Consumer Metrics Institute: A Hard Year Ahead
by John Rubino on February 28, 2013 ·
The US economy stalled in the 4th quarter, but the analysis that accompanied the latest (slightly positive) GDP revision seemed to imply that the reasons for the weakness – a drawdown of inventories and lower defense spending – would be reversed out in coming months, making 2013 a pretty good year.
But the Consumer Metrics Institute, in its latest take on the data, argues that this year is more likely to be an extended version of Q4. Here’s an excerpt from the much longer report which is available here.
Despite the new-found minuscule “growth” reported in this release, there are ample reasons to remain cautious about the economy:
– Even as revised this data represents an economy that is statistically in a dead stall, “growing” at a rate some 3% less than during the prior quarter (the greatest downward quarter-to-quarter change since the fourth quarter of 2008).
– This data is still reporting 4Q-2012, a quarter that in retrospect may be viewed as the last gasp of the “Great Recovery” — before there were significant economic headwinds created by reductions in consumer take-home pay, rising gas prices, sequestered federal spending and accelerating contractions in global trade. If all other components of the economy stay the same, those factors alone could remove something like 3% from real-time economic “growth” by the end of the first quarter of 2013: the normalization of FICA deductions alone could reduce consumer spending enough to pull the headline number down by 1%, the $.50 per gallon increase in gas prices could similarly remove another 0.5% from the headline number, weakening exports could easily reduce the headline number by another 1% and the federal budget sequestrations — if fully implemented and sustained — should eventually pull (at maximum, despite doomsday rhetoric) an additional 0.5% from the headline number.
– However, with respect to the “sequestrations”: political will and doomsday rhetoric notwithstanding, even if they are implemented by Congressional mandate (or inaction) there may be no reason to expect actual short term government spending to change. The budgetary shenanigans during the third quarter of 2012 (when a defense spending spree created a phantom boost to pre-election economic data by bringing some spending forward by a quarter — and incidentally across a fiscal year boundary) probably taught the US Federal bureaucracy that as a practical matter they can spend at will and with utter impunity from the budgetary intentions of the fiscally conservative majority in the US House of Representatives.
In the day-to-day reality of this Administration there simply may be no legal or political consequences to overspending Congressionally-approved budgets in pursuit of the perceived greater good.
To summarize the most interesting points:
Q3 growth was artificially boosted by moving up future defense spending, which vindicates the people who said we can’t trust an election year recovery. They predicted that the numbers would get worse as soon as the votes were counted, and they were right. Q4 GDP growth was essentially zero. And the incumbents got away with the scam. It’s amazing what we’ve learned to accept from the ruling class.
Some of the things that made Q4 so weak will indeed be reversed out, but this will be more than offset by higher payroll taxes and gas prices and Europe’s inability to buy much from the US or anywhere else in the year ahead.
When confronted with budgetary constraints, the federal government has reached the point in its moral devolution that it will simply spend whatever it wants regardless of what the law says. Again, it’s amazing how low the “business as usual” bar has been set.
And finally, the stock market is behaving like it’s entering another bubble, which sets up an interesting collision between the liquidity-driven boom and zero-growth visions. Since we’re already two-thirds of the way through Q1, a resolution one way or the other should come soon.
Statistics: Posted by yoda — Fri Mar 01, 2013 12:25 am
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Is the U.S. economy about to experience a major downturn? Unfortunately, there are a whole bunch of signs that economic activity in the United States is really slowing down right now. Freight volumes and freight expenditures are way down, consumer confidence has declined sharply, major retail chains all over America are closing hundreds of stores, and the “sequester” threatens to give the American people their first significant opportunity to experience what “austerity” tastes like. Gas prices are going up rapidly, corporate insiders are dumping massive amounts of stock and there are high profile corporate bankruptcies in the news almost every single day now. In many ways, what we are going through right now feels very similar to 2008 before the crash happened. Back then the warning signs of economic trouble were very obvious, but our politicians and the mainstream media insisted that everything was just fine, and the stock market was very much detached from reality. When the stock market did finally catch up with reality, it happened very, very rapidly. Sadly, most people do not appear to have learned any lessons from the crisis of 2008. Americans continue to rack up staggering amounts of debt, and Wall Street is more reckless than ever. As a society, we seem to have concluded that 2008 was just a temporary malfunction rather than an indication that our entire system was fundamentally flawed. In the end, we will pay a great price for our overconfidence and our recklessness.
