The More You Dig Into the Numbers, the Worse They Get
Barron’s Alan Abelson calls the September employment report “An absolute horror.”
He notes that as bad as things look on the surface, “the more you dig into the numbers, the worse they get.” He references my pal Doug Kass, who explains why those expecting a “V-recovery” and a robust consumer snap back are kidding themselves.
While Doug and I diverged about how far the market momentum might carry — I said further, he said not-so-much — we are in agreement as to the economic effects of labor under-utilization and years of credit card over-utilization: An anemic US consumer:
“As Doug Kass, our hedge-fund-manager friend, who was a whiz at arithmetic when he was 10 years old and still can do his sums, totes it up, there are 2.2 million of these marginally attached souls, who would like to work but haven’t been able to land a job and aren’t receiving benefits. Add in some 9.2 million involuntary part-timers and the aforementioned 15.1 million formally unemployed, and the jobless total swells to over 26 million.
A compassionate portfolio manager (if there is such an animal), Doug tries to fathom in flesh-and-blood terms what those dry-as-dust dry statistics mean. And what he envisions are 26 million people not going to malls for extras, or taking the kids to the movies, hunting the cheapest victuals they can find at the supermarket and who are denying themselves the pleasures of travel, eating out, upgrading to Windows 7 or buying iPhone apps.
Now conceivably, they may not miss the Windows 7 or buying iPhone apps. (Apple and Microsoft might not agree.) Still, 26 million, even give or take a million, is an awesome number of unemployed men and women. The ironic conclusion Doug draws from this dismal picture as an investment pro is that corporate revenues are destined to continue to drag, and companies straining to realize those absurdly inflated Street expectations for 2010-11 earnings will continue to focus on cutting costs, which translates into cutting jobs.”
That sounds just about right . . .
>
Source:
Downright Scary
ALAN ABELSON
Barron’s October 5, 2009
http://online.barrons.com/article/SB125452481422260689.html
October 3rd, 2009 at 8:46 am
right so all the more reason we need this passed….
Obama links job growth to health care proposal
http://news.yahoo.com/s/ap/20091003/ap_on_go_pr_wh/us_obama
Smart move !
October 3rd, 2009 at 8:46 am
What industries will take the lead rehiring? The only thing I can think of it the smart grid initiative which will actually be wonderful for energy efficiency and possibly broadband competition long term, but at the same time an awful lot of entry level meter reader positions will be eliminated by utilities.
Maybe autos, they wear out faster than homes or commercial buildings!
October 3rd, 2009 at 8:48 am
anyway to read the cited Abelson article without helping out Barrons?
October 3rd, 2009 at 8:55 am
The “recovery” is much worse the more you dig…propped up by government programs that long term have put everyone of is into more debt whether we wanted it or not. Propped up by the MSM, to the point where NYSE Bulls far exceed anything seen during the housing boom. But scroll down on this Barron’s linkand see how insiders who know about their company’s prospects have been selling at record levels for months.
Three more bank failures last night…more to come…empty storefronts everywhere I go. What about the market rally you ask? The mother of all low volume pumps.
Government can’t prevent a global depression…it is still on the table IMO.
October 3rd, 2009 at 8:56 am
Abelson link. Correction of the March 2009 birth/death adjustment moved the job losses up by nearly 1 million, a 40% increase over the reported headline numbers.Once again the real news gets buried a bit. Trimtabs had been calling for these revisions the past couples months, the voice crying in the wilderness
http://www.news-to-use.com/2009/10/abelson-downright-scary.html
October 3rd, 2009 at 9:03 am
There are generally two entities that hire employees; government and businesses. The Federal government has been hiring however, state and local entities have been laying off. Businesses continue to cut back expenses (labor and other costs) until consumer demand returns.
If we do not want the US to become a banana republic where the majority of persons working are on the government payroll, we need to have businesses increase hiring and consumers purchase more – as 70% of our economy is driven by the consumers buying items.
Investment tax credits for business, a payroll tax holiday for both employees and employers, another lump sum payment back to tax payers. All are ideas to encourage spending and hiring. There are others who believe that higher taxes on the wealthy, a health care program and cap and trade legislation, as well as card check legislation will spur consumer demand and business hiring. Though I do not subscribe to the latter, I would encourage others on this board to give thoughts as to how to solve this unemployment problem. There are some very intelligent posters (and readers) on this blog – perhaps some of our not so intelligent politicians will read some of the ideas – and then claim then as their own…
October 3rd, 2009 at 9:09 am
Many long months ago, the possibility of a V shaped recovery was real. Back when people were trying to borrow for their business operations and had not yet started massive lay offs, the possibility of a V existed. All the Fed and others had to do was promote a “Lend or Die” policy and cash would have gone where it was needed when it was still useful.
That never happened. Rather, cash went out for the purpose or manufacturing new asset bubbles in commodities and the stock market. Little to none was made available to people who contribute to the economy. Most, if not all, was handed to the same parasitical influences who broke the economy in the first place. The real economy shriveled and now a whole new approach is needed to fix it.
In an abstract way, the Fed repeated some of the errors of the Great Depression. While it expanded the money supply, little to none got to where it was most useful. Thus, cash and credit for small business who might have softened the impact we are feeling today was withdrawn. Ben the Bubble goofed by giving money to the wrong people and taking it from the wrong people. In spite of his most educated efforts, there was still a contraction in the money supply … it was localized and targeted towards the people who could have best used the cash. Instead, an Everest or two of printed money was flooded towards the asset bubble builders. They are using it to pay themselves bonuses for pumping the stock market and commodity prices.
Let me repeat this. Ben Bernanke created a targeted monetary contraction that was aimed towards the people who might have made this a softer recession. His monetary expansion was targeted towards the same parasitical influences who crashed the world in the first place. He did this in spite of the impressive education he is said to possess. The man is a proven failure.
October 3rd, 2009 at 9:17 am
Bad as digging in makes it sound it’s actually worse. John Mauldin came up with a back of the envelop estimate of needing 15 million new jobs on very conservative estimates to get back to 5% unemployment. That lines up with my own estimates with the kicker that 2.5% real GDP growth doesn’t add jobs and that’s the Fed, OMB, IMF and OECD long-term outlook. On a 3rd level businesses won’t hire or invest until demand starts growing organically. On a 4th, worst level,too many executives were/are deer in the headlights, late to adapt and are NOT adopting new thinking for the new normal. Doesn’t bod well.
Let’s be clear…we’re talking about a decade of doldrums here with aggregate demand less than potential and sub-par job and economic growth. We’re also in and because of credit and banking problems going to be in a liquidity trap for a few years. Put those together and ideological as y’all want to be the Fed will need to maintain loose monetary policy and quantitative easing for a long time while the ONLY source of demand to keep the wheels on the wagon is Federal spending. Mauldin is anticipating a l.t. deflationary environment, based on a dispassionate look at the numbers. Not simple answers.
Mauldin: http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2009/09/25/welcome-to-the-new-normal.aspx
OMB Mid-session update: http://www.whitehouse.gov/omb/budget/MSR/
Current employment and outlook: http://llinlithgow.com/bizzX/2009/10/refreshing_the_economic_outloo.html
Policy and Outlook: http://llinlithgow.com/bizzX/2009/09/between_stalingrad_and_kursk_r.html
Debt and De-leveraging: http://llinlithgow.com/bizzX/2009/09/debt_wealth_finance_outlook_si.html
This is gonna stay uglier for longer than anybody is yet pricing into the market.
October 3rd, 2009 at 9:19 am
If businesses and state& local govs aren’t hiring then the US must hire, WWII got us out of the last recognized depression, we need a major war. We can’t afford to pay volunteer salaries so we need to restart the draft, instantly create 2 million new jobs! There will be plenty of additional jobs building new equipment and rebuilding the old equipment worn out in Iraq.
