past year, reaching a record $US1033.90 an ounce on March 17, after sliding borrowing costs sent the dollar to an all-time low against the euro.
''We're headed toward the rehabilitation of the dollar,'' said Ron Goodis, a futures trading director at Equidex Brokerage in Closter, New Jersey. ''You give the perception that you're going to raise interest rates and that puts a floor under the dollar, and gold is going to go down.''
http://business.theage.com.au/gold-falls-as-us-rises-against-euro/20080508-2c40.html
LOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOL!!
There isn't a snowballs chance in Hell of the Fed raising interest rates. Period! Interest rates will reach ZERO before you'll see an interest rate increase by the Fed. And Gold will be substantially above $2000 if and when the Fed gets the opportunity to raise interest rates. That is if the Fed is still in existence. Rehabilitation of the Dollar? Not a freaking chance.
Look, this is sooooooooooooo simple. The Dollar was up today because the Euro was weak today. That is all there is to this story. Every ounce of hope pinned on this donkeys ass is based on a weaker Euro. The Euro was weaker today because retail sales in the Euro Zone came up a bit lame today. So the genius' that believe the ECB is the European version of the floundering US Fed assume that now they will cut rates in the Euro Zone to stimulate growth. They believe that because the Euro Zone inflation numbers last month were tame enough to give the ECB cover to cut interest rates...just like the pathetic US Fed would/does do. Ain't gonna happen.
The ECB's mandate is price stability...as in controlling inflation. The ECB understands that by cutting rates, they would only fan the flames of incendiary inflation and make their economy even worse as price rose higher and consumers spend even less. [Hey, just like is happening in the US.] European politicians have wised up to the scam that is the US Federal Reserve. They will not pander to them or anybody else. They understand that a strong Euro will, in the long run, insulate the Euro Zone, and limit the negative effects of US Dollar induced global inflation. High rates of interest in the Euro Zone will not "stop" inflation in the Euro Zone. But a strong currency in a world where commodities are priced in Dollars will go a long ways towards getting "more for your money." Because if you're an American, the crumbling US Dollar guarantees that you will "get less for your money". Why would the Europeans want to follow the Americans into Inflation Hell?
Here's the shakedown. Whether the "credit crisis" is or isn't over is irrelevant. Precious Metals and commodities went on a tear between August 2006 and March 2007 because the Dollar was getting crushed because of the "uncertainty" in the Global Financial System. Many believe that the "credit crisis" peaked with the bailout of Bear Stearns on March 17 by the Fed. That remains to be seen. We doubt that it has... Suffice it to say, this recent leg up in gold, almost $300, was the result of money moving to Gold because of its "safe haven status" in times of economic uncertainty. Gold is ALSO the defacto hedge against inflation. And the inflation train has left the station people. It's destination is unknown, but it is destined to tour the entire globe. What is known is that the throttle on this inflation train is stuck. And a stuck throttle means only one thing...rapid acceleration until the throttle gets unstuck, the train runs off the track, or the train hits a wall. We are certain of only one thing. The inflation train has a packed fuel cell...it won't be slowing down or stopping because it runs out of gas anytime in the near future.
The "sub-prime" mortgage meltdown, that has been the scapegoat for the past eight months of Global Financial Meltdown, could be thought of as and Economic Earthquake. The bigger the earthquake, the greater the potential for aftershocks. It's not unusual for aftershocks to be stronger than the initial shock. If you think this Global Financial Meltdown has come and gone, all the best to you in the future...good luck!
If you think there are aftershocks left to endure...Protect yourself, protect your future, protect your family from the ravages of inflation. Buy, Buy, Buy, Gold and Silver. Sale prices won't last much longer.
Tuesday, May 6, 2008
Arrested For Driving While Blind
Gold and Silver followed through today, and remain higher at this hour. The more time and price the metals now put above Sunday evenings gap in prices, without closing that gap, the more pressure the shorts will feel as prices challenge near term resistance. That being 17.02 for Silver and 886 for Gold. Thursday's ECB rate announcement should break the current stalemate between the Bulls and the bears.
Stocks lift even as oil prices soar near $123 a barrel
Wall Street lifts even as crude-oil prices surge near $123 a barrel, credit worries linger
NEW YORK (AP) -- Wall Street reversed early losses to close higher Tuesday, as investors monitored the movements of record high oil prices but still laid bets that the economy and companies are in recovery mode.