So what will the rest of 2013 bring?
Hopefully the economy will remain stable for as long as possible, but right now things do not look particularly promising.
The following are 20 signs that the U.S. economy is heading for big trouble in the months ahead…
#2 The average price of a gallon of gasoline has risen by more than 50 cents over the past two months. This is making things tougher on our economy, because nearly every form of economic activity involves moving people or goods around.
#3 Reader’s Digest, once one of the most popular magazines in the world, has filed for bankruptcy.
#4 Atlantic City’s newest casino, Revel, has just filed for bankruptcy. It had been hoped that Revel would help lead a turnaround for Atlantic City.
#5 A state-appointed review board has determined that there is “no satisfactory plan” to solve Detroit’s financial emergency, and many believe that bankruptcy is imminent. If Detroit does declare bankruptcy, it will be the largest municipal bankruptcy in U.S. history.
#6 David Gallagher, the CEO of Town Sports International, recently said that his company is struggling right now because consumers simply do not have as much disposable income anymore…
“As we moved into January membership trends were tracking to expectations in the first half of the month, but fell off track and did not meet our expectations in the second half of the month. We believe the driver of this was the rapid decline in consumer sentiment that has been reported and is connected to the reduction in net pay consumers earn given the changes in tax rates that went into effect in January.“
#7 According to the Conference Board, consumer confidence in the U.S. has hit its lowest level in more than a year.
#8 Sales of the Apple iPhone have been slower than projected, and as a result Chinese manufacturing giant FoxConn has instituted a hiring freeze. The following is from a CNET report that was posted on Wednesday…
The Financial Times noted that it was the first time since a 2009 downturn that the company opted to halt hiring in all of its facilities across the country. The publication talked to multiple recruiters.
The actions taken by Foxconn fuel the concern over the perceived weakened demand for the iPhone 5 and slumping sentiment around Apple in general, with production activity a leading indicator of interest in the product.
#9 In 2012, global cell phone sales posted their first decline since the end of the last recession.
#10 We appear to be in the midst of a “retail apocalypse“. It is being projected that Sears, J.C. Penney, Best Buy and RadioShack will also close hundreds of stores by the end of 2013.
#11 An internal memo authored by a Wal-Mart executive that was recently leaked to the press said that February sales were a “total disaster” and that the beginning of February was the “worst start to a month I have seen in my ~7 years with the company.”
#12 If Congress does not do anything and “sequestration” goes into effect on March 1st, the Pentagon says that approximately 800,000 civilian employees will be facing mandatory furloughs.
#13 Barack Obama is admitting that the “sequester” could have a crippling impact on the U.S. economy. The following is from a recent CNBC article…
Obama cautioned that if the $85 billion in immediate cuts — known as the sequester — occur, the full range of government would feel the effects. Among those he listed: furloughed FBI agents, reductions in spending for communities to pay police and fire personnel and teachers, and decreased ability to respond to threats around the world.
He said the consequences would be felt across the economy.
“People will lose their jobs,” he said. “The unemployment rate might tick up again.”
#14 If the “sequester” is allowed to go into effect, the CBO is projecting that it will cause U.S. GDP growth to go down by at least 0.6 percent and that it will “reduce job growth by 750,000 jobs“.
#15 According to a recent Gallup survey, 65 percent of all Americans believe that 2013 will be a year of “economic difficulty“, and 50 percent of all Americans believe that the “best days” of America are now in the past.
