Mystery Economic Theater 2010

[davieddy]

Originally Posted by Mathew Steine

davieddy,

I think that is your cue.

I'm not paranoid...
They really do have it in for me.

(I sense a famous Frankie Howard clip coming on)

You know I can resist everything but temptation.
(Oscar Wilde)

[davieddy]

Originally Posted by davieddy

I just heard a Yank burbling on about "qualitative easing"

On second thoughts, it was probably "quannatative easing".
Not sure that makes it any better.

[xilman]

Originally Posted by davieddy

I'm not paranoid...
They really do have it in for me.

Infamy! Infamy! They all have it in for me!

[ewmayer]

I hope none of our readers had a heavy position in Amazon.com (AMZN) ... they reported weak 2nd-quarter earnings (and skyrocketing expenses) after close of market today, and the shares have been down as much as 15% after hours. AMZN`s stratospheric valuation of P/E > 50x forward earnings made this inevitable - that kind of lofty P/E is only appropriate for companies which are growing like gangbusters.


Two side-by-side headlines on the CNN/Money homepage just now caught my eye, as they perfectly illustrate the prevailing market schizophrenia (or maybe bipolarity ... I don`t have a copy of the DSN handy just now):

Existing home sales fall 5.1%: In the latest sign of renewed turbulence in the housing market, an industry group said Thursday that sales of existing homes fell 5.1% in June.

The National Association of Realtors reported that existing home sales fell last month to a seasonally adjusted annual rate of 5.37 million units, down from 5.66 million in May. Sales year-over-year were up 9.8%.

Analysts had expected sales to fall to an annual rate of 5.09 million units, according to consensus estimates from Briefing.com.

"The housing industry is slogging through a swamp looking for solid ground," said Mitchell Hochberg, a principal at Madden Real Estate Ventures. "With mounting foreclosures, growing consumer pessimism and a rise in inventory, the only path to recovery is an increase in employment."

My Comment: Dude, you`re bringing me down all with all those negative vibes, man ... I like this nextdoor article much better:

Dow in triple-digit rally: Better-than-expected existing home sales index and spate of corporate profit reports among the factors boosting stocks in the morning.

Better than expected, you say? Let`s check that out - oh, wait, looks like you wrote the script for the day`s rally before actually having the data in hand:

A reading on existing home sales from the National Association of Realtors is due after the market open. Sales are expected to have fallen to a seasonally adjusted annual rate of 5.09 million units in June, down from a 5.66 million unit rate in May.

My Comment: But indeed, even though 5.37M units is very poor, the fact that y`all were expecting even worse is great news for the economy. Rally time!

It`ll be interesting to see how the markets react to the bogus European-banking-system "stress tests" tomorrow...

[ewmayer]

[See previous post above] Well, the EuroBank fake-stress-tests were as farcical as I thought they'd be, and the markets reacted as sheepishly as I hoped they would - that means that mass green-shoots delusionThink is alive and well, and where there is mass delusionThink, there is opportunity. Amazon opened down over 10%, but recovered nearly all of its loss by EOD on an orgy of "bargain hunting" ... they're not called "dip buyers" for nothing.


Some pointed humor from Rolling Stone gadfly-in-chief Matt Taibbi and The Onion leading into the weekend:

The Steinbrenner Slobituary: Yesterday, when I first heard that Steinbrenner died, I figured his Slobituary (my term for the relentless slobbering that overtakes broadcast media outlets after the death of any Extremely Famous Person) would last about 24 hours nationally and 72 hours here in the New York area.

The mania for elegiac slobbering is one of the most disgusting things about this country, but you'll never see a clearer example of America's unique capacity for this sort of activity than this Steinbrenner business. When Bruce Springsteen dies, it won't be appropriate to make jokes about millions of Americans fawning over a dead Boss. But in George "The Boss" Steinbrenner's case, it fits perfectly, because Steinbrenner was in every conceivable way the prototypical office tyrant and the fact that he's being uninterruptedly worshipped after his death by a nation of cubicle slaves tells you almost everything you need to know about the modern American psyche.