Crude oil climbed to a record near $123 a barrel on the New York Mercantile Exchange as traders, who have nearly doubled the price of oil over the past year, reacted to the weakening U.S. dollar, supply threats, and a note from Goldman Sachs & Co. predicting that oil could reach $200 a barrel. High oil prices threaten to crimp consumers' discretionary spending.
But oil price sticker-shock waned and as investors looked past wider-than-expected quarterly losses at Swiss bank UBS, government-sponsored mortgage company Fannie Mae, and homebuilder D.R. Horton Inc.
Huge quarterly losses from three major players in the financial and homebuilding industries initially sparked some stock selling Tuesday, but those dips were soon met by bargain-hunters betting that those sectors are a good buy right now given their low prices.
Fannie Mae reported a larger-than-expected first-quarter loss of $2.2 billion, and said it plans to lower its dividend and raise $6 billion in additional capital. But it also estimated its market share increased to about 50 percent of the new single-family mortgage related securities issued. Fannie Mae shares rebounded to rise $2.52, or 8.9 percent, to $30.81.
Homebuilder D.R. Horton reported a quarterly loss of $1.3 billion and halved its dividend to 7.5 cents a share. The homebuilder's shares rose 88 cents, or 5.1 percent, to $16.85.
UBS reported a loss of nearly $11 billion and said it is reducing its work force by about 7 percent. UBS shares dipped 54 cents to $33.77.
UBS reported a loss of nearly $11 billion and said it is reducing its work force by about 7 percent. UBS shares dipped 54 cents to $33.77.
Meanwhile, Wachovia Corp. said it is nearly doubling its previously reported loss for the first quarter to $708 million after reviewing its portfolio of bank-owned life insurance. Wachovia's stock rose 30 cents to $30.08.
Yeah, whatever. I had to read it twice myself. "Recovery mode"? With Oil prices at a RECORD $123 a barrel how any investor can even suggest a recovery is possible is beyond me. $123 Oil is the worst news our floundering economy needs. Huge quarterly losses from three major players in the financial and homebuilding industries and stocks closed higher?
"Toto, I have a feeling we aren't in Kansas anymore."
"The great and all powerful Oz commands that stocks will move higher no matter what."
I am as astonished as you are dear reader. Baloney, Bullsh*t, Fantasy...call it what you will. I call it "the Plunge Protection Team to the rescue". For more on that please read in its entirety the essay LINKED below by Deepcaster. This essay was posted on the Internet October 26, 2007. It is quite simply the most brazen explanation of the obvious market manipulations we have come to expect, despise, and loath. Free markets in America? Think again. This essay will shock and infuriate you. Its long. Please read it in it's entirety. Learning the "Rules Of The Game" could be very profitable to us all further on up the road.
MARKET INTERVENTION, DATA MANIPULATION - - CONSEQUENCES FOR GOLD, EQUITIES & CRUDE OIL,& THE CARTEL END GAME
by DeepCaster LLC
Monday, May 5, 2008
I Smell Smoke
What Uncle Sam Gives in Rebates, OPEC Takes, Stalling Economy
May 5 (Bloomberg) -- Wal-Mart and OPEC are battling for the tax rebates the U.S. government began handing out last week. The result may be a draw for the economy.
While consumers might spend enough of the $117 billion stimulus at retailers to keep the U.S. economy afloat in the months ahead, the boost from their purchases will be diluted by gasoline prices at $3.62 a gallon and rising.
Since President George W. Bush signed the stimulus package in February to much fanfare, the price of a gallon of gasoline has risen 64 cents, according to AAA, the nation's largest automobile club.
Food prices, too, have climbed at an annual rate of 5.1 percent since the start of the year...
``A lot of that stimulus money is going to go to filling the gasoline tank and the refrigerator,'' says Mark Zandi of Moody's Economy.com in West Chester, Pennsylvania. ``It's not going to be quite the boost that most of us were hoping for when it was put together a few months ago.''
Are you kidding me? George Bush promised me that this stimulus package was going to help fix everything! And now all it "might" cover is my gasoline and food bills? George, what about my beer tab? Another "smoke gets in your eyes" moment courtesy of the US Government...
