Why GDP Stats Are Still Ugly

GDP came out this morning and there's only one word for it: Ugly.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 1.0 percent in the second quarter of 2009, (that is, from the first quarter to the second), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 6.4 percent.

1% isn't so bad - but look at the revision - to negative 6.4%. So much for "final" on the previous release eh?

The much smaller decrease in real GDP in the second quarter than in the first primarily reflected much smaller decreases in nonresidential fixed investment, in exports, and in private inventory investment, upturns in federal government spending and in state and local government spending, and a smaller decrease in residential fixed investment that were partly offset by a much smaller decrease in imports and a downturn in PCE.

Ok, so we got a reasonably-realistic set of numbers. PCE (personal consumption) declined, but note the bolded text: While federal spending may have been up and may continue to be up (so long as the Chinese will put up with the debt issuance) state and local governments are out of money. That's a booster that is out of fuel, and going forward it is a major problem. California anyone?

Real personal consumption expenditures decreased 1.2 percent in the second quarter, in contrast to an increase of 0.6 percent in the first. Durable goods decreased 7.1 percent, in contrast to an increase of 3.9 percent. Nondurable goods decreased 2.5 percent, in contrast to an increase of 1.9 percent. Services increased 0.1 percent, in contrast to a decrease of 0.3 percent.

The consumer is tapped out - as I have repeatedly noted, including on Kudlow's show, consumer debt peaked in January of 2009 and is on a decline. This means that spending is going to decline, and now we're seeing it. Durable goods orders were down (despite the pumping of "better" durables reported month after month on CNBC!) and non-durables - that is, consumed goods (in the short term) decreased as well. Services were essentially flat - no surprise, given that many of them are inelastic (health care anyone?)

Real nonresidential fixed investment decreased 8.9 percent in the second quarter, compared with a decrease of 39.2 percent in the first. Nonresidential structures decreased 8.9 percent, compared with a decrease of 43.6 percent. Equipment and software decreased 9.0 percent, compared with a decrease of 36.4 percent. Real residential fixed investment decreased 29.3 percent, compared with a decrease of 38.2 percent.

The rate of decline in investment has slowed, but given that it was cut nearly in half, how much further down could it really go? Most importantly there are no upturns in the data - anywhere. Equipment and software are a leading indicator of commerce (you have to buy gear, including computers and software, to hire people) and guess what: nobody is.

Real exports of goods and services decreased 7.0 percent in the second quarter, compared with a decrease of 29.9 percent in the first. Real imports of goods and services decreased 15.1 percent, compared with a decrease of 36.4 percent.

No really? How long have I been banging on that drum - freight loadings both road and rail, along with port traffic data? That's the "leading indicator" and this report validates what I've been saying for the last three months: both import and export demand has effectively collapsed! We are now anywhere from 40 to 60% below comparable levels on imports and exports. Those who believe that "China will save us" are delusional; how is that going to work when half of their exports to us are gone? Bluntly: The alleged "Chinese recovery" is a manipulated lie from the Chinese government.

Real federal government consumption expenditures and gross investment increased 10.9 percent in the second quarter, in contrast to a decrease of 4.3 percent in the first. National defense increased 13.3 percent, in contrast to a decrease of 5.1 percent. Nondefense increased 6.0 percent, in contrast to a decrease of 2.5 percent. Real state and local government consumption expenditures and gross investment increased 2.4 percent, in contrast to a decrease of 1.5 percent.

So much for Obama destroying military spending eh? Uh, not so fast eh? 13% increase? Not bad. The Federal Government is attempting to pick up the pieces from the private sector, but without success. State and local governments are trying to pick up the pieces but all they're doing is going bankrupt; do not expect to see this contribution repeated in the 3rd and 4th quarters, as they're out of money!

The change in real private inventories subtracted 0.83 percentage point from the second-quarter change in real GDP after subtracting 2.36 percentage points from the first-quarter change. Private businesses decreased inventories $141.1 billion in the second quarter, following decreases of $113.9 billion in the first quarter and of $37.4 billion in the fourth.

Remember one of the CNBC memes has been "inventories bottomed in 1Q and are being rebuilt"? Uh, where? Either the BEA is lying or CNBC was absolutely full of crap.