#16 U.S. GDP actually contracted at an annual rate of 0.1 percent during the fourth quarter of 2012. This was the first GDP contraction that the official numbers have shown in more than three years.
#17 For the entire year of 2012, U.S. GDP growth was only about 1.5 percent. According to Art Cashin, every time GDP growth has fallen this low for an entire year, the U.S. economy has always ended up going into a recession.
#18 The global economy overall is really starting to slow down…
The world’s richest countries saw their economies contract for the first time in almost four years during the final three months of 2012, the Organisation for Economic Co-operation and Development said.
The Paris-based thinktank said gross domestic product across its 34 member states fell by 0.2% – breaking a period of rising activity stretching back to a 2.3% slump in output in the first quarter of 2009.
All the major economies of the OECD – the US, Japan, Germany, France, Italy and the UK – have already reported falls in output at the end of 2012, with the thinktank noting that the steepest declines had been seen in the European Union, where GDP fell by 0.5%. Canada is the only member of the G7 currently on course to register an increase in national output.
#19 Corporate insiders are dumping enormous amounts of stock right now. Do they know something that we don’t?
#20 Even some of the biggest names on Wall Street are warning that we are heading for an economic collapse. For example, Seth Klarman, one of the most respected investors on Wall Street, said in his year-end letter that the collapse of the U.S. financial system could happen at any time…
“Investing today may well be harder than it has been at any time in our three decades of existence,” writes Seth Klarman in his year-end letter. The Fed’s “relentless interventions and manipulations” have left few purchase targets for Baupost, he laments. “(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors.”
So what do you think is going to happen to the U.S. economy in the months ahead?
Please feel free to express your opinion by leaving a comment below…
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Japan’s new Prime Minister Shinzo Abe is not messing around. He’s not priming the pump, he wants a gusher caused by massive inflationary pressure. This has always worked well in the past of course. Sure am glad China and Japan keep sparing over those rocks in the South China Sea. Thankfully nobody ever goes to war for economic reasons.
(From The Telegraph)
Premier Shinzo Abe has vowed an all-out assault on deflation, going for broke on multiple fronts with fiscal, monetary, and exchange stimulus.
This is a near copy of the remarkable experiment in the early 1930s under Korekiyo Takahasi, described by Ben Bernanke as the man who “brilliantly rescued” his country from the Great Depression.
The post The Japanese Economic Double Down, Damn the Torpedos, Full Speed Ahead! appeared first on AgainstCronyCapitalism.org.
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Last Debate Proves Mitt Way Ahead
C. Edmund Wright
If anyone still doubts the Gallup Poll — and common sense — showing that Mitt Romney is way ahead in the polls, all they had to do was watch the third presidential debate to have their minds changed. Romney put the game into the "four corners" stall, running out the clock while turning away numerous chances for easy slam-dunks and taking care not to stop the clock. Barack Obama, meanwhile, was pressing, slashing, and committing all kinds of fouls. Referee Bob Schieffer, not wanting to share in Candy Crowley’s sordid legacy, let the players play.
That’s the good news.
The bad news is that since Mitt is ahead and George W. Bush is the devil, we have to pretend that it was indeed Obama, with Crocodile Dundee’s knife clenched between his teeth, who brought Osama bin Laden to justice. Never mind that bin Laden was located with interrogation techniques Obama campaigned against and insists do not work. Never mind the gathering of this intelligence was done largely before Obama took office. Never mind that Obama threatened to hold up the pay for the Seals as a bargaining chip in a budget negotiation with John Boehner. Never mind that Obama won’t use the term "Islamic terrorism" or "the War on Terror." In fact, I guess we have to suspend our disbelief for a second and disregard the fact that everything that led to Osama bin Laden’s death originated with conservatives and was opposed by liberals like Obama at every step. Since Mitt is way ahead, it’s ok to congratulate Obama on that point anyway.