The rest of the world opened the week keen to the nonsense we witnessed last week regarding the Dollar, Gold, Silver, and Oil. Traders jumped at the word go Sunday night and began the week by dumping the Dollar and bidding up the Euro, Gold, and Silver. The fire in the Oil pits was reignited as well. The world is coming to the quick realization that the economic spin cascading out of the US managed financial media is old fashioned BALONEY. The potential for massive short squeezes in the Precious Metals may be imminent. The ECB meets Thursday to announce NO CHANGE in Euro Zone interest rates as the continue to remain vigilant in the face of escalating inflation. The ECB recognizes the obvious: rising prices are not very good for their economy and will chose to fight slowing growth by attempting to keep prices in check. The US Fed should have realized this months ago...
Europe Price Surge Persuades Politicians to Back ECB
May 5 (Bloomberg) -- The European Central Bank is winning Europe's political leaders over to its policy of focusing on fighting inflation even as economic growth slows.
Politicians from France, Belgium and Luxembourg, who previously complained that the ECB paid too little attention to economic growth, have signaled increasing concern that inflation is eating away at voters' incomes.
``There isn't much appetite for having these inflation levels, whether you're the monetary authority or government,'' Robert Barrie, chief European economist at Credit Suisse Group in London, said. ``There's a recognition that inflation is too high and broader-based support for the ECB to do something about it.''
The ECB has refused to follow the U.S. Federal Reserve and Bank of England in lowering interest rates after inflation surged since August, to reach a 16-year high of 3.6 percent in March. The bank argues that rising prices are a bigger threat to economic growth than the increase in credit costs resulting from the collapse of U.S. subprime mortgages.
I can always count on Bob Chapman, The International Forecaster to tell me like it is. This week he spares no words in telling us what a joke the events of the past week really were:
On February 7, 2008 the lead contract on the USDX closed at 77.120. On that day, the Fed funds rate stood at 3.00%, the discount rate stood at 3.50% and the price of gold was trading between 896 and 912. Now this past Friday, May 2, with the lead USDX contract closing at 73.690, the Fed funds rate at 2.00% and the Fed discount rate at 2.25%, the price of gold is trading in the 845 to 860 range, $50 per ounce less than the price range on February 7. So, the fact that since February 7, the funds rate has been lowered 1.00%, the discount rate has been lowered 1.25% and the USDX has closed 3.43 points lower, appears to translate into lower gold prices, prices that are $50 per ounce less than they were on February 7! Sure, there was some anticipation about rates being lowered after February 7, but come on, to what level? We'll tell you what level. The level we are at currently, of course, which is what was anticipated by virtually everyone according to futures that anticipated all these events. And now we are told about a possible pause that is currently being jawboned by the Fed and the fane-stream media, but with the potential for even lower rates, and certainly not for higher rates that would send us into deflation and economic destruction. Does anyone in their right mind think that rates will be raised to support the dollar when the darlings of fraud on Wall Street are about to get a big "swirly" in the gargantuan financial toilet bowl where we now all collectively find ourselves? At this point, we simply have a pause, so the Fed can retain some of its rate-lowering ammunition in order to thwart the next debacle, which will take the form of Alt-A mortgage and credit card defaults mixed with a further and ever-deepening bank insolvency, a worsening credit-crunch, hyperinflation, a sagging and negative GDP, nonexistent consumer spending despite the piddling stimulus, even lower corporate earnings and a potential war against Iran and Syria. SO WHAT GIVES? Can we suggest massive manipulation and gold price suppression by the cartel and their diabolical insider trading team known at the PPT (Plunge Protection Team)?! Heaven forbid that the US public should ever be told the truth about the dire state of our economy.
"Look at gold shoot to the moon! The Mogambo was right! We're freaking doomed!"
-Richard Daughty, The Mogambo Guru
http://news.goldseek.com/RichardDaughty/1209955214.php
http://news.goldseek.com/RichardDaughty/1209955214.php
Sunday, May 4, 2008
Ignore The Truth, Pay the Consequences
Layoffs rise 68 percent in April vs March: survey
NEW YORK (Reuters) - U.S. companies' planned layoffs jumped 68 percent in April from the prior month to the highest since September 2006, pointing to further deterioration in the labor market, a report showed on Thursday.
Planned job cuts in U.S. companies totaled 90,015 last month, up from 53,579 in March and up 27 percent from a year earlier, employment consulting firm Challenger, Gray & Christmas Inc. reported.
The financial services industry announced 23,106 cuts in April with almost half of them occurring in a two-day period that saw hefty planned layoffs from Citigroup (C.N) and Merrill Lynch (MER.N), it said.
http://news.yahoo.com/s/nm/20080501/bs_nm/usa_economy_jobs_challenger_embargo5_1_dc
Employers cut fewer jobs in April, jobless rate falls
WASHINGTON (AP) — Employers cut far fewer jobs in April than in recent months and the unemployment rate dropped to 5 percent, a better-than-expected showing that nonetheless reveals strains in the nation's labor market.