Inventories decreased in the second quarter even more than they did in the first; businesses are not as dumb, nor are they seeing "green shoots" and building inventory back up, irrespective of the incessant media pumping of a big fat LIE from March onward.

Personal current taxes decreased $113.1 billion in the second quarter, compared with a decrease of $241.7 billion in the first.

You only pay taxes on earned and unearned income. It is collapsing. Good luck Mr. President with your claim that the deficit will be brought under control - you're going to need it.

Disposable personal income increased $121.1 billion (4.6 percent) in the second quarter, in contrast to a decrease of $9.9 billion (0.4 percent) in the first. Real disposable personal income increased 3.2 percent, compared with an increase of 1.1 percent.

The government handed out money like candy through its various programs. But...

Personal outlays decreased $18.1 billion (0.7 percent) in the second quarter, compared with a decrease of $27.6 billion (1.1 percent) in the first. Personal saving -- disposable personal income less personal outlays -- was $566.0 billion in the second quarter, compared with $426.9 billion in the first.

The personal saving rate -- saving as a percentage of disposable personal income -- was 5.2 percent in the second quarter, compared with 4.0 percent in the first.

Money is not being saved; debt is being paid down (to the extent it can be.) This trend is accelerating, not stabilizing, indicating that the consumer has much more deleveraging to go, as I have repeatedly said, including on Kudlow's show.

Three months of in-your-face falsehoods by the mainstream media have just been destroyed in seconds with one data release. The facts are irrefutable; the only remaining question is this: when will we see something approaching balance and honest reporting from the so-called media outlets?

Those "green shoots" were either marijuana plants (and were being smoked by the media) or worse, they have been running around with cans of green spray paint, "colorizing" the dead brown weeds, then pointing at them and screaming "green shoots!"

Comments

[H. T. Love:]

On Aug 01 09:44 AM CPST1 wrote:

><snip>
> ... moment of carefully arranged spending that the economy will recover
> just as we have seen the equity markets rebound since the first of
> the year.

Refresh my memory please. Was that the one passed overnight by the house of over 1000 pages that it was claimed "no one had time to read", or some other "carefully arranged spending"?

If they have changed their behavior, I need to know so I can jump on the back of the bull that will certainly follow this atypical behavior.

HardToLove

Aug 01 10:41 AM

[Karl Denninger:]

This article was updated after SA picked it up. Read the complete version WITH TABLES AND CHARTS here:

market-ticker.org/arch...
(just the chart and explanation)

and

market-ticker.org/arch...
(the original)

Aug 01 11:24 AM

[CPST1:]

To elaborate here upon 1000 pages of economic ways and means is to falter the discipline of trial and error. However, to compare GS as example from which to gauge economic recovery is fair to exchange. Duck soup, pump and dump are merely recessional languishment of what has been left behind for that which lies ahead. A 1% increase in newly derived GDP growth and that should be stressed as new with, without any mileage what so ever. As turn key ready to go, is only a starting point from which the stage of this, today’s economic recovery has begun. A 1% GDP factor when measured in relational means as to the returns GS has garnered with careful placement of investment demonstrates how stimulus money provides multitudes of earnings. It is the arrangement of toxic asset to not withhold or hinder any longer, the prosperity already realized and all the much more to be gained when and where within the scale of economy new trends and emerging markets can most succeed.

Aug 01 11:38 AM

[Dialectical...:]

The knock on "conspiracy theories" is that they always use historical data to "prove" them right and never predict the future. That is why I really appreciate this comment. If one is looking to support the idea that GS is manipulating the market (something some people flatly refuse to believe), then it is instructive to see if reasoned predictions about what shape this manipulation may take prove true. I for one will be watching to see if this pattern develops. If it does, I think that is good support for the premise on which your prediction is based. In other words, if things DO play out this way, your reasons for why it did would make a lot of sense.


On Aug 01 10:32 AM H. T. Love wrote:
"As to a time-frame, I'm certainly not brazen enough to call it. My only thought is that it must occur before any further reports on real GDP, or other influential statistics, can be issued that are substantially more negative than expected. Since we have so many weekly items that *might* fit this description, I think they have to get it done pretty quickly."