We’re already bogged down in Afgan and the euros are leaving, we just need to to incite Iran and then we can be involved in a huge swath of enemy territory from Iraq to Afgan with a good chance of Pakistan going bad too.
October 3rd, 2009 at 9:21 am
jc Says:
October 3rd, 2009 at 9:19 am
We’re already bogged down in Afgan and the euros are leaving, we just need to to incite Iran and then we can be involved in a huge swath of enemy territory from Iraq to Afgan with a good chance of Pakistan going bad too.
reply:
———–
Where’s GWB when he’s most needed?
October 3rd, 2009 at 9:30 am
@ dead hobo
> Let me repeat this. Ben Bernanke created a targeted monetary contraction that was aimed towards the people who might have made this a softer recession. His monetary expansion was targeted towards the same parasitical influences who crashed the world in the first place. He did this in spite of the impressive education he is said to possess. The man is a proven failure.
Nassim Taleb agrees with you….”Ben Bernanke saved nothing. He shouldn’t be allowed in Washington. He’s like a doctor who misses the metastatic tumour and says the patient is doing very well”.
October 3rd, 2009 at 9:45 am
Is Bernanke a failure? Depends what his goals were. If his goal was to delay a financial Armageddon so powerful WS interests could save their butts before bailing out, he likely succeeded better than anyone could have imagined. If his goal was to resolve the US debt crisis so we could lay a foundation for future prosperity, well he’s actually worsened it.
October 3rd, 2009 at 9:52 am
In spite of the Fed’s mandate to maintain stable prices, it has and will continue to ignore asset bubbles. The popular excuse is that they are impossible to identify until they have exploded. As a cover, the Fed periodically releases papers that purport to uncover and explain the paradox of asset bubbles (paradox to them, obvious as a large pile of steaming, stinking dog shit on a living room floor to everyone else).
Asset bubbles are a tool of monetary policy.
One excuse is that they promote a wealth effect, which promotes consumer confidence, which hopefully will promote consumer spending. This is monetized prosperity. This type of reasoning should be treated as a criminal conspiracy.
The Y2K bubble left a lot of people broke. The credit/housing bubble left a lot of people in even worse shape than the Y2K burst. The one today is mostly just a distraction, but still will wipe out some 401k accounts, some day trading accounts, and some hedge fund gains when it explodes. Inflated commodity prices are slowly bleeding cash from everyone. Idiotic MSM business reporters somehow equate high commodity prices with prosperity, even when demand is down and supply is in glut. The Fed doesn’t even turn a blind eye towards the problem it created.
October 3rd, 2009 at 9:59 am
@DH: “Idiotic MSM business reporters somehow equate high commodity prices with prosperity, even when demand is down and supply is in glut. The Fed doesn’t even turn a blind eye towards the problem it created.”
This is obvious in the gold market…record high speculative long position, as physical demand plunged 22% y/y. Gold is due for a major correction, likely accompanied with a dollar rally. Stocks will hate that.
October 3rd, 2009 at 10:01 am
Barry,
I know you hedged some long positions this week…but you must have some amazing emotional control to realize how bad the economy really is and still be long equities.
October 3rd, 2009 at 10:09 am
I said:
Asset bubbles are a tool of monetary policy … One excuse is that they promote a wealth effect, which promotes consumer confidence, which hopefully will promote consumer spending. This is monetized prosperity. This type of reasoning should be treated as a criminal conspiracy.
addendum:
—————-
Elements of Fraud (found via Google)
a. a representation;
b. falsity of the representation;
c. materiality of the representation;
d. speaker’s knowledge of the falsity of the representation;
e. the speaker’s intent it should be relied upon;
f. the hearer’s ignorance of the falsity of the representation;
g. the hearer’s reliance on the representation;
h. the hearer’s right to rely on the representation; and
i. the hearer’s consequent and proximate injury caused by reliance on the representation.
****
A ‘reckless disregard for the truth’ may be substituted for telling a direct and intentional lie. Thus, even if the speaker did not know if a lie was told, simply having expert knowledge of the likelihood it may not be true is enough to press a fraud claim.
Tell me, how is this different from the Fed and it’s bubble machine?
October 3rd, 2009 at 10:13 am
Companies went from proftis to cash flow break even. 0% fed funds has given some respite. Since we can’t go lower than 0%, the next phase is cash flow negative. In a few quarters I guess.
What’s going to happen? Bankruptcies, M&A. Capacity will drop like a rock. And suddenly, big boxes will have too much space for the 1 or 2 articles they can carry.
The entire economy is on the verge of getting a major overhaul.
In Canada the TSX is 75-80% in 3 sectors: banks, energy and materials. I’m willing to bet that in 10 years it won’t be 90%. So why would I want to hand over my money to a professional PM, closet indexer who will only try to beat the index by 1%? That’s what ALL pension funds are doing!
October 3rd, 2009 at 10:17 am
Personal note …thru the various years, different card companies that I’ve had a credit card with have been bought up by JP Morgan Chase or “Chase Card”. I’ve had and continued to have excellent credit. Last month, I paid off a card that I had about 2000 dollar balance on with a $15,000 limit. Now that the card is paid off, my balance has been reduced to…..500 bucks! LOL. This is even more laughable than last year when AMEX reduced a card that I had an 18,000 limit on to 4000 bucks (balance owed at the time was 900 dollars on an 18,000 limit).
GREEN SHOOTS BABY!
October 3rd, 2009 at 10:22 am
A compassionate portfolio manager (if there is such an animal), Doug tries to fathom in flesh-and-blood terms what those dry-as-dust dry statistics mean.
“The mark of a civilized human is the capacity to read a column of numbers and weep.”
-attributed to Bertrand Russell
October 3rd, 2009 at 10:25 am
investorinpa Says:
October 3rd, 2009 at 10:17 am
This is even more laughable than last year when AMEX reduced a card that I had an 18,000 limit on to 4000 bucks (balance owed at the time was 900 dollars on an 18,000 limit).
reply:
———
Just out of curiosity, does anybody know about the availability of margin accounts and typical limits today, as compared to a couple of years ago? I’m wondering if they are more available than consumer credit in general.
October 3rd, 2009 at 10:25 am
If we do not want the US to become a banana republic where the majority of persons working are on the government payroll, we need to have businesses increase hiring and consumers purchase more – as 70% of our economy is driven by the consumers buying items.
———
Forget the consumer; he’s overextended. All we are doing now is putting him more into debt.
On a macro level, the US needs to reduce imports and increase exports. This means the US will need to focus on manufacturing and industrials. That’s a good place to start. Of course, it will not happen because the whole world is overbuilt. Too much capacity.
There will be less workers per dependant so obviously there is a need for increased productivity. This means a focus on technology. Companies will not increase this when they are in the red.
Infrastructure is falling apart. So somebody has to decide what is worth repairing and what is not. Then do it.
People are getting older and more health care will be needed. So you can choose to have Grandma stay alone at home while she dies, or let the bodies accumulate in the morgue wihout anyone claiming them is a choice you’ve got to make as a society.
I just don’t see how government can not come into play in all of these ideas. Many exisitng companies are going to die and new ones will take over but it’s going to be a painful process.
October 3rd, 2009 at 10:27 am
Even if Bennie and the Feds are trying to start a bubble in some sector (and I can’t really see that they are), then said bubble would actually require the public’s participation to do the heavy lifting. And this public, God love us, may have finally wised up to the game and should refuse to participate in another bubble for a long, long time.
Also, I wonder if job losses for illegals are counted in the numbers? Construction was arguably the hardest hit, in terms of numbers of bodies out of work, and that’s where a whole lot of illegal immigrants toiled for wages that were later spent at WalMart. Then again, WalMart isn’t doing as badly as most, so screw me.