For the fourth month in a row, the economy lost jobs, the Labor Department reported Friday. But in April the losses totaled 20,000, an improvement from the 81,000 reductions in payrolls logged in March. Job losses for both February and March turned out to be a bit deeper than previously reported.
On the jobs front, construction companies slashed 61,000 positions in April. Manufacturers cut 46,000 and retailers got rid of 27,000. Those losses were eclipsed by job gains in education and health care, professional and business services, the government and elsewhere.
The job losses came in areas hardest hit by the housing and credit debacles. The fact that fewer job cuts were ordered in April raised hopes that damages could be limited.
http://ap.google.com/article/ALeqM5jsanM66tszKz1zFq0LOG4XvWS7zAD90DI75O0
I'm sorry, I can't help but notice a, um..., contradiction here. Has nobody out there in LaLa Land figured out yet that the US Government is absolutely FULL of Shhhhhhhhhhh....it when it comes to their "official statistics". Clearly there is no truth is Washington. History will tell us years from now that "truth" was the biggest casualty of the American Century. In time the "economic boom" of the 90's will be know as The Great Charade: Crushed Under An Avalanche Of Debt.
"There are three kinds of lies: lies, damn lies, and statistics." -- commonly attributed to Benjamin Disraeli
Lies and Other Statistics
By: John Mauldin, Millennium Wave Advisors
If we are to believe the government statistics, the GDP of the US grew by 0.6% in the first quarter of this year. And unemployment actually fell. And there were only 20,000 job losses.
The Bureau of Economic Analysis (BEA) of the Department of Commerce publishes the GDP statistics. They tell us the US economy grew by 0.6% in each of the last two quarters. They come by that number by taking the nominal or "current dollar" measure of the economy and subtracting their figure for inflation, which gives us "real GDP," or after-inflation GDP.
Nominal GDP in the fourth quarter grew by 3%. In the first quarter it was 3.2%. They figure that inflation was 2.4% in the fourth quarter and 2.6% this quarter, giving us the slightly positive growth numbers.
There are several government agencies which track inflation. And in fairness, inflation in an economy as large as that of the US is a very tricky thing to measure. The Consumer Price Index (CPI) is done by another division of the Department of Commerce, the Bureau of Labor Statistics. Let's look at what they calculate inflation to be since last August...
...the average for the 4th quarter was 4%, while for the first quarter of 2008 it was over 4.1%. Never mind whether that is the right number or whether there are problems with how they calculate it -- that is a story for another letter. The key here is that if the BEA used the BLS number (remember, both groups are in the same Department of Commerce), it would show the economy shrinking by 1% in the 4th quarter and by almost 1% in the first quarter. That is not what the happy-talk analysts are saying.
But let's use the Fed's favorite measure of inflation, personal consumption expenditures, or PCE.
If we use the PCE numbers (yet another measure using Commerce Department data), inflation was about 3.3% for both quarters, which would mean negative growth quarters by a few tenths of a percent. That would also mean two quarters of negative growth and a recession.
Further, GDP in the first quarter was helped by inventory build-up to the tune of 0.8%. In times of expansion it is good to see inventories grow, as that means companies are optimistic. But when the economy begins to slow, growing inventories mean that companies anticipated sales that did not materialize. That means that as inventories are allowed to fall in the second quarter, they will show up as a negative factor in second-quarter GDP.
Honey, I Blew up the Employment Numbers
...the monthly employment report. It is one of the most revised reports released by any government agency, and for some reason the market seems to react to it like it means something immediate.
Let's take today's release. It showed a drop of only 20,000 jobs, well above the more negative consensus. The market immediately rallied, taking the thought that the economy may be on its way to recovery. But when you look at the numbers, that optimism evaporates.
The birth/death ratio is the BLS's (Bureau Of Labor Statistics) attempt to figure out how many jobs were created by small businesses that do not show up in their survey of established businesses. It is a simple estimate based on past trends. You have to have this estimate to have any hope of getting the actual number right. And most of the time, the estimates are pretty good. Over time the numbers are revised and in a few years will be pretty close. But in times when the economy is slowing down, the birth/death ratio tends to overstate job growth because the trend is backward-looking. This month's birth/death number was particularly egregious.