Aug 01 02:01 PM

[H. T. Love:]

On Aug 01 02:01 PM Dialectical Materialist wrote:

> <snip>
> ... then it is instructive to see if reasoned
> predictions about what shape this manipulation may take prove true.
> I for one will be watching to see if this pattern develops. If it
> does, I think that is good support for the premise on which your
> prediction is based. In other words, if things DO play out this
> way, your reasons for why it did would make a lot of sense.

But it still leaves us in a lurch as to any "conspiracy".

BTW, I did not use that word, although I certainly do not discount it. There could easily be multiple independent entities attempting manipulation for their own benefit without concern for other potential manipulators, they could be riding the coat-tails of GS or be conspiring.

Anyway, the any predicted results certainly only support manipulation or conspiracy circumstantially. Unfortunately, since we all operate on only "incomplete information", at least until after-the-fact in these sort of things, even if it plays out as I suspect it might, we have little assurance that what I suggested as cause is in fact a cause.

E.g. let us say the S&P makes 1060 +- a bit. Then in the next few days/weeks we get the adjustment to the previous advance GDP that shows not -1%. but -5% (this is similar to what happened to the previously reported advance GDP). The market reacts by dumping 5-10% or more over the next few days/weeks.

The obvious explanation is the market reacted properly and its actions do not support the assertion of manipulation. And it's hard to refute this. And it doesn't disprove an assertion of manipulation (can't prove a negative). So we end up hanging any manipulation assertions on "but look it went to 1060 and then ..." which is what we thought would happen. The occurrence of the 1060 could have been natural market action and the fact that it was predicted could mean only that the coin came up heads instead of tails.

But that's ok by me. Being relatively new at all this stuff, it's fun seeing if I've actually began to learn even a tiny fraction of what I need to learn. The trick is if I get it right too often, I have to make sure I don't get all full of myself and thinking that I really *do* know what's going on.

HardToLove

> "As to a time-frame, I'm certainly not brazen enough to call it.
> My only thought is that it must occur before any further reports
> on real GDP, or other influential statistics, can be issued that
> are substantially more negative than expected. Since we have so many
> weekly items that *might* fit this description, I think they have
> to get it done pretty quickly."

Aug 01 05:56 PM

[Dave Wrixon:]

What? Like all the new bridge Obama was supposed to be building?

Surely, you don't believe all that BS?


On Aug 01 09:44 AM CPST1 wrote:

> The real question is what is changing and by how much? Either you
> can subscribe to the stimulas package as a way in which to promote
> new, faster, better cleaner technology today, or keep plodding along
> with the same old, same old bubble brain technology.
>
> Taking the wheels off GDP data is not the way to look at the "new
> tomorrow" and the better days ahead. There are new attributes within,
> that the stimulas bill has targeted and it is through this defining
> moment of carefully arranged spending that the economy will recover
> just as we have seen the equity markets rebound since the first of
> the year.
>

Aug 01 06:20 PM

[Big Bubbette:]

So the taxpayers pay billions to the automakers and unions which we now own a substantial interest in. We are now being ordered by the government to fund cash for clunkers to buy cars and that is again more debt being piled on the taxpayer. The only thing consistent here is the reaming of the taxpayer. We have now been passed the debts of banks, AIG, automakers, Fannie and Freddie. As to the toxic assets I am sure somewhere there are minions going through the toxic assets trying to separate the truly worthless items to sell to the public while the banks keep anything that has a remote possibility of being worth something.

The only consistent thread in this is the government continuing to ram this debt up the Nation's colon.

Aug 01 07:37 PM

[MudEngineer:]

I want some of what is in your "kool-aid". I work in the oil industry and see things only getting worse with less and less exploration occurring. That is the absolute worst thing that could happen right now when the world's existing oil wells are now depleting at 9% per year. That is twice as bad as it was only 3 years ago. If and when this economy does turn around and that is a big if, it will get knocked on its ass very fast when the oil price far surpasses last years $147 high.

Wait till the option arm and liar loans start to reset later this year and home prices restart their rapid decline. Banks and homeowners will be back in deep trouble and the economy will tank even further down than it has.