October 3rd, 2009 at 10:27 am
Rosenberg has maintained that where everyone is getting this recession wrong is by treating it like it was an inventory based recession. It was not. It is a credit based recession. Because of that, Rosenberg claims that unemployment and job loss numbers are not lagging indicators, they are leading indicators.
As for inventories, they are going down. However, demand is going down more rapidly. If you do a ratio of inventory to demand, it has not improved measurably in over a year. It will continue down that path so long as we keep losing jobs…
Watching TV this morn, local news, and the auto commercial is 0%financing on Mustang and $1000 cash. Can you say demand is satiated? We are back at a 8mm sale rate for autos. Why? The avg age of cars on the road is inside of 5-7years I read somewhere. Bad economy. Why make the second most expensive purchase a household can make if you don’t need to?
Debt needs to be reduced. Govt spending plans do not help this. Bailouts do not help this. Part of bankruptcy is the workout of debt. Or it used to be. On a personal basis, this has been made more difficult by GW Bush. The companies that lobbied for these provisions will now pay the price. If a jobless, homeless man has lost everything, has he lost the debts too? I don’t know. I suspect that once he show up on a payroll, he will be found again and his check is docked. Anyone have an answer to that, because I really don’t know.
We may have “great” earnings from the market starting next week, but they are on easy comps and the “better than expected” story probably only works once is there is no improvement on toplines. I imagine what is said on conference calls afterwards about future prospects will hold much more weight this go around…we shall see. The market always likes to surprise a majority.
October 3rd, 2009 at 10:29 am
Steve Barry is back? I thought I had banished you from this site, http://www.ritholtz.com/blog/2009/09/at-of-the-woods/#comment-214756
Well…welcome back, Steve Barry!
Now, for my real reason for posting: Franklin420d, TRADE PROPOSAL ALERT! Calling all Mangy Mutts! Put the bong down and reply to my Ritholtz FF trade offer.
October 3rd, 2009 at 10:31 am
Oh and another observation… All the growth companies with a future? Only the Ken Lewis’ of the world can invest in them. The average Joe only has access to the have beens that are going to disappear.
October 3rd, 2009 at 10:38 am
@CNBC
“The commish” (cvienne) will not authorize any trades to Mangy Mutts this weekend (that being his “matchup”)…
Just kidding…
October 3rd, 2009 at 10:49 am
@Steve Barry @ hobo
Personally, I have been closer to the Kass viewpoint than BR’s viewpoint (with regards to the EXTENT of the rally)…
I’m sure everyone already realizes this, but the “synthesis” of the broader argument is that Kass and BR are very much aligned with regards to the macroeconomic picture)… They simply diverge as to where this bear market rally eventually dumps people off…
Kass, if I remember correctly, was closing out his longs this past summer while BR held on…
ROUND ONE to BR – (the rally continued)
BR stated the other week that he had hedged…
ROUND TWO to BR – (he hedged at an opportune time)
It will be determined (probably this month), how deep a correction we see… Since BR is hedged (but still ‘long’), the market could pull back to the summer levels… Therefore…
ROUND THREE – a draw
After the correction will be where the tale will be told… Are we at the end? or will there be yet another rally past 1079?…
It feels to me that there are at least two more rounds in this fight, OR, if the market simply rolls over here and takes out the summer levels to the downside, Kass may win in the 4th round by TECHNICAL KNOCKOUT…
October 3rd, 2009 at 10:56 am
hobo,
Our system is flat out bubblenomics. Its based and is driven forward by bubbles, thus they have to let them run out of control. That way the FED is popular until it has to spend OPM to fix the inevitable blowout. Then its our savior. All the while those with first access, to cash credit and bailouts, get richer than G_d. And actually increase in influence with each crises. Its a brilliant scheme to concentrate power more and more. The problem is we should have shot the first person to utter the bubble clean up thesis. The fleas are too big and numerous for the dog, but I guess we get to see how many bloodsuckers they can pile on us until we pitch face first into the dust.
October 3rd, 2009 at 10:57 am
I’m afraid that any huge tax holidays would just mostly be saved by people; understandably. Those with debt will pay down debt, those without will save to guard against the coming inflation (perceived, at least) and tax increases to pay for the money they just got. So we’ll just shift some more private debt to the federal balance sheet and borrow money to save. It won’t have a lot of effect on the current economy and will exacerbate the longer term problems.
There are no magic pills to take. We’ll be having our hangover from the huge party whether we want to or not. Just a matter of when.
I will agree that a meaningful health care reform effort that breaks the employer provided insurance link will do much good for businesses. I’m shocked that this angle has not been emphasized by the business lobby. It would do wonders for leveling the field with businesses in other countries who don’t have that to worry about. And it would remove the barrier to employee mobility that puts sand in the gears of our economy.
Alas it appears that the entrenched interests for the status quo (ins companies, people who are comfortable with their employer provided plan and are afraid of change, etc.) are holding sway in the battle. We are paying the price for that intransigence.
October 3rd, 2009 at 11:00 am
Government can’t prevent a global depression…it is still on the table IMO.
—————–
I think this is key.
Over the last few decades, the big debate has been on how government should act in times of trouble. Most economics courses revolved around this concept. The theory has been that government should save while times are good and spend when times are tough.
This is it. The time has finally come to prove the theory right. Right?
I can already predict that the government is going to fail. Why? Because they forgot to save when times were good.
October 3rd, 2009 at 11:03 am
I will agree that a meaningful health care reform effort that breaks the employer provided insurance link will do much good for businesses. I’m shocked that this angle has not been emphasized by the business lobby.
—————
That’s because insurers are part of the propped up financial system. If they change the system, not only will we see banks propped but insurers will need to be also.
October 3rd, 2009 at 11:04 am
@CNBC and others:
Didn’t know I had been banished…a combination of other responsibilities, along with mother of all low volume pumps and questioning my sanity, led me to stop posting for awhile. How often can I post the same stuff and be made to look foolish by the market? It obviously can keep going up and diverging from my worldview ad nauseum. My posts and links from 8:55 and 9:59 sum up my current views. The stark contrast of high bullishness with depression-like employment situation could make for a non-linear market event.
October 3rd, 2009 at 11:04 am
“The theory has been that government should save while times are good and spend when times are tough.”
If only we had done the former, doing the latter might actually work. But alas…
October 3rd, 2009 at 11:07 am
@Damn:
“This is it. The time has finally come to prove the theory right. Right?
I can already predict that the government is going to fail. Why? Because they forgot to save when times were good.”
Great line…should be a quote of the day…bitch of a thing to forget huh? Or maybe times were so good because it was all borrowed from the future anyway.
October 3rd, 2009 at 11:07 am
“That’s because insurers are part of the propped up financial system. If they change the system, not only will we see banks propped but insurers will need to be also.”
I agree danm. And big business may also have thought that they could keep their labor on a short leash by pinning them down with employer provided insurance. That’s coming back to bite them in the longer run, IMO. Another shortsighted business mindset that is adding to the fire’s fuel.
October 3rd, 2009 at 11:09 am
thetanman Says: October 3rd, 2009 at 10:56 am
thetanman, well, understands that what we’ve been witnessing is, yet, another version of Economy Ramp ‘n Crash.
for those that haven’t cottoned on to the idea, this book: http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212
and/or this link http://www.financialsense.com/transcriptions/2006/1018griffin.html
or, more broadly http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=The+Creature+from+Jekyll+Island
will give one substantive background on the principles, and lack thereof, and the Principals of the Schema.
October 3rd, 2009 at 11:09 am
“Or maybe times were so good because it was all borrowed from the future anyway.”
Bingo. The “miracle of productivity” that led to “The Great Moderation” was all a sham. We spent our future income and ate our seed corn; and now we pay.