April, for whatever statistical reason, has shown the highest number of birth/death jobs for any month. In 2007, the BLS estimated that 262,000 were created in April that they could not account for in the survey of businesses. Somehow, the spreadsheets at BLS had them add 267,000 jobs in April of 2008. That number includes an estimated 45,000 new jobs in construction! And this in a time when both residential and commercial construction are contracting. The actual survey results showed that construction jobs fell by 61,000.
And somewhere, they estimate that 8,000 new jobs in finance were created. As Philippa Dunne notes: "It may be that the gains in our old friend, bars and restaurants, are the [birth/death] model's creation; it added 83,000 to the leisure and hospitality sector. With vacation plans at near-record lows, and restaurants reporting reduced traffic, many of these job gains could disappear in the next benchmark revision."
Without that addition from the birth/death number, total private employment would have dropped by 296,000. Now, if that had been the headline number, the market would have tanked. Now, I have no doubt that the economy did create a lot of new jobs last month. But when the final revisions are in, we will see that job losses were well south of 100,000.
This employment report was ugly, when you look at the numbers under the headline statistics. It is no wonder consumer sentiment is down.
http://news.goldseek.com/MillenniumWaveAdvisors/1209955281.php
John Mauldin's essays are always great reads, very insightful. The man is a most powerful Bullshit Detector, I recommend you read him regularly. After reading his "explanation" of Friday's revered Non-farm Payrolls Report it really makes you stop and wonder how this "report" has been raised to such a high pedestal of importance as an economic indicator. How the entire sentiment of the World's stock markets, let alone those in the US, can be influenced by such a bogus and flawed report completely escapes me. Honestly, it is not a secret how the Non-farm Payrolls Report comes by it's statistics, yet the numbers contained in it are taken as gospel the first Friday of every month.
If the average man in the street wasn't so completely ignorant and uneducated, there would be riots in the streets over the inflation in this country...perhaps soon there will be. Everybody you stop and ask can tell you it costs more to fill their gas tank, fill their stomachs, and fill their prescriptions, but few can comprehend the scope of the economic catastrophe unfolding right in their face every day. The sheep are being led to slaughter. Their leaders, and wannabe leaders, want the sheep to believe that it is "Big Oil", and the "speculators on Wall Street" that are destroying their lives, when in fact it is their "elected shepards", the politicians the sheep flippantly elect to serve the herd, that are leading them to financial ruin.
Fed Revs Up Lending in Latest Jolt to Credit Market
May 2 (Bloomberg) -- The Federal Reserve, seeking to prevent a deeper economic slowdown, took another stab at coaxing banks into lending at lower rates.
The Fed boosted its biweekly Term Auction Facility sales of cash to banks by 50 percent to $75 billion and expanded the collateral it takes from bond dealers through loans of Treasury securities. It also raised the amount of dollars it makes available to the European Central Bank and Swiss National Bank through swap lines to a combined $62 billion from $36 billion.
``The world is awash in liquidity, it just isn't reaching the right financial borrowers,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``Today's action from the central banks is another strong dose of medicine that will help cure what ails the credit markets.''
Today's decision comes two days after the Fed's interest- rate setting Open Market Committee lowered its benchmark rate for a seventh time since September, while signaling it's ready to hold off on further cuts.
The TAF, which provides 28-day loans to commercial banks, will sell $75 billion in auctions every two weeks, starting with the May 5 operation, the Fed said in the statement. The decision will increase the amount outstanding under the auctions to $150 billion from $100 billion.
It's the third increase since the program started in December at $40 billion per month.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aTNWHKv5CoPw&refer=home
Fed likely to prefer lending over interest-rate cuts
NEW YORK (AP) -- The Federal Reserve's decision Friday to lend more to banks may be a sign that policy makers want to avoid cutting interest rates any further, as they combat a credit crisis that is far from over.
The Fed said Friday it would boost the amount of emergency reserves it supplies to U.S. banks to $150 billion in May, from the $100 billion it supplied in April. The Fed took this action and several other moves to boost credit in coordination with the European Central Bank and the Swiss National Bank.
The Fed has committed about $600 billion in loans to banks, an amount that represents perhaps half of all the distressed debt in the market, said Lehman Brothers credit strategist Amitabh Arora. This helps moderate the risk that a struggling bank might have to auction off its investments to avoid bankruptcy, he said.
Rather than sustaining banks with badly needed loans, Dan North, chief economist at Euler Hermes, thinks the Fed is "polluting the world with dollars," meaning making money so easy to obtain that the dollar is losing value.