In no other country do people genuinely love their bosses the way Americans do. They'll go home after 12 hard hours of capricious superiors peeing in their faces, and the very first thing they'll do is call up some talk radio show and denounce the graduated income tax that gives them a break at their bosses' expense. In other countries bosses need to constantly fend off revolts and strikes; in America people tune in by the millions to cheer on an impetuous, bloated asshole like Donald Trump as he ritualistically fires a succession of sheepish sacrificial stand-ins who are clearly chosen for their resemblance to the target demographic.

My Comment: Note that the denominator in the Stalin Applause Index formula presented by Taibbi is in nondimensional (that is, metaphorical) form, and thus applies equally well irrespective of gender.


The Onion | God Hinting At Retirement

Over the past few centuries, God has on numerous occasions deflected speculation that his reign might be winding down, but his remarks Tuesday appeared to signal a shift in celestial policy.

[ewmayer]

Business Insider has a nice 22-point summary with a happy title:

22 Statistics That Prove The Middle Class Is Being Systematically Wiped Out Of Existence In America: The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.


Robert Reich explains why the spate of "Great Q2 corporate earnings" which Wall Street has been cheering about for over a week won`t do a damn thing to help the dismal U.S. jobs picture:

The Great Decoupling of Corporate Profits from Jobs

The next supply-side economist who tells you companies need more incentive (i.e. lower taxes) before they’ll hire is living on another planet.

The reality is this: Big American companies may never rehire large numbers of workers. And they won’t even begin to think about hiring until they know American consumers will buy their products. The problem is, American consumers won’t start buying against until they know they have reliable paychecks.

My Comment: The NYT`s Bob Herbert has an op-ed today which fits into this theme nicely:

Long-Term Economic Pain: The pain coursing through American families is all too real and no one seems to know what to do about it. A rigorous new analysis for the Rockefeller Foundation shows that Americans are more economically insecure now than they have been in a quarter of a century, and the trend lines suggest that things will only get worse.

Rampant joblessness and skyrocketing medical costs are among the biggest factors tearing at the very fabric of American economic life so painstakingly put together in the early post-World War II decades.

The analysis was done by a team of researchers led by Professor Jacob Hacker of Yale University. They created an economic security index, which measures the percentage of Americans who experience a decrease in their household income of 25 percent or more in one year without having the financial resources to offset that loss. (Major medical expenses were counted as a decrease in available income.)

The team’s findings were grim. Simply stated, more and more families are facing utter economic devastation: completely out of money, with their jobs, savings and retirement funds gone, and nowhere to turn for the next dollar.

Economic insecurity has been increasing for at least a generation and perhaps longer, with very dangerous levels being reached in this latest recession. Professor Hacker discussed the ominous trend lines in an interview.

[EWM: That "at least a generation" neatly overlaps the emergence of the Reagan trickle-down-nomics, the era of corporate welfare, and the Greenspan credit bubbles ... used to mask the continuing deterioration in middle-calls Americans` real - in the sense of non-borrowed - standard of living. Mere coincidence?]

In 1985, at a time when the unemployment rate was 7.2 percent, the portion of American families that would be counted as economically insecure by the terms of this new index was 12 percent. Professor Hacker explained that the percentage would naturally tend to rise or fall with improvements or a deterioration in the economy.

But what has happened over the past few decades is that the percentage of insecure Americans relative to any given level of the economy has tended to steadily rise. So in 2002, coming out of a mild recession, there was a 5.8 percent unemployment rate, but the percentage of economically insecure families had jumped to 17 percent.

All of the data for 2009 are not yet in, but the research team projects, conservatively, that more than 20 percent of Americans experienced a 25 percent or greater loss of household income (without a financial cushion) over the prior year — the highest in at least a quarter of a century.

A decrease of this magnitude in available income is a heavy blow. As the study points out, “The typical individual who experiences a decline of at least 25 percent in household income requires between six and eight years for income to return to its previous level.”

“What we’re seeing, basically, is what we’re calling ‘the new normal,’ ” said Mr. Hacker. “We’re slowly ratcheting up this level of economic insecurity.”

