UbuTranscendent

What Will Fuel the Next Market Rally?

Madness? More likely greed... And remember the first half of Mr. Buffet's famous admonition: "When others are greedy, be afraid.

We should all heed his warning. Ubu.

Consumption, Apparently, Must Be Maintained

It is only the APPEARANCE of consumption that must be maintained, and for that, we have the prodigiously magical skills of the Bureau of Labor Statistics.

I sleep easier every night knowing the BLS is working to keep every single Taxpayer happily ignorant, and so should you.

Huzzah for Hedonics! Ubu.

America's Ever-Shifting Debt 'Ceiling'

On Aug 09 02:13 PM basehitz wrote:

> How about an analogy to Timmy’s reasoning:
Sorry Dad that I drank all your scotch and wrecked the SUV. But if you will let me have the bourbon, I promise not to wreck your Harley.

----------------------...

basehitz,

You have missed the flow of Timmy's logic. He needs the bourbon or else he CAN'T AVOID wrecking the Harley.

You clearly have not had the lobotomy required to fully appreciate the peerless logic of all Administrations, whether Republican or Democratic.

Ah the joys of thinking with half a brain, Ubu.

California's Pension Problem: Shockingly Irresponsible

Hmm. As a coda, please note that

"majority-to-spend-but... in the first paragraph of my comment above should read

"majority to spend but supermajority to tax" with hyphens connecting the words.

The posting software evidently did not care for such a long series of words concatenated with hyphens.

Ubu.

California's Pension Problem: Shockingly Irresponsible

Musical Deckchairs on the Titanic

Clearly, California is approaching some sort of Great Reset. The proposed 2010 state constitutional convention might be a constructive part of that process, though the seemingly limitless will of the opposing political camps to mire themselves in protracted deadlocks does not auger well. However, it was not the legislature that created the crippling majority-to-spend-but-... absurdity - for that we can thank a ballot initiative!

If we ever need an example of why representative government, flawed though it may be, produces a better result than direct democracy, let the exemplar be the Propositions legislated by a century of California's ballot initiative process. Many, many passed propositions have had unintended (or deceitfully intentional) benefits for special interests at the expense of the state's infrastructure or long-term fiscal health. California's pension plans are not innocent of complicity in promoting crippling propositions, of course.

Proposition 13 is the archetype of a measure that common wisdom praised as a boon to the residential homeowner but has had huge negative consequences for the prosperity and future of the state, and significant benefits to a special interest (commercial property owners). We are wallowing in the Prop 13 collateral damage to the physical and education infrastructure.

A new constitution may well be the only way to finally reform or (hopefully) eliminate California's crippling ballot initiative mechanism. Unfortunately, even the fastest conceivable timeline for strategic reform of California's governmental processes will be overshadowed by tactical fiscal events.

So, back to pastimes on a sinking ship: the beneficiaries of California pension funds and the legislature will doubtless have a rude awakening when the Great Reset is upon us and the music stops and (surprise!) there are no chairs left at all.

Until then, let the music play! Preferably something upbeat, perhaps 'Don't Worry, Be Happy'.

Regards from sunny SoCal, Ubu.

Bloomberg Reports Extreme Recession: I'm Shocked

Craig,

Be calm, breathe deeply. As outre as it might seem, Bloomberg may even publish an article before the year's end that double-digit unemployment during a protracted global meltdown is more than just a lagging indicator.

Just wanted you to be prepped, no sense in risking a cardiac 'event', you know.

Regards, Ubu.

U.S. Jobless Claims Rise 30,000 from Artificially Low Number

Edward,

In your analysis, how do you factor-in the growing number of people who are leaving the ranks of those counted as continuing claims because their benefits have expired?

Thanks for your good post, Ubu.

Housing: 'We're About to Have a Big Problem'

Oh yes, and then there's the little matter of accelerating commercial mortgage defaults and their cascading effect on commercial mortgage-backed securities.

A little nitroglycerine for the bonfire...

Mass Layoff Events Accelerating

On May 23 06:04 PM Brian McM wrote:

> It is understood by many that unemployment (aka layoffs) is a Lagging
> indicator (though the LEI counts new "claims" as a leading indicator).
> There is no predictive value to the charts you show in respect to
> the future of the economy (green shoots as you say).


Brian McM,

Your comment brings to the foreground an important issue: When is a rule-of-thumb correct?

As you note: "It is understood by many that unemployment (aka layoffs) is a Lagging indicator". Recall that, not so long ago, it was also 'understood by many' that home prices and the stock market were going to continue to rise - in fact, those who said otherwise were often ridiculed. Unfortunately, it is not uncommon for widely-held views to be incorrect - even long-standing, cherished and stoutly-defended views.

The idea that unemployment is always a lagging indicator was challenged recently in a thoughtful analysis by Bridgewater Associates. ( bwater.com ) The analysis was discussed at several websites in the econo-blogosphere.