As unsavory as all of this is to swallow, it is nonetheless strong evidence that Romney’s campaign realizes Mitt is fast pulling away from Obama. Obama’s slash and burn techniques show me that his campaign understands the same thing. No one in either campaign really believes a 2008 turnout model is valid, and that is the primary methodology that is keeping Obama "ahead" or "tied" in certain polls. Gallup, which has showed a 6-7 point Romney lead for several days in a row now, is about what the other polls would show if they would simply use a reasonable party affiliation turnout model.
Mitt is 6-7 points ahead nationally and 2-5 in the swing states. He knows it. Obama knows it. They all showed the nation last night they know it. That is the big takeaway from the final debate.
Statistics: Posted by yoda — Mon Oct 22, 2012 10:22 pm
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What’s ahead for US as more Americans lose connection to religion
Young, white Americans are driving the trend, with as many as one-third saying they affiliate with no religion, a new survey says. It could affect notions of family and the shape of politics.
By Allison Terry, Contributor / October 9, 2012
One-fifth of US adults – including one third of adults under age 30 – identify as religiously unaffiliated, the highest percentage ever recorded by the Pew Research Center’s Forum on Religious and Public Life.
The rapid growth of religiously unaffiliated adults, which rose from 15 percent to 20 percent in the past five years, indicates significant changes in the American religious landscape, say authors of the report, “ ‘Nones’ on the Rise,” released Tuesday.
“What we are seeing here is long-term social changes in how people think about themselves, and how people talk about their connection to religion,” said Cary Funk, a Pew senior researcher, at the Religious News Association (RNA) convention on Oct. 6 in Bethesda, Md.
Are you smarter than an atheist? A religious quiz.
The religiously unaffiliated – also called “nones” – are people who answer surveys saying they are atheists, agnostics, or “nothing in particular.” The report shows that the US population includes 13 million people who identify as atheists or agnostics and 33 million who identify with no particular religion.
This rapid increase of the religiously unaffiliated will have “vast implications” for society, including a “restructuring of American religion,” said John Green, a Pew senior researcher and director of the Ray C. Bliss Institute of Applied Politics at the University of Akron, during the RNA convention.
As the population becomes less religious, there could be potential impacts on other social institutions such as family, marriage, education, and politics, said Mr. Green.
More than six in 10 religiously unaffiliated voters are registered Democrats and are more likely to identify as liberals: 72 percent support legal abortion and 73 percent support same-sex marriage, the report found.
If the unaffiliated population continues to grow, it may become the largest “religious” group for Democrats, Green said, which may create sharper divisions and tensions between political parties and also within the Democratic Party.
The demographic change of the religiously unaffiliated is broad-based – generally uniform across gender, income level, and education – but it is concentrated in younger generations and whites, said Ms. Funk. The growth in the unaffiliated population is driven by generational replacement as young adults gradually supplant older generations. Young adults today are more likely to identify as unaffiliated than previous generations were at the same age.
Even though people identify themselves as religiously unaffiliated, they are not wholly secular, said Funk. A majority consider themselves religious or spiritual in other ways: 68 percent say they believe in God, 37 percent classify themselves as “spiritual” but not religious, and 21 percent say they pray every day, according to the report.
The group is also not “hostile” toward religious institutions, and most say religion can be a “force for good” in society. Seventy-eight percent say that religious organizations “help strengthen community bonds,” and 77 percent say that they have a role in helping people in need.
The US is still a highly religious nation – 58 percent say religion is very important in their lives – compared with other industrial democracies, the report found. In Britain, for instance, only 17 percent of the population says that religion is very important in their lives, which is similar to France (13 percent), Germany (21 percent), and Spain (22 percent).
Religious affiliation in the US has remained constant among religious minorities, particularly Protestant blacks and Catholic Hispanics. However, the Protestant population decreased from 53 percent in 2007 to 48 percent in 2012, which marks the first time that percentage has reached below 50 percent.
The report’s analysis is based on dozens of Pew surveys conducted in recent years, as wells as a new survey that looked into the beliefs and practices of the religiously unaffiliated.