On Jul 31 07:42 PM FB5000 wrote:

> "Media lies". "Chinese Recovery Lies". Blah, Blah, Blah.
>
> What a lot of emotional nonsense. You seem to have a real axe to
> grind with CNBC and "mainstream media". You sound like Rush Limbaugh.
> You folks just can't stand to see an improvment. You just want/need
> things to be terrible or to get worse. Sorry. You are wrong.
>
> Forget for a moment that Q2 GDP is ancient history. April/May/June
> is an age past. ALL THE NUMBERS - ALL THE NUMBERS ARE TRENDING BETTER.
> It is a simple fact. The recession moderated drastically in Q2 and
> is now over.
>
> The leading indicators are flashing green. The market is up. Recovery
> is here. The question now is how strong. All the rest is beating
> a dead horse and kind of boring.
>
> That's all.
>
>
>

Aug 01 08:01 PM

[FB5000:]

Look at the data champ. Straws in the wind

GDP - which as I said ealrlier is very old data was good. Ignore the blowhard - most of it is just invective.
Inventories are so low that production will add to GDP just to keep them at these low levels let alone building inventory and this in an environment when nobody is buying anything.
Rail Freight tonnages are rising.
July saw steel prices up double digits
The CEO of Autonation says store traffic is up over 30% for the seconf half July
Cash for Clunkers ran out of money in a week!?
Housing strength
ECRI's leading indicators are flashing green
Initial claims are trending down
The market is up up

The recession started in Q3 2007. Most people did not figure this out until Q4 2008. Do you think recovery is any different?

You do not need to be a genius to see the signs. The question is not if and when recovery will come but how fast it will be

Look. I am sorry you sold all your positions at 700. I am sorry that the market has not obliged you by heading to 400 or some such ridiculous level so you and the others of your ilk can live their fantasy and get back in. Time to admit defeat.

We are in recovery. What a surprise? Printing money works. The next issue will be inflation. With so much spare capacity it is hard to imagine that recovery wil be very strong or we will have inflation but you never know...

The option ARM stuff, the bank failures all that stuff that you others endlessly regurgitate. That is priced in. Any idiot can see that malls are empty and commercial property is hurting. It is in the market. The only surprise that you can play right now because most people still just don't get it - is upside surprise. If the economy booms in Q4 and Q1 2010 we will see S&P rocket to 1300's then if inflation wakes up and intrest rates need to be jacked we will see a 10 to 20% correction from there - maybe back to 1000 or so. As I said elsewhere the time to sell will be when payrolls are growing strongly - not now. So get set ladies and gentlemen - lay your bets.

On the oil thing. What is your point? It reached $140 last year - it is down now. $70 is about the right price to encourage new production and investment so it seems that unless there is a real boom - see above - it is kind of stuck around there - but I am no oil economist and avoid placing bets in the stuff.

That's all.





On Aug 01 08:01 PM MudEngineer wrote:

> I want some of what is in your "kool-aid". I work in the oil industry
> and see things only getting worse with less and less exploration
> occurring. That is the absolute worst thing that could happen right
> now when the world's existing oil wells are now depleting at 9% per
> year. That is twice as bad as it was only 3 years ago. If and when
> this economy does turn around and that is a big if, it will get knocked
> on its ass very fast when the oil price far surpasses last years
> $147 high.
>
> Wait till the option arm and liar loans start to reset later this
> year and home prices restart their rapid decline. Banks and homeowners
> will be back in deep trouble and the economy will tank even further
> down than it has.

Aug 01 10:05 PM

[Dialectical...:]

HTL,
You're right of course. And I didn't really mean conspiracy in the New World Order sense, only in the sense of market manipulation (which takes some level of conspiring to make happen unless it is one lone person doing the manipulating). And you're right, a correlation wouldn't PROVE anything. Nonetheless I think it is instructive (and fun) to track some of the predictions made in the articles and comments in SA and seeing if they pan out. The higher a person's hit rate, the more I accept his/her general concept of market moving. We are dealing with such fractional understanding of a fraction of the whole picture that it is a wonder we are ever right!

Good luck, and I'll be watching for that pullback.