October 3rd, 2009 at 11:16 am
Nothing like a good, hysterical bear rant on a Saturday morning, eh?
On Thursday, we were in recovery. On Friday, because a single report came in 50,000 jobs lighter than expected (but still 500,000 jobs stronger than just 6 months ago), it’s Armageddon!
Shivers! Time to stock up on God, gold and guns!
October 3rd, 2009 at 11:17 am
SB,
w/this: “The stark contrast of high bullishness with depression-like employment situation could make for a non-linear market event.”
good point, the Risk of such ‘non-linear market event’ has seldom been greater..
as well: “…Current circumstances are worse now than back in 1929, at least at that point in time the U.S. did not have a deficit of 11 plus trillion dollars and growing on its back. It was the leader in manufacturing and consumer spending did not account for over 70% of the GDP as it does now. One has to understand that if spending accounts for such a large part of the economy then something has to give sooner or later whether it is now or 10 years later. Consumer spending creates nothing of value; a long term foundation of growth can only be created by investing in capital goods and not by taking on more debt. An economy whose foundation is based on debt can only keep growing by taking on more debt, eventually you are going to run into a brick wall and everything will fall to pieces and that’s exactly what happened. Going forward we are still trying to use to debt to get out of this hole, which means that the next correction is going to be even more severe as there is nothing to support the foundation but paper bricks…”
http://www.financialsense.com/fsu/editorials/ti/2009/1002.html
October 3rd, 2009 at 11:22 am
@Franklin411
Yeah Franklin I’m with you… All these “skeptics” are crazy…
As soon as that nano-bot comes out of the chemistry lab, $50 trillion in debt is going to magically disappear…
Woe be to non-believers! Let them eat their gold and guns, and worship a NEW God!
October 3rd, 2009 at 11:25 am
@ Steve Barry: Click the link that I provided. It was a front-handed insult — as opposed to a back-handed compliment — for you. You are too smart and rational for a stupid and illogical world. Sucks to be you. ahab will outperform you everyday of the week and twice on Sunday. It’s ahab’s world.
@cvienne: I don’t think you will have to worry about having to authorize any trades this weekend. Franklin420d will wake up in a purple haze around, say, Tuesday, from a weekend orgy of hashish and Doritos. I don’t know why you went all “it’s all about the Ws” crazy giving up Aaron Rodgers, when you are facing the phantom Dwayne Bowe and the vaunted Seahawks offense (in Indy, without Hassleback, mind you) this weekend.
October 3rd, 2009 at 11:38 am
Bad jobs numbers will keep the monetary tap open.
Bullish for gold and emerging markets.
October 3rd, 2009 at 11:48 am
@CNBC
Week 5 – Aaron Rogers/BYE
Week 15 (potential FINALS) – Aaron Rogers vs. Steelers (away on a frozen Heinz Field, Dec 20th)… Steven Jackson vs. Houston (at home in Edward Jones Dome, Texans ranked DEAD LAST in NFL in rushing defense)…
October 3rd, 2009 at 11:54 am
@CNBC: I read your link originally and took your post in the proper vein.
@DL…re :Gold
I am very negative on gold…reasons why are well stated here:
http://www.technicalindicators.com/gold.htm
“Most significant is the large number of long speculators in the gold market now. Except for last year when the gold hit $1,030, this would have been the highest number of long speculators in the history of the New York gold market (since 1975). With the decline of the past few days there is likely to be a lot of selling as long speculators are likely to begin selling and margin calls go out requiring speculators to have more money in their accounts to make up the losses of the past few days …
The slow economy has diminished the number of physical gold buyers which is reflected in the latest demand figures for physical gold. It is obvious that people are not buying gold as they were last year – demand for jewelry which usually represents about 70% of total global demand was down 24% in the past quarter, continuing the downtrend of the past few years. It has been mostly speculators that have driven up the price (reflected in the latest Commitment of Traders report.
A significant factor is the outlook for the stock market since commodity prices have recently been influenced by the sharp moves in the stock market. As of the end of August (latest available) the price earnings ratio on the S&P 500 was 129, near the highest since records were kept on the index in 1936. The stock average remains overpriced in relation to earnings in the extreme, a very negative indicator since stock prices ultimately depend on earnings. The ratio is very high when compared to an historical average of closer to 15 or 20 times earnings (click here for a chart of past price earnings ratios). A falling stock market is potentially bearish for the gold. “
October 3rd, 2009 at 12:09 pm
franklin411,
“On Thursday, we were in recovery. On Friday, …”
We? Who? On this blog? That I must have missed.
Are we in a recovery? Or have you been cheering a wobble for some months now, which was stimulated by the increase in new government debt and will fade as soon as new government debt doesn’t increase anymore?[1]
[1] Here I assume that GDP growth is a function of the first derivative of new debt (in addition to the change in income/demand), or the second derivative of total debt. See: http://www.econbrowser.com/archives/2009/09/credit_stock_gr_1.html
rc
October 3rd, 2009 at 12:15 pm
Steve Barry @ 11:54
Thanks for your input on the gold question.
Sure, we could see a small pullback here, which would dampen bullish enthusiasm, but I see gold significantly higher over the next six months, and over the next two years. And it’s not just about gold. Other commodities, and commodity currencies (e.g., Norwegian krone, Brazilian real, and AUD) should keep rising until the Fed finally tightens aggressively.
And the massive Federal debt doesn’t hurt the gold picture either.
October 3rd, 2009 at 12:23 pm
Welcome to the vicious circle folks
On Friday, because a single report came in 50,000 jobs lighter than expected (but still 500,000 jobs stronger than just 6 months ago), it’s Armageddon!
That’s because they’re running out of people to fire Frankie.
We don’t have to recover you know. We could stumble along and stagnate like a backtilted L instead of a V or a U. That was my guess six months ago and it is still my guess today
If the government wanted to put people to some moderately productive work, maybe they should start hiring people to patrol and guard the Mexican border. That should have two effects. It will employ Americans and it will cut off the supply of cheap, illegal labor. I don’t know if it will have a big effect but it will at least help to reduce the labor pool from two sides with one action.
October 3rd, 2009 at 12:25 pm
@ cvienne: Believe me, I have been obsessive-compulsive on the byes and the weekly matchups, especially Weeks 15 and 16. I took a flyer on Josh Morgan on the speculation that he might blossom into a great Week 16 WR against Detroit, but it became quickly evident that he will not, so I dropped him a week ago. I also fully appreciate the need to win now — the short-term need — but you also have to consider the long-term consequences.
As for Steven Jackson against Houston, remember that I drafted him (he has been traded three times now!) in the second round, because all the elite RB1s were gone by my 8th pick. My first priority after getting Jackson was to upgrade him, which I was able to do with Forte, perhaps thanks to aforementioned purple haze. Jackson can be great as long as he does not get worn out or injured, being the only jewel on a bad team.
I appreciate your and ahab’s short-term motivations…far be it for me to criticize. Quite frankly, The Great CNBC Sucks would be ecstatic if CFA were to get even stronger at the expense of everyone else but me.
October 3rd, 2009 at 12:31 pm
@rootless
I’m pretty sure that we will eventually see more stimulus…
BUT NOT YET
By way of the “silly and unfortunate way” this government manages our economy, they have left themselves with no other outs…
1. Obama came into office in CRISIS mode (with regards to the economy).
2. He USES the crisis as an excuse to spend money on wasteful programs.
3. In order to make it appear that the programs are working, a “green shoots” media campaign ensues.
4. Obama & Bernanke declare “mission accomplished”, and the “recession is over”
Now comes the WAITING part… As we swing from “mission accomplished” back to “crisis 2″
5. Government plays “hands off” with regards to stimulus until March 2010.
6. The markets begin to reflect this, a new panic ensues.
7. We are in FULL CRISIS mode again come next March to July time period (“pinnacle” being reached in July).
8. Obama, the wonderful organizer that he is, rushes to the rescue with yet more stimulus, and more spending. Americans DON’T DARE to vote out the incumbents in November for fear of changing hands in a crisis. Democrats ride to victory on a FEAR message that if you vote Republican, the help you’re going to need will never arrive.