Statistics: Posted by yoda — Tue Oct 09, 2012 1:49 pm
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Big Changes Ahead: Gold Just Became Money Again
Posted on 17th August 2012 by Administrator in Economy |Politics |Social Issues
By Doug Hornig, Casey Research
On June 18, the Federal Reserve and FDIC circulated a letter to banks that proposes to harmonize US regulatory capital rules with Basel III.
BASEL III is an accord that tells a bank how much capital it must hold to safeguard its solvency and overall economic stability.
It’s a global standard on bank capital adequacy, stress testing, and market liquidity risk.
Here’s the important bit:
At the top of the proposed changes is the new list of “zero-percent risk weighted items,” which now includes “gold bullion,” right after “cash.”
That’s the part to take notice of.
If the proposals are approved by regulators – and that seems likely since adoption of Basel III will be– then this is a momentous change for the gold market.
Now banks will be allowed to hold bullion in their vaults and count it among their Tier 1 assets – in other words, the least risky assets.
That by itself would be bullish for the gold price, as banks that recognize gold’s unique characteristics seek to stockpile more of it.
But that’s not the whole story…
Gold Regains Money Status
For one thing, Basel III also stipulates that a bank’s Tier 1 holdings must rise from 4% of assets to 6%.
That means that banks may not only replace a portion of their existing paper with bullion, but may use it to meet some of the extra 2% as well.
In addition, this vote of confidence from the highest monetary authorities gives further impetus to the remonetization of gold.
In essence, what’s happening is that from now on gold will be considered “money” in virtually the same way as cash or bonds.
And banks will be given the choice between holding more of their core assets in history’s most reliable store of value vs. paper backed by nothing more than the promises of increasingly wasteful governments.
Finally, there is the impact on individual and institutional investors.
Jeff Clark, in Casey Research’s BIG GOLD newsletter, has been guiding gold investors for years. In his view, this news looks set to really shake up the gold market, because as regulators and banks increasingly view gold as having safety on a par with the various paper alternatives, it is logical that they will also see the need to beef up their own holdings.
There are a number of positives for gold going forward.
Though it remains speculation on our part, we believe that the net result of Basel III and associated adjustments to US regulations will be an increased recognition of gold’s safe-haven status across all markets.
And that translates into higher global demand for the metal next year, and a concomitant increase in its price.
Statistics: Posted by yoda — Sat Aug 18, 2012 9:22 am
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July 31, 2012, 12:04 a.m. EDT
The Real Crash is dead ahead as 2008 is forgotten
Commentary: Ironically, you’ll win by buying banks now
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — “Facebook will become the poster child for the current social-media bubble,” warns economist Gary Shilling in his latest Forbes column, “just as Pets.com was for the dot-com bubble.” Yes, Wall Street is repeating the 2000 dot-com crash as today’s social-media bubble crashes and burns.
Think history folks: Remember 2000-2002? The economy suffered a 30-month recession and a brutal bear market. The Dow Jones Industrial Average peaked at 11,722, then crashed, losing over 4,000 points dropping below 7,500, down more than 43%, with massive losses of more than $8 trillion in market cap.
Pets.com sock puppet.
But it gets worse: Shilling’s bluntly warning: “If we aren’t already in a recession, we’re getting very close.” Yes, he’s more reserved than Nobel economist Paul Krugman, whose latest book goes beyond hinting that the America economy is repeating the 2000-2002 recession, His title says it all: “End This Depression Now!”
But the scariest fact is that America’s warring politicians, CEOs and Super Rich can’t even see the obvious link between the 2012 social-media bubble and the 2008 Wall Street credit bubble that nearly bankrupt our monetary system and forced Congress and the Fed into bailing out our too-big-to-manage banks to an estimated $29.7 trillion in cash, credits, cheap money loans and debt relief.