The market is "awash in liquidity," North said. Plenty of companies have plenty of cash to lend or spend, North said.
"The Fed is trying a multitude of things," he said. "They're looking for ways other than lowering interest rates, but what's happening is they're just pumping liquidity into the system and it's not necessarily going to make the banks want to lend more."
http://biz.yahoo.com/ap/080503/wall_main.html
A "strong dose of medicine" is just what the Gold Doctor ordered. Label it Inflation. If the Fed were really so concerned with "fighting" inflation why are they upping the ante into this growing pool of "stealth liquidity"? $600 BILLION has been dumped to date into the money supply to "avert the credit crisis" and yet credit is harder to get today than it was 60 days ago? You bet banks are hoarding this money. They have to keep this money on their books to stay solvent...their vaults are packed with worthless mortgage backed securities, and myriad other forms of credit backed bonds. Banks can't get money to loan, unless they have solid assets to back up the loans they need to conduct their "business" of loaning money. The economy is a virtual engine of debt. Our entire society is built upon a pyramid of debt. Never forget, ALL Dollars represent one thing and one thing only, DEBT. The more debt, the more worthless the Dollar. It really is that simple. And the more worthless the Dollar, the more valuable is Gold, Silver, Oil, etc.
As I put this post to bed late this evening, the Asians are AGAIN buying Gold and Silver marked down by the desperate banks in the West on Friday. The Asians hold a great deal of American debt via US Treasuries. If I were Asian, I'd be buying Gold hand over fist too. They see the US Dollar for what it is, BAD DEBT. Americans will be the last to know the truth about their money as they insist on accepting the lies of their government as truth. Only when the "Haves" become "Havenots" will the truth be known. By then truth will be very expensive. Truth is on sale for a limited time only, and it's labeled Gold.
NEW YORK (Reuters) - U.S. companies' planned layoffs jumped 68 percent in April from the prior month to the highest since September 2006, pointing to further deterioration in the labor market, a report showed on Thursday.
Planned job cuts in U.S. companies totaled 90,015 last month, up from 53,579 in March and up 27 percent from a year earlier, employment consulting firm Challenger, Gray & Christmas Inc. reported.
The financial services industry announced 23,106 cuts in April with almost half of them occurring in a two-day period that saw hefty planned layoffs from Citigroup (C.N) and Merrill Lynch (MER.N), it said.
http://news.yahoo.com/s/nm/20080501/bs_nm/usa_economy_jobs_challenger_embargo5_1_dc
Employers cut fewer jobs in April, jobless rate falls
WASHINGTON (AP) — Employers cut far fewer jobs in April than in recent months and the unemployment rate dropped to 5 percent, a better-than-expected showing that nonetheless reveals strains in the nation's labor market.
For the fourth month in a row, the economy lost jobs, the Labor Department reported Friday. But in April the losses totaled 20,000, an improvement from the 81,000 reductions in payrolls logged in March. Job losses for both February and March turned out to be a bit deeper than previously reported.
On the jobs front, construction companies slashed 61,000 positions in April. Manufacturers cut 46,000 and retailers got rid of 27,000. Those losses were eclipsed by job gains in education and health care, professional and business services, the government and elsewhere.
The job losses came in areas hardest hit by the housing and credit debacles. The fact that fewer job cuts were ordered in April raised hopes that damages could be limited.
http://ap.google.com/article/ALeqM5jsanM66tszKz1zFq0LOG4XvWS7zAD90DI75O0
I'm sorry, I can't help but notice a, um..., contradiction here. Has nobody out there in LaLa Land figured out yet that the US Government is absolutely FULL of Shhhhhhhhhhh....it when it comes to their "official statistics". Clearly there is no truth is Washington. History will tell us years from now that "truth" was the biggest casualty of the American Century. In time the "economic boom" of the 90's will be know as The Great Charade: Crushed Under An Avalanche Of Debt.
"There are three kinds of lies: lies, damn lies, and statistics." -- commonly attributed to Benjamin Disraeli
Lies and Other Statistics
By: John Mauldin, Millennium Wave Advisors
If we are to believe the government statistics, the GDP of the US grew by 0.6% in the first quarter of this year. And unemployment actually fell. And there were only 20,000 job losses.