Here's John Mauldin regarding the subject:

======================

www.ritholtz.com/blog/.../

...

Is Unemployment a Lagging or a Leading Indicator?

...

The typical pundit keeps telling us unemployment is a lagging indicator, and that the recovery will be well under way before it shows up in the job numbers. Therefore, you should buy what they are selling, because the recovery is on its way. But that may not be the case this time. One of my favorite reads, when I get to see it, is the economic analysis from Bridgewater. They are among the best thinkers anywhere, and everyone who follows them gives them a great deal of credence. This is what they wrote about unemployment being a lagging indicator last month:


“Normally, labor markets lag the economy because incremental spending transactions are financed via debt, stimulated by interest rate cuts. But as long as credit remains frozen, spending will require income, and income comes from jobs. And debt service payments are made out of income. Therefore, in a deleveraging environment job growth becomes an important leading, causal indicator of demand and other economic conditions.


“… The bounce in the economy and the stabilization in markets reflect government actions that are big enough to impact near-term growth rates, but are not sufficiently directed at the root problem of excessive indebtedness to produce permanent healing. The deterioration in employment markets will continue because companies’ profit margins are so deeply damaged that a little bounce in growth won’t do much to alter their need to cut costs. This deterioration in labor markets will undermine demand and continue to pressure loan losses, which will keep the pressure on the banks and elevate the cost of capital for tentative borrowers, inhibiting credit expansion.”

This again illustrates the problem of using past performance to project future results. You have to look at the underlying conditions in order to get a real comparison, and we have not seen a deleveraging recession in the US for 80 years. Using the past data in today’s world is statistical masturbation: it may make you feel good, but it is not producing anything really useful, and may be harmful to your portfolio.

======================

I confess to being an admirer of both Zero Hedge and John Mauldin, and I find this line of reasoning sound, for it does seem to me that we are in an economic period that is significantly different from a 'normal' recession. Thus, it may well be that unemployment has changed from a lagging to a leading indicator in this economic cycle.

The answer to the question: "When is a rule-of-thumb correct?", is the tautology: "It is correct unless it is not correct."

A rule-of-thumb is, after all, only a guide. Ubu.

Notes on a Scandal: High Dividend Investor's Survival Guide to This Unsustainable Rally

Cliff,

Thank you for distilling countless news items, analyses, and blog posts into a high signal-to-noise ratio summation with useful action items for every investor.

Keep up the great work! Ubu.

Decline in Jobless Claims Implies End to Recession

Arnold,

Your optometrist gave you the rosiest tint available!

If only the probabilities favored your point of view. Unfortunately, it's likely that the Treasury, Fed, and a small army of assorted economists are more likely correct: recession may end later this year (hopefully).

But it would sure be great if you are right and all of them are wrong, Ubu.

The Government Has Played Its Hand Nicely

.
Dr. Leeb,

Thank you for reminding us that effective tactical execution is commendable and necessary, but if the strategy is incorrect, the goal will not be achieved.

The Fed and Treasury seem to be making moves that gamble that short-term gains will negate very risky long-term positions.

If they were playing a game of chess, their punishment would likely be checkmate.

Let's hope against the odds that their tera$ gamble works, because we taxpayers are the ones left with the bill.

Thank you again, Ubu.

VIX: The Fear Index Falls to an 8-Month Low

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Mark,

If fear has receded, perhaps greed has returned, and so it is time again to contemplate the merits of Mr. Buffett's investing strategy:

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

I understand he's had some success with that approach and I'm a-thinkin' maybe I should be a teensy bit scared 'bout now, yes?

Ubu.

Consensus Outlook for Economy Not So Troubling

.
Matt,

I heartily agree with your statement: "Economists have enough trouble getting what will happen next quarter right."

After all, the overwhelming majority of those same folks absolutely failed to see the great bubble collapse of 2008, even after on-the-job training in 2001-2002 and a warm-up lap in 2007.

Based on their past track record as a group, the probability that the certified prognosticators are right about real GDP growth resuming next quarter and unemployment topping-out at only 9.6% seems mighty, mighty slim.

In fact, I'll wager that a seasoned pony bettor would size up those odds and bet that whatever happens, it WON'T be what the the consensus of economists predict.

Gotta go, maybe Intrade.com has odds for that and I've got $2 burning a hole in my pocket...

Ubu.

Mission Accomplished: Time to Sell

A fine WAKEUP call indeed...

Thank you for explaining one of the great mysteries of the web.

In the future, I resolve to treat the serial epitaphs posted under the "Cetin" moniker with the respect due the dearly departed.

Regards, Ubu.


On May 11 04:27 PM WAKEUP wrote:

> Someone (probably a Wall Street broker) is using the name, "Cetin
> Hakimoglu,", because: Cetin the Cretin is dead. He committed suicide,
>...