But, unfortunately, the banks still haven’t learned the lessons of history. Instead, they dug in their heels, spending hundreds of million on lobbyists, fighting all reform efforts, went back to business-as-usual, sabotaging America and ultimately themselves.
Déjà vu: here we are four years later. Again mired in another presidential election, right back where we were in the summer of 2008. In denial, trapped in lies and mean-spirited theatrics, ignoring warnings, blinded, obsessed about the smell of election victories no matter the cost, even if it triggers a recession.
Yes, déjà vu all over again. Four short years. We forget. We’re back repeating the same buildup scenario to another meltdown.
Worse, bankers, politicians and billionaires just don’t seem to care. And you get the foreboding feeling that it really doesn’t matter who wins the election. This war will go on till 2016: For one party and their billionaire super PACs will do anything to hold on to the presidency, and the other, backed by their billionaire super PACs, will do anything to regain it.
Politics is now a deadly blood sport that reminds us of the “Hunger Games.”
As if 2008 never happened, creating the granddaddy of all bubbles
Yes, another crash is coming soon because we’re back playing the same speculative games as we did for years prior to the 2008 crash. Nothing’s changed. And when we collapse, it will be because America’s leaders never do learn the lessons of history. And never will, if you get the meaning of economists Carmen Reinhart and Kenneth Rogoff who surveyed “800 Years of Financial Folly” and saw nothing but repetitive cycles.
In a BusinessWeek editorial, Peter Coy and Rouben Farzad described the latest cycle in this eternal drama of the bubbles:
“It’s as if 2008 never happened. Once again the worlds investors are pumping up bubbles that will probably explode in their faces. After the popping of a real estate bubble led to the first global recession since the 1930s, world markets are frothing like shaken Champagne. Pundits claim to have spotted price increases that are unsupported by economic fundamentals in assets ranging from U.S. farmland to Israeli biotech to Australian housing to Chinese cemetery sites. Commodities have soared. Global junk-bond issuance hit a record … this is the granddaddy of them all, an almost-encompassing bubble right at the heart of monetary systems.”
Yes, for the past four years our great free-market system has been blowing many new bubbles, like the Facebook bubble that we saw coming months ago. It will soon halt Chairman Bernanke’s nonstop printing press. This bubble will sink like a mafia stiletto deep into the “heart of the monetary systems” worldwide, proving something Nassim Taleb said about Bernanke when Obama reappointed him in 2009: “He doesn’t even know he doesn’t understand how things work,” that his methods make “homeopath and alternative healers look empirical and scientific.”
Warning, the Real Crash is dead ahead, will bankrupt America
That’s also what economist Peter Schiff, CEO of Euro Pacific Capital, predicted recently when interviewed on Fox Business about his new book, “The Real Crash: America’s Coming Bankruptcy.”
“We’ve got a much bigger collapse coming, and not just of the markets, but of the economy … like what you’re seeing in Europe right now, only worse … when we hit our real fiscal cliff” and a meltdown more severe than the Crash and Great Recession of 2007-2010.
Schiff was one-upped during the same NewsmaxWorld report by Robert Wiedemer, author of the 2006 “America’s Bubble Economy” and recent “Aftershock” book about the “Next Global Financial Meltdown.” He warns that “the data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation,” starting this year.
Yes, it sounds like overkill to drive home the message, but maybe not. Maybe this is déjà vu 1929. Maybe the Real Crash is dead ahead. And maybe nobody wants to see it, like 2008.
Big secret, buy banks? Yes, if Wall Street doubles down, splits up
That signal comes from no less than former Citigroup president Sandy Weill. Imagine, the man responsible for building the first too-big-to-manage mega-bank, and killing the 60-year-old Glass-Steagall separating commercial and investment banking back in 1999, now saying:
“I think what we should probably do is go and split up investment banking from banking. Have banks be deposit takers, make commercial loans and real estate loans. And have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.” What a game-changer.