Put another way, the bottom is falling out for increasing numbers of Americans, and with the national employment situation stuck in an extended horror zone there is little to stop the free fall. In addition to tracking the percentage of Americans suffering household income losses of 25 percent or more, the index also shows that families are suffering steeper income declines than in previous decades.

According to the study, “Between 1985 and 1995, the typical (median) drop among those experiencing a 25 percent or greater available income loss was about 38.2 percent; between 1997 and 2007, it was 41.4 percent.”

Only the very well-to-do are out of the range of this buzz saw. [EWM: That`s because they`re simply better than the rest of us ... corporate welfare and government-approved looting of the lower classes have nothing to do with it, I`m sure.] “The fact that Americans are facing a very real and growing risk of large-scale economic loss is true across the spectrum,” said Mr. Hacker. “It’s true of blacks more than whites, but it’s true of whites, as well. It’s true of less affluent people more than more affluent people, but it’s true of the more affluent as well.

“If anything, we’re understating how bad things are out there right now.”

Policy makers seem bewildered by the terrible economic state of ordinary working Americans, including those once considered solidly in the middle class. Despite warnings back in 2008 that we were on the verge of another great depression, the big financial institutions and corporate America seem to be doing just fine now. But average Americans are hurting with no end to the pain in sight.

My Comment: What, you mean throwing $Trillions at the Wall Street crooks and Ponzi artists rather than letting them taste the fruit of their misdeeds has failed to trickle down to the Great Unwashed by way of of the magical Supercallifragilistic Equity-Market wealth multiplier effect which all the acolytes of neo-Keynesianism assure us will take hold if we have the courage to simply make the forced wealth transfer "large enough" - whatever that means? [But we know a mere couple $Trillion ain`t there yet]. shocked, I am *shocked* to hear this.

[cheesehead]

Originally Posted by ewmayer

The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

Those latter-1970s conservative think tanks that came up with the transfer-the-wealth scheme may have been unethical, but they weren't stupid.

[only_human]

Among the statistics frequently purveyed is that debtors are unwinding credit card debt. This WSJ article reaches different conclusions. It finds that desperate people are clinging to their credit cards beyond mortgages as a last lifeline and that the decline of aggregate credit-card debt is almost entirely the result of writing off defaulted accounts. Fewer people are making late payments but when the accounts are in arrears, the amount owed is greater. [my bolding in quoted material]
http://online.wsj.com/article/SB1000...leTabs=article

The biggest reason credit-card balances are declining isn't that people are paying them off with their spare cash and extra earnings. It's because the banks have been writing them off as the borrowers default. Sure, that reduces the balances. But it tells a somewhat different story.
During the first quarter of this year, says the Fed, credit-card balances fell by about $19.5 billion. How much of that was written off? About $18.7 billion, according to data from the Federal Deposit Insurance Corp.

People are moving heaven and earth—and eating sky-high interest rates—to make sure they pay at least the minimum on their credit cards each month so they can keep them alive as a final cash lifeline. They would rather go into arrears on their mortgage—especially if they are underwater on the home anyway—than skip a payment on their card and risk seeing it switched off.

[ewmayer]

Several articles out of the UK this morning for our readers:

Record number of fake £1 coins could force reissue. There are now so many fake £1 coins in circulation the Royal Mint could be forced to scrap all of the coins and reissue the entire denomination.

“Their warning came as new figures indicated there were £41 million fake £1 coins in Britain – one in every 36 in circulation. This is a record level and suggests that the proportion of counterfeit coins had tripled in the last decade.”

Jonathan Hilder, the chief executive of the Automatic Vending Association of Britain, representing snack and drinks machines which take £1.6 billion of coins every years, said: "Ironically, the fakes are so good that it isn't yet causing a problem for consumers. Because they don't usually spot them, the trust in the coin is still high."