This is basically the same way Bush got elected over Kerry… The only difference is, the FEAR to apply then was with regards to terrorists, not the economy…
Same idea… Same idiot politics…
Nothing changes… (except for the fact that after “crisis 2″, the price tag on the debt will actually be so high as to collapse the bond market)… Therefore, Obama will make “America’s problem”, the “World’s problem”…
October 3rd, 2009 at 12:33 pm
“…According to Jim Rickards, director of market intelligence for scientific consulting firm Omnis, the unannounced purpose of last week’s G20 Summit in Pittsburgh was that “the IMF is being anointed as the global central bank.” Rickards said in a CNBC interview on September 25 that the plan is for the IMF to issue a global reserve currency that can replace the dollar.
“They’ve issued debt for the first time in history,” said Rickards. “They’re issuing SDRs. The last SDRs came out around 1980 or ‘81, $30 billion. Now they’re issuing $300 billion. When I say issuing, it’s printing money; there’s nothing behind these SDRs.”
SDRs, or Special Drawing Rights, are a synthetic currency originally created by the IMF to replace gold and silver in large international transactions. But they have been little used until now. Why does the world suddenly need a new global fiat currency and global central bank? Rickards says it because of “Triffin’s Dilemma,” a problem first noted by economist Robert Triffin in the 1960s. When the world went off the gold standard, a reserve currency had to be provided by some large-currency country to service global trade. But leaving its currency out there for international purposes meant that the country would have to continually buy more than it sold, running large deficits; and that meant it would eventually go broke. The U.S. has fueled the world economy for the last 50 years, but now it is going broke. The U.S. can settle its debts and get its own house in order, but that would cause world trade to contract. A substitute global reserve currency is needed to fuel the global economy while the U.S. solves its debt problems, and that new currency is to be the IMF’s SDRs.
That’s the solution to Triffin’s dilemma, says Rickards, but it leaves the U.S. in a vulnerable position. If we face a war or other global catastrophe, we no longer have the privilege of printing money. We will have to borrow the global reserve currency like everyone else, putting us at the mercy of the global lenders.
To avoid that, the Federal Reserve has hinted that it is prepared to raise interest rates, even though that would mean further squeezing the real estate market and the real economy. Rickards pointed to an oped piece by Fed governor Kevin Warsh, published in The Wall Street Journal on the same day the G20 met. Warsh said that the Fed would need to raise interest rates if asset prices rose – which Rickards interpreted to mean gold, the traditional go-to investment of investors fleeing the dollar. “Central banks hate gold because it limits their ability to print money,” said Rickards. If gold were to suddenly go to $1,500 an ounce, it would mean the dollar was collapsing. Warsh was giving the market a heads up that the Fed wasn’t going to let that happen. The Fed would raise interest rates to attract dollars back into the country. As Rickards put it, “Warsh is saying, ‘We sort of have to trash the dollar, but we’re going to do it gradually.’ . . . Warsh is trying to preempt an unstable decline in the dollar. What they want, of course, is a stable, steady decline.”
What about the Fed’s traditional role of maintaining price stability? It’s nonsense, said Rickards. “What they do is inflate the dollar to prop up the banks.” The dollar has to be inflated because there is more debt outstanding than money to pay it with. The government currently has contingent liabilities of $60 trillion. “There’s no feasible combination of growth and taxes that can fund that liability,” Rickards said. The government could fund about half that in the next 14 years, which means the dollar needs to be devalued by half in that time….”
Read more at: http://www.huffingtonpost.com/ellen-brown/the-imf-catapults-from-sh_b_306665.html
book, from the article’s Author http://www.webofdebt.com/#
October 3rd, 2009 at 12:37 pm
And the massive Federal debt doesn’t hurt the gold picture either.
CBs are also net buyers for the first time in years. Many, many years
October 3rd, 2009 at 12:37 pm
The thread I pick up as I scan the responses above is that the economy, in the future, won’t be able to ride on the back of the consumer, because they have learned the lesson of debt accumulation. I don’t agree with that. The consumer will hold himself back for a time (maybe reducing their debt), but the impact of tighter credit on the banks will sooner or later lead them right back into the world of looser credit and they will, again, start lending to the consumer least capable of controlling their spending . Spending will start up the slope to another debt bubble again, because the consumer has tasted the good times and won’t be able to stick to conservative spending for very long.
October 3rd, 2009 at 12:56 pm
“CBs are also net buyers for the first time in years. Many, many years”
Yes…and CBs are never misguided (snark)
October 3rd, 2009 at 12:56 pm
“they wanna have a war to keep us on our knees
They wanna have a war to keep their factories
They wanna have a war to stop us buying japanese
They wanna have a war to stop industrial disease”
- Dire Straits
http://www.youtube.com/watch?v=tlAPDQdHqCY
October 3rd, 2009 at 12:59 pm
More of the same stuff. @cvienne- I really like your grading of BR vs DK. I’m going to go on a limb and say that BR puts more weight on the psychological aspects of the market while DK is more a data guy, not factoring in as much the human aspects, hence the earliness of his calls both up and down.
In the last two weeks, the most noticeable change I see is psychological. The news dribbling out from various places has not been good, but now instead of news being seen as “less bad” or simply ignored, the market is moving on it in the correct direction. I think we’ve run out of kool-aid and the market is now sobering up to reality.
It all follows a typical pattern. The dull headache of reality is now starting to set in on the revelers of the last seven months. Or is this pattern exactly like what we saw at end of 2q? The resemblance is striking on a chart. The tenor of the conversations are not.
October 3rd, 2009 at 1:13 pm
@Steve
The ones who are buying today are not the ones who have been selling for years. But I know you know that
October 3rd, 2009 at 1:21 pm
@MEH
“The government currently has contingent liabilities of $60 trillion. “There’s no feasible combination of growth and taxes that can fund that liability,” Rickards said.”
—
But f411 says that there is this nano-bot being cooked up in the chemistry lab of some un-nominated community college California that is bound to solve that $60 trillion problem in a “nano” second…
Get on the bandwagon MEH! The time has come to beat those swords into microscopes! (Hell, forget shovels, we don’t need food… Spam & Twinkies come from the US Government who pull them from this magical time machine they possess called “borrow from 2o50 – eat Twinkie today”)…
October 3rd, 2009 at 1:26 pm
@MEH
Things you may not have known about Twinkies…
http://uncyclopedia.wikia.com/wiki/Twinkies
Excerpt:
The Twinkie Incident of 2007
Early in 2007, well-known fatty Jennifer Hudson was found passed out in her hotel room surrounded with twinkie wrappers and a half-eaten twinkie in her mouth. Through millions of your wasted tax dollars, top scientists determined that Jennifer Hudson’s died by suffocating on the twinkie found in her mouth.
October 3rd, 2009 at 1:27 pm
employment population ration
http://delong.typepad.com/sdj/2009/10/another-bad-employment-report-i-wish-we-had-a-ripcord-to-pull-department.html
October 3rd, 2009 at 1:31 pm
deanscamaro,
For your scenario you need two assumption:
1. The current debt load of the consumers is sustainable and can be increased by the consumers w/o big problems, i.e., consumers still can comfortably pay off debt and interest on the debt from consumer’s income generated in the economy. Thus, you assume paying off debt or increasing the debt load is mainly due to a free decision by the consumers, not so much enforced by the circumstances.