On Aug 01 05:56 PM H. T. Love wrote:
"Anyway, the any predicted results certainly only support manipulation or conspiracy circumstantially."

Aug 02 12:23 AM

[Michael Clark:]

The Linear Chronology of an Economic Depression Illustrated Through Historical Quotes

"We will not have any more crashes in our time." - John Maynard Keynes, 1927

''We've never had a decline in housing prices on a nationwide basis.'' - Ben Bernanke, 2005

"Stock prices have reached what looks like a permanently high plateau." - Irving Fisher, Yale Ph.D. in economics, Oct. 17, 1929

"There was never a bubble, so there is nothing to burst." - Jeromith Sutton, 2006, NAR Investment Advisor

"I am convinced that through these measures we have reestablished confidence." - Herbert Hoover, December 1929

"I've abandoned free-market principles to save the free-market system" - George W. Bush, 2008

“The report confirms that our plan will likely save or create 3 to 4 million jobs” - Barack Obama, 2009

"Gentleman, you have come sixty days too late. The depression is over." - Herbert Hoover, 1930

"...there are indications that the severest phase of the recession is over..." - Harvard Economic Society (HES) Jan 18, 1930

Our approximate present location within the Depression

"We are now near the end of the declining phase of the depression." - HES Nov 15, 1930

"Stabilization at [present] levels is clearly possible." - HES Oct 31, 1931

"The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something." - Franklin D. Roosevelt, 1932

"We shall tax and tax, and spend and spend, and elect and elect." - FDR aide Harry Hopkins, 1933

“If all employers in each competitive group agree to pay their workers the same wages... and require the same hours... then higher wages and shorter hours will hurt no employer. Moreover, such action is better for the employer than unemployment and low wages, because it makes more buyers for his product.” - President Roosevelt, 1933, Explaining the National Industrial Recovery Act (NIRA)

"The National Industrial Recovery Act (NIRA) in June 1933 forced manufacturing industries into government mandated cartels and empowered a massive federal bureaucracy to dictate production and pricing standards covering two million employers and 22 million workers. The Supreme Court eventually ruled the act unconstitutional, but the damage had been done. Industrial production dropped 25% in the six months after the law had passed." - Mark Levin, 2009

"The New Deal is plainly an attempt to achieve a working socialism and avert a social collapse in America; it is extraordinarily parallel to the successive 'policies' and 'Plans' of the Russian experiment. Americans shirk the word 'socialism', but what else can one call it?" - H. G. Wells

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S." - President F.D. Roosevelt, 1933

“We have tried spending money… We are spending more than we have ever spent before and it does not work… After eight years of this Administration we have just as much unemployment as when we started.” - Henry Morgenthau, Jr., FDR’s Treasury Secretary, 1939


On Aug 01 10:05 PM FB5000 wrote:

> Look at the data champ. Straws in the wind
>
> GDP - which as I said ealrlier is very old data was good. Ignore
> the blowhard - most of it is just invective.
> Inventories are so low that production will add to GDP just to keep
> them at these low levels let alone building inventory and this in
> an environment when nobody is buying anything.
> Rail Freight tonnages are rising.
> July saw steel prices up double digits
> The CEO of Autonation says store traffic is up over 30% for the seconf
> half July
> Cash for Clunkers ran out of money in a week!?
> Housing strength
> ECRI's leading indicators are flashing green
> Initial claims are trending down
> The market is up up
>
> The recession started in Q3 2007. Most people did not figure this
> out until Q4 2008. Do you think recovery is any different?
>
> You do not need to be a genius to see the signs. The question is
> not if and when recovery will come but how fast it will be
>
> Look. I am sorry you sold all your positions at 700. I am sorry that
> the market has not obliged you by heading to 400 or some such ridiculous
> level so you and the others of your ilk can live their fantasy and
> get back in. Time to admit defeat.
>
> We are in recovery. What a surprise? Printing money works. The next
> issue will be inflation. With so much spare capacity it is hard to
> imagine that recovery wil be very strong or we will have inflation
> but you never know...
>
> The option ARM stuff, the bank failures all that stuff that you others
> endlessly regurgitate. That is priced in. Any idiot can see that
> malls are empty and commercial property is hurting. It is in the
> market. The only surprise that you can play right now because most
> people still just don't get it - is upside surprise. If the economy
> booms in Q4 and Q1 2010 we will see S&amp;P rocket to 1300's then
> if inflation wakes up and intrest rates need to be jacked we will
> see a 10 to 20% correction from there - maybe back to 1000 or so.
> As I said elsewhere the time to sell will be when payrolls are growing
> strongly - not now. So get set ladies and gentlemen - lay your bets.
>
>
> On the oil thing. What is your point? It reached $140 last year -
> it is down now. $70 is about the right price to encourage new production
> and investment so it seems that unless there is a real boom - see
> above - it is kind of stuck around there - but I am no oil economist
> and avoid placing bets in the stuff.
>
> That's all.
>
>
>