My Comment: Now see, if they actually put approximately £1 worth of metal into each coin they wouldn’t have such problems … but that would interfere with the permanent state of ongoing currency debasement all debt-plagued sovereigns engage in. Mr. Hilder`s comment, which could be snarkily restated as "the unauthorized fakes are almost as good as the real fakes" serves as a pithy commentary on all inherently-valueless fiat currency regimes.


Ambrose Evans-Pritchard`s latest Telegraph piece has an eloquent observation on the deflation and credit contraction - the latter being especially pronounced at present in the Eurozone - once again manifesting itself now that last year`s heroic government attempts-to-reflate are fading. {Warning: Article contains picture of the Green Goblin ... the faint of heart are encouraged to disable image rendering in their browser before viewing]:

Drip after drip of deflation data. Today’s release on manufacturing activity by the Richmond Fed is pretty ghastly, as you would expect given that the effects of fiscal stimulus are now wearing off at accelerating pace – before the happy handover to the private sector is safely consummated – and given that the structural East-West imbalances that lay behind the global crisis are getting worse again.

As David Rosenberg at Gluskin Sheff reminds us eloquently every week, the bond markets are telling us that we are already in a deep and intractable depression – which does not preclude Japanese-style rallies, technical recoveries, and bursts of growth, all within a Kondratieff Winter.

I have no idea what assets prices will or will not do. My area of curiosity is the global economy, and where it intersects with political, cultural, and historical forces. ... In the end, the global macro economy will dictate the outcome.

So watch the Chinese banking system. Watch Japanese exports. Watch OPEC as it keeps cutting output to hold up the oil price. Watch Euribor rates and the continued contraction in eurozone lending to companies. Watch French industrial output. Watch Polish sovereign debt (that’s a new one).

Watch the M3 money supply in the US as it contracts at a 10pc annualized rate. And for goodness sake watch the Fed Board.

Then sit in a deep leather arm-chair with a good Calvados, listen to Bach Fugues, and think.

My Comment: Personally, I prefer a nice mug of my special "east meets west" evening brew - long-simmered green tea with mulling spices (I make it weekly in sa large batch which I wrap in an insulating blanket and let steep for a half-day) and honey, spiked with a splash of a hearty red wine. My favorite of the Bach fugues is a little-known piece called "Prelude und Unfuge in G-Dur", better known to the English-speaking cognoscenti as "The Unfugue".

[The joke works better in the original German, I admit].


Case-Shiller Home-prices: An Updated Infographic: ...Featured by Barry Ritholtz this morning ... after viewing the full-sized chart, just keep reminding yourself that "Ben Bernanke says bubbles cannot be spotted in real time" - yes indeedy, the runup that began around 2002 was really quite subtle and hard to spot until, oh,around 2006:

[xilman]

Originally Posted by ewmayer

My favorite of the Bach fugues is a little-known piece called "Prelude und Unfuge in G-Dur", better known to the English-speaking cognoscenti as "The Unfugue".

Ah, the piece by PDQ Bach. Not quite serious enough for my tastes, unfortunately, though in general I prefer its composer to his better known ancestor.

I can recommend "Freude an der Oder" (known in English as "Boating Around in Muck") from the 9th for the classically inclined, or "Tuba Smarties" for those who prefer something a little more modern.

With luck, the Green Goblin will realize that by far his best song in his repertoire is "1.323 millirad" and will perform it exclusively henceforth.


Paul

[ewmayer]

Originally Posted by xilman

I can recommend "Freude an der Oder" (known in English as "Boating Around in Muck") from the 9th for the classically inclined, or "Tuba Smarties" for those who prefer something a little more modern.

Dog owners will want to check out the Music Minus One^TM version of "Wachet Arf".

Other ones which PDQ never quite got around to finishing, possibly because of infringement claims from their titles being overly reminiscent of works by old J.S.:

Nun komm, der Heiden Holland (Now come, you heathen Hollanders)

Liebster Jesu, Wir Sind Hin (Sweet Jesus, we are so screwed)

Nun föhnt euch, liebe Christen g'mein (Now blow-dry yourselves, dear Christians together)

Wo soll ich flöhen hin? (Where should I put my fleas?)