2. The banks haven’t been increasingly struggling with loan assets that are going bad with the prospect of huge future losses, so that the are willing to increase the loan amount to debtors who, according to your first assumption, will be able to pay off debt and interest.
I think both assumption are very questionable. Currently, total private debt amounts to about 41 trillion dollars, or almost 300% to GDP. Household debt is about 13.7 trillion dollars, business debt (w/o finance industry) about 11.1 trillion dollars. Every ten years for the last two/three decades private debt almost had to double to stimulate a new round of economic expansion after a recession. So, do you assume that households will load an additional 25 trillion dollars of debt, or households and businesses (w/o finance industry) together another 50 trillion dollars, onto their balance sheets in the next 10 years? Because this would be required to generate a new cycle of economic expansion by a another round of the expansion of the debt bubble, if we extrapolate from the past changes in the private debt levels.
rc
October 3rd, 2009 at 1:31 pm
If CBs were smart, they would have been buying as gold went from 250 to 1000…and we wouldn’t be in such a debt hole.
October 3rd, 2009 at 1:49 pm
Reality sucks these days, doesn’t it Frankie? Go stick your head back into the comfy sand.
October 3rd, 2009 at 1:50 pm
SB
Of course if that had been the case gold wouldn’t have gone from 250 to 1000.
October 3rd, 2009 at 1:53 pm
cv–
yes, We all know that Twinkies, like our beloved Paperback, are pulled from thin air..
good thing, too, for if We were to understand that Both were foisted upon us via the Hand of Man, We may have to contemplate that sorry state of affairs..
though, re: f411, misguided as he may be, his underlying point, if I’m understanding it, is rather Sound.
there are many valuable, developed and proven, Technologies that are sitting on the shelves, un-/underutilized, that could spark a new Genesis of American/Worldwide Economic Growth–from the ground up.
too bad for us that, not only, has that been construed as Contra to the Financial Interests of the Status Quo, but also that We’ve been too stupid to do our own Homework so that that we may have a better grasp on what is eluding Us.
beyond ‘nano-tech’, to your point of ~”Food being the first Drug”
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=NITRILOSIDES
October 3rd, 2009 at 1:55 pm
Sorry, wrong numbers: household debt another 14 trillion dollars or so, or household and businesses together 25 trillion. It doubles in ten years.
Anyways still the same question. How realistic is the assumption of an inflation of the private debt bubble by another 25 trillion dollars up to 50 trillion dollars in ten years to get a new cycle of economic expansion?
rc
October 3rd, 2009 at 1:58 pm
@MEH
“there are many valuable, developed and proven, Technologies that are sitting on the shelves, un-/underutilized, that could spark a new Genesis of American/Worldwide Economic Growth–from the ground up.
too bad for us that, not only, has that been construed as Contra to the Financial Interests of the Status Quo”
—
Agreed 100%, I said as much here (another thread)
http://www.ritholtz.com/blog/2009/10/end-of-recession-blues/#comment-222209
October 3rd, 2009 at 2:07 pm
This topic is exactly the crux of the difference between the “severe recession” and “depression” perspectives from a little while back.
But as to the likelihood of a “global depression”, I think that question remains open. I can see a furious expansion of third world domestic markets, fueled in the very best central bankster bubblicious manner, while the staid old first world (that would be the so-called “developed nations”, most particularly the EU and the US of Bananamerica) endures the actual depression. There could be a trading places taking place between the developed andf emerging economies.
The only real global danger I see in all this is that we have a debt-drunk gunslinger looking for something, ANYTHING, to distract his troubled sheeple.
But as for the bread-and-butter issues, I think that people will figure out Real Soon Now that investing in the BRICs is a lot better than buying S&P 500 toxic debt lottery tickets. There will be a few US companies that will prosper, I can see NetFlix cleaning up as people dump their cable TV grand-a-year subscriptions and going to movie theaters in favor of a cheap NetFlix subscription to fed their Chinese HDTV via their Chinese DVD players.
And there are a few other US companies that are poised to prosper, but most are not.
And the safe old utilities? I don’t see them as all that “safe” anymore, with US debt markets rapidly becoming a mine field, as everyone comes to realize the the bond ratings mean very little, and a lot of these companies have their investment portfolios intertwined with toxic debt that should have been eliminated along with their TBTF bankster toxic debt factories, but was not. Same thing with insurance companies. Investing in the US markets is about to get very dangerous, with unforeseen entanglements tripping up companies that everyone “knew” were solid as a rock.
October 3rd, 2009 at 2:10 pm
From Fear, the lyrics to Let’s Have a War:
[Chorus:]
[Growling]
There’s so many of us
There’s so many of us
There’s so many
There’s so many of us
There’s so many of us
There’s so many [x2]
[Sung]
Let’s have a war
So you can go and die!
Let’s have a war!
We could all use the money!
Let’s have a war!
We need the space!
Let’s have a war!
Clean out this place!
It already started in the city!
Suburbia will be just as easy!
[Chorus]
Let’s have a war!
Jack up the Dow Jones!
Let’s have a war!
It can start in New Jersey!
Let’s have a war!
Blame it on the middle-class!
Let’s have a war!
We’re like rats in a cage!
It already started in the city!
Suburbia will be just as easy!
[Chorus]
Let’s have a war!
Sell the rights to the networks!
Let’s have a war!
Let our wallets get fat like last time!
Let’s have a war!
Give guns to the queers!
Let’s have a war!
The enemy’s within!
It already started in the city!
Suburbia will be just as easy!
[Chorus x2]
October 3rd, 2009 at 2:12 pm
cv,
I hate to be the bearer of ‘bad news’, though, Turkeys do Fly. (;
http://clusty.com/search?v%3aproject=clusty-images&query=Turkey%20flying
past that, the ‘Cained Peep need to understand that if they are going to have a Future that might be worth passing down to their Children, they’re going to have to undertake a ‘reverse- Charlie Merrill’, and bring their ‘Dollars’ back to Main St.
As it is now, They’re, just, funding their own Bankruptcy–Financial, and otherwise..
October 3rd, 2009 at 2:15 pm
The “v-shaped” recovery is gonna be a 6-point type, lower-case “v”.
Followed by a series of carriage returns (wonderful anachronistic term, “carriage return”, bringing back fond memories of rental carriages).
October 3rd, 2009 at 2:16 pm
and the video:
http://www.youtube.com/watch?v=6PU4TOoUatg&feature=PlayList&p=992CC3C5AC4E55FB&playnext=1&playnext_from=PL&index=7
October 3rd, 2009 at 2:17 pm
Black Monday part deux anyone? What month is it again?
October 3rd, 2009 at 2:23 pm
FYI – Our new business was recently rejected for a measly $30K credit line from WFC. All three owners have high FICO scores (mine is about 800), I carry no credit card debt, and after January will only have a mortgage payment as my only recurring debt payment. My wife makes very good money (thankfully) but we were still turned down. They didn’t even ask for a business plan or any detailed financials. Just turned us down. I’m committed to pulling all of our money from WFC and not doing business with them again when the time is right. What does this tell me about WFC and the other immortal 19? They ain’t anywhere near as “healthy” as they say they are, but are merely in “extend and pretend” mode. Bottom line is they are lying about their financials with the implicit backing by our gov’t to do so. It’s downright criminal that we’re bailing these fuckers out with our tax money and they’re not doing what they can to support small businesses in this country.
October 3rd, 2009 at 2:33 pm
@MEH
Nice try! I see a bunch of blue and green background shots, some vultures on swing sets, some turkey shaped cookie cutters, a map of Turkey, some fat birds falling out of trees, & otherwise some “photoshop” work…
Howard Hughes built a plane which he names the “Spruce Goose” (as I’m sure you are aware)…
It flew too… kinda sorta!