Aug 02 03:03 AM

[Michael Clark:]

A picture is worth a thousand words. Check out Clusterstock's chart on GDP minus government spending to see how healthy this 'recovery' is:

www.businessinsider.co...

Aug 02 03:06 AM

[Michael Clark:]

Stock market recovery?

See Clusterstock's chart of stocks 1930 vs. 2009:

www.businessinsider.co...

Aug 02 03:09 AM

[FB5000:]

Dude, I have no axe to grind with you, this isn't about ideology. It's about making money.

Open your eyes look at the data. I mention some of it elsewhere on this thread. There's more out there. Dig. Bloomberg and the WSJ is more interesting to me. I am sure Denninger is a thoughtful and insightful genius most of the time but the article is full of invective and pure shlock. Not a lot of facts. His comment about revisions is just funny - I am not going to pull him apart. Not worth it.

Yes. the picture is not perfect. A lot can and could go wrong. Too much stimulus, to much loose money for too long, protectionism, commercial property collapse, stupid government policies e.g they just raised minimum wage - expect more unemployment, maybe a war with Iran all are possible and not good. some are already built in. You figure it out, sport. But hyperinflaton. No. Not from here. You need to read about the conditions that led to Weimar, Latin America, Zimbabwe and understand. The way Bernanke is handling the Fed - for example paying intrest on deposits and using that as a lever is a just a really good smart innovation that and the fact that banks have tightened underwriting standard enormously limits supply and velocity and therefore eventual inflation. So no - forget Hyperinflation but there will be some inflation and then tightening. It is inevitable. Just as recovery is inevtiable. One more risk. they don't renew Bernanke. That would be a mistake. Not too many people out thre who can safely land the Jumbo on the driveway. But politicians tend to speak drivel and there is a certain "get Bernanke" mentality in the Congress. Hopefully they will be contained.

There are a lot of bad opinions out there. I recently saw a guy advocating a 4 day week to reduce unemployment. Wow! Really? Why didn't I think of that? That's just funny. But sifting the facts and understanding what is happening takes some real work and effort and needs to be done dispassionately. Leading Indicators and ECRI is a good place to start. And they have done the work for you.

One more tidbit - housing prices are rising. That does not square with the Armageddon scenario so beloved around here.

Another freebie ( iguess its all free - that's the problem) - look up Coppock Indictor on the web and check it out. I don't like or use technicals but check it out. It sort of a leading indicator in its own right.

That's all


On Aug 01 02:21 AM Adam Sharp wrote:

> FB5000 sez: "ALL THE NUMBERS - ALL THE NUMBERS ARE TRENDING BETTER.
> It is a simple fact. The recession moderated drastically in Q2 and
> is now over.... The market is up. Recovery is here"
>
> Kudlow, is that you? Or Dennis? Either way, I will attempt brief
> re-education; Any numbers that are "trending better" are only doing
> so because of massive, unsustainable government intervention, along
> with accounting changes and earnings manipulation.
>
> The fundamental picture has gotten worse, if anything. The slight
> decrease in personal debts is far outweighed by the increase in public
> ones.
>
> We are headed for a major collapse. Might take a while, as more and
> more desperate and ineffective measures are tried to remedy the situation.
> But it'll end in either a deflationary depression or Argentina-style
> hyperinflation. I'm betting on Argentina, but Mr. Derringer, among
> others, thinks otherwise, so you'd be wise to consider that scenario
> as well. Apologies for any preachiness, I've had a beer or six.