The Bureau of Economic Analysis (BEA) of the Department of Commerce publishes the GDP statistics. They tell us the US economy grew by 0.6% in each of the last two quarters. They come by that number by taking the nominal or "current dollar" measure of the economy and subtracting their figure for inflation, which gives us "real GDP," or after-inflation GDP.
Nominal GDP in the fourth quarter grew by 3%. In the first quarter it was 3.2%. They figure that inflation was 2.4% in the fourth quarter and 2.6% this quarter, giving us the slightly positive growth numbers.
There are several government agencies which track inflation. And in fairness, inflation in an economy as large as that of the US is a very tricky thing to measure. The Consumer Price Index (CPI) is done by another division of the Department of Commerce, the Bureau of Labor Statistics. Let's look at what they calculate inflation to be since last August...
...the average for the 4th quarter was 4%, while for the first quarter of 2008 it was over 4.1%. Never mind whether that is the right number or whether there are problems with how they calculate it -- that is a story for another letter. The key here is that if the BEA used the BLS number (remember, both groups are in the same Department of Commerce), it would show the economy shrinking by 1% in the 4th quarter and by almost 1% in the first quarter. That is not what the happy-talk analysts are saying.
But let's use the Fed's favorite measure of inflation, personal consumption expenditures, or PCE.
If we use the PCE numbers (yet another measure using Commerce Department data), inflation was about 3.3% for both quarters, which would mean negative growth quarters by a few tenths of a percent. That would also mean two quarters of negative growth and a recession.
Further, GDP in the first quarter was helped by inventory build-up to the tune of 0.8%. In times of expansion it is good to see inventories grow, as that means companies are optimistic. But when the economy begins to slow, growing inventories mean that companies anticipated sales that did not materialize. That means that as inventories are allowed to fall in the second quarter, they will show up as a negative factor in second-quarter GDP.
Honey, I Blew up the Employment Numbers
...the monthly employment report. It is one of the most revised reports released by any government agency, and for some reason the market seems to react to it like it means something immediate.
Let's take today's release. It showed a drop of only 20,000 jobs, well above the more negative consensus. The market immediately rallied, taking the thought that the economy may be on its way to recovery. But when you look at the numbers, that optimism evaporates.
The birth/death ratio is the BLS's (Bureau Of Labor Statistics) attempt to figure out how many jobs were created by small businesses that do not show up in their survey of established businesses. It is a simple estimate based on past trends. You have to have this estimate to have any hope of getting the actual number right. And most of the time, the estimates are pretty good. Over time the numbers are revised and in a few years will be pretty close. But in times when the economy is slowing down, the birth/death ratio tends to overstate job growth because the trend is backward-looking. This month's birth/death number was particularly egregious.
April, for whatever statistical reason, has shown the highest number of birth/death jobs for any month. In 2007, the BLS estimated that 262,000 were created in April that they could not account for in the survey of businesses. Somehow, the spreadsheets at BLS had them add 267,000 jobs in April of 2008. That number includes an estimated 45,000 new jobs in construction! And this in a time when both residential and commercial construction are contracting. The actual survey results showed that construction jobs fell by 61,000.
And somewhere, they estimate that 8,000 new jobs in finance were created. As Philippa Dunne notes: "It may be that the gains in our old friend, bars and restaurants, are the [birth/death] model's creation; it added 83,000 to the leisure and hospitality sector. With vacation plans at near-record lows, and restaurants reporting reduced traffic, many of these job gains could disappear in the next benchmark revision."
Without that addition from the birth/death number, total private employment would have dropped by 296,000. Now, if that had been the headline number, the market would have tanked. Now, I have no doubt that the economy did create a lot of new jobs last month. But when the final revisions are in, we will see that job losses were well south of 100,000.
This employment report was ugly, when you look at the numbers under the headline statistics. It is no wonder consumer sentiment is down.
http://news.goldseek.com/MillenniumWaveAdvisors/1209955281.php
John Mauldin's essays are always great reads, very insightful. The man is a most powerful Bullshit Detector, I recommend you read him regularly. After reading his "explanation" of Friday's revered Non-farm Payrolls Report it really makes you stop and wonder how this "report" has been raised to such a high pedestal of importance as an economic indicator. How the entire sentiment of the World's stock markets, let alone those in the US, can be influenced by such a bogus and flawed report completely escapes me. Honestly, it is not a secret how the Non-farm Payrolls Report comes by it's statistics, yet the numbers contained in it are taken as gospel the first Friday of every month.