October 3rd, 2009 at 2:38 pm
@Manny
I guess it’s a good thing then that that “nano-bot” lab of Franklin’s can go to Obama (who borrows from cvienne & company), instead of going to WFC…
I’m only too happy to oblige! Or am I? I can’t remember…
October 3rd, 2009 at 2:41 pm
Remember Manny…
cvienne should be considered the HERO here… After all, cvienne has been buying long Treasuries since June…
But I’m just a jerk to the likes of techy and f411…
October 3rd, 2009 at 2:41 pm
@cvienne: Can that nano-bot lab give me a nano-job? What would I do in that lab?
Seriously though – franklin’s thoughts about needing a breakthrough invention to spur the economy and job growth again is sound in THEORY, but the feds are blowing our wad on all too many unproductive uses. In short, they’re throwing our future down the rat hole that is our zombie banking system, zombie auto makers and any other TBTF zombie industries (but big political donors) they can think of…..
October 3rd, 2009 at 2:43 pm
cv,
yes, of course, then there’s this:
…The wild turkey is found in all of the lower 48 states and Hawaii.
In spite of their size, wild turkeys can fly at speeds up to 55 miles per hour.
Wild turkeys can run at speeds of at least 12 miles per hour…
http://www.esf.edu/pubprog/brochure/turkey/turkey.htm
October 3rd, 2009 at 2:45 pm
@cvienne: I’ve been doing the SAME thing – - buying long Treasuries as well as sitting on a pile of cash in my low-yield savings fund. Girding myself for the coming deflation.
Anecodotally – was out at a popular restaurant last night and I’ve NEVER seen it so dead, even on a week night. Parking lot wasn’t even half full and tables half ful as well. No “buzz” in the place at all. I can feel the mood changing. It’s darkening. Granted, I live in the North Pole, but you get my drift.
October 3rd, 2009 at 2:48 pm
@Manny
…as soon as the “cheers” die down and the “tears” of joy evaporate, here’s HOPE-ing that they’ll eventually understand that…
Please Americans, PLEASE!… I implore you to sober up!
October 3rd, 2009 at 2:54 pm
@MEH
LMAO
OK, my friend… I’ll admit that you GOT me there… but cvienne still contends that it is all a ruse, and maintains “skepticism” based on the subtle change in NOMENCLATURE…
cvienne was referring to TURKEYS…
MEH has deftly included “wild turkeys” into the argument…
cvienne acknowledges that anyone who drinks WILD TURKEY, thereby attains & inherits the capability of flying at 55 mph, and running at speeds of 12 mph…
October 3rd, 2009 at 2:55 pm
as an aside, thought this was, rather, stunning..
Get 20% Off With Your Reusable smart assistsm Savings Card
Eligibility:
Kmart customers who present state-issued identification (driver’s license or identification card) and a state-issued unemployment benefits enrollment confirmation are eligible to participate in the program (“Eligible Participants”). At checkout, cardholders will be required to show their valid discount card, their state-issued identification card for signature verification and their state-issued unemployment benefits enrollment verification. Valid signature verification is required to use the card. Terms & Conditions
http://print.coupons.com/couponweb/Offers.aspx?pid=14544&zid=jj40&nid=10&bid=alk1003111028daef779a75019
never know what you’ll find when looking through the ‘Private Scrip’ pages..
October 3rd, 2009 at 2:58 pm
Consumer spending may not really be equal ot 70% of the economy. See:
==============
The Associated Press
September 18, 2009
Meltdown 101: How much power is in your wallet?
By ASHLEY M. HEHER
There’s power in our pocketbooks. But how much?
In the U.S., consumer spending — the amount of money we shell out on everything from hammers to homes — fuels our economy. At the end of the federal second quarter in late March, the government said “personal consumption expenditures” climbed to almost 70.7 percent of the nation’s gross domestic product, a term for the value of everything produced by labor, plants and properties in the U.S.
Not everyone agrees with that figure, though. Some economists say defining consumer spending as the engine behind more than two-thirds of the U.S. economy is misleading math; they say government spending and other items should be factored out.
Here are some questions and answers about consumer spending and its impact the economy.
Q: What is consumer spending?
A: Personal consumption spending — what’s commonly called consumer spending — is the dollar value of what’s bought every day. It’s on pace this year to be just short of $10 trillion.
Federal economists separate the data into dozens of categories, tracking spending on everything from tires and televisions to flowers, fuel and amusement park admission fees. But the figure also includes services like health care and insurance, along with rent and mortgage payments and even checking account fees.
Q: Why don’t some people agree that consumer spending is 70 percent of the economy?
A: Critics note that the official consumer spending figure includes things that aren’t paid out of our own pockets.
The biggest area of debate is health care spending, which in 2008 reached $1.56 trillion, according to the Bureau of Economic Analysis. That figure includes federal and state government spending on programs like Medicaid and Medicare.
Another federal agency — the Centers for Medicare & Medicaid Services — does its own analysis of the nation’s health care spending, which it says was about $1.88 trillion in 2007, the last year for which they have data available. By CMS estimates, roughly 14 percent of medical costs were paid out of pocket in 2007 while nearly half was paid with public money from local, state and federal coffers. Much of the remainder is picked up by private health insurers and other private money.
Some economists argue that only the part of health care costs paid out of Americans’ pockets should count as consumer spending.
The same argument can be made for much smaller categories of personal spending that are supplemented by federal money, such as subsidized school lunch programs or military uniforms. Both figures are included in the overall consumer spending number.
Subtract the public money from the nation’s personal spending figure and you can see how the 70 percent gets whittled away, category by category.
Q: If 70 percent is too high, what’s an accurate figure?
A: Among the vocal dissenters is Business Week Chief Economist Michael Mandel. In a blog posting last month, he argued that personal consumption spending as most people understand it — the money everyday people spend on everyday items — accounts for just 40 percent of the nation’s economic activity.
Federal economists say there’s no official figure detailing what consumer spending would be after stripping out government money. And experts say there could be any number of figures to define what consumers’ actual spending is based on how different variables are measured. (If your taxes supplement a police department purchase of a new squad car, does it count as “consumer spending” or not?)
…
http://www.businessweek.com/ap/financialnews/D9APT7B80.htm
October 3rd, 2009 at 3:06 pm
@Manny
I know what you’re saying (vis-a-vis “mood changing”)…
I have actually TEMPERED by outlook on that somewhat… I was somewhat of an Armageddon-ist about 18 months ago (because I was afraid of what I perceived to be the collective response)…
Instead, the collective response (which I’d perceived to be “stark preparation/behavior modification”), became DENIAL and POSTPONEMENT after the Obama election)…
So I guess that’s who we are (Americans)… I’d mistakenly thought that Americans were TOUGH, but instead they’re MILQUETOASTS, and elected MILQUETOASTS as policy makers…
That doesn’t mean it’s too late for behavior change… It simply means that as long as we have smooth talking policy makers that say… “Don’t worry, worship US and we’ll take care of you”… Instead of giving us the bad news or harsh medicine… It’ll go on until it basically can go on no longer…
Some people hear the clarion, others don’t (or choose to ignore it)…
October 3rd, 2009 at 3:12 pm
cvienne, you were a jerk trying to trick me into giving up Matt Forte for Thomas Jones and a bag of…uh, chips…but The Great CNBC Sucks wuvs the commish anyway.