Huffington Post columnist Mark Gongloff notes that Weill is “not doing it out of the goodness of his heart.” But the truth is banks haven’t been doing well since 2008, in spite of controlling politicians and regulators: “The banks themselves, including the abomination he created, Citigroup, would be worth a lot more if they were broken into smaller pieces.”
Since 2008 “the market has turned against the big banks,” investors have been “doing the government’s dirty work for it.”
De facto Glass-Steagall? Yes, split and get richer on two bank stocks
Weill must also sense that with all the relentless political fears about the government’s out-of-control debt, plus the real possibility that the American economy could in fact go over a Fiscal Cliff in 2013 and into a long recession, or even a depression, the appetite for another taxpayer bailout will be zero, forcing a bank breakup anyway.
So Weill’s brainstorm makes a helluva lot of sense: Take command. Get ahead of the coming slowdown. Shilling warns the social-media bubble will keep deflating.
Forget them, seize this opportunity. Refocus on new bank stocks. Besides, if insiders control a split-up into a commercial bank and an investment bank, it’d be on terms more favorable to bank insiders, executives and shareholders than if Washington did it.
And you can bet the smart money’s on Weill’s strategy. For example, The Wall Street Journal quotes Phillip Purcell, former CEO of Morgan Stanley: “From a shareholder point of view, it’s crystal clear these enterprises are worth more broken up than together.”
Yes, deniers are claiming it’ll never happen, especially Jamie Dimon, who publicly doubled down on loving his too-big-to-manage $2.3 trillion bank. But Gongloff and the Journal note that Dimon’s reshuffled organizational chart suggests otherwise.
Moreover, you know bank CEOs like Lloyd Blankfein are motivated more by their own personal wealth than by firm assets under management. Ultimately, if they can make more money and get more control of their destiny by owning two bank stocks, you can bet they’ll plan a de facto Glass-Steagall revival in a New York minute. They can make more … and so can America’s 95 million Main Street investors like you.
Bottom line: if you are a risk-taker, maybe you can beat the market to the punch, before The Real Crash overwhelms Wall Street, like it did in 1929 and in 2000 and in 2008. Because next time, even though our too-big-to-manage banks expect they’ll get bailed out, the reality is that they’ll go begging for bail-out billions and Congress won’t do it again, without forcing a newer, tougher Glass-Steagall law on the banks.
Statistics: Posted by yoda — Tue Jul 31, 2012 3:37 pm
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April 10, 2012
If the stock market can never crash again due to the Bernanke Put, then why have all the crash test dummies been ordered up?
I know, I know: the stock market will never go down because Ben Bernanke and the other central bankers won’t let it. It’s funny how the "Bernanke/European Central Bank Put" is ranked alongside gravity as a rule of Nature until markets roll over; then talk shifts from purring adulation of central bankers’ godlike powers to panicky calls for another flood of liquidity/free money to "save" the market from the harsh reality of global recession.
The crash test dummies know better: they’ve been called up for a humongous crash.
The basic mechanism that is being overlooked is Liquidity Resistance. This is akin to insulin resistance, where insulin becomes less effective at lowering blood sugars. The amount of insulin required to maintain normal blood sugar levels increases as resistance rises until even massive doses of insulin no longer have the desired effect and the system crashes.
Liquidity has the same dynamic. Back in the good old days of 2008-09, a $1 trillion tsunami of liquidity was enough to save the global debt machine from implosion and spark an enduring global stock market rally.
The current rally since late December required (by some estimates) over $3 trillion in global liquidity injections from central banks. In four years, the market’s resistance has skyrocketed: where $1 trillion launched a multi-year global rally (goosed along with QE2 and Operation Twist when it began to falter), now $3 trillion yielded a 100-day rally that is already coming apart at the seams.
You see where this is going. To maintain the veneer of normalcy, i.e. a continuing Bull market, the next liquidity injection will have to be $5 trillion, and it will spawn a rally of perhaps 50 days. That $5 trillion will probably break the global market; if it doesn’t, then the next tidal wave of $7 trillion (or whatever the market needs to trigger another high) most certainly will.