If the average man in the street wasn't so completely ignorant and uneducated, there would be riots in the streets over the inflation in this country...perhaps soon there will be. Everybody you stop and ask can tell you it costs more to fill their gas tank, fill their stomachs, and fill their prescriptions, but few can comprehend the scope of the economic catastrophe unfolding right in their face every day. The sheep are being led to slaughter. Their leaders, and wannabe leaders, want the sheep to believe that it is "Big Oil", and the "speculators on Wall Street" that are destroying their lives, when in fact it is their "elected shepards", the politicians the sheep flippantly elect to serve the herd, that are leading them to financial ruin.
Fed Revs Up Lending in Latest Jolt to Credit Market
May 2 (Bloomberg) -- The Federal Reserve, seeking to prevent a deeper economic slowdown, took another stab at coaxing banks into lending at lower rates.
The Fed boosted its biweekly Term Auction Facility sales of cash to banks by 50 percent to $75 billion and expanded the collateral it takes from bond dealers through loans of Treasury securities. It also raised the amount of dollars it makes available to the European Central Bank and Swiss National Bank through swap lines to a combined $62 billion from $36 billion.
``The world is awash in liquidity, it just isn't reaching the right financial borrowers,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``Today's action from the central banks is another strong dose of medicine that will help cure what ails the credit markets.''
Today's decision comes two days after the Fed's interest- rate setting Open Market Committee lowered its benchmark rate for a seventh time since September, while signaling it's ready to hold off on further cuts.
The TAF, which provides 28-day loans to commercial banks, will sell $75 billion in auctions every two weeks, starting with the May 5 operation, the Fed said in the statement. The decision will increase the amount outstanding under the auctions to $150 billion from $100 billion.
It's the third increase since the program started in December at $40 billion per month.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aTNWHKv5CoPw&refer=home
Fed likely to prefer lending over interest-rate cuts
NEW YORK (AP) -- The Federal Reserve's decision Friday to lend more to banks may be a sign that policy makers want to avoid cutting interest rates any further, as they combat a credit crisis that is far from over.
The Fed said Friday it would boost the amount of emergency reserves it supplies to U.S. banks to $150 billion in May, from the $100 billion it supplied in April. The Fed took this action and several other moves to boost credit in coordination with the European Central Bank and the Swiss National Bank.
The Fed has committed about $600 billion in loans to banks, an amount that represents perhaps half of all the distressed debt in the market, said Lehman Brothers credit strategist Amitabh Arora. This helps moderate the risk that a struggling bank might have to auction off its investments to avoid bankruptcy, he said.
Rather than sustaining banks with badly needed loans, Dan North, chief economist at Euler Hermes, thinks the Fed is "polluting the world with dollars," meaning making money so easy to obtain that the dollar is losing value.
The market is "awash in liquidity," North said. Plenty of companies have plenty of cash to lend or spend, North said.
"The Fed is trying a multitude of things," he said. "They're looking for ways other than lowering interest rates, but what's happening is they're just pumping liquidity into the system and it's not necessarily going to make the banks want to lend more."
http://biz.yahoo.com/ap/080503/wall_main.html
A "strong dose of medicine" is just what the Gold Doctor ordered. Label it Inflation. If the Fed were really so concerned with "fighting" inflation why are they upping the ante into this growing pool of "stealth liquidity"? $600 BILLION has been dumped to date into the money supply to "avert the credit crisis" and yet credit is harder to get today than it was 60 days ago? You bet banks are hoarding this money. They have to keep this money on their books to stay solvent...their vaults are packed with worthless mortgage backed securities, and myriad other forms of credit backed bonds. Banks can't get money to loan, unless they have solid assets to back up the loans they need to conduct their "business" of loaning money. The economy is a virtual engine of debt. Our entire society is built upon a pyramid of debt. Never forget, ALL Dollars represent one thing and one thing only, DEBT. The more debt, the more worthless the Dollar. It really is that simple. And the more worthless the Dollar, the more valuable is Gold, Silver, Oil, etc.
As I put this post to bed late this evening, the Asians are AGAIN buying Gold and Silver marked down by the desperate banks in the West on Friday. The Asians hold a great deal of American debt via US Treasuries. If I were Asian, I'd be buying Gold hand over fist too. They see the US Dollar for what it is, BAD DEBT. Americans will be the last to know the truth about their money as they insist on accepting the lies of their government as truth. Only when the "Haves" become "Havenots" will the truth be known. By then truth will be very expensive. Truth is on sale for a limited time only, and it's labeled Gold.
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