Normally, this is a good thread for me to add to American self-bashing with crap on emo or indie and money printing and our corporatist and militarist tendencies, but before I return to Lurkerville again, America’s Favorite Registered Republican just wanted to give a shout out to the geopolitical geniuses on that International Olympic Committee. Well, ya Europeans and other non-American types FINALLY got the type of guy in the White House you can work with, and what do you do? Reject him and his hometown on the very first round of voting for the host city of the 2016 Olympics. Brilliant! You didn’t care that 2016 could have been an opportunity for all y’all to reconnect with the Joe Six Pack Americans that decide the fate of the world every couple of years, and that this egg on Obama’s face might have significant political ramifications here, do ya? I guess it was just too much for you to comprehend how your VERY FASHIONABLE vote in Copenhagen yesterday might possibly affect the futures of a whole lotta people not living in the United States.
Well, I hope you IOC members enjoy a Republican President in 2012 as much as you think you will enjoy partying in Rio in 2016.
October 3rd, 2009 at 3:25 pm
deanscamaro,
Everyone around me is levergaed to the hilt.
Many have gone from 1 fridge to 3 in the last decade. Some have washing machines on 2 floors. And that’s only middle class.
The last decade was all about boomers reaching their peak spending years and upgrading. Gen-X (1965-1975) is already full of debt and quite small vs. the boomers.
Boomers are being forced to slow down (age + economy), and the group picking up the baton is smaller and net worth negative.
I’m not betting on the consumer.
October 3rd, 2009 at 3:45 pm
@CNBC
Re: RIO 2016
Come on dude, it’s not as complicated as all that…
You’re an IOC voter, and you’re faced with a choice…
- One one side of you you have Michelle Obama staring at you with an unintelligible stare
- On the other side, you have Brazilian samba dancing hookers
Can YOU choose wisely?
Re: Fantasy Football
I would be REMISS in my duties as a “commissioner” of a FF League, or, as a true patriarch of the genre to NOT offer a dud trade…
Consider cvienne the Lloyd Blankfein of Fantasy Football (Do NOT buy what he sells, or vice versa)…
October 3rd, 2009 at 3:46 pm
au contraire, cvienne. My FFL team name isn’t hte “Blankfiends” for nothing.
October 3rd, 2009 at 3:50 pm
…although the Tashard Choice for Heath Miller deal was a “well thought out” proposal that could have provided benefits to both sides…
Very unlike cvienne to go against his better instincts, which are… RAPE & PILLAGE – TAKE NO PRISONERS – SLAY ALL THE WOMEN & CHILDREN FIRST… With respect to FF, of course…
October 3rd, 2009 at 3:55 pm
@Manny
Manny I’ve gotta hand it to you actually… You’ve assembled yourself a nice team and are a definite contender…
After the draft, the first thing I said to myself after I’d surveyed the landscape was “OH CRAP – Manny has a team that’s going to kick my ass in Week 5″…
I’ve “neutralized” that somewhat through acquisitions & trades (& I’m STILL hampered by the Ladainian Tomlinson injury)… But cvienne knows how to manage his team for optimum performance… If, in the end, he falls short… He quietly accepts and returns to his beloved CHALKBOARD…
It’s going to be a battle ROYALE next week Manny… One of the TRUE games that I fear on my schedule…
… and, compliments on your team!
October 3rd, 2009 at 4:48 pm
Thanks cvienne. Your team is looking might formidable as well. Things could change VERY quickly though. May the best team win!
October 3rd, 2009 at 5:15 pm
Why do I get the feeling oil’s going to $100+ soon? That will ultimately be used as the handy excuse for the double dip we are about to enter….
http://www.nytimes.com/2009/10/04/world/middleeast/04nuke.html?_r=1&hp
October 3rd, 2009 at 5:37 pm
@ cvienne
Yes, buddy, that Tashard Choice for Heath Miller offer was well thought out. The Cowboys did in fact activate Chauncey Washington from their practice squad, but it is still iffy one way or the other whether I start Marion Barber or do the trade with you and start Choice. Either way, it’s a tough Choice, har har!
But the main thing is Miller is playing Detroit next week, and Greg Olsen has a bye.
And lo and behold, I go WAY off-topic on this thread with a bit on the Olympic thing, and what does Ritholtz do? Start a new thread on the Olympic thing. Barry Wuzzy weally wuvs The Great CNBC Sucks.
October 3rd, 2009 at 6:09 pm
(sorry for the repost. I posted this in the comments of the wrong BR post)
cvienne, your comments on the difficulty of the entrepreneur breaking in these days reminded me of this:
“Remember the old adage ‘what’s good for GM is good for America’? That’s no longer the case. Success with money is intimately connected with inflation – people have got rich not through productive, wealth-creating activity, but because they bought a house or stocks at a time when general asset prices were rising. But what’s good for Warren Buffett is not necessarily good for the rest of us. Turroni wrote about the new business leaders who “became rich not with the general rise in prosperity but with the increase in the poverty of the people”. In a similar vein, the US may have become a plutocracy over the last eight years. And you have Buffett financially backing the Democrats. Could it be that the uber-rich are attempting to build moats around their castles in order to secure their fortune?”
- “Why are billionaires voting for Obama and backing Brown?” By Hugh Hendry Nov 28, 2008
http://www.moneyweek.com/news-and-charts/why-are-billionaires-voting-for-obama-and-backing-brown-14178.aspx
October 3rd, 2009 at 6:38 pm
cvienne, TRADE PROPOSAL ALERT TO YOU. I changed my choice regarding Choice. I had to. If you accept, try to get it approved quickly by the commissioner.
October 3rd, 2009 at 11:09 pm
I’m kind of curious to see if they have printed enough money to make equities and commodities buoyant in spite of worsening economic conditions. Aside from the dollar getting nuked, I have little idea about what’s going to happen but I think the next month should be extremely enlightening as to where we go from here.
October 3rd, 2009 at 11:19 pm
@Steve Barry Says: October 3rd, 2009 at 1:31 pm
If CBs were smart, they would have been buying as gold went from 250 to 1000…and we wouldn’t be in such a debt hole.
Actually, the ones who were buying from $250 that helped drive gold to it’s current price are still buying. Also, the ones that were selling in a vain effort to keep the price under $300 are still selling, so your point is invalid
The most ominous part is that the buying CBs are no longer interested in buying US paper and want gold instead. If they decided to spend as much on on buying gold as they do US paper then the price of gold would not be at $500 it would be at $4,000 or $5,000
But I know you knew that
October 3rd, 2009 at 11:20 pm
Bad formatting. This should close the hole
October 4th, 2009 at 2:24 am
The worst of the numbers is unemployment. I can bet that FED is bluffing. Unemployment has already crossed 20% but they keep telling us it is only 9.8%.
Guys some important posts at Investing contrarian
1. Fed is going Bankrupt. Unknown computer glitch?
2. 1800 banks set to fail
3. Portfolio update at GA Alpha Fund
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October 4th, 2009 at 5:21 am
This is obvious in the gold market…record high speculative long position, as physical demand plunged 22% y/y. Gold is due for a major correction, likely accompanied with a dollar rally.
http://www.michaelcovel.com/2009/09/25/dollar-fun/
I don’t know, we’ll see, but I think stepping in front of the gold freight train and dollar downtrend here and now is a mistake that rivals not covering short stock positions at the March lows.
October 4th, 2009 at 10:10 am
Barry-please remember Abelson is a perma bear and got the entire 1980s decade wrong before promoting his pieces to your readers. Barron’s should have fired him 20 years ago. Unemployment is a lagging economic indicator. Fed tightening, ‘exit policies’ on average comes over 12 months after unemployment peaks. Global reflationary backdrop is incredibly stimulative, sentiment (as evidenced anecdotally by the responses to this post) is still very bearish (which is good for risk assets). The market has rallied a lot and people intuitively feel like its due for a correction. It may but it won’t be because of Abelson’s analysis but for the broken clock being right twice a day. All suggests we continue to climb the worry wall.
October 5th, 2009 at 7:29 am
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October 5th, 2009 at 8:15 am
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