Aug 02 09:26 AM

[FB5000:]

More ideology. At this stage it is just all "demand". Government spending is taking up some of the slack but clearly not all that was been created by the collapse in consumption we experienced in Q4 2008 and Q1 2009. The issue arises where the stimulus spending goes on for too long and then competes with the private sector. That is not yet really happening. But it may and if/when it happens it is inflationary. The recent calls for more stimulus are a case in point. More at this stage would be a mistake and bearish - not because it signals a poor or anemic recovery - but more for its longer term impacts on inflation. The concern is that the Congress - decided to "do something and panics" that would be a policy error.


On Aug 02 03:06 AM Michael Clark wrote:

> A picture is worth a thousand words. Check out Clusterstock's chart
> on GDP minus government spending to see how healthy this 'recovery'
> is:
>
> www.businessinsider.co...

Aug 02 09:34 AM

[appone:]

On Jul 31 07:42 PM FB5000 wrote:

> "Media lies". "Chinese Recovery Lies". Blah, Blah, Blah.
>
> What a lot of emotional nonsense. You seem to have a real axe to
> grind with CNBC and "mainstream media". You sound like Rush Limbaugh.
> You folks just can't stand to see an improvment. You just want/need
> things to be terrible or to get worse. Sorry. You are wrong.
>
> Forget for a moment that Q2 GDP is ancient history. April/May/June
> is an age past. ALL THE NUMBERS - ALL THE NUMBERS ARE TRENDING BETTER.
> It is a simple fact. The recession moderated drastically in Q2 and
> is now over.
>
> The leading indicators are flashing green. The market is up. Recovery
> is here. The question now is how strong. All the rest is beating
> a dead horse and kind of boring.
>
> That's all.
>
> The real stimulus which has directly affected the average Joe has come from him refusing to pay the mortgage, property taxes and (with condos) the maintenance. The money saved on a monthly basis is substantial. With banks slow or reluctant to foreclose and an entire cottage industry designed to delay the foreclosure process, a family can occupy their home, practically free, (or collect rent from an investment property) for a long time. All one has to do is refuse to pay and hire a law firm to delay any attempt at foreclosure. It is likely that at least two years will pass before the property has to be vacated, and possibly a lot longer.
This phenomenon is spreading like wildfire. It is no longer about those who cannot afford to pay. It’s about all those that, for many reasons, decide they just don’t want to pay.
There isn’t a lot of talk about this in the media, but it seems to me that it is becoming an epidemic. Anecdotal evidence: of the people with mortgages, that I personally know enough about to be certain, 10 are no longer paying, and 6 are paying. At the beginning of the year, the number of those not paying was 6.
This behavior is not without a lot of consequences, some short term some long term. I can list a great number, but they are quite evident.
My fear is that if this behavior becomes the norm, there will be political pressure for leniency or complete amnesty. The “delinquent” voters will overrule those that have abided by their contractual commitments. I’m afraid the government has already set a precedent. If most don’t pay, eventually the money will be taken from all by taxes, in order to “right the system”. Not paying may feel good for a while, but in the longer run it will mean the abdication of power and rights.

>

Aug 02 12:54 PM

[jj Roberts:]

Since the March bear market rally began, the insider (company officers) trading ratio that I have been trying to watch seems to be about 50 selling their company stock to 1 buying their company stock. I guess they are enthused with all the green shoots!

Aug 03 02:53 AM

[H. T. Love:]

HEY DIALECTICAL!

I know it's early, but how'm I doing so far? Aug+Sep = a couple months. Late Sep S&P500 about $1073 or so. Today, 10/1, $1030, appx. -4%.

WHEEEEE! I'm betting down to 1015 at a minimum, and $980 more likely, appx. -9%. Let's hope it doesn't breach that!

PMI yesterday, jobs today, ISM today, unemployment tomorrow - all rocking the market. And just in time ... GS chimes in.

Manipulation? NAW! GS says OOPS! Looks like we lost more jobs than we thought we would. How surprising that they waited until $1060 on the S&P500 was exceeded to 'fess up.

www.bloomberg.com/apps...