At some point, the liquidity injection will fail to boost the market at all, and that will trigger a panicky rush for the exits.
None of this is new or surprising. One technical tool of interest is the Coppock curve; this chart is courtesy of frequent contributor B.C.:
Those who argue that "this time it’s different," i.e. that markets can inflate essentially forever on the "juice" of liquidity, are conveniently overlooking Liquidity Resistance. The crash test dummies have been ordered up, and not because "this time it’s different:" they’ve been ordered up because central bank manipulation is not a law of Nature, it is an artifice of increasingly marginal effectiveness.
Statistics: Posted by yoda — Mon Apr 09, 2012 9:21 pm
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US farmers zoom ahead in sowings – except for corn
US famers, helped by warm temperatures, got spring sowings off to a rapid start – but not for one crop, corn, for which seedings were expected to have got off to a record pace.
Growers were well ahead of the average pace in sowing the likes of cotton, barley and rice, besides oats for which nearly half of farmers’ intended acreage is already planted, the US Department of Agriculture said in the first of the 2012 series of weekly crop progress reports.
In spring wheat, farmers had sown 8% of the crop, four times the average as of the start of April, with growers in North Dakota particularly quick of the mark, having one-quarter of their crop seeded compared with an average of 2%.
Seeding was spurred by warmer temperatures which lifted state soil temperatures to 46-62 degrees Fahrenheit, from 31-33 degrees Fahrenheit a year ago.
‘Waiting on the go date’
However, growers had only 3% of their corn crop in the ground, only one percentage point ahead of the average rate, and well below market forecasts.
Traders had expected a figure of 5-7%, according to broker US Commodities, a start-of-April record believing that growers would attempt both to exploit the benign spring sowing weather, and attempt as early harvest as possible to achieve higher prices.
In Chicago, corn futures for September were on Tuesday trading at $5.71 ¼ a bushel, a premium of $0.26 a bushel to the December contract.
However, early sowers risk invalidating insurance, which sets earliest planting dates by area and crop, and will not cover prematurely-seeded crop damaged by, for instance, a late frost.
Even in Illinois, one state where early sowings, at 5% completed, were unusually quick, the USDA noted that "most [farmers] are waiting on the ‘go date’ for their area to arrive" before starting.
‘Corn seed returned’
Later seeding of corn increases the chance that growers will switch area from the grain to soybeans, which thanks to price rises over the last few weeks, has become an increasingly competitive choice.
Indeed, there is already talk of growers changing, with Paul Georgy at broker Allendale saying that "we are getting calls from producers who are switching from corn to soybeans.
"We are hearing from seed salesmen who are getting corn seed returned and soybeans seed purchases."
At Market 1, Mike Mawdsley said: "We have already heard of some switching of corn to soybeans because of the change in price."
In Chicago, new crop November soybeans were, in showing a 0.1% decline, slightly underperforming flat December corn as of 10:00 GMT, reversing the recent trend between the two contracts.
The crop progress report also revealed a further improvement in the condition of winter wheat, which has continued to recover from a weak start, amid drought in important growing states in the southern Plains.
In Kansas, the biggest wheat-producing state, the proportion of the crop rated "good" or "excellent" edged 1 point higher to 60%, the highest figure since the 2010 harvest.
The Kansas crop is also "one of the most advanced in recent history", with 61% of it at the jointed stage, three times the usual proportion by now, USDA officials noted.
This could provide a boon to farmers, with an early harvest increasing the chances of allowing a follow-on crop, such as soybeans, but does render the crop more vulnerable to frost damage.
"Talk of threatening cold temperatures has dissipated for now," Brian Henry at Benson Quinn Commodities said.
"But given the advanced stage of the winter wheat crop, the trade will be watching closely for any additional talk of cold temperature entering this region."
Statistics: Posted by yoda — Tue Apr 03, 2012 4:07 am
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