And have you noticed the lack of stick saves the last couple of weeks? WAY DOWN!

And today, the computers must have been upside down because in the last 10 minutes we saw a BIG "upside down stick save". Market wasn't doing *that* shabby 'till that last 10 minutes or so.

I'm *not* gloating, but as a n00b, if I even approach getting something right, I need to celebrate a bit to offset the "Aw Shits" awaiting me in the future! >:-((

HardToLove

On Aug 01 02:01 PM Dialectical Materialist wrote:

> The knock on "conspiracy theories" is that they always use historical
> data to "prove" them right and never predict the future. That is
> why I really appreciate this comment. If one is looking to support
> the idea that GS is manipulating the market (something some people
> flatly refuse to believe), then it is instructive to see if reasoned
> predictions about what shape this manipulation may take prove true.
> I for one will be watching to see if this pattern develops. If it
> does, I think that is good support for the premise on which your
> prediction is based. In other words, if things DO play out this
> way, your reasons for why it did would make a lot of sense.
> "As to a time-frame, I'm certainly not brazen enough to call it.
> My only thought is that it must occur before any further reports
> on real GDP, or other influential statistics, can be issued that
> are substantially more negative than expected. Since we have so many
> weekly items that *might* fit this description, I think they have
> to get it done pretty quickly."

Oct 01 08:30 PM

[Dialectical...:]

I was thinking about this recently. Pretty much as expected so far. I am in the cash-on-the-side crowd waiting for some pullbacks to dip my toe in. I can't say I am certain as to the causes or the players, but it is clear that there are some macro volatility swings that will bounce up and down in the coming quarters (years?). I did some buying last March/April, not because I was so smart or certain that the market had bottomed but only because it had fallen so far there was some room for big profits on the upside if it did go the way it turned out. And I now feel the same about the other end of this roller coaster. Hard to see why things would continue to climb in this climate and much to be gained from buying at a lower point. I am but a gnat on the swinging tail of a giant dragon. I control nothing, understand little, but will be doing what I can to gain advantage in tiny ways. Good luck and good call so far.


On Oct 01 08:30 PM H. T. Love wrote:

> HEY DIALECTICAL!
>
> I know it's early, but how'm I doing so far? Aug+Sep = a couple months.

Oct 02 07:21 PM

[H. T. Love:]

On Oct 02 07:21 PM Dialectical Materialist wrote here:
seekingalpha.com/artic...

><snip>
> I did some buying last March/April, not because I was so smart or certain
> that the market had bottomed but only because it had fallen so far
> there was some room for big profits on the upside if it did go the
> way it turned out.

Good move, regardless. You know what they say, "Sometimes it's better to be lucky than good". Sounds like you were both! :-))

Your right, I think, about the swings continuing. Using SPY as a proxy, volume is still weak, although much better than a few weeks back. Out of the last seven days, 6 of them closing down, the volume has been "stronger". It's been a while (Feb 17 - Mar 6) since I've seen such a high % of down days and volume generally "stronger" (although still less than 50% of Feb 10 volume) at the same time.

That is a difference from the last 6 months or so.

To me that means that they can still whipsaw us as their near-term priorities change.

And I have no doubt they will do it. A brief interlude may appear in the form of "earnings season". I expect we'll still see a large number of bottom-line beats, which might raise the market more. But what I'm looking at is also the top-line numbers. Since last earnings season, the MSM seems to have found religion and have recently been wondering about top-line too, only a couple of months after Robert Martorana penned this article

seekingalpha.com/artic...

and we discussed the top-line results starting here

seekingalpha.com/artic...

If the top-line results are not improving and folks are more aware of them now, it may provide the pressure the bears are looking for. I do expect that certain segments will show top-line improvement as a result of inventory rebuild and things "fiat money for perfectly good used cars that could have been used by some folks that can't afford new cars" programs.

Just no way for me to even guess what top-lines will look like. With the drop in average hours worked, I can't imagine that indicates a much stronger order flow, even if productivity gains are factored in.

Oh well, let the games begin anew!

HardToLove

Oct 03 05:39 PM